How Does Your Publisher Make Money?
If you read the publishing blogs and follow industry Twitter feeds, you’ve no doubt gathered that there’s a firestorm of controversy over Pearson, the parent company of Penguin Books, purchasing a company called Author Solutions (ASI), a well-established self-publishing company. You can read numerous diverse opinions on this acquisition and plenty of astute commentary (links at the end of the post) but here, I want to focus on one tiny aspect.
What is the most important thing for an author to understand about a traditional publisher entering into the self-publishing fray?
As it happens, I addressed this very issue over 2½ years ago on the blog (December, 2009). Much of what follows is what I said back then.
Self publishing represents a completely different business model from that of traditional publishing.
The business model of publishers has always been to make money from READERS. Readers pay their twenty bucks for a tangible product – a book. And an intangible – a reading experience. They’ll either like a book or they won’t. Either way, they’re only out their $20.
But self-publishing is different. This is a business whose bottom line is to make money from WRITERS. And that opens up a whole can of worms, because it’s no longer about $20. And it’s no longer about simply purchasing a product, knowing you might like it or you might not. Instead it’s about a writer’s lifetime of hopes and dreams. It’s about expectations that are often unrealistic. And it’s about laying down a chunk of money that’s anywhere from hundreds to thousands of dollars, with little chance of recouping it.
I think the switch from making money from readers to making money from writers is huge. It sells hopes and dreams more than it does a tangible product. It opens up the possibility of exploitation, even if the publisher’s intent is not to exploit but simply to increase bottom line and keep their doors open while giving both readers and writers want they want.
Here is the point I think authors should digest:
→ Traditional publishers make money by selling your book to consumers.
→ Self-publishing companies make money when YOU write them a check.
To me, that’s a pretty important distinction to understand.
Is your publisher motivated to sell copies of your book? Only if that’s how they make money.
Authors should be aware that when they decide to go with a self-publishing company (something I am NOT disparaging), they’re going in a whole new direction. They’re working within an entirely different business model, and THEY are the source of revenue for their “publisher.”
Does this distinction in business models concern you? Does it matter how the different publishers make their revenue? As an author, do you care?