Smashwords Year in Review 2012 - The Power in Publishing is Shifting to Authors

Welcome to my annual Smashwords year in review.

In the last 12 months, tens of thousands of new authors and publishers have joined the Smashwords community.  I welcome you.

A brief introduction to Smashwords is in order.

I founded Smashwords in 2008 to change the way books are published, marketed and sold.  I realized that the traditional publishing industry was broken.  Publishers were unable, unwilling and disinterested to take a chance on every writer. 

Today, Smashwords has grown to become the world’s largest distributor of ebooks from self-published authors and small independent presses.

The idea behind Smashwords was simple:  I wanted to create a free ebook self-publishing platform that would allow me to take a risk on every writer.  I wanted to give every writer the freedom to publish, and every reader the freedom to read what they wanted.
 

Back in 2007, we designed our logo with this revolutionary ideal in mind.  The up-thrusting fist holding the book represented our desire to transfer the power of publishing to writers and readers.  Today, we still refer to it as our “Power to the people” logo.

The revolution is now in full swing.  Indie authors know ebook self-publishing is the future of publishing.  Ebook retailers know this as well.  Traditional publishers, however, have been slow to grasp the transformative impact the self-publishing revolution is having on the industry. 

We’re entering a golden age of publishing.  The ebook self-publishing revolution will lead to a more great books being published than ever before.  More books will touch the souls of more readers, because indie ebooks make books accessible, affordable and discoverable to more people.  These books, in all their diverse and controversial glory, are cultural treasures.

Our authors know that every writer – every one of us – is special, and those who doubt this truth will become the dinosaurs of tomorrow.  You can’t truly honor the culture of books without honoring the writers who create them.  You can’t truly honor the value of books if you measure their value by perceived commercial merit alone.  You either value the human potential of all writers, or none at all.

Every day, I’m thankful that so many writers, readers and retailers have supported the cause of self-published ebooks.  Every day, I’m tickled pink that so many authors, publishers and retailers have partnered with Smashwords, because without your trust and support, we wouldn’t be here.

Unlike self-publishing services that earn their income by selling over-priced services to authors, Smashwords doesn’t sell services.  The money flows to the author.  We earn our commission only if we help sell books.  We think our approach aligns our interests with the interests of our authors and publishers.

Since most books don’t sell well, and we rely entirely on commissions, it’s incredibly difficult to build a profitable business doing what we do.  We figured out how to do it.

Smashwords highlights for 2012

2012 was another incredible year for the Smashwords authors, publishers, literary agents, retailers, libraries, and customers we serve.

Here are some of our key milestones for 2012:  

• Catalog growth:  We're ending the year with more 190,500 books at Smashwords.  98,000 new titles were added to the Smashwords catalog this year.  This is up from 92,500 at the end of 2011, and up from 28,800 at the end of 2010, 6,000 in 2009, and 140 our first year in 2008.

• More authors/publishers/literary agents choosing Smashwords:  Smashwords today supports 58,000 authors and small publishers around the world, up from 34,000 at the end of 2011, 12,100 in 2010, 2,400 in 2009, and 90 in 2008.
   
• Profitability: Smashwords has been profitable for 27 straight months, and our profitability is growing as our business grows.  We’ve done this without bringing in outside venture capital, which means we’re free to pursue our unconventional business model without the interference of outside investors.  Profitability is important, because it means we’re here for the long haul.  It means we have the resources to reinvest in our business for the benefit of the authors, publishers, retailers, libraries, and readers we serve.  Nowhere is this investment more apparent than in our staffing numbers (next item).
   
• Employee Count:  We’re ending 2012 with 19 employees, up from 13 in 2011, and 3 in 2010. This year we continued to invest heavily in customer service and software development. 
   
• Faster-Faster-Faster:  Thanks to investments in technology and staffing, we’re providing faster conversions, faster Premium Catalog approvals, faster response times to support inquiries, faster distributions to Apple, Kobo and Barnes & Noble, and faster sales reporting.  We will improve further on all counts in 2013.
   
• Libraries:  We signed new distribution deals with library aggregators such as Baker & Taylor Axis360, 3M Cloud Library and one other major aggregator not yet announced.  We added support for custom library pricing, and we introduced Library Direct to support libraries that operate their own ebook checkout systems under the Douglas County Model.
   
• Ebook Distribution Systems:  We began a complete re-architecture of our ebook distribution systems to enable faster, more accurate ebook distributions and metadata updates. 
   
• Smashwords Profiled in Forbes Magazine:  This was a big deal for us.  For the first time ever, we revealed to the world our revenues (Forbes requires that startups they profile reveal numbers).  Later in the year, we received coverage in the New York Times and Time Magazine.  The indie ebook revolution is starting to go mainstream, though I think we're all still flying below the radar.  That'll change in 2013.
   
• Improved categorization:  We completed adding support for thousands of BISAC categories to help our author's books land on the correct virtual shelf.
   
• Merchandising collaboration with retail partners:  We ramped up our merchandising collaboration with retailers, especially Apple, which has been incredibly proactive and creative in working with us to create new opportunities to connect Smashwords books with millions of their customers (See Apple’s Breakout Books promo).  We continued to build tools to help our retailers identify books worthy of promotional love, because these tools help Smashwords authors sell more books and help retailers satisfy more of their customers, which is their primary objective.
   
• Retailers earning millions of dollars from the sale of Smashwords books:  Our retail partners have made incredible investments to help list, maintain, promote, merchandise, and sell our books to their customers.  I’m pleased to say their investments are paying off.  We want our retail partners to do well with our books, because the value they provide to our authors and publishers far exceeds the sales commission they earn. 
   
• We released the Secrets to Ebook Publishing Success:  In March, I released this free ebook, which identifies the 28 best practices of the most commercially successful Smashwords authors.  It's the lastest in a series of free ebooks I've written that promote professional publishing best practices.  Along with The Smashwords Style Guide (how to publish an ebook) and the Smashwords Book Marketing Guide (how to promote any book and build author platform), my three books combined have now been downloaded over 250,000 times.  Thousands of our authors and publishers have since put these practices to work. 
• Amazon:  Our relationship with Amazon has been frustrating.  Even though Smashwords authors have the freedom to bypass Smashwords and work directly with many of our retail partners, about 80% of our authors choose to distribute through Smashwords.  They appreciate the time-saving convenience and simplicity of centrally managing their books and metadata from the Smashwords Dashboard.  Unlike every other major retailer, Amazon has not yet provided us the ability to do large, automated distributions and metadata updates.  As a result, our authors who would prefer to reach Amazon through Smashwords are forced to upload direct to Amazon.  Although I remain hopeful Amazon will one day see fit to treat us as a partner rather than a competitor to be crushed, killed and destroyed, I’m not holding my breath.  We’ve built a healthy, profitable and fast-growing business without their help, and we’ve done this despite their attempts to harm us and our retail partners.  Unlike traditional publishers which would probably go bankrupt if they stopped distributing to Amazon, we face no such noose.  In the meantime, we focus our energy on helping our true retail partners succeed in the marketplace.
• We protected your right to publish legal content:  When PayPal tried to ban certain categories of “objectional” books, we pushed back, and led a broad coalition of authors and pro-books advocates to overturn PayPal’s proposed policies.  PayPal and the credit card companies decided to do the right thing.  It was a victory for all authors, and demonstrated the growing power of the indie author movement, especially when we stick together and work toward a common cause.  At Smashwords, we’re always advocating for the rights of our authors.  Much of this advocacy happens quietly behind the scenes, outside the glare of press releases and media spotlight.  We’re all in this together.
• Smashwords Direct: Today, we released Smashwords Direct, a new publishing option at Smashwords that allows authors and publishers to upload professionally designed .epub files for distribution through the Smashwords network.  The service complements our Meatgrinder conversion engine by enabling us to support ebooks with more complex formatting requirements.

Industry Highlights:
When we started Smashwords five years ago, self publishing was viewed as the option of last resort, and 99.95 of writers aspired to publish through traditional publishers.  The stigma of self publishing that was so prevalent five years ago has given way to new credibility, as Smashwords authors top all the bestseller lists and set the example for the next generation of writers.

At the same time, we’re seeing a growing stigma develop around traditional publishers, which continue to underserve authors and readers.  Just as traditional publishers were slow to embrace ebooks before they began their breakout in 2009, publishers have also been slow to recognize the transformative impact self-publishing will have on the business of books.  Self-published ebooks still account for the minority of ebook sales, but just as ebooks will one-day eclipse print books, so too will self-publishing eclipse traditional publishing.

In 2012, some Big 6 publishers bumbled their way into the self-publishing business, starting with Pearson/Penguin’s acquisition in July of the granddaddy of vanity presses, Author Solutions (ASI).  In November, oblivious to all the screaming indie authors who called foul about the business practices of ASI, Simon & Schuster introduced its own self-publishing imprint called Archway Publishing, powered by none other than ASI, and proudly offered publishing packages ranging from $1,000 to $25,000.  Twenty-five thousand dollars?  How do they sleep at night?  By adopting the worst practices of the worst vanity presses, publishers telegraphed to the writer community what they really think about authors:  Only a few of you are worth the investment of our time, talent and resources, and the rest of you are worth only the money in your wallet.

