Saturday, December 31, 2016

2017 Book Industry Predictions: Intrigue and Angst amid Boundless Opportunity

If you could see into the future, what would you do to change it?

Each year I polish off my imaginary crystal ball and attempt to divine how the boiling crosscurrents of technology, competitive intrigue, author aspirations, and reader tastes will shape the opportunities facing authors, publishers and retailers for the year ahead.

As I caution each year, the prediction game is fraught with folly.  No one really knows what will happen tomorrow, though there are plenty of clues.

Book publishing is in the grip of multiple long-term macro trends.  Like strong trade winds, these forces will fill the sails of those who can harness them while swamping those who don't.

2017 will mark a special milestone for the ebook industry.  It marks the ten year anniversary of the Kindle.  It’s also the ten year anniversary of Smashwords’ incorporation.  In early 2007, after three years of crafting our business plan, I hired our first programmer and began active development on the Smashwords platform which we launched in early 2008.

Although my prediction track record has been pretty good over the years (see the end of this post for a complete list of my past predictions), my overarching objective is not to be correct.  Instead, these predictions are meant to spark conversation and contemplation. 
From conversation comes insight.  From insight comes the opportunity for all of us to make course corrections to our publishing strategies so we can take full advantage of the exciting opportunities of tomorrow.

YOU are the captain of this wonderful industry’s destiny.  Your decisions and actions matter, because it’s the collective publishing decisions of today’s authors and publishers that will shape the future of publishing.

We either seize control of our futures with deliberate action or we allow ourselves to become victims of others’ agendas.

Predictions provide a framework around which we can all strive to better understand the opportunities faced by the indie authors, publishers, retailers, libraries, and by association, the dear readers for whom we all work to serve.

Your reactions and comments – whether in agreement or disagreement – are an integral leg in our collective journey toward greater understanding.  Please consider my predictions the start of the discussion, not the end.  I’m handing you the ball and I want you to run with it.

As you read the predictions, I encourage you to consider how each prediction makes you feel.  And then as you plot your publishing strategy for the years ahead, take actions that support the outcomes you desire, and resist the forces that run counter to your long-term interests.

Ten Years of Indie Publishing in Review

Before we get into my ten predictions for 2017, let’s take a moment to review the amazing transformational change over the last decade, and celebrate how far the indie author movement has come in such a short period of time.

Ten years ago traditional publishers controlled the means of book production, distribution and sales.  It was a print-centric world where print books accounted for 99.8% of book sales, and where publishers were the bouncers at the pearly gates of authordom.

Publishers controlled which writers graduated to become published authors, which books readers could read, which authors remained in print, and which authors would be allowed to publish another book.

Ten years ago, the biggest challenge faced by published and aspiring authors alike was access to readers at retail.  Most writers were shut out of the game.

But it’s not like publishers were sitting idly on their hands conspiring to suffocate the dreams of millions of writers, nor did they seek to exercise authoritarian control over what readers were allowed to read.  Publishers were wrestling with the challenges not all that dissimilar to the challenges every indie author faces today, such how can I make my books more discoverable and more desirable to readers so I can grow my publishing business?

Ten years ago trade publishers were releasing about 300,000 new titles per year.  Even back then, for readers and publishers alike it felt like there were too many great books and not enough time to read them.

Brick and mortar book retailers of yesteryear applied further constraint on writer opportunities, but it was not out of malice or disrespect for authors. Retailers faced their own challenges.  They couldn’t stock every book given the high cost of operating physical stores.  Shelf space is expensive.

Successful retailers managed their inventory with an iron fist.  Small indie retailers could only stock maybe a couple thousand titles, while the large box retailers could stock maybe 50,000 to 80,000.

Distribution to booksellers has always mattered.  If your book isn’t in stores, readers won’t find it.

It’s easy for us indie authors to fall into the common trap of thinking that victims of this distribution dilemma were unpublished and rejected authors.

Yet even for published authors, life was not a bed of roses.

With hundreds of thousands of new books published each year and millions of previously published books competing for precious retail shelf space, thousands of great traditionally published books and authors couldn’t achieve or maintain the retail distribution they needed or deserved.

The most successful books and authors achieved the broadest distribution, which further perpetuated their sales success.

Poor and moderate sellers faced the antithesis - a negative self-reinforcing cycle where weak sales would lead retailers to return books to publishers for a full refund within weeks of publication.  This caused the weak sellers to lose shelf space, which caused sales to drop further.  Often the first printing was the last.

If ten years ago the primary challenge facing writers was access to retail distribution, then the rise of ebooks solved that problem.

Ebooks transformed the distribution landscape by making it cost effective for online retailers to digitally stock every ebook.

