Tea for Texas

Textbooks are so expensive to produce that publishers typically prepare only one version of each textbook and sell it to all school districts. Because the textbook market in Texas has been so big for so long, publishers have courted this lucrative market for years. To penetrate this market, textbook publishers tailor their books for approval by the Texas Board of Education. The board can approve or disapprove any textbook it wants, and its ruling is final. Books that do not meet the Texas standards are not allowed to be used in Texas schools. As a result, Texas has a disproportionate influence over the content of textbooks published, not just in Texas, but in every state.

Apparently that's not good enough for the Board of Education. Now the conservatives who dominate the Board are trying to dictate the specific content of those textbooks. See "Texas Conservatives Seek Deeper Stamp on Texts" (http://www.nytimes.com/2010/03/11/us/politics/11texas.html?hp)

The conservatives on the board claim that their actions are necessary to counter the left-leaning biases of textbooks. They may be right that textbook writers live on the left side. But textbook writers are not required to follow officially mandated standards. The Texas School Board seems intent on using its governmental authority to impose its own politically correct orthodoxy on every school child throughout the state and, by extension, elsewhere. This is censorship exercised by government. I expect this will end up in the court system before you can say “Life, Liberty, and the Pursuit of Happiness.”

This should trouble everyone, regardless of their political orientation. When the government of the former Soviet Union imposed its version of the truth on public discussion, and when governments in countries like Iran and North Korea do it today, we rightly call it "brainwashing." Just because it is Texas doing it this time doesn’t change the fact that it is just plain wrong. Government censorship is offensive everywhere. The board has made a lie out of its public responsibility and given its nemeses on the left ample prospects for visibility and fund-raising.

On the very same day as it ran that article, the New York Times also published a letter from another Texan, Dick Armey, who wrote to extol the virtues of the Tea Party movement (http://www.nytimes.com/2010/03/11/opinion/l11brooks.html?ref=opinion). It is ironic that Armey praises the Tea Party for its roots “in the American traditions of individual freedom and constitutional limits on government power.” I am waiting for Dick Armey to take the Texas Board of Education to task for the constitutional limits it has failed to observe. I’m holding my nose, but I’m not holding my breath.

Like it or not, e-books are here to stay

Whatever you may feel about reading books on a screen, you had better get used to the prospect that the e-book is not going away. Print books will not disappear either, but the big players in the market have made sizeable enough investments in electronic technology to push it well past the turning point. Yet even if they hadn’t made the commitment, simple economics make it easy to convince publishers that a large part of the future is digital.

Print has several handicaps. The first is the cost of the book itself. Books cost money, and the inventory of books that publishers need to be taken seriously by bookstores may cost a lot of money. Second, books have to be shipped, usually at the expense of the publisher. Third, publishers need to pay discounts and possibly commissions, often to more than one middleman. Finally, publishers have to wait to be paid for sales, sometimes as long as 90 days or more. It may be discouraging, but a publisher of print books may not get paid much more that 25% of the cover price. From that, the publisher needs to pay the cost of goods, royalties, and overhead. And then come the returns--sometimes as high as 40% or so of sales--and the various chargebacks associated with them.

Electronic books have few of these handicaps. They have no printing costs. They don’t have to be shipped. There is no overhead for the e-book. Sales are automated, and payment is immediate. There are no returns, and even if there were, returns cost virtually nothing to process. Publishers do pay commissions and royalties, but even then, the publisher can reduce the price of the book significantly and still come out ahead.

Consider the imaginary fifteen-dollar book, Martha’s Pickle Juice. It costs Bob the publisher $2.00 each to print the book, and he prints a thousand copies or so at a time. His distributor charges Bob 25% of net for handling the book, and Bob pays Martha a royalty equal to 12.5% of net receipts. Bob also produces an e-book version of Martha’s Pickle Juice, which he sells for $10.00 on ebookemporium.com and pays a royalty of 50%. The accounting may surprise you.

