The creator economy has destroyed the walls between creators and their audiences. With the click of a button, people can reach people all around the world via voice, video, and text. People who are sharing ideas across mediums like blogs, YouTube channels, and podcasts are used to having not only creative control over their work but the freedom to monetize it. Even on a place like YouTube, where the company keeps 50% of the revenue, they still allow video creators to use ads in their videos and don’t take a cut of such a thing.
But when these creators start engaging with the traditional publishing industry they are dumbfounded. What do you mean they get to own lifetime rights of my work? I only get 10% of the cover price? And only 25% on an ebook which costs $0 to produce?!
In my deep dive on the different “games” of traditional versus self-publishing, I pointed out that the decision between self-publishing and traditional publishing is not a simple decision. It is a decision to create and deploy your work in fundamentally different ways.
- In traditional publishing, it is a longer process, with a focus on an intense launch and hardcover sales through global retail channels
- In self-publishing, the focus is much more on digital versions of the book like the kindle or audiobook version with the majority of the sales coming through Amazon and trying to ride hype from sales on Amazon to then hopefully land in retailers and global markets (which is harder than I realized)
The traditional publishing machine is great at what it does. It puts out high-quality printed books that are aimed at massive audiences. They publish tons of them (Penguin publishes 1600 a year) and hope that within that portfolio, some of the books resonate with that massive audience. Since they have lifetime rights to the books plus 70 years, they can collect profits for more than 100 years on that work. It’s low risk, average reward for the company and it’s no surprise that most of these publishers are also part of bigger conglomerates. They aren’t trying to crush every book, they are just trying to do good enough to grow a few percentage points a year as part of a larger corporate structure.
The Shifting Tides
In today’s digital age, giving up the rights to the most important creative project of my life, especially in a time in which creative tools are being democratized faster than ever before, was not something I wanted to do, even if it meant more book sales. And more people are realizing that despite some of the flaws of self-publishing, like lower quality hardcover books and lack of relationships to break into retailers and foreign markets, self-publishing can work incredibly well.
Two examples are Eric Jorgensen’s Navalmanack selling over a million copies and David Goggins’ books, which sold even more.
But people still do traditional deals and the main reasons people give are:
- The advance was so big that it was hard to say no
- They wanted to appear in bookstores
- They wanted access to the network of other authors
While some of these are probably not as promising as people think (many books don’t last long at a bookstore even if they do initially), the traditional publishing industry still has a tremendous hold over the minds of today’s aspiring authors and creators. And many people have succeeded at that path, including people like Tim Ferriss and James Clear who both have blockbuster hits that have sold millions of copies over several years.
But how happy are they really?
In March 2024 both of them announced they were getting involved in a new venture, called Authors Equity. The goal was to let the author take more of the risk and capture more of the upside of the relationship, potentially capturing 60-70% of the profit of the book.
As Clear said, “I’m not saying I wasn’t satisfied…But there are a lot of options out there.”
Clear has had the number one book on Amazon for multiple years now which is impressive but his publisher is almost definitely capturing more value than him. Given his current prices and a standard contract (he may have renegotiated), he’s likely earning:
- Hardcover: Priced at $13.99 on Amazon, Royalties at 15% = $2.10 per book
- Paperback: Priced at $15 on Amazon, Royalties of 8% = $1.20
- Kindle Priced at $13.99 on Amazon, Royalties of 25% = $3.49
Compare this to self publishing where I am currently (as of March 2024) earning:
- Hardcover: Priced at $27.99, earning $8.27 per book
- Paperback: Priced at $17.99, earning $7.27 per book
- Kindle: Pricing at $4.99, earning $2.50 per book
Personally, I decided to self-publish not because of the financial upsides (which can be quite lucrative) but because I wanted to have more control over the process and learn how things work. I’ve had jobs before and have worked with far too many people in the prestige professions in New York City to be interested in letting them shape my work. I found good work in writing that I want to protect as long as possible. The risks for me were never that my book flopped, it would be that I lose interest in writing.
Another reason I self-published is that I still retain optionality. I retain the option to sell my book, do any sort of creative projects with it and to partner with anyone for the forseeable future. This option felt incredibly valuable to me, so much so that I easily walked away from a $200k book deal from Penguin in 2023.
After I shared my reflections on turning down that deal, I was shocked at how many traditionally published authors wish they could get their books back. They haven’t earned out their advances and have no potential upside in promoting their books anymore. It’s a shitty situation.