It was a cynical move.  A move that will damage the already diminishing credibility of large, traditional publishers, even those which haven’t made such a bone-headed move. 

In my 2011 Smashwords Year-in-Review post last year, I wrote:

“I think few people in the traditional publishing industry comprehend how this indie author revolution will transform their business in the next few years. Their world is about to be turned upside down.”

They still don’t get it.  From the perspective of indie authors, it’s starting to not matter.  Publishers risk irrelevanance if they don’t adopt more progressive business policies soon.

The writing is on the wall.  Traditional publishers are earning well-deserved ridicule and stigma at the very time indie authors are shedding their stigma by blazing a better path forward.  What I tell you here isn’t pie-in-sky theory or empty pontification.  The numbers tell the story.

In 2010, it was virtually unheard-of for an indie ebook author to hit the bestseller lists at retailers, let alone the NY Times bestseller list.  In 2011, indies began to hit the bestseller lists on a more regular basis, but it was still rare.  In 2012, indie ebooks were frequently listed among the top 10 bestsellers at major retailers, and multiple indie authors landed books in the bestseller lists maintained by The New York Times, USA Today, The Wall Street Journal, and others.  For example, the week of August 4, 2012, four Smashwords authors hit the NY Times fiction ebooks list in the same week.  Next year we’ll see more, and within a couple years indies will dominate all the bestseller lists and it’ll be seen as business as usual.

Some industry watchers might label my prediction delusional.  Indie authors know it’s real because some of them are experiencing it today, and they’re sharing their results with their fellow indies. 
At Smashwords, where we distribute books to most major retailers, we see the sales numbers.  We see how our books are starting to earn more dollars than many traditionally published books.  This growth is not because Smashwords is wonderful, it’s because all writers are wonderful.  You can’t love books without loving the writers who write them.

What’s driving the rise of indie ebooks?  There are multiple factors, chief among them include:

1. Indie authors are learning to become professional publishers – Indies are pioneering the publishing best practices of tomorrow, as I note in the Secrets to Ebook Publishing Success.  They’re becoming more sophisticated publishers, and they’re starting to publish better books, priced more competitively, written more responsively to reader tastes, and more broadly distributed.
   
2. It’s a game of numbers – Although only a small fraction of indie ebooks grace the bestseller lists, the publishing output of indie authors is unprecedented.  Authors are now releasing over 9,000 books per month on the Smashwords platform.  Thanks to such democratized publishing and distribution, the business of publishing has become available and accessible to all writers, for FREE.  Writers who were previously shut out of publishing – simply because the conventional publishing business was broken and unable to take a risk on every author – are now publishing for free at Smashwords and elsewhere.  Writers who previously gave up on writing are now writing again, because every writer can now confidently begin a book and know that it will be published, one way or another.
   
   In my 2013 book publishing predictions post, I talked about how future bestsellers are like baby black swans.  They’re extremely rare, and hidden and indistinguishable amid flocks of baby black geese.  Publishers devote enormous energy trying to cull the flock and eliminate the geese, yet at the same time they’re also indiscriminately culling black swans.  Self-publishing changes this.  Self-publishing gives all writers – the geese and rare swans alike – the freedom to publish direct to their readers, today, and be judged.  Readers are the only ones capable of reliably identifying the black swans.  This shouldn’t be a surprise.  Readers have always created bestsellers through their impassioned word-of-mouth.
   
   When we analyze the future of publishing, where authors become more professional, and all books are given a chance in the marketplace, the law of numbers would indicate that it becomes a reasonable and inevitable conclusion that self-publishing will hatch more black swan bestsellers of the future than traditional publishing.  The vaunted editorial gatekeeping function of publishers, long mistakenly believed to be a public service, has become a public disservice.  At the end of the day the smart folks in publishing can only guess at what readers want to read.  Publishers have long been in the business of throwing spaghetti against the wall, and then retroactively taking credit for the few books that become bestsellers.  Now writers can throw their own spaghetti, and when it’s cooked just right, the author can take the deserved credit.
   
3. Retailers welcome indie ebooks – Retailers have been true enablers in the ebook revolution.  Ever since 2009, every major retailer has welcomed self-published ebooks.  These retailers have collectively invested hundreds of millions of dollars to bring readers to their stores, and these readers are purchasing these books.  Retailers and authors alike are earning millions of dollars for their efforts, which makes it a win-win for retailer and author.
   
4. Ebook Self publishing is simply a superior method of publishing – Ebooks cost less to produce, package and distribute than print books.  There’s no inventory, and therefore no returns of unsold inventory.  With a traditional publisher, it often takes 12 months or more before the book is released.  With indie ebooks, the book is published instantly to a worldwide market.  The indie author enjoys greater creative freedom, a closer relationship with their readers, the ability to earn 85-100% net as opposed to the paltry 25% of net paid by publishers, and the ability to price lower - which has the virtuous effect of driving greater sales volume, faster platform-building and greater author profits.  Unlike the static print books of yesteryear, ebooks are living creatures.  Indie authors can leverage Viral Catalysts (see my Secrets ebook for more on these) to make their books more available, more discoverable and more enjoyable.  Unlike print books, most of which quickly go out of print, Indie ebooks need never go out of print.  Ebooks are immortal.
   
5. Reading is moving to screens – Ebooks as a percentage of the overall trade book market will reach about 30% in 2012, up from 19% in 2011, 8% in 2010, 3% in 2009, and 1% in 2008.  Within two years, ebooks will account for over 50% of book sales.  As noted in my 2013 predictions, I predict that the number of books read on screens will exceed the number read on paper in 2013.  If authors want to reach readers, indie ebooks are the fastest, most efficient method of doing so.
   
6. The global opportunity – The ebook retailers expanded their global footprint in 2012, and will expand further in 2013.  This means an author in Columbia can upload their book to Smashwords today and see that book available for sale in the Apple iBookstore in their home country in a matter of days.  And because that book is written in Spanish, it’s also available in the world’s largest Spanish-speaking markets across North, Central and South America (and Spain too!).  Authors can publish locally and reach readers globally.  This kind of global publishing and distribution simply wasn’t feasible under the old print model.
   
7. Stigmas of traditional publishers increasing as self-publishing gains street cred – Many Smashwords authors now publish direct to their readers and don’t even bother to shop their books to agents and publishers.  At multiple writers’ conferences this year, I lost track of the number of times authors approached me and said words to the effect of, “I’ve been waiting for years to get picked up by a publisher.  I’m done waiting.  I’m going to self-publish and get out there now.”

What's Coming to Smashwords in 2013?

At Smashwords we consider our business in constant beta.  Every day we’re tweaking our business processes and technology to make everything we do faster, more reliable, more scalable, more efficient and more competitive.

In 2013 we will continue to invest in people and technology to better serve our authors, publishers, retailers, and libraries.

Here’s a brief sampling of what you can expect from Smashwords in 2013:

• Discovery – We’ll improve our metadata to make our books more discoverable by readers.  One such example is series.  Currently, we don’t offer an elegant method of identifying books in a series.  You’ll see this in 2013.
  
• Retailer Merchandising – We’ll continue building tools, processes and relationships that give Smashwords-distributed books increased visibility to the merchandising managers at the major ebook retailers.  By serving our retailers, and helping them identify Smashwords books that are worthy of extra in-store promotion, many of our authors will enjoy merchandising advantages not available to other authors.
  
• More Distribution – We’ll continue to create new distribution opportunities for our authors and publishers.  We believe the more high-quality retailers promoting our books to readers, the better. 
  
• Faster Distribution – In 2011, we shipped books to our retailers once per week.  In 2012 we began shipping multiple times daily to Apple, once-daily to Kobo, and twice-weekly to Barnes & Noble.  In 2013 we will continue to work with our retail partners to allow faster shipments and faster metadata updates.  This will give authors greater control over their distribution.
  
• Faster Reporting – We provided faster sales reporting in 2012, compared to the previous year, but we still have much improvement to make, both in speed and schedule consistency.  We will continue to make incremental progress here in 2013.
  
  
• Faster Premium Catalog Approvals – Six months ago Premium Catalog approvals took up to 13 days from the date of upload.  Today approval times range from 1-5 days.  We will continue to add staff and technology to improve the speed of reviews so your books can reach retailers faster.
  
• Improvements to Smashwords Store – When people tell us the design of the Smashwords store is so circa 2000, we take it as a compliment because we think they’re being generous by at least a decade.  The Smashwords web site user interface is outdated.  We’ve neglected the design and customer experience of the Smashwords store, in favor of investing our limited resources on the distribution side of our business where we generate over 90% of our revenue.
  