Print book

Printing cost $2.00

Sales price $15.00

Less 40% wholesale discount ($6.00)

Net from sale $9.00

Less distributor commission ($2.50)

Net after commission $6.50

Less 10% returns ($0.65)

Net after return $5.95

Less royalty ($.75)

Net after royalty $5.20

Less cost of goods sold ($2.00)

Less shipping and overhead ($1.10)

Net to publisher $2.10

Net percentage of cover price 14%

E-book

Printing cost $0.00

Sales price $10.00

Less 70% wholesale discount ($7.00)

Net from sale $3.00

Less distributor commission ($0.00)

Net after commission $3.00

Less 10% returns $0.00

Net after return $3.00

Less royalty ($1.50)

Net after royalty $1.50

Less cost of goods sold ($0.00

Less shipping and overhead ($0.10)

Net to publisher $1.40

Net percentage of cover price 14%

These numbers do oversimplify, but they are not unreasonable. You get the general picture: Bob the publisher pockets the same 14% of the cover price for both the print and electronic books. Bob’s cash outlay for the printed book is considerable, while for the electronic book, it is negligible. Meanwhile, since Bob used the existing print book files to create the e-book, his investment in the electronic edition is negligible, and the return on his investment is astronomical.

Numbers don’t tell the whole story, except occasionally to bean counters. Bob still needs to sell Martha’s book to readers who continue to prefer print books over electronic books by a wide margin. Reading habits are still on the side of the traditional book, as are most of the marketing and publicity avenues available to publishers. But even that is changing. According to socialnomics.net, Kindle books account for more than a third of all Amazon book sales. Add in book sales for other readers and for downloaded books in general and it is pretty clear that the economic incentives to produce e-books are pretty compelling. As the population gets younger, resistance to reading on a screen will diminish. Publishers and booksellers would be crazy to ignore e-books, and they are not going to.

The Distributor Dilemma

In case you missed it, another book distributor has closed its doors. Blu Sky Media recently succumbed to economic uncertainties, losses of collectibles, returns, and all the associated cash-flow challenges. This is a shame. Blu Sky was one of the shrinking number of distributors around who would take on small publishers. CEO Greg Snider is a nice guy, and I’m told he’s very accommodating. Even today, he’s working to help his publishers find alternate distribution. But being a nice guy who’s easy to work with doesn’t offset the not-so-nice economics of this business. Lots of people are going to be hurt, not just Blu Sky.

It’s discouraging, too. Every publisher who hopes to thrive in the book trade needs to have a distributor, especially when so many books are competing for shrinking trade attention. Both optimism and desperation can seduce publishers to sign up with the first distributor that will take them. What they need to do, especially now, is resist the temptation and be selective.

Publishers who are looking for distributor to work with still need to ask the basic questions about territory, commissions, fees, chargebacks, returns, and reports, and they still need to explore how suitable the distributor is.

Now, publishers need to inquire about finances, too. Most distributors are not likely to open their records to publishers who offer only a few books, but they should answer questions about things like returns, collections and defaults, the punctuality of payments. Publishers can ask other clients of the distributor about their experience with payment history and overall financial accountability. These have always been part of due diligence. Today, they are just more urgent.

The problem is not so much in book distribution as it is in the book business in general. The “digital revolution” is turning everything on its head, including publishing. Authors and publishers have recognized this and sought out new ways to sell books (in whatever form their books have taken). Distributors need to be just as creative. Not even that will guarantee success, but consider the alternative of doing nothing.

Kindles, iPhones, and Oh, My

What do these devices all have in common?

They are far more than convenient electronic devices. They are indeed handy. You can carry an entire library of books you have personally selected in your briefcase at the added weight of a few ounces. You can read them almost anywhere. I can take my Kindle with me on the road and indulge my curiosity whenever I want except during take off and landing.

It’s not just the Kindle. A colleague showed me how he reads on his iPhone. He connects directly to his Kindle account and download books directly to his phone. The screen size isn’t ideal, even when he rotates it 90%. And the type is still pretty small. But the display is not too bad. And it is even lighter than a Kindle.