Smashwords played a role in partnership with leading retailers to break down these prior distribution barriers.  When I approached retailers in 2009 about opening their stores to our authors’ self-published ebooks, I expected reticence.  After all, there was a stigma back then about self-published books.  To my pleasant surprise, they wanted to stock all our ebooks.  Barnes & Noble, Sony, Kobo and Apple were the first to sign on with us, and the rest is history.

The indie author revolution of the last decade could not have happened were it not for the visionary commitment shown to self-published authors by the major retailers.

Today indie ebooks form an essential and increasingly important part of every retailer’s inventory.

Retailers recognized then, as they do now, that their customers appreciate the greatest possible selection of books.  These retailers correctly recognized that indie authors would inject a new vibrancy to publishing by enabling new voices to serve readers with an amazing diversity of works.

In the last ten years ebooks took off.  Ebooks today account for maybe 25% of book sales, up from essentially nothing a decade ago.  In genres like romance, the percentage is much higher.

When I look back at the rise of the indie author movement the last ten years, romance authors and their readers have always led at the tip of the spear.  They were first to embrace the indie ebook publishing, the first to achieve significant commercial success as indies, and the first to pioneer many of today’s best practices for ebook publishing and promotion.

Romance authors – predominantly women – are the some of the smartest players in this business, and their readers are the most coveted and voracious.  These are the readers who often read a book a day.

Romance authors are the canaries in the coal mine.  Romance authors were first to benefit from the rise of ebooks and the first to experience the deleterious effects when the market became saturated.  They’ve also been the first to fall prey to some of the more troubling developments in the industry now affecting writers and publishers in every category.

In the last decade, hundreds of thousands of writers have joined the indie author movement, drawn by the advantages of self-publishing ebooks.  What are these advantages?  In a nutshell, indie authors enjoy faster time to market, greater global distribution, complete creative control, greater pricing and promotion flexibility, greater opportunity to serve their readers with high-quality low-cost ebooks, and the opportunity to earn royalty rates up to five times higher than what the traditional publishers pay.

Whereas the print publishing landscape remains tilted to the traditional publisher’s advantage because publishers maintain a stranglehold on print book distribution to brick and mortar stores, the ebook marketplace is tilted to the advantage of indie authors and small indie presses.

Indie authors are now a major force in publishing, and I expect indie influence to increase in the years ahead.  Today, all writers have the freedom to decide when, where and how they publish.  For this reason, in my view all authors are now indie authors, even if they don’t yet recognize themselves as such.

While many of us have celebrated the rise of the independent author, there are strong forces at play that seek to limit the power of writers, limit their distribution, and strip them of their newfound independence.

You have the power to do something about this.  Don’t be a victim.  Be a leader.

For long time followers of this blog and my annual predictions, you’ll recognize some recurrent themes below.

At this stage of the industry’s maturity, much of the industry’s developments are propelled by longer-term trends set in motion decades ago.  On the surface, the trends of 2017 are not radically different than those of 2016 or 2015, although as these trends unfold their affects will become more pronounced.

There’s inertia to some of these trends.  Like a large ocean liner, directional changes are usually slow and incremental.  It can take years for some trends to play out.  Occasionally there are shocks to the system that can cause abrupt trend reversals.

It’s impossible for anyone to discuss the future of publishing without discussing Amazon.  The industry has been locked in a contentious battle with Amazon, and the industry is losing.  Amazon plays by different rules.  Publishers are showing up for gunfights with butter knifes.

Okay, on with the party.

Ten Publishing Predictions for 2017

1.  Indie authors will continue to capture greater ebook market share in 2017 

Indies will capture a greater share of digital reading in 2017.  Factors driving this include:
  • Each year the indie author community raises its game to become more sophisticated and more professional.  Indies are learning to implement – and in many cases pioneering – the best practices that motivate readers to choose one ebook over another.
  • Indie ebook authors combine quality with lower prices, providing readers tremendous reading value.
  • Even though indie ebooks are already low-priced, indie authors have greater flexibility to lower prices further than do the large publishers.  This is a mixed blessing.  This also means indies are vulnerable to some of the greatest devaluation pressures because indies don’t wield the collective bargaining power of large publishers.

2.  The glut will grow more pronounced

Over the last few years here at the Smashwords blog I’ve talked a lot about how there’s a glut of high-quality low-cost ebooks.  These ebooks are immortal and will never go out of print.  Thanks to low-cost virtual shelf space, retailers can stock these ebooks forever – even if the books don’t sell.  Although it’s great that your book will forever occupy the shelf, and forever be discoverable and purchasable by new readers, it also means that the virtual shelves are becoming more overcrowded every day.   The major ebook retailers each stock millions of ebook titles in their online stores, with Amazon fast approaching five million titles.  Every day from yesterday forward it will become more challenging to stand out, which leads me to my third prediction.

