No one buys books

🌈 Abstract

The article provides an in-depth look at the publishing industry, based on insights gathered from the trial between the Department of Justice and Penguin Random House's proposed acquisition of Simon & Schuster. It covers key aspects of the industry, including:

🙋 Q&A

[01] Bestsellers are Rare

1. What is the approximate number of authors across the industry who sold more than 500,000 units during a four-year period? According to the CEO of Penguin Random House US, the approximate number of authors across the industry who sold more than 500,000 units during a four-year period was about 50.

2. What percentage of books sold fewer than 2,000 copies, and what percentage sold less than a dozen copies? The DOJ's lawyer found that 90% of the 58,000 titles published in a year sold fewer than 2,000 copies, and 50% sold less than a dozen copies.

[02] Big Advances go to Celebrities

1. What percentage of titles earn an advance over $250,000? According to a partner at Bates White Economic Consulting, 2% of all titles earn an advance over $250,000. The Publisher's Marketplace says it's even lower, with less than 1% of authors receiving advances over that mark.

2. What percentage of advance spending by publishing houses goes to titles that earn advances over $250,000? According to Nicholas Hill, titles that earn advances over $250,000 account for 70% of advance spending by publishing houses. At Penguin Random House, the bulk of their advance spending goes to deals worth $1 million or more, which is about 200 deals per year.

[03] Franchise Authors are the Other Big Category

1. What percentage of the 60-65 books Putnam publishes per year are from repeat/franchise authors? According to the SVP and Publisher of Putnam, a good portion of their 60-65 books per year are from repeat/franchise authors that they regularly publish every year, sometimes twice a year.

[04] Publishing Houses Pay for Amazon Placement

1. Does Penguin Random House hire data scientists to try and improve their books' visibility on Amazon compared to competitors? Yes, according to the CEO of Penguin Random House, one of the many efforts they pursue is hiring data scientists to try and improve their books' search results and visibility on Amazon compared to competitors.

2. Does Penguin Random House pay Amazon to improve their search results? Yes, the CEO of Penguin Random House confirmed that they, like other publishers, can use Amazon Marketing Services to pay Amazon to hopefully improve their search results.

[05] Books Don't Make Money

1. What percentage of books with advances of $250,000 and up never earn out their advance? According to Nicholas Hill, 85% of the books with advances of $250,000 and up never earn out their advance, meaning the royalties earned never covered the cost of the advance.

2. What percentage of a publisher's top 10% best-selling books sell around 300,000 copies in a year? Madeline McIntosh, CEO of Penguin Random House US, stated that the top 10% of books they publish sell around 300,000 copies in a year.

[06] Amazon is the Biggest Threat to the Industry

1. Are publishing CEOs concerned that Amazon will favor Penguin Random House and Simon & Schuster in terms of promotion, distribution, and discoverability? Yes, the CEO of Macmillan Publishers expressed concern that Amazon could favor Penguin Random House and Simon & Schuster over other publishers.

2. Why does the CEO of Simon & Schuster believe Amazon as a publisher of books is underestimated? The CEO of Simon & Schuster believes Amazon as a publisher is underestimated because they have access to data on what people are buying, and their bestseller list is more important than the New York Times list because it's updated hourly.

[07] A "Netflix of Books" would put Publishing Houses out of Business

1. Why do publishing house CEOs think an all-access subscription model like "Netflix for books" would be bad for the industry? The CEOs believe that if the 20-25% of heavy readers who account for 80% of industry revenue had access to all books through an all-access subscription, it would drastically reduce the overall revenue pool for the publishing industry, leading to the demise of physical retail and dependence on a few tech companies.

[08] Authors are Getting More Independent

1. What examples are given of authors successfully bypassing traditional publishing? Examples include romance authors moving to self-publishing, Colleen Hoover publishing both through a publisher and independently on Amazon, and bestselling author Brandon Sanderson raising over $42 million on Kickstarter to self-publish his novels.