  2013 is the year we will give the Smashwords store a facelift, not because we have designs on becoming a large ebook retailer (well, actually, we already are, even though that’s not our focus), but because we think an updated site will help us attract more books and more customers that we can feed to our retail partners.  In 2013, expect to see us start adding links to some of our retail partners, so the millions of visitors to the Smashwords site can enjoy greater freedom to purchase our books and support our authors at their favorite ebook retailers.  Although an individual ebook sale at Smashwords earns the author a higher royalty than a book sold at our retail partners, a book sold at our retailers brings a multiplier advantage, because it drives their “also bought” algorithms.  Put most simply, our retailer partners with their broader customer reach have the ability to turn each sale into more sales than we can at the Smashwords site.
  
• Improvements to Smashwords Direct – As I write this, Smashwords Direct has been operational for about one day.  We’ll make multiple iterative improvements to Smashwords Direct in 2013 because we want to make it as easy as possible for Smashwords to become the ebook distributor of choice for as many authors and publishers around the world as possible.
  
• Expansion of “Mark’s List” – A couple of years ago, we created a simple auto-responder email (email to list@smashwords.com) that contains a list of recommended, low-cost ebook formatters and cover designers.  When you hire off of this list, all your money goes straight to the service provider performing the work.  We don’t receive a commission, advertising fee or kickback of any sort.  This means you gain access to valuable services at the lowest possible cost.  Most of the providers are fellow Smashwords authors.  We’ll expand the list in 2013 to contain more service categories.  The application process will be announced at Smashwords Site Updates as we open up the list to more providers.  There may be some surprises, but I’ll save that for another time.

My thanks to you

I want to express my sincere appreciation to every Smashwords author, publisher, reader, retailer, literary agent, service provider partner, and angel who has supported Smashwords over the last few years.  I want to especially thank authors who continued distributing their books through Smashwords despite the inevitable growing pains experienced by both Smashwords and our retailers.  Those of you who left and are considering returning, I thank you too.  Your support of Smashwords – especially your decision to distribute through Smashwords – is what fuels our ability to serve the greater community of all writers around the world.

Although I’m excited by what we’ve accomplished thanks to your talent and support, I’m even more excited by the future that lies ahead of us.  I still believe we’ve only scratched the surface of what’s possible.  I believe that within five years, the majority of bestselling ebooks will be published by self-published authors, and I want those authors to be Smashwords authors.  Help me realize this, because working together we can create a better future for writers, readers, retailers, libraries, and all those who contribute to the culture of books.

Happy New Year and safe holidays.  Peace to all.

Smashwords Supports EPUB Uploads With Smashwords Direct

One year ago in my 2011 annual year-in-review here at the Smashwords Blog, we committed to support direct EPUB uploads to the Smashwords platform in the second half of 2012. 

Today we fulfilled that commitment with the launch of Smashwords Direct.  

This new capability allows our authors and publishers to upload their own professionally formatted EPUB files for sale at the Smashwords store, and for distribution to the Smashwords retail distribution network.

This first iteration of Smashwords Direct supports two methods of direct EPUB upload:

1. You can replace your Smashwords-generated EPUB with your own EPUB.  To do this, click to your Dashboard, then click "Upload New Version," then upload your file. 
   
2. If you're preparing to publish a new book not yet at Smashwords, sign in to your Smashwords account, click the regular Publish link, then fill out the publish page as  you would normally, but upload your EPUB instead of a Word .doc.  Later, if you wish, you can add more ebook formats to your book page by uploading a Word .doc, formatted to the Style Guide.

EPUB files uploaded through this new Smashwords Direction option must still adhere to the formatting best practices listed in the Smashwords Style Guide.  Books will still be reviewed by our vetting team before shipping out to our retailers.

Smashwords Direct has some important limitations compared to our standard Meatgrinder workflow.  For example, when fed a Word .doc file, Meatgrinder converts the book into as many as nine different ebook formats, making it readable on any e-reading device, and ready to be sampled both through our two browser-based formats or a downloadable file.  If you upload an EPUB instead of a Word .doc, you won't get the multiple formats (PDF, MOBI and browser formats are most important), nor will you get the downloadable samples.  At least not yet.  We do plan to add better sampling later, plus the ability to upload your own PDFs and MOBIs.

To overcome this limitation, you can upload your book as a Word .doc file first, formatted to the Style Guide, and then replace our EPUB with your own (assuming your EPUB is higher quality).  This way, you'll have the major formats covered.

You'll find the latest documentation for Smashwords Direct here:  https://www.smashwords.com/swdirect   This is a public beta, so we invite interested Smashwords authors and publishers to begin using it and reporting their feedback direct to the email address, beta@smashwords.com.

Over the weekend, we sent out a call for sample files over at our Site Updates page to assist with our internal alpha testing, and multiple authors helped out.  Thank you!

A few observations from our tests:

• Smashwords authors and publishers are using multiple workflows to create their .epub files.  Their workflows are as unique and varied as the writers themselves!
  
• Smashwords authors and publishers are using various (and often multiple) tools to create their epubs.   Some of the tools mentioned include Adobe InDesign, Nisus writer pro, OpenOffice, Jutoh, Atlantis, Epubmaker, LibreOffice, Writer2epub, Scrivener, HTML, Sigil and Calibre.  HTML, Sigil and Calibre were the most often cited among the suppliers of our first test files.
  
• Nearly 1/3 of the files failed EPUBCHECK validation.  Yikes!  The Apple iBookstore requires 100% compliance.  None of the other retailers do.  This means that a large percentage of people are using non-compliant EPUBs that will need to be repaired by the author (or their service provider) before we can add the files to our Premium Catalog.  Because the authors are using so many different workflows and tools to create their files, our support team will be unable to assist with EPUBCHECK validation repairs.  Our standard Meatgrinder conversion system, which relies upon Word .doc source files formatted to the Smashwords Style Guide, performs a lot of magic to auto-correct many common EPUBCHECK errors without the author's intervention, and we've long offered an EPUBCHECK help page for how to repair other common sources of problem from within Microsoft Word.
  
• If the book says "Kindle Edition" or "Kobo Edition," we can't distribute it.  This is your Smashwords Edition.  Similarly, if the book contains buy links to Amazon or other retailers, we can't distribute it.  The Style Guide has a complete set of guidelines, most of which are common sense and will improve reader experience, or as with the above examples, prevent customer confusion.

Smashwords Direct will allow us to support ebooks that contain richer, more sophisticated formatting than is supported through our standard Meatgrinder process.  That's the idea, at least. Some of the sample files we received were beautiful, and contained features such as drop caps or nested NCX navigation that we don't support in Meatgrinder.  This made us happy, and validated our decision to support this.

On  the other hand, we observed several .epub files that were no better (and some worse) than what the average Smashwords author is already creating with Meatgrinder.  The high rate of EPUBCHECK failures illustrates just one problem.

Meatgrinder has been vilified and demonized over the years, despite its proven ability to produce high-quality ebooks.  Although Meatgrinder's not perfect, some of the criticism has been unfair.  Many authors have needlessly avoided Smashwords out of misplaced fear. 

One author volunteered that they'd heard such horror stories of Meatgrinder from their publisher that they kept their books off of Smashwords for that reason.  That's really unfortunate, both for the author and Smashwords, because the vast majority of Smashwords authors have received professional-quality results with Meatgrinder.  Our Meatgrinder-generated Premium Catalog books are pleasing millions of readers each month with rarely a complaint.  Our retailers have told us in the past that our books have dramatically lower failure rates (measured in the fraction of a percent) compared to others.  This tells me many authors who have avoided Smashwords out of misplaced fear have unnecessarily missed out on up to five years of sales and platform-building opportunity.  I suppose if there's a silver lining to the launch of Smashwords Direct, it's that maybe we can help writers do the right thing (achieve full Smashwords distribution) for the wrong reason (availability of Smashwords Direct).

Another author, upon us presenting him with the list of EPUBCHECK errors (these errors read like gobblygook to anyone who's not an HTML expert!) decided he was going to go back to Meatgrinder, even though the name unnerved him. 

We have never claimed Meatgrinder to be the be-all, end-all of ebook publishing tools.  We created Meatgrinder as a low-cost automated means to the ends, where the ends are to help any writer, anywhere in the world, publish a quality ebook at zero cost.  The only tool they needed was a word processor.  If they couldn't afford Microsoft Office, a free word processor works great too.

I still expect that most authors will continue to choose Meatgrinder over the Smashwords Direct option.  Meatgrinder does great for the vast majority of books readers are actually buying, and the Style Guide shows how to incorporate sophisticated styling for those who need it.  For the books that require even more sophistication, we now have a solution in Smashwords Direct.

In the end, we don't care which option our authors and publishers choose.  We want our authors and publishers to have the freedom to choose what method is best for their book.

Our #1 interest has always been to facilitate the release and distribution of indie ebooks, and do it at the lowest possible cost for our authors and publishers.  We're excited that Smashwords Direct will enable us to better support the distribution needs of current and future Smashwords authors and publishers, and we're excited that many of these books will contain professional-quality formatting that is above and beyond the capabilities of Meatgrinder. 

We also look forward to working more closely with the community of professional ebook designers. We view them as valued service providers who can offer authors an upgrade path for the books that need it.

The next step is up to you!