3.  Ebooks will face greater commoditization pressures in 2017

Any time the supply of a product outstrips demand, retailers and producers differentiate their product by lowering the price.  When one product is priced less than another, the lower priced product will usually – but not always – be viewed as more desirable to the consumer.  Are $3.99 ebooks to expensive?  How about 99 cents?  How about free?  How about authors paying readers to read books, the subject of my April Fools satire on Kindle Power Bucks which is starting to become all too real?

Most authors and publishers will vehemently argue that their books are unique objects and therefore not commodities.  After all, commodities like corn or soybeans are by definition similar products, largely undifferentiated in form or quality.  Books are the unique product of author creativity, right?  The answer isn’t so black and white.

Why books are vulnerable to commoditization

If we look at why readers read books, it’s because they aspire to receive knowledge, entertainment or escapism, or all the above.  We can boil it down to “reading pleasure.”  The product of the reading experience – the pleasure – is the commodity because there are so many media forms competing to satisfy the same aspirations for pleasure – from Facebook to news outlets, to blogs, television, YouTube, Snapchat, video games, movies, theater, museums, a walk in the park, and even Wikipedia.  So while no two books are ever the same, all books strive to provide pleasure to the reader.  If there are two books of equal perceived quality, equal cover design, equally compelling product descriptions and equally trusted author brand, those two books will look quite similar to the prospective customer.  With all other things equal, price becomes the trigger for consumer action.

You’re selling a product that is ripe for commoditization.  Further exacerbating the book’s vulnerability to commoditization is the innate desperation of writers to reach readers.   Most writers write to be read.  Every writer – even New York Times bestselling authors – fret about how they’re going to reach their next reader.  They fret about how they’re going to make their next book sell as well or better than the last.

Added to this mix is a single retailer that controls about 70% of the global ebook market, and this retailer’s business model is entirely predicated upon offering its customers the greatest possible selection at the lowest possible prices.  Stop for a moment and contemplate that.  The only way for Amazon to survive is to continually lower prices, and continually attract the greatest possible selection.

To offer lower prices, a retailer must force its suppliers to constantly accept lower prices and lower margins.  This is why Amazon always opposed agency pricing, which allows authors and publishers to set their own prices. 

As one former Amazon executive told me eight years ago, “We think we’re smarter at setting book prices than publishers.”

But Amazon’s interests aren’t necessarily aligned with those of the author.  Amazon is driving ebook commodization because in commodity markets, individual sellers become powerless to set prices.

But you’re not selling a mouse-trap.  You can’t outsource your production to China.  You can’t put food on your family’s table if you become powerless to earn a fair price for your work.

There are voices that argue low prices are universally good, because lower prices increase consumption.  At best, this is not entirely true, and at worst, it’s disingenuous.  Low prices come at a cost.

If every book in the world was priced at free, there’s a limit to how many more books readers could or would read.

How do authors earn a living for the long-term when the dominant marketplace controlling access to the most readers has the power to limit your readership if you refuse to concede to their terms?

4.  The publishing industry will begin to recognize KDP Select as the cancer that it is

On December 8, 2011, Amazon announced KDP Select, an ebook self-publishing option that invited indie authors to make their ebooks exclusive to Amazon in exchange for preferential access to readers.  Most in the publishing industry failed to understand the significance of KDP Select when it launched in 2011 because most in the industry don’t even understand the difference between KDP and KDP Select.  For the past six years when I’ve had conversations with publishers, retailers, industry watchers, media, and authors outside of Smashwords, I’m often dumbstruck by the industry’s inability to parse the long term implications for every player in the industry.

Maybe I’m the wrong messenger.

I sense attitudes are shifting on KDP Select.  Authors, traditional publishers and retailers are starting to personally experience KDP Select’s effects on their bottom line.

KDP Select participants – including many former defenders – are starting to have second thoughts.  KDP Select itself has become glutted and has become rife with scammers.  Authors have witnessed how KDP Select gives Amazon the power to arbitrarily change the terms of the program at any time without notice, because they have done so on multiple occasions.

The big question is whether KDP Select has already done irreparable damage to the author opportunities.  Indie authors enabled the rise of KDP Select because the catalog is almost entirely supplied by indies.  Now many of these authors find themselves trapped in it.   Yes, they can opt out when their next three-month term expires, but for many of these authors it’ll take years to rebuild readership at other retailers.  Some of those retailers have already disappeared , and we can see KDP Select’s fingerprint as one of many contributors at the scene.  This week, for example, All Romance eBooks announced it was closing.  KDP Select didn’t kill ARe, but it was a factor.  Any ecosystem or business can only suffer so much before it collapses.

