What Writers Need to Know about the E-book Market

E-books have dramatically changed the landscape for authors looking to get published. Now, with the press of a few buttons, an unknown author can go from manuscript to book available for sale in online stores trafficked by millions of people—with or without the backing of a publishing house.

For established authors with agents and/or publishers, e-books have changed everything, too. Digital distribution through major retailers such as Amazon, Barnes & Noble, Apple’s iBookstore and Kobo has given published authors fresh and exciting ways to reach worldwide readers with their new titles as well as their backlists—which, thanks to e-books, never go out of print.

—by Jeremy Greenfield, editorial director of Digital Book World

E-books have truly leveled the playing field. Kindle, Nook and Apple bestseller lists feature titles from big publishing’s all-stars right alongside fierce competition from the world of independent publishing. Through the first half of 2013, self-published e-books appeared on the weekly Digital Book World E-book Bestseller list 66 times, putting independent authors collectively fourth among all “publishers,” ahead of such powerhouses as Simon & Schuster, Macmillan and HarperCollins. Revered New York Times book critic Michiko Kakutani even named a self-published work among the top 10 books of 2012 (The Revolution Was Televised: The Cops, Crooks, Slingers and Slayers Who Changed TV Drama Forever by Alan Sepinwall).

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By early 2013, e-books accounted for nearly 29 percent of all trade publishing revenues in the U.S., according to the Association of American Publishers. In the U.K. and Canada, publishers are reporting similar trends, and newer e-book markets such as Germany and Japan are catching up quickly. A quarter of Americans read an e-book in 2012 (according to the Pew Internet & American Life Project)—a proportion that has surely gone up since. And a recent survey by Digital Book World and PlayCollective revealed that some 54 percent of kids ages 2–13 read e-books, suggesting that as that generation grows up, e-book reading will become even more popular.

The trick to building a successful career as an author in the digital arena is understanding the marketplace. Here’s what every writer really needs to know.

Today, anyone with a smartphone, e-reader or tablet computer has the world’s largest bookstore in her pocket. While stats vary between countries, publishers, genres and even titles, it’s thought that Amazon has the largest part of the worldwide e-book sales market share. In the U.S., the company is estimated to account for about 60 percent of all e-book sales, with Nook and Apple each comprising 15–20 percent, and Kobo and other smaller players making up the rest. (In Canada, however, where Kobo is based, it is estimated to have a slight lead over Amazon.)

Myriad smaller retailers are also cashing in on digital titles. Smashwords, a company that distributes self-published e-books, reports that it generated $20 million in revenue in 2013 from taking a small cut of sales from titles it’s distributed to e-book retailers outside of Amazon.

[Editor’s Note: In 2012, WD published a comprehensive overview of the leading services for formatting and distributing an e-book, comprising single-channel providers—Barnes & Noble PubIt!, Google eBooks, iTunes Connect and Kindle Direct Publishing—as well as multi-channel services BookBaby, Publish Green and Smashwords. To read the complete article, visit writersdigest.com/feb-14.]

And there are other rising digital distribution models. All “Big Five” U.S. publishers (Hachette, HarperCollins, Macmillan, Penguin Random House and Simon & Schuster) now sell e-books to libraries for lending in some form. Most smaller publishing houses have been doing so for years, placing digital titles in libraries through vendors such as OverDrive and 3M Cloud Library. And self-published authors are getting into the act, too, utilizing library distribution programs through Smashwords and similar providers.

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Business models for digital books are evolving almost daily. In late 2013, several consumer-facing e-book subscription services launched, including a New York–based mobile-focused platform called Oyster, which opened for business with over 100,000 titles available for a $9.99 monthly fee. Scribd, an established document-sharing platform with some 80 million monthly users, also launched a competitive e-book library, accessible for $8.99 per month.

Oyster co-founder and CEO Eric Stromberg predicts that business models such as his own will actually broaden the spectrum of what people read. “In an unlimited [e-book subscription] model, because the barrier to starting a new book is so low and requires no additional purchase, it’s really easy to start a new book you may not have otherwise read,” he says. “This encourages people to try new books, and can ultimately lead to more reading overall.”

Innovative companies are experimenting with additional models even as this article goes to press. Among them: e-book apps for tablets and smartphones, and free e-books funded by ads.

In the digital marketplace, discoverability (how readers will find your title in the rising sea of available e-books) has replaced distribution as the key buzzword. And rightfully so. After distribution, it might be marketing that has changed the most in the digital age.

