Here is an excerpt from an email to Sarah Lacy. To me, an outsider, this is a fascinating glimpse into the realities of the publishing world. Do you agree that this could turn out better for authors? Emphasis is mine.
(…) Long-term there’s no future in printed books. They’ll be like vinyl: pricey and for collectors only. 95% of people will read digitally. Everybody in publishing knows this but most are in denial about it because moving to becoming a digital company means laying off like 40% of our staffs. And the barriers to entry fall, too. We simply don’t want to think about it.
Amazon is thinking about it, though, and they’re targeting the publishers directly.
Publishers like to pretend that we make our money from discovering unknown talents for small advances and selling millions of their books. That’s a very small part of our business. The bestselling books are all written by celebs, by people with huge platforms, by fiction writers with a long history of bestselling books, or by people who do a proposal that’s on its surface brilliant. In short, there’s a bidding war among the publishers over the big books. We all know what the good books are–it all comes down to how much of an advance we’re willing to pay for them. The hotly fought-for books are the ones that sell. And while we might not make huge profit % on these, we make big profit $ on these. They keep the lights on by covering overhead. Better to cover our fixed costs by going all in on a few big books than trying to buy dozens of mid-list books.
But in recent years, as book sales have declined, the advances for the biggest books have gone down proportionally, too. What used to be a $1 million book is now a $400,000 book. Publishers are thinking, “OK, we’ll move less copies but we’ll pay less for them, so we’ll survive.” Enter Amazon’s print publishing arm. They hired this guy Larry Kirshbaum to run it–he’s a savvy vet with 30+ years of publishing experience–and they have some editors, too. And they’ve been paying a ton of money for books.
I saw this [redacted] proposal a few weeks back. It was okay–[same redacted author] is an asshole but [redacted] has a certain following and it would probably be a bestseller. Bestseller now means selling 20,000 copies, so I was thinking of offering like [hundreds of thousand] for it. But Amazon had already bid $1 million for it. A similar thing happened with a [redacted] memoir a few months back. Traditional publishers are snickering, “Look at stupid Amazon–overpaying for books!”
But Amazon isn’t stupid. They’re overpaying intentionally to keep advances high (and high advances will bankrupt publishers). And they’re also taking away all the authors who actually move units. They gave Seth Godin really favorable terms on a deal. Only a matter of time before they snag a James Patterson or some other big genre fiction name.
We can’t pay $1 million for books anymore. Amazon could probably afford to lose $20 million/year in their publishing arm just to put the other publishers out of business. I think that’s what they’re trying to do–throw money around in an industry that doesn’t have any, until Amazon becomes not only the only place where you buy books, but the only place that publishes books, too.
So rather than getting a 30% of an ebook (with the other 70% being split between the publisher and author), they’ll be getting a 70% cut (with the other 30% going right to the author). Funny thing is that it’s actually better for authors.
To be honest, publishing is a quaint little industry based on romance and low profit margins. But now we’re in Amazon’s sights, and they’re going to kill us.