KDP Select was constructed for Amazon’s benefit.  It gave Amazon exclusive inventory, which then undermined competing ebook retailers’ ability to serve millions of customers who wanted to read these books.  Many of those customers were forced to migrate their purchase behavior and e-reading devices to Amazon, even if their favorite retailer/device combo was with Barnes & Noble, Kobo, iBooks or some other.

Many authors who moved books to KDP Select have found themselves locked into a Hotel California where they can check out but never leave.  They’ve become dependent upon Amazon.

After suffering decades living under the yoke of an inflexible and calcified traditional publishing regime before finally being liberated by the indie author revolution, should we care if authors lose their independence again?

Should you care if the dominant retailer demands exclusivity simply to make your book visible in their store?

Should we care if Amazon’s retail competitors fail, or if there are fewer strong retailers competing for the privilege to sell your books?

Should you care if all your earnings are coming from one sales outlet?

Should you or can you sleep easy if your next mortgage or rent payment is 100% dependent on your Amazon sales every month?

If you believe Amazon is a benevolent retailer whose interests are aligned with your own, then going exclusive with Amazon is the path for you.

As I’ve argued before, by any measure Amazon is not a benevolent player.  To ask Amazon to suddenly change their stripes is like asking a cheetah to become a vegetarian.

Meanwhile, every new book enrolled in KDP Select is another vote to put all the other retailers out of business.

Never mind that these other retailers through their policies and actions have shown they’re much more benevolent than Amazon.  None of the other retailers hold a gun to your head and essentially say, “Go exclusive and we’ll make your book more visible and more desirable to our customers.  Refuse exclusivity and we’ll make your book less visible and less desirable.”  None of the other retailers send authors browbeating nastygram emails threatening to kick them out of their publishing programs for the most minor of reasons, as Amazon does when currency fluctuations collide with their arbitrary pricing rules.  Heck, I even got an email from Amazon last week demanding that a New York Times bestselling author we distribute to Amazon must remove “New York Times bestseller” from her keywords, otherwise they’ll unpublish her book.

Boiling Frogs

Amazon has rolled out a continuous cavalcade of small incremental tweaks to KDP Select over the last six years, most of which have conspired to tighten the screws on author earnings and author independence.  When the program first launched, authors were paid $1.40 each time their book was read past the first 10%, regardless of the book’s list price.  For a lot of authors, that $1.40 represented a 50% pay cut or more compared to a single-copy sale.

When Amazon opened up sales to India, Mexico and Brazil, Amazon required authors to enroll in KDP Select if they wanted to earn 70% for their single-copy ebook sales in those small markets.  Otherwise, KDP authors only earn 35% list. Then Amazon changed the payment to about ½ cent per page read, and then later Amazon redefined their definition of a page, which pressured author earnings further.

In 2014, Amazon announced Kindle Unlimited, a subscription service that caused significant devaluation of books, both in terms of what readers think a book should cost, and also in terms of what authors will be paid for those books.

In 2016 Amazon announced that because some markets outside the US, such as India, can’t afford KU’s $9.99/month subscription fee, that Amazon would lower authors’ already-paltry ½ cent per page royalty.  So whereas a book read in the US might earn ½ cent per page (USD $.005), the same book read within KU in India might earn about 1/3 that, or about two-tenths of a cent per page.  By way of example, at two-tenths of a cent per page, a reader would have to read about five pages for the author to earn one penny.  A 200-page-book regularly priced at $3.99 might normally earn the author about $2.75 for a single copy sale.  The same book might earn only about 40 cents in India.  A 100-page novella normally priced at $2.99 would earn 20 cents in India.  Woohoo, 20 cents!

This is what happens when you hand a commodity retailer sole control over the price of your book and your royalty rate.  And there’s nothing stopping Amazon from tightening the screws further.  In fact, you can count upon such further downward pressures because it’s the only way Amazon can stay in business.

To understand what Amazon is doing, we need to think beyond conventional measures of reading such as pages read or books purchased.  Instead, start thinking in terms of units of reading pleasure, where one unit might equal one hour of reading time.  Amazon is on a tear to commoditize the units of reading pleasure so it's cheaper to read at Amazon than anywhere else.

KDP Select is metastasizing.  It’s wreaking the havoc I predicted six years ago and more. 

It’s fair to say KDP Select has its hand in several of the biggest trends shaping the future of publishing.  KDP Select’s exclusive club itself is now glutted and overcrowded, which means the program is ripe for further commoditization.

We can expect Amazon to impose additional tolls on authors in 2017 under the guise of marketing opportunities.  Amazon’s recently announced Kindle Ads which fit that fare.  You can now pay Amazon to advertise your book.  It’s another way for Amazon to extract margin from your sale, while disadvantaging those authors and publishers who refuse to surrender more blood.