Today, a book that once would have taken years to go to market can now go from concept to e-bookstore shelves in a matter of months—sometimes in a matter of days. The shift has implications at every stage of the book production chain, affecting everything from timelines for editing and design to those for marketing and promotion.

It has also created unprecedented opportunities to meet market demand. Capitalizing on “Linsanity” (when NBA basketball star Jeremy Lin quickly and un-expectedly rose to prominence in 2012), independent publishing service Vook conceived and published an e-book about the Harvard graduate in six days. Other titles, including one about retired Pope Benedict XVI, followed suit, coming to market nearly as quickly when opportunity arose.

Such compressed publishing deadlines mean altered marketing timelines—both before and after publication. “Publication dates are less important, and promoting an author’s book for a longer time is much more important,” says Fauzia Burke, president of New Jersey–based marketing firm FSB Associates.

What that promotion entails is also changing. Perhaps even more than e-books themselves, electronic communications through email and social media have changed the way books are marketed. “Electronic communication has given authors the tools to develop a relationship with their readers; this is the biggest and most fundamental shift,” Burke says.

Beyond using new means to promote electronic versions of what we traditionally think of as a book, innovative authors and publishers are going digital to create products that simply didn’t exist before. Bestselling author Lee Child released “High Heat: A Jack Reacher Novella” for $1.99 in 2013 with Random House in part to promote the upcoming release of Never Go Back: A Jack Reacher Novel later in the year. He’s just one of many authors bolstering a career with short works that, because of their format and turnaround time, would be impossible to sell in print.

Short-form e-book content can also be used to test what readers want. Well-known self-publishing success story Hugh Howey, whose viral saga, Wool, was eventually picked up by Simon & Schuster in a landmark six-figure print deal that let Howey keep digital rights, is one example: He produced Wool in installments after a short initial segment (what would become the opening chapters) unexpectedly caught fire online.

“From the creative standpoint it’s very empowering,” says Dan Blank, CEO of marketing firm We Grow Media. “It shortens the space between writers and readers.”

Innovative Illinois-based publisher Sourcebooks has pioneered the practice of “agile publishing.” The company worked with author and futurist David Houle to build an online audience feedback platform for his new title Entering the Shift Age. He wrote and posted the book to the site in sections, then used real-time feedback from those readers to shape the finished book in tandem with his audience. At a glance, this might look simply like innovative creation, but make no mistake that it’s marketing, too—it breeds readers who have a vested interest in buying the book and promoting it to their social circles. Sourcebooks has since signed a similar deal with Toronto-based e-book platform Wattpad (known as “the YouTube of e-books”) to create “agile” young adult books.

Beyond dedicated e-book platforms, other electronic media such as apps, video and online slideshows give authors and publishers the ability to reach out to readers to drive interest in new e-book releases, backlist titles and preorders for forthcoming work.

All of these platforms are empowering book marketers by giving them more information about readers than ever before. Innovations in marketing can be as simple as gathering contact information from electronic book purchases to continue to reach these readers after they’ve left the “store.”

“You get their email address and you can stay connected with them to sell them other things,” Blank says. “Their contact information is an incredibly powerful thing to have from a marketing standpoint.” That’s one thing authors and publishers never got when a reader walked into her local bookstore to buy a print book.

For better or worse, a confluence of factors has contributed to much lower prices for e-books than their print counterparts. Lower overhead when creating e-books (in terms of printing, storage and distribution) is a prime factor. The largest cost to a publisher in creating a book in any format is acquiring, managing and developing content, said Penguin Global Digital Director Molly Barton in a 2012 interview, but when that same content is used across multiple formats, the cost can be split and therefore lowered.

Retailers have also played a role in driving e-book prices lower. Following lawsuits filed by the U.S. Department of Justice and other law enforcement bodies in 2012, Amazon and other retailers gained control of e-book pricing for titles published by the world’s largest publishers—a power they had lost in 2010 when those publishers signed distribution deals with Apple, then new to the e-book business, allowing them to set their own prices and requiring them to have the same power at other retailers. In this so-called “agency” pricing model, these large publishers would often set e-book prices at $12.99, $14.99 or even higher in some cases. Retailers now wield the power to price e-books at much lower levels—often $9.99 or less. To promote their platforms to readers, retailers such as Sony have run promotions for bestselling titles by brand-name authors for as little as $1.

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Self-published authors, in an attempt to compete with big publishers, have perhaps inadvertently contributed to the downward trend. It’s rare to see self-published e-book titles on bestseller lists for more than $3.99 or $4.99; they are sometimes priced as low as $0.99.