Quick links:
Smashwords Direct documentation:  https://www.smashwords.com/swdirect
Smashwords Style Guide: http://www.smashwords.com/books/view/52

Apple iBookstore Sales Surge Over Christmas Holiday

Apple today reported sales for the recent post-Christmas period.

Santa was generous to Smashwords authors at the Apple iBookstore.

The chart at left shows daily unit sales.  Sales the day after Christmas surged 76% from the same day a week earlier.  Sales for December 27 increased 65% over the same period a year ago.

This data is aggregated for over 125,000 Smashwords titles at Apple, so it gives a good representation of the overall strength of the store.  Each author's individual performance will vary.  Bottom line, there are more iPads, iPhones and iPod Touches in the world today than one week ago, which means your books just became that much more available, discoverable and purchasable by new readers.

The chart at left shows Smashwords unit sales at the Apple iBookstore for the last 24 months.  If previous seasonal trends stay true, we'll see a record December, followed by a strong January, and then sales will moderate but probably settle in at a stepped-up level compared to October or November.

Congrats to Smashwords authors who remained fully distributed this holiday season, and thanks to our friends at Apple for their great support of Smashwords authors, publishers and literary agents.

Mark Coker's 2013 Book Publishing Industry Predictions - Indie Ebook Authors Take Charge

It’s that time of year when book people make their predictions for the year ahead.  I bring you, my dear reader, my epic predictions for 2013.

I say "epic" tongue in cheek, because I went a bit overboard this year. When I sat down to write this, I was thinking of maybe eight or ten predictions with short narratives.  I'm bringing you 21 predictions with expansive narratives.  Skim the headlines then read what grabs you.

All of us in this business, from writers to readers and everyone in between, have a vision for where things are going. 

Vision is an odd thing.  To see something which doesn’t exist either makes one a prophetic seer or a delusional nut.  At the wonderful Pikes Peak conference in Colorado Springs earlier this year, I had the pleasure to meet Donald Maass, an author and top tier literary agent for whom I have much respect.  I attended a surprising session in which he trashed self-publishing.  The mood in the room changed from optimism to dejection when he spoke words to the effect of, “If you don’t care to reach readers, then by all means self-publish.”  I was floored by his comment, because it’s not what I expected from someone of his smarts.  I’ve met with dozens of literary agents over the last 18 months, and 95% of them see things differently than Donald Maass.

When I saw him later that night at a dinner, I told him I thought he was underestimating the transformative impact self-published authors will have on book publishing.  He looked me in the eye, smiled, and said, “and I think you’re delusional.”  Touché!  I think it was one of my favorite moments of the year.  One of us will come to our senses eventually.

We are all on a journey.  None of us know with absolute certainty what happens next.  All we can do is position ourselves for the future we prophetically or delusionally imagine.  History will judge us all.  Those who position correctly will be rewarded.  Those who aren't prepared will face the harsh realities of the future marketplace.

Every one of us holds the power to change the course of history by taking actions today that enable the future we desire.  Our actions mirror our aspirations, which means the future of publishing will be determined by our collective and sometimes competing aspirations.  Readers are our gatekeepers.

I challenge you, my dear writer, publisher or reader, to take charge of your future.  Imagine a brighter and better future ahead, where the culture of books reigns supreme, where more people are discovering, reading, purchasing, publishing, selling, and profiting-from books.  Imagine a future where more readers than ever before will enjoy a greater diversity of books than ever before.  Imagine a future where the power center of the publishing business shifts from traditional publishers to ordinary writers where it belongs.  This is the future I imagine, and it’s the future we’re working to realize at Smashwords on behalf of our 50,000 authors and publishers around the globe. 

The utopian and often self-serving aspirations of industry participants don’t always intersect.  Sometimes, objectives are at odds with one another, and at other times objectives are aligned.  Our experiences, biases and fears color our perceptions, and sometimes distort them.

Much is at stake.  The world's 50 largest book publishers alone achieved $68 billion in sales in 2011, according to Publishers Weekly. When so much money and power is up for grabs, industry players have a lot to fight over, and much to protect.  Books are worth fighting for, so fight for the future you want.  Otherwise, someone else may determine your future for you.

When I started Smashwords almost five years ago, I felt I had a clear vision for how ebooks could transform book publishing for the benefit of authors, publishers and readers.  I positioned Smashwords and its services to serve self-published authors and small publishers.  Although I believed we could build a large business helping authors publish and sell ebooks, I had no idea our revenues would grow so slowly in our first year, 2008, when our revenues totaled under $1,000.  In early 2009, I had no idea that by the end of the year, we'd fundamentally change our business from that of simply a publishing platform to that of ebook distribution. Although I believed in ebooks, I had no idea the market would develop this fast.  When I first started working on the Smashwords business plan, ebooks accounted for less than one quarter of 1% of overall US trade book sales.  Although I believed self-published authors deserved to become future bestsellers, I had no idea that so many would hit the bestseller lists so quickly. I definitely had no idea that less than five years after starting Smashwords, we'd be supporting the e-publishing and distribution efforts of so many authors, small publishers and literary agents.  None of us can truly predict the future, but we can still prepare for it by remaining flexible.  We must be willing to roll with the punches when fate tries to smack us upside the head, and adjust our course and our beliefs when we make mistakes.

My crystal ball gets murkier from here on out, and for reasons you might not expect.  The doubters like Donald Maass are becoming the exception, not the rule, and that worries me.  When everyone starts swimming in the same direction and believing the same group think, that’s when I start wondering about what comes next.  It's the job of any entrepreneur - and we are all entrepreneurs of our own destiny - to prepare for the future while surviving today. 


My 21 Book Industry Predictions for 2013:


1.  In the US, ebooks sales will reach 45% of US trade book market

Ebook sales growth in the US is slowing, but we’ll still continue to see ebooks take eyeballs from print books.  Brick and mortar retailers will reduce shelf space for print as more readers turn to screens as their new paper of choice.  Ebooks as a percentage of overall trade book sales in the US should hit 45%, up from what I’m estimating will probably be 30% in 2012.  I might be underestimating both numbers.  It’s tough to find reliable market share data.

2.  Follow the eyeballs:  2013 will be the first year unit volume of ebooks exceeds print

The dollar sales growth of ebooks understates the profound shift to ebooks and screen reading.  2013 will be the first year more books are read on screens than on paper.  To really understand the seismic shift toward screens, follow the eyeballs.  Ebooks cost less than print books.  The price of ebooks is declining, which means that the dollar sales growth cited above understates the increase in unit sales volume, and unit download volume.  Furthermore, the data doesn’t measure free downloads.

Here’s a newsflash, and you’re reading it here first: Smashwords authors are generating about 3 million downloads at the Apple iBookstore each month, for books priced at FREE.  Annualized, that’s over 36 million downloads. I expect we’ll do more in 2013.  My 36 million number doesn’t include the millions of readers our authors are reaching each month across Barnes & Noble, Sony, Kobo, the Diesel eBookstore, Page Foundry, Blio, the Smashwords.com store, and at public libraries. Our authors are building platforms and fan bases at a faster rate than many traditionally published authors.

When customers have the option to purchase two books of equal quality, and one is priced at $2.99 and the other at $10+, our data indicates the books generate essentially the same amount of dollar sales, but the $2.99 price yields six times as many unit sales.  If you’re an author, and you have a the option to earn the same earnings at $2.99 as $10+, but at $2.99 you’ll build your platform six times faster, what price is the right price?  It's a no-brainer.

Indie authors are leveraging the agency model, earning royalties of 60-70% list.  This allows them to price lower, earn more per-unit at lower prices than traditionally published authors selling at higher prices, and all while the lower prices help them sell more units and build author brands faster than authors stuck with traditional publishing deals.  Tell me again why authors of the future will want to hobble their careers working with a big publisher that over-prices their work, starves them of readers, and pays per-unit royalty rates of 25% net when indies are earning triple to quadruple that when they self-publish?

3.  The current glut of books will become even more pronounced

Even before the indie ebook revolution, there was a glut of books.  There are simply too many great books worth reading, and not enough eyeballs or hours in a lifetime to read them all.  2013 will remind us we haven’t seen anything yet.  Thanks to the increased awareness and street cred of indie ebook publishing, and free online tools like Smashwords that make ebook publishing fast, free and easy, the next generation of writers is realizing they need not bow subservient before the altars of publishing gatekeepers ever again.

Smashwords authors are publishing direct to their readers and achieving global distribution.  This is leading to a surge of new titles that never stop coming, and never go out of print.  In 2013, self-published ebooks will swamp the titles put out by traditional publishers.  This is good for the future of authors, readers and publishing.  We’re in the early stages of a full scale publishing renaissance.  Readers now have access to an amazing diversity of high quality books.

Some industry participants – some authors included – fear this glut, because they think it’ll either increase competition or decrease discoverability.  Yes and no.  More high-quality titles than ever will be released, because the barriers to publication have been eliminated.  Readers will discover the best books and propel them forward through word of mouth.  More poor-quality books than ever will also be released, and these books will be summarily ignored by readers, reviewed poorly, and will fail to spark word of mouth.  Yes, competition will increase, but so will author opportunity, because more readers than ever will be reading ebooks.

