The Death Spiral of Another Publisher

In 2000, Tina Engler started a little publishing company. Her sexy contemporary stories were constantly rejected by bigger publishers as too risque. The publishers claimed there was no market for contemporary, fantasy or sci-fi erotic romance. Tina proved them wrong when she launched Ellora's Cave.

Not only did Tina prove there was a market for those sub-genres, but she did something unique. She launched new stories as e-books first. If they proved popular enough, a paper version of the book was published. Remember, this was over ten years ago. Very few e-readers were on the market at the time, the most prominent manufacturer of which was Sony.

EC was the first erotica publisher to gain mainstream prominence. Their books were shelved in Borders and Barnes & Noble. They were getting noticed by financiers and mainstream press. EC was featured in Forbes. They were raking in the dough.

So why haven't EC editors and writers been paid for several months now?

That's the question on everyone's mind. Jane Litte at Dear Author provides a breakdown of the sequence of events. She believes incompetence and/or fraud is responsible for the tailspin EC finds itself in.  On top of salaries and royalties, state taxes haven't been paid. Writers are asking their fans NOT to buy their EC titles. Requests for reversions of rights go unanswered.

Unfortunately, the real life drama at EC sounds just like the sequence of events at other publishers and a certain retailer by the name of Borders Group, Inc., before they crashed.

First came the complaints from the occasional writer, who was subsequently labelled a troublemaker. Then came the late payments. Just a computer glitch; nothing to worry about. Layoffs of publisher staff, or reorganization as they called it. Royalty statements didn't match sales figures from Amazon or Barnes & Noble. The payments stopped being late and didn't come at all. The smart writers got their lawyers involved in a desperate attempt to get their rights back. Some writers succeeded; other couldn't get their calls, letter or e-mails returned. Finally, the company collapsed and writers found their rights sold to another publisher.

Think I'm talking about EC? Nope, this was the exact sequence of events at Dorchester a few years ago.

We're seeing the same pattern over and over again in the current disruption of the publishing industry. EC is simply the latest.

And I fear Barnes & Noble may be next.

The Eye of the Storm?

Last week, one of Kris Rusch's reasons for cutting back on her business blogging was that the publishing business had entered a period of stabilization. But with the Gulf hurricane season officially starting a month from Thursday and preparation ads starting to spring up, I wondered:  Are things really stabilizing or are we in the eye of the storm?

1) Writers

The trickle of writers who had contracts for novel length works leaving publishing companies has turned into a steady stream. Many new writers are refusing to even consider  working with a major publishing house. We haven't gotten to the point where that steady stream turns into a gush, or where a MAJOR name like King, Roberts or Grisham walks away from their publisher.

2) Publishers Houses

Sure, you've got guys like Joe Konrath predicting the big publishers will collapse, but the bigger publishing houses made record-breaking profiits in 2013. There's also a lot of issues not being said.

Both Disney and Warner Brothers streamlined their print book operations so that they are focusing on materials and IP properties they fully control, e.g. Star Wars and Superman among others. Supposedly, Disney is keeping the contract Lucasfilm had with Random House to produce Star Wars novels, but I question how long that arrangement might last.

After news got out that Harlequin used contractually sleight-of-hand to rip-off writers, pitch slots to their editors were empty at the 2013 Romance Writers of America Conference. Other small publishers, such as Kensington and Ellora's Cave, are seeing a drop in submissions, and the submissions coming in are dropping in quality.

Overall, the publishing houses are reducing advances, reducing print runs, and issuing draconian contract terms to keep the writers they already have tied to them. They are also tying up reversion rights even though they seem to have no interest in reissuing the older books.

The question is at what point will the majority of writer grow tired of these shennanigans and walk way from the publishers, or writing, altogether.

3) Brick and Mortar Stores

It's been a little over two years since Borders collapsed here in the U.S. Barnes & Noble is scrambling to stay alive by cutting down on books and selling trinkets and toys. Book-a-Million and Half-Price Books only sell a fraction of what the ailing B&N sells. Walmart, Target and Costco will only sell  book on the top twenty of the New York Times bestseller list. Groceries stores and pharmacies are whacking their mass market paperback displays in a quarter of what they used to carry, assuming they are still carrying books at all.

On the plus side, many independent bookstores have arisen from the ashes of the Borders collapse and the closing of several B&N's. They've learned their lessons that they can't compete on price alone and are focusing on service and the customer experience.

Can the bigger stores afford to carry books? And if not, at what point do they quit?

4) Devices

This is where I think the most pundits are short-sighted. I've read article after article about slow down in sales of dedicated e-readers. Barnes & Noble is floundering. Sony gave up on devices totally, then sold its e-book division to Kobo. Kobo turned around and laid off 63 people last week. Yet, I still see publishing CEOs claim the slow down in dedicated device sales means adaption to e-books is also slowing.

This is where I *facepalm*.

First of all, if e-book adaption is slowing, why are the same companies claiming record profits? Sales of paper books are down or steady according to the folks who keep track of such things like Bowker.