I’m tired of talking about Amazon, but we can’t have a serious discussion about the biggest trends facing publishing without talking about the largest, smartest and most fascinating player in the room.

I know some people who’ve followed my writings over the last few years think I hate Amazon.  I don’t.  I respect their smarts and I admire the amazing contributions they’ve made to self-publishing.

6.   Large ebook retailers pushed to the brink

Over the last three years, ebook sales have been flat to down at most major retailers.  As I look at the early sales results in the first several days post-Christmas - usually the high water mark of the year - it's shaping up to be one of the weakest post-holiday ebook sales periods in several years.  B&N and Kobo will face increased pressure in 2017 as two of the highest profile and last remaining pure-play online booksellers.  By “pure-play,” I mean these two companies depend upon book sales to earn a profit and stay in business.  Amazon, iBooks and Google, however, don't need to earn a profit in the book business to remain in the ebook business.  For them, ebooks are a small but strategically important component of a content ecosystem supporting much larger profitable non-book businesses.  For Amazon, it's about selling anything to anyone.  For Apple, it's about enriching the experience of their devices.  For Google, it's about helping people find whatever they're looking for.

Over one million ebooks are now exclusive to Amazon thanks to KDP Select.  That’s over one million reasons for tens of millions of customers to stop shopping at Amazon's competitors, and a million reasons for Kindle Unlimited subscribers to never purchase another single copy ebook again.  This leads me to the next prediction.

7.  Kindle Unlimited will continue to harm single copy ebook sales in 2017

Amazon controls close to 70% of the global ebook market.  With Kindle Unlimited they’re training the world’s largest community of ebook buyers to consume books for what feels like free.  When a customer visits the book page of any book enrolled in KDP Select, they’re offered the opportunity to read the book for free as part of a Kindle Unlimited subscription, or as part of their Amazon Prime subscription.  Kindle Unlimited makes the purchase of even a 99-cent book look prohibitively expensive to readers.  How’s that for devaluation?

The Kindle Unlimited party train is leading authors over a cliff.

Whereas ebook subscription services Scribd and the dearly departed Oyster offered author-friendly subscription services where the author earned the same royalty for a subscription reader as a retail sale, Kindle Unlimited is less author friendly.

Bottom line, Amazon is encouraging its customers to read books via subscription where list price is irrelevant and it can pay the author less.

It works against Amazon’s best interests to promote the sale of single copy books, since every Kindle Unlimited subscriber represents one more nail in the coffins of Amazon’s retail competitors.  Not only will most authors see their single-copy sales diminish at Amazon in 2017, they’ll also see their sales challenged at other retailers as the power-reader customers of other retailers are drawn to Amazon’s greater selection (enabled by those almost one million+ exclusive books in KDP Select), and the ability to enjoy more units of reading pleasure per dollar at Kindle Unlimited.

8.  Many indies will quit or scale back production

I’m in daily contact with indie authors.  Over the last couple years I’ve heard from current and former bestsellers that times are tough and getting tougher.  Many are considering scaling back production or even quitting altogether.  This was one of the trends I mentioned in last year’s predictions, and my sense is that author anxiety will only increase in the year ahead.  A lot of talented authors out there are hurting and feeling discouraged.  I've heard some authors say, "let the quitters quit - it'll mean more readers for me," yet this is fallacious thinking.  Every single indie author is enriched by the participation of fellow indie authors, because every author has the power to bring more readers to the market.

9.  Industry consolidation will hit self-publishing

Self publishing has become big business.  Everyone and their dog has hung out a shingle in a gold rush to monetize writers’ desire for publication and visibility.  As self-publishers, indies assume responsibility for all the publishing roles once fulfilled by traditional publishers.  Great publishers assist authors with editing, print and digital production, translation, pre and post-publication sales, distribution to retailers, back office accounts receivables and payments, promotion, tax compliance, sales reporting and analysis, merchandising support, and more.

Thousands of service providers have popped up over the last ten years to provide these important services to self-published authors.   Retailers and distributors are service providers too. The good news about this trend is that authors can retain incredible talent for reasonable prices.  But if you’re a service provider, it’s another story.  Today the market is glutted with service providers competing for the favors of writers.  Too many cover designers, and too many cover models, editors, ebook formatters, and book publicists.  As an author, if some of these service providers drop out it will only harm you because it takes a village to publish a book.

In most industries, there are natural Darwinian forces that come to play to bring ecosystems back to a sustainable balance, and indie book publishing is not immune to these natural forces either.