4.  It’ll get tougher to sell books

The easy days are behind us.  In the next few years, I expect millions of out of print books will come back to life as ebooks.  Millions of writers will self-publish new titles.  The virtual shelves of online ebook retailers will expand to accommodate a limitless supply of ebooks.

In the early days of self-published ebooks when there were fewer books to choose from, the act of making your book available in the ebook format helped you reach a lot of readers.  In 2013, authors will face more competition for reader eyeshare.  Most of that competition will come from fellow indie authors.

Indies, as a collective organism, are become more knowledgeable, professional and sophisticated in their publishing.  They're pioneering the best practices of tomorrow.  All authors will need to up their game. That means more professional editing, more professional cover design, broader distribution, smart pricing, and more books.  Unlike their static print counterparts of yesteryear, ebooks are living, dynamic and immortal creatures.  You can upgrade your ebook to make it more available, accessible and enjoyable to readers at any time.

5.  Publishers, in search of Black Swans, will lose authors to self-publishing platforms

Publishers are in the business of selling books, not publishing books.

The dirty business of publishing is simply the means to the bookselling ends.  The publishing industry has always been built around a model of scarcity and exclusivity.  Publishers want to acquire and publish only those titles they think have the greatest commercial potential.  They reject all the rest as riff raff, and then they carefully meter out their chosen books in seasonal catalogs.

Publishers have built barriers – let’s call them dams and dykes and parapets – to protect against the hordes of aspiring writers seeking publication.  Publishers require writers to work through agents, who are charged with identifying titles publishers will want to publish.  Many top-tier agents reject 5,000 authors for every author they sign on.  Publishers still reject many of the agented books as well.

Big publishers see the great unwashed masses of aspiring authors as a problem, and these walls insulate them from the problem.  Publishers are simply unable to take a risk on every author.  They realize most of these books don’t have strong commercial potential, and on that count they’re correct.

Publishers devote tremendous energy and expense trying to build barriers to hold back the flood, but in the process of rejecting the riff raff they’re also rejecting the unrecognizable future breakouts.  These breakouts are the Black Swans of publishing, to borrow a term popularized by Nassim Nicholas Taleb, author of The Black Swan: The Impact of The Highly Improbable.  As described by Taleb, a Black Swan event is unexpected, unseen, unanticipated, improbable, and unpredictable.  When it hits, it turns everything upside down and changes the world forever.

Since most books fail, we can think of a true breakout book as a Black Swan event.  The newly hatched Black Swans are invisible to the publisher because they're hiding in a sea of baby black geese.  By sheer luck, numbers and some skill, Publishers pick out a few of the swans, but miss the others.  Only the full marketplace of readers can reliably identify the black swans. In the dark ages of publishing, prior to five years ago, the baby swans were culled by publishers, denied any chance to reach readers.  How many great classics have been lost to humanity simply because publishers missed the black swans?

This philosophy and attitude among large publishers that “most authors are a problem” and are unworthy of publishing is deep-seated.  Yes, most authors don’t sell well.  Most authors published by big publishers don’t sell well either, and therefore are unprofitable to publishers.

The secret to capturing the Black Swans is to embrace all authors.  It’s what we do at Smashwords.  I created the Smashwords publishing platform so I could take a risk on every writer, the swans and geese alike.  We believe every writer is special, every writer has a right to publish, every book is valuable to the world regardless of commercial potential, and only readers can determine what’s worth reading.  We don't sell services.  We earn a small commission only if we help sell books.

Until publishers learn to honor, respect and embrace every writer, unequivocally and independent of perceived commercial merit, they’ll continue to lose the Black Swans to Smashwords, and they'll continue to disenfranchise writers.  Publishers can’t embrace authors with platitudes.  To succeed at self-publishing, the publisher must learn to embrace authors in a way that the publisher’s interests and author’s interests are properly aligned.  Proper alignment is only possible if publishers help authors sell books, and if the money flows from publisher to author.  If money flows from author to publisher, that publisher is a parasite. 

6.  Overall ebook prices will decline, though author brands will retain pricing power

It’s simple economics.  Excess supply of books, unlimited supply of alternative non-book media forms, and limited supply of reader eyeballs means that the producers of books – authors and publishers – will continue to compete on price.  When quality is equal, price is one of the dominant levers (convenience and selection are the other two) that drives consumer behavior.

Will book prices fall to zero as authors and publishers compete for readers?   No.  But authors and publishers must compete against free.  Luckily, what writers write is completely unique.  This unique creation has value, and if it’s desirable to readers, and the perceived desirability outweighs the price, readers will pay.  Readers will favor trusted author brands.  That means your opportunity as a writer is to build your brand.

7.  Passive discoverability trumps other book marketing methods

Most books don’t sell well, even when backed by expensive marketing.  It’s really tough for authors to earn a return on their marketing investment.  Many marketing service providers will happily take thousands of dollars in fees, yet deliver few sales.

Authors need a better solution, and part of that solution is to recognize that marketing isn’t quite as important as most people think it is. Marketing is a catalyst, not a fuel.  The book, and the customer's reaction to that book, is the fuel. In the year ahead, authors and publishers will place increased attention on passive discoverability.

Passive discoverability is all about making books findable by readers. The secret is to apply viral catalysts, a term I introduced and describe in detail in The Secrets to Ebook Publishing Success.  A viral catalyst is something that makes a book more available, discoverable, accessible, and enjoyable to readers.

Think of your books as an object, and attached to the object are dozens of dials and levers (the viral catalysts) you can twist, turn and tweak to make your book more available, discoverable and enjoyable.  When you get the combination just right, reader word of mouth kicks in and propels your book sales forward.

Think of these viral catalysts as beacons that are working 24 hours a day, 365 days a year, to broadcast your book’s virtues to readers looking for a book just like what you published. The beacons will shine on ebook retailer shelves, and readers will discover them through retailer-operated merchandising systems, search engines, reader reviews, and social media hyperlinks.  By leveraging viral catalysts for passive discoverability, your book becomes findable forever. 

8.  Tablets will become the new paper as E-Ink becomes niche product

In the brief history of ebooks, 2012 was the first year that dedicated e-reading devices saw a unit volume decline, even though overall ebook consumption continued to grow.  The cause?  Readers are showing a preference for multi-function tablets like the iPad, according to a report released this month issued by iSuppli.

In 2013, this trend is likely to continue as readers are drawn to tablets, and these tablets become faster, better and cheaper.  It's unclear how this will impact ebook sales.

On the one hand, as books become woven into the hyperlinked fabric of the Internet, books will become more available and discoverable to more people, even to people who aren't looking for them.  On the other hand, these tablets are media consumption devices, which means books will once again have to compete against an ADHD-inspired array of alternative media consumption options.

With dedicated e-reading devices, such distractions are less prevalent.   E-Ink devices won't go away because they still provide compelling advantages for many consumers.

9.  Global will be the biggest story of 2013 for indie authors

The market for English-language ebooks outside the US will eclipse the US market in 2013.

As I predicted above, in the US, ebooks as a percentage of the overall trade book market will probably reach about 45% in 2013, up from approximately 30% in 2012, 19% in 2011, 8% in 2010, 3% in 2009, and 1% in 2008 (these are AAP numbers, with 2012 and 2013 my personal estimates).

This means that while the US market is still growing, the growth is slowing.  Ebooks broke out first in the US market.  Now they’re breaking out internationally as other countries enter the exponential phase of growth for their ebook markets.

Indie authors have a similar ground floor window of opportunity to become big fish in the small pond of these fast-growing markets, like the early indie ebook authors had in the US market in 2008 and 2009.  And like the market of 2008 and 2009, larger publishers were slow to enter the party.  Today on the global front, they’re struggling to overcome decades of legacy territory rights practices that have hamstrung their ability to distribute ebooks to all countries.  They’ll get there soon.

As an indie author, you can get there now.

The rise of global also means that authors should modify their marketing to become more world-aware.  Each store in each country has its own reviews and its own web page addresses.  A great review at Apple or Amazon in the US is invisible to customers shopping in their UK stores (Amazon provides a link in their UK store to view additional reviews in the US store, though US customers aren't given a link to view reviews from other Amazon stores).  Each store in each country represents its own micro-market, and your opportunity is to build fans everywhere. On your blog and website, start providing direct hyperlinks to the different stores operated by each retailer in each of your primary countries. Outside the US, English-language authors will do best in Australia,  the UK, Canada, and New Zealand, but you'll still sell into other countries.  Your social media marketing on Facebook, Twitter or on your blog will cross most international boundaries.

10.  Amazon, Apple, Barnes & Noble and Kobo will redouble global expansion efforts

It’s a land grab.  In 2012, all the major ebook retailers expanded their global operations.  Amazon is now in about 10 countries.  The Apple iBookstore is operating stores in 50 countries.  Barnes & Noble entered the U.K. in 2012, and will probably make 2013 the year it goes completely global.  Kobo has always had an international focus, and following its acquisition by globally-minded ecommerce juggernaut Rakuten in Japan, I expect more global expansion from them in 2013.

