The Shatzkin Files


John Locke and S&S show us another kind of deal we can expect to see again


OK, now we know another new paradigm for book publishing in the digital age with the announcement of self-publishing author John Locke’s new deal for print distribution with Simon & Schuster.

The big publishers have said for a while now that they won’t be signing up books for print rights only. That makes sense, up to a point.

It is logical that with print declining and digital sales rising, publishers don’t want to be investing in an author only to control the getting-smaller part of the sales. We’re in this moment when print sales are still vitally important but less so every day. Ebooks don’t require the same organizational scale as distributed print, so authors legitimately feel that they can get the substantial part of that sale without giving up the 75% of the ebook royalties big publishers demand as the price to gain access to the print distribution capability that makes real use of big publisher scale.

But there are limits to the publishers’ logic to walk away from print-only deals. Publishers also have the challenge of feeding the big organization they’ve built to deliver print to its shrinking marketplace. It is hard to ignore sales volume you need to support expensive operations.

The first crack in the wall of “we don’t do print-only” was Houghton Harcourt’s deal with Amazon to publish the print edition of some titles originated by Amazon imprints. Houghton made the point that although it might look like what they were doing was a print-only deal, it really broke no precedents. They pointed out, accurately, that when a publisher acquires paperback rights to a book another house did in hardcover (the most common sort of licensing deal 30 or 40 years ago but not so common now), the ebook rights would stay with the originating publisher. That, they said, was all that was happening in this case.

As a fan of Locke’s Donovan Creed books (I just finished reading another one yesterday!), I had already done some analysis and written that I thought he was leaving a lot of money on the table working exclusively on the ebook side. (I ignored a deal he had with “Telemachus Press” to do print of his books because I figured they’d hardly sell any; the deal announced today would tend to confirm that assumption.)

Although the details of the Locke deal with Simon & Schuster haven’t been revealed, it is characterized as a distribution deal. Strictly speaking, that would make Locke himself the publisher and the party responsible for the cost of inventory. S&S would warehouse that inventory and handle all the mechanics of distribution, including billing and collecting. Then they would remit the larger portion — probably more than 70% and less than 80% — of the revenue they receive to Locke.

How profitable Locke’s print sales will be for him depend on his costs for print (which are in turn a function of how well he and Simon & Schuster match what is printed and distributed to the demand for his books), the retail price he sets, and, of course, the numbers he can sell.

There is another way Locke will profit. The increased awareness of his books that he’ll gain by having them in stores should generate more ebook sales and he presumably doesn’t share those with his print distributor.

There have been a number of signs this year that the publishing world is changing dramatically.

In March we had Barry Eisler, who had sold many books through conventional deals with major publishers, decline a six-figure deal with a major house. At first, Eisler was going to self-publish, but then he decided to take a (presumably) six-figure deal to be published by Amazon instead.

Amanda Hocking, who had started (like Locke) as a startlingly successful self-publishing author, accepted a deal with a major house to continue her career, pretty much the opposite of Eisler’s originally-intended path (although closer to what he actually did in the end).

Then J.K. Rowling, the author of the Harry Potter series, announced she was creating her own online destination, Pottermore, to deliver ebooks. Rowling is apparently not just disintermediating her publisher from her ebook sales; she’s leaving out many of the online retail channels as well.

Last week we had the news that superstar non-fiction author Tim Ferriss became the first truly marquee signing for Amazon’s own publishing efforts.

And now we have Locke entirely self-publishing, but working through a major house to get his printed material into the supply chain.

When we discussed Eisler’s original decision, we talked about the fact that self-publishing left the substantial revenues from print untapped. The Hocking and Ferriss deals are similar, even though hers is with a traditional publisher and his is with Amazon. They are both pursuing what they think will be the most lucrative alternative for them, choosing from among options by which they get paid and somebody else does all the non-writing parts of the work.

Rowling’s initiative and Locke’s are both real self-publishing plays. I am skeptical that Pottermore is worth tracking as a commercial example by any but a small handful of wildly successful authors. It’s an anomaly in many ways. Harry Potter to publishing in the past decade is like the Beatles to music in the 1960s; nothing else comes close to its level of commercial success. What Rowling is doing might work just fine (although I have my doubts that it will reach more readers than if she used more conventional means, she might make more money and she might build a platform for other opportunities), but that doesn’t mean it would work for anybody else.

Locke might be an outlier as well. Nobody else except perhaps Hocking has achieved his level of self-publishing success. And, unlike Hocking, who is a writer who just wants to be a writer and is delighted to have a publisher take over her business responsibilities, Locke is an experienced businessperson who seems to prefer managing his own commercial affairs.