In 2017 we’re likely to see increased merger and acquisition activity as large publishers, retailers, distributors and larger service providers recognize an opportunity to take advantage of the glut to strengthen their indie author portfolio and grow their businesses.  If you believe as I believe that indie authors are the future of publishing, then it starts to become clear that some form of consolidation is inevitable because the business opportunity to serve readers by serving authors and readers is so enormous.  Last year I predicted WattPad would be acquired.  I was wrong!  Or I was early.

10.   Amazon to face anti-trust scrutiny for unfair business practices

This is a long shot, but in the spirit of prediction folly I’m going to go out on a limb here.  In anti-trust law, there’s nothing illegal about operating a monopoly (where you have exclusive control over a commodity and can manipulate prices) or a monopsony (when there’s only one major buyer).  What’s illegal however, is when a company exploits their monopoly or monopsony for unfair business advantage that makes it impossible for other competitors to compete on a level playing field.

Amazon defenders will argue that Amazon is a brilliant competitor and innovator, and that those who think Amazon plays unfair should stop whining and start innovating.  But this argument rings hollow.  The other retailers have innovated, and continue to innovate.  I work with them.  I see it.  This specious argument by Amazon defenders confuses market share for commitment.  If Kobo earns authors 1/10th of what they earn at Amazon, it’s not necessarily a failing of Kobo, it’s a function of market share.  If you decide to open an indie ebook store specializing in personalized recommendations for cookbooks, the fact that you can't grow sales to billions of dollars overnight is not a failure to innovate.

One industry watcher explained Amazon’s anti-competitive business practices to me with an analogy about trains, which I’ll paraphrase and expand upon:

Let’s say you own the railroad network that connects farms to the largest marketplace (which your railroad also owns) 1,000 miles away where 70% of corn is bought and sold; and your railroad also owns some corn fields along the rail lines.  If the railroad operator decides to give its own corn first priority on shipments, then their corn will reach the market first while the corn of other producers spoils or is late to market.  If the railroad also gives its own corn preferential display in the marketplace, or if it denies other producers the option to sell under favorable terms in their marketplace, or gives them poor placement within the marketplace, then what are the other farmers to do?  Shame on the other farmers for not buying their own railroad or operating their own marketplace!
Bringing this back to Amazon, Amazon operates the world’s largest ebook retailer providing access to 70% of the world’s ebook readers.  They operate their own publishing imprints.  This means Amazon has the ability to give its exclusive titles first class priority on the train and in the marketplace, and they do.  They operate the Kindle store where all books are allowed but exclusive KDP Select books and Amazon-imprint books are given preferential store placement.  They operate marketplaces such as Kindle Unlimited where only exclusive books are available and non-exclusive books are shut out.  Shame on you Mr. Retailer or Ms. Author for failing to innovate.

This is anti-competitive and unfair, and these facts have led some anti-trust experts to conclude that the only way to solve this problem is for Amazon to be broken up into smaller, independent companies that operate at arms length.

Amazon has so far been able to skirt anti-trust scrutiny by arguing that the network they operate benefits consumers because of Amazon’s track record of lowering consumer prices for ebooks, and this is very true.

But what about the producers?  Do they have any rights?  You’re a producer, you tell me.

WHOA, Where to from Here?

Okay, so I’ve painted a stark picture for 2017.  What are you going to do about it?

First, remember that you are not powerless, despite the efforts of those who seek to beat you down and take your power.

Recognize that the collective actions of authors and publishers like you will determine the course of this industry.  If you have strong feelings about a particular future you’d like to see realized, it’s incumbent upon you and everyone you know to take a stand, organize with fellow authors and put words to action.

I realize some authors are unable take a public stand.  I’ve spoken with many of them – including many big name NY Times bestsellers – who've privately thanked me for speaking out for them, and they've encouraging me to continue speaking out.  Some of these authors have confided to me they’re unable to speak publicly for themselves.  They’re afraid of recrimination from Amazon; they’re afraid of recrimination from their friends; or they’re afraid of seeing their books carpet-bombed with one-star reviews from Amazon partisans.  If you must remain silent, I respect that.  But if you have the ability to share your concerns with your readers and author friends, whether publicly or privately, please do.  Do it for you.

Despite the challenges writers and publishers face, I continue to believe as I’ve believed for the last decade that there’s never been a better time to be a writer.  There’s never been a more exciting time to be involved in publishing.

Yes, times are challenging for writers, retailers and the rest, but they’ve always been challenging.  Keep in perspective that your opportunities today are significantly better than they were even ten years ago back in the dark ages of publishing when ebooks accounted for less than one percent of the market, and back when publisher overlords were the gatekeepers standing between you and your prospective readers.

You have the freedom, knowledge and tools to chart your own course in this industry.  You have the power to support those players that are working for you, and you have the power to resist those who are working against you.