The Percent of List Price Model Dates To The 1800s
I love to see experiments like this, especially with the backing of Clear and Ferriss because its making visible the obvious trend that creators will be able to capture more market power. And that if someone already has an audience, giving up ALL rights to all versions of a book for their lifetime plus 70 years will mean publishers will have to give up far more than up to 25% of the list price of books.
With a profit sharing model the incentives are much more aligned between the company and the author. The percentage of list price model doesn’t really make sense in a world of digital products and where the author does all the marketing work and the publisher gets the rewards. The list price model emerged (mostly in the United States) in the 1800s. The anthology, The History of The Book, describes how publishers shifted away from profit sharing toward the current model for the author Herman Melville:
Some publishers utilized half-profits agreements with their authors, where both risks and profits of publication were shared, although this arrangement was more common in England than in the United States. During his early career, Herman Melville entered into such agreements with Harper & Brothers: he and the Harpers split the profits after the costs of manufacturing the book had been paid.With the publication of Pierre in 1852, however, the Harpers converted to a royalty agreement under which Melville received one-fifth of the retail price after the first 1,190 copies had been sold.
While authors in the 1800s didn’t love this model, “and authors frequently complained that they received vague or padded account statement,” many were okay with it because the publishers were taking on more risks by vertically integrating the full stack of author services and “as publishers became increasingly sophisticated in managing advertising and retail sales, authors grew more dependent on them for editorial advice and royalties.” In addition to this many authors made a good living from getting paid for magazine articles so were okay to not maximize their income from books.
Profit sharing means that both the author and Authors Equity are incentivized to increase revenues and try to decrease costs AND to take a long-term perspective on the relationship. In a world where publishers are no longer taking most of the work and risk of marketing and selling a book, and a lot of work is outsourced, it makes far more sense for an author with a large audience to pursue something that gives them far more upside.
And this is what they make clear in their principles (bolding mine)
- Aligned Incentives: Our profit-share model rewards authors who want to bet on themselves. Profit participation is also an option for key members of the book team, so we’re in a position to win together.
- Bespoke Teams: We’ve assembled a wide network of creative talent – from within and outside publishing – that we can tap for projects based on an author’s unique goals, needs, and ambitions.
- Flexibility and Transparency: Every author brings something different to a project, so we approach every project differently. By shaping the process and strategy alongside each author, and making decisions together, we’re able to act in the best interest of that book.
- Long-Term Collaboration: Too often, even the very best publishing talent has too little time to invest in helping an author develop their ideas and their audience. This bandwidth pressure can translate into saying “no” a lot. We’re deeply committed to trying for “yes”: to giving books room to breathe and supporting individuals and teams with the space they need to think big and think differently. We’re in it from day one, and for the long haul.
Writers like Clear and Ferriss understand what it means to have creative control and know that the traditional publishing industry only exists in its current form because its always been done that way not because they have some secret knowledge.
I suspect this new venture will show that:
- You can create high quality hardcover books and have global distribution for influential writers and creators
- That there are alternatives to the traditional advance payment and that it may be far more lucrative, especially for the top influencers, writers and creators without having to compromise on quality or distribution
- That you can build an effective publishing house in the modern age without thousands of employees and expensive New York City real estate that puts authors first
Based on the number of people involved in this who are exiting the traditional publishing industry, it also shows that there is a deep dissatisfaction with the existing model from existing stakeholders as well. The founding team includes the former CEO of MacMillan, the former CEO of Penguin, the former President of Penguin, a former Editor-in-Chief of Penguin, and multiple other senior executives at top publishing houses.
Digital and the internet is changing every industry and if you think its going to spare traditional publishing, you haven’t been following how every other industry had been disrupted. I only expect more changes over the next ten years.
For an author, I think the choice between traditional publishing and self-publishing is not a binary. If you spend a decent amount of time you realize there is a wide range of options out there already. You have places like Scribe which let you retain 100% ownership and ones like Harriman House who already are running a similar model, giving authors a 50% share of profits.
What makes Authors Equity unique is that it has the backing of the #1 author in the world right now. If the system isn’t working for authors like Clear and Ferriss, not to mention the Executives in the industry already, something’s off.
Overall, I’m excited to see more experiments like this. Even though they are only planning on launching 25 books, I suspect that the 25 people they work with could have a massive ripple effect and an awakening of writers and authors that their work, especially if they are internet-native writers, is much more valuable than the traditional publishers are currently offering.