11.  Apple iBookstore will be the breakout story of 2013 ebook retailing

With little fanfare, the Apple iBookstore dramatically expanded its international reach in 2012, starting the year with iBookstores in 19 countries and ending the year with 50 countries - far outpacing the global expansion of other retailers.  Internationally, iBookstore sales surged on the strength of explosive growth in iPads and iPhones, and with readers showing preference for multi-function devices over single-purpose e-readers.

For the month of November 2012, sales of Smashwords-distributed titles at the Apple iBookstore more than tripled compared to the same month a year ago, a growth rate that exceeded the growth at other retailers in the Smashwords distribution network.

Despite the fantastic growth at Apple, many authors still treat Apple as an afterthought compared to the bigger book retailing brand of Amazon, and to some extent Barnes & Noble.  It's not uncommon for many authors, in their email signatures, blogs, websites, and other social media networks to link only to their books at Amazon.  This is a mistake because when analysts start estimating ebook market share for 2012 in 2013, I think Apple's growth will turn heads.

The growth of the Apple iBookstore is inextricably linked to the growth of Apple devices, such as the iPad, iPad Mini, iPhone, and iPod Touch.  If sales of these devices continue to surge, the iBookstore will enjoy above-market growth rates.  Apple's primary competitors, Amazon and Barnes & Noble, both offer competing tablets, which, although lower priced, are starting from a disadvantage in that they don't have the hardware and software design experience of Apple, or the same fanatic brand loyalty.

It's interesting to think that the winner of the ebook retailing wars may be the company that designs the best e-reading devices. Screens are the new paper.

As 2013 progresses, keep an eye on market share data for the different tablet platforms.  If the recent iSuppli data is correct, and if tablets continue to take market share from dedicated E-Ink devices, then the market share numbers will serve as a leading indicator of which retailer is gaining advantage in the ebook marketplace.  Two days ago, an industry analyst at Pacific Crest Securities came out with a report that said his channel sources have provided him data that led him to conclude that the Kindle Fire tablet is selling more poorly than he expected as buyers choose Apple devices instead.  If true, it could be a turning point.

Ever since launching the iBookstore in early 2010, Apple has been aggressively adding content and capabilities to their store, and has expanded its global footprint faster than any retailer.  Despite their progress, they maintain a low key public profile when it comes to touting their growth and accomplishments.  I'm not sure why they've taken this low-key approach.  Apple keeps their future plans close to the vest.

Apple has always been supportive of indie authors.  They pioneered the agency pricing model, which dramatically increased author earnings over the industry's conventional wholesale model.  Agency pricing puts pricing decisions in the hands of authors and publishers, where it belongs.  It's counterintuitive to some, but the agency model actually leads to price reductions.  It gives authors greater flexibility to compete on price, and earn more at lower prices compared to what they'd earn under the old wholesale model.

Apple's global merchandising team is impressive.  They're customer centric.  They're giving our authors a seat at the merchandising table.  They've been more proactive than any other retailer at promoting Smashwords titles, both individually and within larger creative promotions, such as the Breakout Author promotion that happened in Australia and New Zealand featuring thousands of Smashwords authors.

Apple's pro-indie merchandising efforts have paid big dividends for Apple. These books are getting great reviews from Apple customers.  Our books are selling.  Smashwords titles routinely grace the top 10 bestseller lists at Apple iBookstores around the world.  Apple's earning millions of well-deserved dollars selling our books, and that makes me happy.

2013 will be the year people start paying fresh attention to Apple.  Thanks to Apple's success, indie authors will gain increased credibility and respect in the publishing industry.

 
12.  Amazon’s global ebook market share will decline

Amazon deserves immense credit for catalyzing the ebook revolution.  Although Sony beat Amazon to market with a solid e-reader, Amazon helped put ebooks on the map in a way that no other retailer could.  In the process, they’ve helped create livelihoods for many writers who previously faced few options.

That said, Amazon’s star could dim in 2013, even as its ebook business grows.  Amazon’s ebook sales volume will grow significantly in 2013, but their global market share will decline amid increased competition from well-funded competitors such as Apple, Barnes & Noble, Kobo, and others.  We’ve seen it already in the US market.  A few years ago, Amazon held about 90% market share in the US.  Today, thanks to the rise of its competitors, Amazon’s market share has dropped to somewhere around 60% (Amazon doesn’t disclose its numbers, so the industry is left to guess the true number).

Amazon also faces a backlash from authors, publishers and partners who have grown weary of Amazon’s heavy-handed business practices.  Amazon’s a fierce competitor and a brilliant strategic player.  They play the game of chess like few others.  Every move today is calculated based on its impact five years from today. By making moves today to exploit opportunities that don't even exist yet, they have shown an uncanny ability to outflank and outmaneuver their competitors.

Amazon's potential undoing, however, is greed and bullying.  They don’t just play to win, they play to grind their competitors into bloody submissive pulps.  They also have a more expansive, more inclusive definition of their competition than any other ebook industry player.  Amazon’s working to vertically disintermediate everyone that stands between the content producer (the author) and the content buyer (the customer).  In a cover story in Fortune Magazine this month, writer Adam Lashinsky notes that a favorite Jeff Bezos aphorism is "Your margin is my opportunity."  That attitude may come to haunt Amazon in 2013.

If Amazon could invent a system to replace the author from the equation, they’d do that too.  Actually, it's already happening, though not directly by Amazon's hand.  One innovative publisher, ICON Group International, has patented a system that automatically generates non-fiction books.  Over 100,000 of these titles are now for sale at Amazon, according to this story at Singularity Hub.  As the field of artificial intelligence increases, how long until novelists are disintermediated by machines?  It's a preposterous idea worthy of science fiction.

But maybe it's not so preposterous after all.  Amazon has already shown a willingness to replace one author with another.  Witness their KDP Select program, announced one year ago, which encourages authors to remove their books from Amazon’s competitors.  The opt-in program aims to remove indie ebooks from the shelves of its retailer competitors, while at the same time making participating authors more dependent upon Amazon.  By providing favorable sales advantage to those who opt in to their exclusivity program as compared to KDP authors who don’t opt in, they’re punishing their own non-participating KDP authors by providing KDP Select books preferential discoverability over non-participating books.

As Amazon enters new markets, as they did this year with India and Brazil, they’re making KDP-Select participation a mandatory requirement if authors want to earn the full 70% royalty rate which is otherwise standard in other Amazon territories, and standard at other retailers (and without the corresponding exclusivity strings attached).  If you don’t opt in, you earn only 35% in these emerging countries.

Exclusivity works to Amazon’s advantage, but for the author it’s a crapshoot.  From the author’s perspective, exclusivity carries with it a set of knowns and unknowns, placing authors in the difficult of position of playing Russian Roulette with their careers.  The author can’t accurately predict or measure what they’re giving up by going exclusive (though based on what I’m seeing, KDP Select authors are harming their platform building in other channels), but if they don’t go exclusive they don’t know what KDP Select benefits they passed up. 

For some authors, Amazon’s attempts at exclusivity speak to their worst fears about the company.  Despite the criticism and bad will generated by these policies, Amazon soldiers on, doubling down on its exclusivity strategy.  Either we’re witnessing Amazon making a strategic blunder, or Amazon sees a future none of the rest of us see.  A future where Amazon's the dominant controlling player and any author who wants to reach readers will be forced to do so under the thumb of Amazon’s rules, which are already the strictest and most vigorously enforced in the industry.  Time will tell.

I think Jeff Bezos is brilliant, and Amazon is a great company, though I think they’d be better served if they dropped a bit of their crush, kill, destroy, turn-to-bloody-pulp attitude.  It’s a high risk strategy that will either work well for Amazon, or it"ll blow up.  At a minimum, Amazon’s “everyone is my competitor” attitude encourages its potential partners, like Smashwords, to pursue fruitful relationships with other kinder, gentler partners.

Amazon's actions, such as their controversial Price Check app, have revealed their intentions to do to all brick and mortar retailers what Wal Mart did to Main Street America.  Competitors such as B&N (next item below), now have an opportunity to strike mutually complementary partnerships with companies that won't partner with Amazon.

13.  Barnes & Noble will rise again like a Phoenix

Barnes & Noble is the Rodney Dangerfield of ebook retailing.

Industry watchers have been predicting the demise of B&N for a few years.  Premature causes of death were said to be the rise of Amazon, or the DoJ or EEC’s anti-agency rulings, or B&N’s slow global expansion, or their poor cash position.

In 2012, B&N received a $300 million cash infusion from Microsoft, and entered the U.K. with an innovative brick and mortar strategy backed by 2,500 retail outlets.  This strategy can’t be easily replicated by Amazon because retailers are rightly wary of inviting the Amazon fox into their brick and mortar hen houses.

B&N, by comparison, has a broader palette of synergistic and welcoming partners to choose from, because unlike Amazon, B&N isn’t hell bent on vertically disintermediating the retailing of all physical and digital goods in the universe.  B&N hired a new global chief, and now stands ready, I predict, to execute an aggressive global expansion in Europe and elsewhere, in symbiotic partnership with allied retailers, that will solidify B&N as one of the top global brands for e-reading.