Second of all, consumers are buying more and more tablets and smartphones. These multi-purpose devices are driving technology sales right now. In fact, tablets sales are seriously impacting Dell's laptop business. Executives don't seem to understand that you can READ on these multi-purpose devices.

Do you want a prime example? Two weeks ago, an older woman and I were sanding in line at the post office to mail Easter packages to family. I was reading on my iPhone 4. She had a HC. She didn't understand how I could read on such a small screen. I showed how I could adjust the font on the Kindle app, which led to an explanation of how apps work on a phone.

And why am I reading so much on my iPhone? Because the toggle switch on my Kindle 2 broke. While I like reading on e-ink since I spend twice as much business time on my computer than I ever did when I was a programmer or systems engineer, I question why should I spend the extra money. If my eyes need a break, I have 1300+ paper books I can read.

Even Genius Kid, who just got a Galaxy S4, doesn't think he needs another device, even though he's been asking for a Kindle for the last year.

When are execs going to understand that the loss of dedicated devices doesn't mean the loss of e-books?

* * *

With all these issues still outstanding (and I'm sure there's more I missed), I can't see any supposed stability lasting for long. The real question to me is--are we on the clean side of the hurricane or the dirty side when the storm roars past us?

How Much Longer Can Barnes & Noble Hold Out

It's hard  to believe it's been two and a half years since Borders drowned in Chapter 11. You'd would have thought Barnes & Noble would have learned from the death of what had been their biggest rival for a couple of decades.

And in some ways B&N did. They saw what Amazon was doing to gain market share. They jumped into the device market with the introduction of the NOOK. They opened up their e-book store to indie writers. But they did nothing to alleviate the crushing overhead of brick-and-mortar stores.

Sales of paper books went down or stagnated, depending in which source you take as gospel. Even as their archrival fought to keep its head above the rising tide of debt, B&N reduced their movie selection and eliminated music entirely. They expanded that previous media space and installed a mini-toy store instead. In the front of the store, a gigantic NOOK display blocked the sight of the books. Where the NOOKs hadn't invaded, home furnishings, kitchen knick-knacks, and Vera Bradley dominated.

So why didn't these changes save B&N?

They forgot their primary mission--customer service.

Clerks would refuse to order books that the stores did not carry, or they would lose the order. The B&N website has not improved its search criteria or any other functionality in the last three years. Attempts to contact the company regarding problems are often met with a resounding silence.

The toys were not necessarily a bad idea, but pricing them 30-50% above other retailers like Target and Walmart was.

On the NOOK side, they didn't fulfill their promise of additional content for their tablets. Customers only had access to e-books and a few cheesy apps. No movies, TV, music or decent games. So customer started rooting their tablets in order to use them with other vendors. B&N retaliated by locking the devices in such a way that if a customer tried to root her device, she ended up with a paper weight.

Then there's the issue with vendors. B&N got into a pissing contest with Simon and Schuster over payment of front table and end cap placement prices that lasted six months. Some indie writers are missing payments as far back as May.

Rather than take a hard look at business practices and improve them, the B&N board fired CEO William Lynch last month. CFO Michael Huseby now runs the company. I'm sorry but beancounters rarely have the vision to pull a company out of a tailspin.

Chairman Len Riggio filed with the Securities and Exchange Commission that he planned to buy out B&N's shares of the retail stores and take the company private.

Fourth quarter losses in the NOOK division prompted the company to state last month that it was withdrawing from the tablet market. They've been mum about whether the e-book section will follow NOOK or stay with the bookstore division should they find a buyer for the NOOK. And frankly, no other tech company wants to touch NOOK with the proverbial 10-ft. pole.

A couple weeks after the fourth quarter announcement, losses went even higher due to extra taxes on an accounting "mistake."

In August, management reversed the policy changes stated in July. NOOK devices will still be manufactured. Riggio has withdrawn his offer for the retail stores.

And in the midst of the chaos, bugs in Nook Press, the upload interface that replaced PubIt in July, has caused a wealth of suspicion in the indie writer community. Sales appear and disappear. Real-time updates have been a joke. Writers are concerned they are seeing the same types of fuzzy accounting that trad publishers are notorious for. Many are biting their nails, waiting to see if August payments hit their bank accounts.

Can B&N get their shit together?

Not at the rate they are going. The big question? How long can their bloated plane glide before it crashes.

RIP Borders

Currently reading - Dead Girls Are Easy by Terri Garey

Today begins Borders' Going-Out-Of-Business Sale.

The reader in me says, "Yahoo! Books on sale!"

The writer in me says, "Well, shit.  There goes more shelf space into the ether for all of us."

The former BGI employee in me knew this day was coming seven years ago, just shakes her head sadly and keeps her fingers crossed that the employees can find something else soon in this freaking' economy.

There're others who've analyzed the Borders'demise to death.

I can add very little, except to honestly say, "They're all right and all wrong at the same time."  Everybody in this publishing business has started turning on each other.  It's been ugly.  It'll get uglier.  Few will come out unscathed.

All we can hope for is to survive the blood bath and become better writers, and business people, in the new world order.