These trends have combined to create powerful price pressure on e-books. The average price of a Top 25 bestselling e-book peaked at $11.79 in the summer of 2012; about year later, the price dipped as low as $5.41, according to data provided by Iobyte Solutions, a New York–based firm.

While “electronic book rights” were granted in at least one book contract dating back to 1966 (according to Tim Knowlton, CEO of Curtis Brown literary agency), they weren’t common until relatively recently—generally the early ’90s—leaving some digital rights up for debate.

In fact, even older book contracts that did aim to clearly spell out the grant of electronic rights can be in dispute. The most famous case of this is HarperCollins vs. Open Road Integrated Media, which at press time was working its way through the courts. HarperCollins claims that a 1971 contract gives it the right to publish author Jean Craighead George’s middle-grade novel Julie of the Wolves in any format. In conjunction with George, Open Road—a New York–based start-up digital publisher—released an e-book version of the work in 2011, prompting a lawsuit from HarperCollins.

Of course, the nature of publishing contracts has changed now. “In the last three years, three of the “Big Five” publishers have radically changed their publishing contract boilerplate language in direct response to digital changes in this industry,” says Kristin Nelson, owner of the Denver-based Nelson Literary Agency and agent to such digital-focused authors as Hugh Howey. “I’ve seen stricter non-compete clauses, new types of royalty clauses to tackle sales that haven’t been envisioned before, and more movement toward bundling the e-book [and audiobook editions].”

In response, agents have carved out new rules for royalties and rights exploitation on behalf of other clients. The unofficial royalty that agents are thought to be able to negotiate for e-book authors is 25 percent of their digital sales, much higher than the 15 percent typical for hardcover books. And the ability to instantaneously distribute e-books worldwide makes the monetization of e-books abroad a more enticing, achievable and complicated issue than ever before.

“I am still a strong believer in the fact that publishers are paying far too low a digital royalty rate [to authors] at 25 percent of net,” says Dystel & Goderich Literary Management’s Jane Dystel, who has made headlines for her work with self-published authors. “In time, traditional publishers are hopefully going to be forced to increase their digital royalty rates; I am predicting up to 40–50 percent.”

The fact that agents now find themselves negotiating more complicated rights with publishers is just the beginning of how e-books have changed the world of agenting.

For starters, agents have new ways of finding clients: Many now spend time scouting blogs, e-book sites and self-published e-book bestseller lists. “In this new world agents find new talent almost more easily, as there is so much writing online,” Dystel says. “Spending time every day scanning the Internet can turn up a large number of new, fresh and creative ideas.”

And their relationships with those clients might not look the way they used to. More and more agents are nurturing authors with “hybrid” careers that combine traditionally published and self-published work (Editor’s Note: Turn to Page 26 for more on this). Some have even started facilitating digital publishing partnerships, launching their own e-book platforms for clients.

One example of this took shape in 2011, when Nelson Literary launched NLA Digital Liaison Platform to help some of its authors self-publish. “We are not a publisher,” Nelson says. “The authors maintain all rights and full control of their content.”

Other agencies have made similar moves, though business models for agent-assisted digital publishing vary.

There are questions of potential conflicts of interest that can arise when agencies also begin operating as publishers, however. Literary agent, publisher and e-book retailer Richard Curtis launched E-Reads, one of the first e-book publishers, complete with its own retail website. Once the head of the widely respected Association of Authors’ Representatives (which has codes of conduct designed to protect authors), he no longer qualifies for membership. One of the AAR’s bylaws stipulates that agents can’t run publishing imprints.

However, agencies may be finding ways to in essence do so while complying with the AAR: Gersh, a New York–based literary agency, recently signed a deal with New York–based digital publishing start-up Diversion Books to launch an e-book imprint. And many agencies have signed deals with Argo Navis, an author services platform run by book publisher and distributor Perseus Books Group, to help their clients self-publish.

E-books have changed everything for the publishing industry. Well, nearly everything.

Despite all the dramatic innovations in digital publishing, distribution and marketing, readers want the same thing out of a book today that they always have: good writing and a great story.

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Jeremy Greenfield is the editorial director of Digital Book World (digitalbookworld.com, a subsidiary of F+W Media, parent company of WD), the leading conference and online resource for e-book and digital publishing news and analysis. Follow him on Twitter at @JDGsaid.

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Brian A. Klems is the online editor of Writer's Digest and author of the popular gift bookOh Boy, You're Having a Girl: A Dad's Survival Guide to Raising Daughters.

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