My valued neopatrons called my attention to this viral Substack post by author and editor Elle Griffin. In it, she shares facts that came to light in the US government’s recent suit against oldpub giants Penguin Random House and Simon & Schuster.
The main takeaway is that publishing house representatives called to testify spent their time on the stand shooting holes in oldpub’s own business model.
Related: The Big Four
In 2022, Penguin Random House wanted to buy Simon & Schuster. The two publishing houses made up 37 percent and 11 percent of the market share, according to the filing, and combined they would have condensed the Big Five publishing houses into the Big Four. But the government intervened and brought an antitrust case against Penguin to determine whether that would create a monopoly.
The judge ultimately ruled that the merger would create a monopoly and blocked the $2.2 billion purchase. But during the trial, the head of every major publishing house and literary agency got up on the stand to speak about the publishing industry and give numbers, giving us an eye-opening account of the industry from the inside. All of the transcripts from the trial were compiled into a book called The Trial. It took me a year to read, but I’ve finally summarized my findings and pulled out all the compelling highlights.
Related: Oldpub Cope
And those highlights vindicate everything that newpub pioneers like Joe Konrath and Dean Wesley Smith have been saying for over a decade.
The DOJ’s lawyer collected data on 58,000 titles published in a year and discovered that 90 percent of them sold fewer than 2,000 copies and 50 percent sold less than a dozen copies.
Related: No Future for Oldpub
Hill says titles that earn advances over $250,000 account for 70 percent of advance spending by publishing houses. At Penguin Random House, it’s even more. The bulk of their advance spending goes to deals worth $1 million or more, and there are about 200 of those deals a year. Of the roughly $370 million they say PRH accounts for, $200 million of that goes to advance deals worth $1 million or more.
Keep in mind, that 70 percent of advances goes to 1-2 percent of authors. Yet only 20 percent of those authors earn out their advances. Because 4 percent of books earn 60 percent of oldpub’s profits. And along with perennial backlist sellers from decades—sometimes centuries, or in the case of the Bible, millennia—past, those unicorn titles are what keeps those pricey Manhattan offices’ lights on.
Related: No Gatekeepers Where There Are No Walls
A charge levied against legacy publishing from newpub authors alleged that oldpub did little to promote new authors and help them build brands—not enough, at least, to justify publishers’ 85 percent cut of the royalties. Now we have top corporate officers admitting as much under oath.
Q. Would you agree that those type of authors, meaning the ones with the built-in audience, are also authors who would command a high advance if they went to a traditional publisher like Macmillan or PRH?
A. That’s a broad brush. But, yes…
Q. And you’re willing to pay more if they have a significant following?
A. Yes.
— Donald Weisberg, CEO, Macmillan Publishers
Related: One Foot in the Grave
But all of the above could be deduced by anyone with a sharp eye and a clear head. An even bigger admission confirmed newpub’s educated speculation about oldpub’s love-hate relationship with Amazon.
Every second book in America, ballpark, is being sold via e-commerce…Amazon.com has 50 million books available. A bookstore, a good independent bookstore, has around 50,000 different books available… an algorithm decides what is being presented and made visible and discoverable for an end consumer online. It makes a huge difference.
— Markus Dohle, CEO, Penguin Random House
Related: Why Amazon Failed
And it gets even better. Newpub authors have long suspected that Amazon’s algorithm has become a payola scheme. Now we have proof.
Q. Penguin Random House has hired data scientists to try and figure out these algorithms so that its books get better presented on Amazon than its competitors’ books?
A. One of the many efforts that we pursue, correct.
Q. And Penguin Random House pays Amazon to improve its search results?
A. There is something that is available to our publishers, it’s called Amazon Marketing Services, AMS, and all publishers can spend money and give it to Amazon to have hopefully better search results.
— Markus Dohle, CEO, Penguin Random House
Related: How Amazon Cut Your Royalties Under Your Nose
“But indie authors can do their own ad spend with Amazon,” you may object. And while that’s true, the ad algo runs on a bid system. And there is no way you can outbid subsidiaries of multibillion-dollar megacorps. Yet oldpub is riding the tiger. Because while they’re dependent on Amazon, Amazon does not need them. And could unleash a book apocalypse on them with the click of a mouse.
Q. No books are found on Kindle Unlimited? Because you think that’ll be had for the industry?”
A. We think it’s going to destroy the publishing industry.
— Markus Dohle, CEO, Penguin Publishing House
Related: Amazon Ghettos
The nightmare scenario that keeps oldpub executives up at night is the prospect of Amazon going all-in on a Netflix style model.
Around 20 to 25 percent of the readers, the heavy readers, account for 80 percent of the revenue pool of the industry of what consumers spend on books. It’s the really dedicated readers. If they got all-access, the revenue pool of the industry is going to be very small. Physical retail will be gone—see music—within two to three years. And we will be dependent on a few Silicon Valley or Swedish internet companies that will actually provide all-access.
— Markus Dohle, CEO, Penguin Publishing House
Related: eBook Zombie Memes Won’t Die
But a robust KU-type subscription service isn’t the only bogeyman making oldpub lose sleep.
There is a New York Times best selling author in the science fiction and fantasy category. His name is Brandon Sanderson. I believe he’s published by both Macmillan and Penguin Random House. He went onto Kickstarter and announced that he would be offering four of his novels to anybody who wanted them if they wanted to donate to Kickstarter. And he raised over $42 million…
— Jonathan Karp, CEO, Simon & Schuster
Related: King Brandon Does it Again
Look, the upshot is that newpub authors were right all along. Oldpub is a vertical paper distribution monopoly that hangs on a thread held up by a handful of unicorn authors. The overwhelming majority of those are already famous, broke out decades ago, or are dead.
“Traditional publishers” are not there to help new authors realize their validation-granting dreams. By their own admission, they are venture capitalists looking to lay big bets on strong horses so they can extract value from those rock star authors’ success. That is not a sustainable business model. That is parasitism.
To be honest, it bodes ill of authors as a whole that any of us even consider working with oldpub anymore. The hard numbers gave the win to newpub almost a decade ago. Anybody who didn’t go indie then was just plain delusional. We have now evolved past the Amazon-centric indie model into far more profitable, reliable, and independent Neopatronage. So writers who persist in wanting parasitic New York publishers to take all of their rights and 85 percent of their earnings forever—most times in exchagne for a one-off payment of $1500—defy description.
Newpub is old. Oldpub is dead. Long live Neopatronage!
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