14.  In the self-publishing gold rush, more money will be made in author services than in book sales

With the shift to self-publishing, writers must carry the publishing burdens once borne by traditional publishers, such as the cost of editing, proofing, book production, packaging, and distribution, as well as backoffice tasks such as accounts receivable, accounts payable and year-end tax reporting.  Third parties are building businesses to serve the needs of indie authors.  Most indie ebooks sell poorly at first, so it’s not uncommon that writers will invest an amount of money in their books that far exceeds their near term return.

This is a problem.  Writers want to publish books that reach readers, but to reach readers they must produce books that are as good or better than what the big NY publishers are putting out.  This means writers must invest time and talent in their books, and if outside talent is required, it usually costs money.  With this burgeoning demand for professional publishing services, thousands of service providers will open up virtual author services shops in 2013.  The challenge for writers is to procure the highest quality services at the lowest cost.  Plenty of scamsters and over-priced service providers will be standing by to help.

The smart Kristine Kathryn Rusch, blogging on December 12 in a posted titled, Writing Like it's 2009, likened what happening today to a gold rush:

Here’s the thing: From 2008-2010, e-publishing on the early e-readers was a gold rush. And if you look at the history of any gold rush, you’ll see a familiar pattern.

A few people hit it big in an unexpected way. They make a small fortune.  They broadcast the news of that fortune, and then hundreds, if not thousands, of people follow. They hook their horses to their wagons, drop everything, and head to the land of riches, expecting to become millionaires with very little work.

And what happens? Millionaires. Hundreds of them. Only those millionaires don’t get rich panning for gold. They open the supply shops, they serve food to the miners, they supply blue jeans and work boots and equipment, hay for the horses and rooms to rest in at night.

It’s not a coincidence that S&S [Simon & Schuster] has opened up an expensive do-it-yourself shop in indie-publishing land. It makes perfect sense. Think of S&S as the chain hotel who heard that there was a fortune to be made by offering rooms to miners who are too tired to pitch their own tents.

There’s gold in them thar hills, folks. And the gold is for business people who know their way around a profit-and-loss statement.

By the way, scammers always show up in the middle of a gold rush. Scammers know they can make a fortune off the ignorant. We’re in the scammer/chain hotel phase of this gold rush.

I think Rusch nailed it.

How can writers protect themselves?  I have two recommendations:

1.  Pinch Your Pennies - As I write in Secrets to Ebook Publishing Success, pinch your pennies.  As a self published author, you're the publisher.  You're running a business.  The lifeblood of a business is profit, because profit generates cash.  If you run out of cash, you go out of business.  Since profit equals sales minus expenses, and sales are difficult to predict and often minimal, it's important to minimize expenses.  DIY as much as possible, especially when you're starting out. Invest your sweat equity (your time and talent) first.  If you can't afford editing, barter for editing, and leverage beta readers.  Once you start earning a profit, then carefully reinvest.  Never borrow money to finance your ebook publishing adventure. Never spend money you need to pay the mortgage or to put bread on your table. 

2.  Work directly with the individual providing your service - When you hire professionals (cover artist, editor, proofreader, marketing pro), hire the professional directly, so your money goes straight to them, and not to some author services firm who will farm the job out to someone then mark up the fee several-fold.  At Smashwords, for example, we have a free autoresponder email service called "Mark's List," where I maintain a list of low-cost ebook formatters and cover designers (send an email to list@smashwords.com), with prices starting around $50.00 (that's all!).  You're hiring the freelancer directly.  We don't get a referral fee, listing fee, commission or kickback, which means you're getting the service at-cost, as low as possible, and your money goes directly to the service provider you choose.  Most of the service providers are fellow Smashwords authors.

Writers beware.  This brings me to my next prediction.

15.  Pearson/Penguin/Random House/Simon & Schuster will either cut bait on Author Solutions or ride this anchor to the bottom of the sea

In 2012, Pearson, the parent of Penguin, acquired Author Solutions (ASI), an author services company backed by Bertram Capital, a private equity firm in Silicon Valley.  Author Solutions maintains a less-than-stellar reputation, right alongside fellow vanity publishing posterboy, PublishAmerica.  Blogger Emily Suess  has been running a series of damning posts for months at http://blog.emilysuess.com/tag/author-solutions/ where she exposes ASI’s business practices.

Author Solutions is a provider of over-priced author services, and that’s about the kindest description I can share.  They earn 2/3 or more of their income selling over-priced services to authors, and these services are of nebulous value and invariably print-centric.  According to Publishers Weekly, ASI's ebook sales accounted for only $1.3 million, or 1.3% of their $100 million in revenue for 2011, and that was with a staff of about 1,600 employees, 1,200 of whom are in the Philippines, where the bulk of their work is performed.  By contrast, Smashwords will do around $15 million in ebook sales in 2012 with 1/100th the staff.

Author Solutions is not in the business of selling author books to readers.  Instead, they’re in the business of exploiting the dreams of newbie authors who don’t know better.  Pearson/Penguin’s acquisition of ASI left me befuddled.  Although Pearson/Penguin was smart to recognize that self-publishing represents a tremendous growth area, their acquisition of ASI – a company that helped put the “V” in Vanity – demonstrated an utter disregard for the best interests of writers.  It demonstrated a deep-seated cynicism that valued the money in authors’ pockets ahead of good business ethics.  Newbie writers who don’t know better are easily exploited by the heavy-handed sales tactics of ASI, as so aptly documented by Emily Suess.  Yes, Pearson/Penguin can make money with ASI.  But it’s blood money.   With the acquisition of ASI, Pearson/Penguin made the decision to become a blood sucking parasite.  The indie author community raised a stink when the news came out.  Did publishers listen?

The acquisition placed Pearson/Penguin in an inextricable pickle.  As I blogged in July in my post titled, How a Traditional Publisher Could Harm a Writer's Career, if they want their $116 million acquisition to pay off, they’ll have to continue the same author-fleecing services and business practices, and by doing so they’ll tarnish the once sterling Penguin brand.  In the proudest tradition of the great publishers, money should flow from book buyers to publisher to author, not from author to publisher.  If Pearson/Penguin decided to clean up the act of ASI, they’d find themselves facing a print-centric business model that doesn't help authors, and the specter of huge operating losses due to what is likely ASI’s $100 million operating expense overhead.  It’s a lose/lose situation, no matter how Pearson/Penguin proceeds.

But wait, there’s more.  On October 29, 2012, Pearson announced a deal that will help it divest itself of Penguin, and along with Penguin, the newly acquired ASI albatross, by merging it into a new joint venture with Bertlesmann’s Random House division.  Soon, to borrow a phrase from Douglas Adams, ASI will become “Somebody Else’s Problem” when Random House gains majority ownership over Penguin/ASI.  You'd think Random House would have been paying attention to the bad smell surrounding ASI.

And yet there’s more. Another Big 6 publisher was asleep at the wheel.  Despite all the author community outrage over the ASI acquisition, less than a month later, on November 27th, Simon & Schuster decided to launch its own self-publishing “imprint” called Archway Publishing - sporting a logo that proudly advertises it's powered by none other than Author Solutions.  They're going to sell publishing packages priced up to $25,000.   $25,000?  How could Pearson/Penguin/Random House/Simon & Schuster make such a massive series of blunders?  Do they really have so little respect for writers?  The pattern is very disappointing for those of us who want to see the big publishers survive and thrive.

16.  The Big 6 will become the Big 4 as bean counters take over the farm

Warning:  I get a bit wonky with financial acronyms at the end of this one (that's what I get for going to business school).

Pearson, the UK media conglomerate parent of Penguin, and Bertelsmann, the German media conglomerate parent of Random House, agreed to merge Penguin and Random House into a joint venture in 2013, pending regulatory approval.  I think the union will produce an ugly baby.  The convoluted financial details contain a circus of financial machination hula-hoop acrobatics and if-then-what variables that only their proud investment banker parents could love.

The merger’s benefit to authors, or to the employees of the publishers, is less clear.  Ostensibly, the merger would give the larger combined firm more negotiating leverage against the channel, and specifically Amazon.  I don’t buy that, unless they’re willing to pull their books from Amazon.  Amazon will either laugh in their face and say no to their demands, or will say yes while it continues developing direct relationships with authors, thereby neutering publishers by denying them the sustenance of future authors.

Within a couple of years, it'll be game over for publishers who think they can push the channel around, because there will be hundreds of thousands of other high-quality indie-published books to take their place. I had a conversation earlier this week with a smart publishing industry veteran who told me, "Publishers created Amazon, so I don't know why they're acting so surprised now."

What the merger really says is that the shareholders, parent companies and executives of Big 6 publishers are starting to view their catalogs as no- or low-growth assets to be milked, when in fact they should instead be focused on growing the farm for future harvests. I expect them to eventually saddle the operation with more debt (their merger press release contains an option for that very outcome), and then merge and eliminate redundant operations (lay off employees in HR, finance, editing, marketing, sales, distribution, merge or eliminate imprints) to reduce costs so they can make the debt servicing expenses.