These devices open up marketing opportunities that may have escaped the attention of a lot of publishers. Consider what has happened to the music business over the last decade. You no longer need to shop in a record store. (Record store? What’s that?) You can now download (or, unfortunately, share) music files in a matter of seconds. Savvy record companies have discovered they can turn music into impulse purchases. Especially now that consumers can buy single tracks instead of entire albums, the music industry can “give away” the most popular tunes to broadcast and Internet radio stations and let the market initiate the purchase of the track. Artists themselves have discovered that social networks allow them to sell music while they assert their independence from labels.

E-book readers like the Kindle and the iPhone let publishers and authors turn their books into impulse purchases like music tracks. A good interview, a good blog entry, a good YouTube video, a good audio clip can stimulate a buyer to purchase a book on impulse. Within 30 seconds or so of making the spontaneous decision to purchase a book, a customer can own a less expensive copy that cannot be returned, duplicated, or given away. I’ll try to explain in a later entry why lower price for the customer does not necessarily mean lower profits for the publisher or author.

Book Coaches

Everyone is writing a book these days--or so it seems--so it’s no wonder that book coaches have sprung up everywhere. There’s so much business for people who refer to themselves as book coaches, book shepherds, book stewards, etc. A good book coach can save a novice writer/publisher hour of time and hundreds if not thousands of dollars.

Unfortunately, there are no standards for people who offer to help writers get published or become self-publishers. Anyone can hang out a shingle and send out three and four figure invoices for services they may or may not provide well.

How can a new or even a seasoned author choose the right book coach? Here are a few questions that aren‘t always asked:

• What do you want the coach to do? Will the coach help you achieve your goals and not just those of the coach? If your goal is to produce a book to supplement your speaking career, for example, your coach should not push you to emphasize bookstore sales.

• How long has the coach been in business? The right book coach will have been around long enough to know at least a little about the entire publishing business. Regardless of the coach’s background, the coach should know something about all phases of the business.

• What are the coach’s strengths? Most coaches do know something about the business, but few know everything. Look for a coach who knows his or her own limitations and is willing to trust others who know more than they do about particular areas. If the coach says “I do it all,” beware. Very few people do everything well.

• What will the coach charge you for? Different coaches charge different amounts for different services, so there are no hard-and-fast rules. Still find out what the coach charges for the services the coach does and how much the coach marks up services contracted from others. Do expect to pay a premium if the coach brokers services, but find out how much a premium you’ll be expected to pay. I know people who paid coaches obscene amounts for third-party services the coach actually paid someone else to do. Find out if the coach will share the service provider’s invoices with you or let you communicate directly with the service provider.

• How many clients is the coach working with, and how much in-house help does the coach have?
A coach with too many clients makes you the small fish in the big pond. A coach with no clients has a suspicious amount of free time. Both are red flags.

• Will the coach provide you with references of several recent clients? You can assume that you’ll get the names only of satisfied clients, but it’s a start. Call them and ask how satisfied they are.

• How many books will you need to sell to pay for the coach’s services? This is a tough question. You don’t know until your book actually comes out how much profit you’ll make on each sale. Still, unless your book is so specialized that it can carry an unusually high cover price, estimate that you’ll make $2 or $3 for each book you sell to the book trade and $10 or $12 for each book you sell at the back of the room. For every $10,000 you pay a coach, you’ll need to sell between 1,000 and 5,000 books before the money stays in your pocket. Ask your coach how many copies he or she thinks you’ll sell, and expect an optimistic answer.

• How long does the coach expect the relationship to last? This depends on what the coach will do for you. But like all temporary relationships, it needs to come to an end. Make sure you spell this out so you don’t continue paying the coach after the coach’s work is done.

• Will the coach let you out of the contract if your plans change or the relationship sours? Don’t expect bad things to happen, but make sure that if they do, you will not be locked into a commitment you can’t sustain. The coach needs you as much as you need the coach. I know still other people who had acrimonious difficulties extracting themselves from a deteriorating relationship with a coach. Make sure you can end the relationship peacefully without paying for services not yet rendered.

These are just a few questions you can ask, but they are ones I have found often don’t get asked until it is too late. There are many excellent book coaches, and I know you can find one who is perfect for your needs.