Even in a flat or declining market, there’s ample opportunity for sales growth.  The global market for books is measured in the tens of billions of dollars.   There are millions of readers around the world ready to discover their next great read.  And thanks to the amazing free tools you have at the ready that didn't exist a mere ten years ago, you have a shot of reaching some of these readers.

How do you reach them?  It’s all about implementing best practices.  Best practices are what make your books more discoverable and more desirable to readers.  If you’re new to publishing, or if you’d enjoy a refresher on what differentiates bestselling ebook authors from poor-selling ebook authors, I invite you to check out my free ebook, The Secrets to Ebook Publishing Success.

Thanks for reading.  I welcome your comments below.

Summary of prior publishing prediction posts by Mark Coker:

2016 Predictions (Published December 31, 2015)

2015 Predictions (Published December 31, 2014)

2014 Predictions (Published December 30, 2013) and Huffington Post (Published January 7, 2014)

2013 Predictions (Published Dec 21, 2012)

2011 Predictions at GalleyCat (published Dec 28, 2010)

10-Year Predictions at GalleyCat (published Jan 4, 2010)

Check out my Smashwords Year in Review post which includes a summary of plans for 2017.  We're moving to monthly payments in February!!

Smashwords Year in Review 2016 and 2017 Preview

Welcome to my annual Smashwords year in review for 2016 and preview of the year ahead.

I want to start with a big THANK YOU to Smashwords authors, publishers, retailers, library partners, industry friends, and Smashwords employees.

Thanks to your trust, partnership and overall awesomeness, in 2017 we will celebrate our ten year anniversary in business.  Thank you for honoring us with your support, hard work and friendship.

2016 was a challenging year in publishing for anyone with a pulse and a book to sell.

The evidence is pretty compelling that most ebook retailers again suffered flat to declining ebook sales.  For some analysis regarding the driving factors behind the market conditions, check out my annual 2017 publishing predictions post, also published today  I share ten publishing industry predictions for 2017 and do a deep dive on some contentious topics.

Each year thousands of new authors and publishers join the Smashwords community, so for those of you who are new to Smashwords, welcome!  We look forward to supporting you for many years to come.

For our new friends, a quick introduction is in order before we get started.  I founded Smashwords almost ten years ago to make it fast, free and easy for writers to self publish ebooks.  Our mission back then, as it still is today, is to provide authors and small publishers with the tools, knowledge and distribution relationships to reach more readers.  In the nine years since our launch we’ve grown to become the world’s largest distributor of self-published ebooks with over 400,000 books published.

At Smashwords, we love our authors and publishers.  Many of us here are authors.  We respect your hard work and we understand the tremendous passion and commitment that makes your publishing possible.

Unlike vanity presses and even some of our contemporaries among ebook distributors, we don’t sell services, publishing packages or charge setup fees.  We don’t accept payments from authors because we think the money should flow in your direction.

We’re all about relationships at Smashwords, and I’ve always believed relationships are built on trust.  We’ll never stop working to earn and deserve your trust and confidence.

Let's get started.

Smashwords 2016 Year in Review

Business Milestones

Books published  - Smashwords now publishes 437,000 books, up 12.6% from 388,000, this same time last year.

Words published - Smashwords now publishes 15.6 billion words, up 1.6 billion from the same time last year.

Authors/pen names published - Smashwords now publishes 127,500 authors, up 10 percent from 116,000 authors a year ago.

Profitability - Despite a challenging business environment, Smashwords had another profitable year.  As I’ve mentioned in previous years, I view profitability a big plus for our authors because profitable companies are lasting companies.  As a small company, our profits are modest by any measure, but I’ve always believed we should invest as much as possible back into the business for the long term.  Smashwords is debt free and we’ve got a solid, fully funded balance sheet to cushion us and our authors against the inevitable ups and down of this hypercompetitive industry.

Library ebooks a bright light – We’ve been working the last six years to open up libraries to Smashwords ebooks, and this work is beginning to pay dividends to our authors.  We now reach most of the major library ebook platforms with OverDrive, Baker & Taylor Axis 360, Gardners UK, and Odilo.  In 2016 despite lackluster retail sales, our library business showed promising progress with good sales increases over the prior year.  Although library sales represent a small fraction of our retailer sales, I’m pleased to see the growth and I’m optimistic we can continue to grow our authors’ library business in 2017, especially as our newest partners hit their stride.

Service Milestones

Smashwords Alerts – In August we introduced Smashwords Alerts, a cool feature we’ve been developing for a long time that allows your readers to sign up for automated email alerts notifying them whenever you publish a new title.