Each of the publishers is sitting on a goldmine of back catalog, ready to be milked. Perhaps the investment bankers will push a path forward for some publishers to stop or reduce their publishing exposure altogether, and instead become asset manager custodians of their backlists.  They can abandon big print runs, move to POD, digitize their lists, focus on distribution and marketing, cut back on new title acquisitions, impose stricter reversion clauses upon authors so digital books never go out of print, and harvest the profits that will come from the reduced operating expenses of not having to be a publisher.  Although this would create an insanely profitable business for their shareholders and debt holders, it would also mark a capitulation of sorts.

None of these moves help authors at a time when authors want more support from their publishers, not less.  It also limits employment opportunities for the brain trust of passionate book lovers who work at the big publishers, and who now risk having their livelihoods eliminated in the name of “strategic realignments” and other unpleasant euphemisms for lost jobs.

Expect the remaining Big 4 to get frisky with the mating and M&A dance. I also wouldn’t be surprised to see one or more of the remaining Big 4 acquired by private equity firms.  Private equity firms typically acquire operating companies with mostly borrowed cash, and then saddle the company with debt.  With little of their own money invested, the private equity firms generate high  ROE – return on equity, even when the company's profits drop under the weight of debt servicing obligations.

They’ll cut costs to raise EBITDA, another favorite and dehumanizing finance metric that stands for Earnings Before Interest, Taxes and Depreciation.  Finance folk love EBITDA as a tool to determine how much debt they can load on a company before they choke it to death with debt payments.  More debt means higher ROE, but if they pile on too much debt, the company dies.  Think of EBITDA calculations as a form of auto-erotic asphyxiation administered by bean counters.  It's a risky business.  These financial metrics, when abused, are dehumanizing and will sap the soul of publishers.  Watch out, bean counters are in control now.


17.  Stigma of Big 6 (or Big 4 or Big 3) publishers will increase as prior stigma of self-publishing evaporates

The stigma of self-publishing is disappearing.  Each week, indie authors are hitting the ebook bestseller lists at all the major ebook retailers, as well as lists maintained by the New York Times, USA Today, Wall Street Journal, GalleyCat, and Digital Book World.  A year ago, this was rare.  A year from now, it’ll be commonplace.  The future bestsellers of tomorrow are the indie authors of today.  Indie authors are poised to take more market share in 2013 as the next generation of writers turns its back on traditional publishing.

Five years ago, back in the dark ages of publishing, self-publishing was seen as the option of last resort.  It was seen as the last refuge for failed authors.  Publishers controlled the printing press, the access to distribution, and the knowledge to professionally publish, which made authors entirely dependent upon publishing gatekeepers.  Today, these three elements of professional publishing are fully democratized.

Indie authors now have the tools to publish faster, smarter and more effectively than traditional publishers.  Many indies are publishing books of equal or greater quality than what’s put out by large publishers. Indies are pricing more aggressively, and as a result they’re building bigger platforms faster than many traditionally published authors who are now disadvantaged.  As ebooks continue to take market share, and as physical brick and mortar shelf space disappears, the allure of traditional publishers will fade further.

At the same time the stigma of self-publishing evaporates, the stigma of traditional publishing is increasing.  Authors are questioning what big publishers can do for them that they can't already do on their own.  Authors are realizing, as mentioned earlier, that the traditional publisher business practices (high prices, slow release schedules, limited marketing support, etc) can actually harm a writer's career.

Traditional publishers are also showing themselves skilled at adding their own self-inflicted injuries.  Traditional publishing's cynical misadventure into vanity publishing will stain the reputation of all big NY publishers, even those that haven’t made the same mistakes.  That's sad, because I think the world of books would be better off if we could maintain a healthy and vibrant ecosystem of large publishers in addition to smaller ones.

18.  EPUB 3 will disappoint

EPUB 3, ratified in October 2011 as the next generation of the popular open industry EPUB file format, is likely to see slow and disappointing adoption in 2013.

The new standard offers a range of promising benefits, such as improved book navigation, improved language support, support for fixed format books, more sophisticated metadata management, and improved support for multimedia.  Unfortunately, such promised benefits come at a cost to authors, publishers, device makers, distributors, ebook stores, and consumers in the form of increased complexity, new workflows and questionable backward-compatibility between EPUB3 books and prior reading systems.

If the marketplace concludes that the benefits of EPUB 3 outweigh the costs, it’ll gain traction in the marketplace.  Otherwise, we'll either see slow adoption,  increased file format fragmentation, or proprietary file formats if major retailers decide they can support these next-generation capabilities more effectively on their own, outside the purview of the IDPF standard-setting body.  If EPUB 3 increases production complexity for authors, publishers and the digital supply chain, we could also see a decline in the number of titles released.  As a member of the IDPF, the standards-setting organization that manages EPUB, we support standards, though I do have cost/benefit concerns about the transition. 

19.  Ebook subscription offerings will face uphill slog

In 2012 there was a wave of promising startups talking about creating the “Spotify of Ebooks,” or the “Netflix of ebooks.”  I admit, at first the notion of an all-you-can-read smorgasbord of reading material held appeal to me.  I’m always interested to consider new models of book distribution that help us achieve our overall mission of connecting our authors with readers.  However, as the year progressed and new subscription hopefuls came to the fore, I found my enthusiasm waning.

Ebook prices are declining as authors and publishers compete on price.  Indies have released thousands of high-quality books priced at FREE, more than any voracious book lover could ever read in a lifetime.  Traditional publishers are dropping their ebook prices to become more competitive – even independent of the DoJ’s ill-conceived crackdown on agency publishers.  Ebooks are already free or dirt cheap, and likely to become cheaper as big publishers drop their prices, so the potential advantages of an all-you-can-read buffet are diminishing.  The challenge for some enterprising entrepreneur is to find a method of connecting books to readers that’s more effective and profitable than what the major retailers are already doing, and that’s a tall order because the retailers are doing an awesome job.

20.  Indie authors poised to capture a growing percentage of library ebook market
Libraries are the forgotten stepchildren of the publishing industry, yet they operate 230,000 public library buildings across the globe where patrons come to find, read and enjoy books.  Libraries purchase hundreds of millions of dollars worth of books each year, making books available and discoverable to all readers.  They promote a culture of reading among readers which benefits the entire publishing industry, and they're where millions of readers first discover their new favorite authors.  Libraries are engines for book discovery and consumer retail purchases.

Traditional publishers have been wary to distribute ebooks to libraries, for fear that library ebook sales will cannibalize publishers' ebook and printbook sales through traditional retail channels.  As a result, many publishers refuse to sell to libraries, or will sell to libraries under onerous terms.

Publishers' refusal to provide adequate ebook support for libraries has created a window of opportunity for self-published authors, and it's a window we're looking to pry open even further in 2013.  In 2012, we signed distribution deals with the leading library aggregators.  We launched Library Direct, which this month alone will sell and deliver nearly $200,000 worth of ebooks to libraries.  Self-published authors will find their books in greater demand in 2013 as libraries implement ebook checkout systems. 

21.  Indie ebooks will start driving more film & television projects

Books have long been a popular source of material for film and television producers.  A proven bestseller means that audiences find the story compelling, and this increases the appeal to film and television producers for a couple of reasons: 

1.  A successful book creates a built-in audience more likely to want to view the film or television derivative.   

2.  A successful book helps lower the risk to the film or television producer because the story has already proven itself an audience-pleaser in the marketplace.

A film or TV deal is great news for the author and publisher, because it sells more books.  It helps more prospective readers discover the story or want to read the story again. The dynamic between publishers and film and television producers is not perfect, however.  Most books come out 12 months or later after the publisher acquires it, so if a book is sold to film or television before publication, the film/television producers face the risk that they begin production only to learn later that the story didn’t resonate with readers.

If you believe that indies are the future of publishing, and that the world’s best and most commercially successful future stories will come from indies, then it’s inevitable indie authors will begin to fill the production pipelines of film and television producers.  Indie authors – not hamstrung by the slow book release schedules of traditional publishers – are reaching the market instantly with stories better tuned to audience desires.  Indies achieve instant market feedback in the form of sales data, reviews and retailer bestseller rank.  Expect many indie ebooks to be optioned for film and television in 2013.  Maybe one or more of the 9,000+ titles uploaded to Smashwords in the last 30 days will find its way to a theater near you.

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Thanks for reading.  I think this was my longest post ever.  Believe it or not, I had other predictions I left out regarding the ebook supply chain, retailer-operated publishing platforms, and more.  There's too much.  Back to work now.  Prior to year-end, I'll do a Smashwords 2012 year in review.


Just for kicks, here are couple of my past predictions:
2011 Predictions at GalleyCat by Mark Coker (published Dec 28, 2010)
10-Year Predictions at GalleyCat By Mark Coker (published Jan 4 2010)

Did my crystal ball miss anything?  Please add your own predictions below.