Revamped Payment Settings Page Enables Streamlined Tax Compliance – In what was probably our biggest development project of the year, we redesigned our payment settings page.  It enables improved tax compliance for the large number of Smashwords authors and publishers who reside outside the United States.  These authors and publishers no longer need to endure the US IRS’ convoluted process for obtaining IRS-issued tax identification numbers in order to obtain the tax treaty benefits of reduced tax withholdings.  We also built and deployed systems to automate other tax compliance monitoring so authors and publishers are quickly notified if the IRS deems their tax ID information incomplete or inaccurate.

Smashwords Coupons Gain Exciting New Features – One of the most popular tools is our Smashwords Coupon feature.  For the last nine years, this industry-exclusive marketing tool makes it easy for authors to create custom coupon codes that readers, bloggers and book reviewers can redeem in the Smashwords Store.  In 2016 we made a series of exciting enhancements including the introduction of metered coupons so you can set redemption limits (for example, to increase promotional urgency, you can configure your coupon to automatically expire after you’ve received a predetermined number of redemptions).  We introduced descriptive campaign labels (makes it easier to track the performance of different campaigns), and this month we introduced another really cool feature that we haven’t even announced yet - public coupons where with a single click of a button you can publish your coupon codes directly to your Smashwords book page so readers are instantly aware of the opportunity to get a special deal.  Give it a try!

New retailer and library partners brought online – In Q4 of 2015 we announced new relationships with Gardners (a large retailer and library platform operator based in the U.K), Tolino (an operator of a large network of German retailers), and Odilo (an ebook platform for libraries).  In 2016 all of these retailers came online with our books, albeit behind schedule.  Now that these three new partners are up and running, we’re looking forward to working with them to grow sales in 2017.

Improved Dashboard – We made updates to the Smashwords Dashboard to help you more easily identify ebook cover problems that can delay or prevent distribution.   For example, cover issues are now clearly marked, at-a-glance, in the Dashboard’s Premium Status column.  And in support of the new Smashwords Alerts feature, you can also easily monitor from your Dashboard the number of customers at the Smashwords store that have favorited you and the number that have subscribed to your automated new release alerts.

Daily Sales Reports enhanced – We get great feedback on our Daily Sales reports, which presents attractive and easily customizable same-day and next-day sales charts aggregated across multiple retailers.  In 2016 we enhanced the reports to capture a full 12 months worth of sales data, a big improvement over the prior 6-month data range.  The charts make it easy to track and compare your performance across multiple retailers, and to track the effectiveness of promotional campaigns.

Retailer Merchandising ramped up – We ramped up our retailer merchandising support to make it easier for the merchandising managers at our largest retailers to identify the hottest Smashwords titles and most anticipated new releases.  By distributing a preorder with Smashwords, your book is eligible if it’s performing well.  Hundreds of Smashwords authors benefited from our merchandising collaborations with retailers this year, and all without lifting a finger other than to distribute with Smashwords.

Smashwords Enters Relationship with Happy Ever After blog at USA Today – To further support the success of our romance authors, Smashwords has formed a relationship with the Happy Ever After blog hosted by USA Today.  Each week, Smashwords will supply HEA with the “Smashwords Hotlist,” featuring a selection of our bestselling romance titles, as well as our most anticipated upcoming romance releases.  The titles are selected by the Smashwords merchandising team.  Selections based on merit as measured by aggregated sales results across our distribution network.  For a chance to make the list, publish and distribute with Smashwords so we can count your sales!  This week’s installment of the Smashwords Hotlist, fresh out yesterday, features Jamie McGuire, Quinn Loftis, May McGoldrick, Cora Reilly, Chloe Walsh, Katy Regnery writing as K.P. Kelley, Justine Elvira, Ivy Smoak and Carole Mortimer.  Check out HEA's 'Related' stories at the end of each weekly Smashwords Hotlist to view previous Smashwords Hotlists.

Smashwords Plans for 2017

In broad strokes, below is what you can expect from Smashwords in the coming year.  If some of this looks familiar to our goals for 2016 (most of which we met), it’s because some of these items below will remain persistent themes for us for many years to come:
  • Faster payment cycles – January will be our last quarterly payment round, after which Smashwords is going monthly starting in February.  Yay!        
  • New distribution to global retailers and libraries
  • New tools to help authors connect with readers
  • New partnerships with friends in the industry that share our love of indie authors
  • New enhancements to Smashwords Coupons
  • New minor and major improvements to make our tools easier to use
  • More tools to help authors manage pricing and promotions
  • More training and educational resources to help our authors tap into the full potential of best practices
  • More surprises
Thank you again for honoring us with your partnership.  When you distribute with Smashwords, you directly support our ability to continue bringing you exiting tools and relationships to help you publish ebooks with pride, professionalism and success.

Happy New Year!  We look forward to working with you in 2017.