In the Locke deal, though, we can see the outlines of future arrangements by which publishers can reconfigure their dealmaking to adjust to changing times. It isn’t just agents who are changing their business models or offering new services to accommodate the reality of self-publishing fostered by the growing ebook market share (and Locke’s agent, Jane Dystel, is one that has announced that her office is doing just that), publishers will adjust as well.

The model of “self-publishing through a major house ” can be a workable one for all sides if it is restricted to authors whose commercial appeal has already been established. Since all the major houses have distribution deal models, it might not be long before there’s a person at each one assigned to making sure that authors and agents are as well taken care of as “clients” as they were in the past working through their editors.

These deals will morph. For example, does Locke really have to pay the printer, or will S&S cover him on that and just take the costs out of proceeds? If S&S were doing a deal like this for books that hadn’t already been published digitally, would they be able to extract a modest share of ebook sales as compensation for doing the ebook setup? And deals like this could evolve to also include some other costs — like copy-editing or cover creation – being fronted by the publisher, or I guess I should say “the distributor”.

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  • Jack W Perry

    An example where publishing is evolving. 

    Locke sees the value of having the muscle of S&S physical distribution behind him. S&S can get books into airports, B&N etc. that Locke could not on his own. S&S will also have favorable rates to print the titles.

    S&S sees the value of having the writing chops, marketing skill and considerable mind-share of a brilliant businessperson. Locke is an example of how being successful draws interest.

    It is a great marriage of the old school and the new school.

    It is publishing 2011.

    • /blog Mike Shatzkin

      Don’t know, Jack. You’re definitely right about what Locke gets. Whether S&S gets anything more than the right to distribute his Donovan Creed books is an open question. I think Locke is a sharp enough businessman that if they want “mindshare” from him about marketing or anything else, they probably have to pay extra! (But, maybe they will…)

      Mike

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  • Chris

    This is definitely my idea of a great self-pub deal. It provides the one thing that hinders the breakout success (print) of an author like Locke. 

    Even if S&S take 30% for the distribution it is still a great deal for Locke. That said, I’d be requesting that they project manage the printing as well for cost if he supplied print-ready artwork.

    Oh, how I would kill to get a deal like this.

    This is exactly how the future model of publishing should work in my opinion: launch with an ebook -> gather data  -> build market -> offset print -> bricks & mortar dist. -> roll nude in self-made millions.

    Of course, I’m pretending this is in an alternative universe of wonder where every retailer buys on a no-return basis!

    • Chris

      I wonder who gets to stock Amazon with the print version – Locke or S&S?

      • /blog Mike Shatzkin

        And that’s a good question that could fall either way. Of course, if Locke “supplies” it, then it would just be Amazon supplying themselves in a CreateSpace deal.

        Mike

      • Chris

        Surely he would have to make use of the offset run to increase his margins on Amazon? He could spin out an extra 10000 units on top of his Bricks and Mortar run for negligible cost.

        That said, if he gave S&S the distribution for online sales too the margins would probably be the same as if he went through CreateSpace… only difference being that he would keep his distributor happy. 

      • /blog Mike Shatzkin

        I suppose if he wanted to squeeze out every nickel, this would be a sensible tactic. But it he wants to just deal with print distribution the easy way (as I would), he’ll just let S&S handle it.

        Mike

    • /blog Mike Shatzkin

      The returns are definitely the joker in the mix which is why your idea that the books be market-tested in e first is a critical part of this model. Getting a decent distribution for something without a track record could be both expensive and risky.

      Mike

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  • Bob Mayer

    Very interesting.  I’m starting to get feelers from foreign publishers for some of my titles that selling in the top ten in their genres on Amazon and Nook.  I just blogged about the fact that publishers have got to start realizing eBooks sales are a real sign of an author’s strength.  When we used to not get renewed because mass market sales were dipping, why should we not get book deals when our eBooks sales are increasing exponentially? 

    • /blog Mike Shatzkin

      Bob, I think most publishers are acutely aware that ebook sales can be a signal. The foreign interest you’re finding is interesting. Perhaps you have — or can get — a read on where your export sales are going. I believe somebody at Amazon once told me about a “country report” that told authors where their sales were. Of course, there’s a bias there — some countries have more built-out ebook networks than others. But it might tell you (or your agent) where to *pitch* your stuff if they don’t come after you first.
      Mike

  • http://tahlianewland.com Tahlia Newland

    It’s great to see all these different options coming up. I hope this one works for all concerned.

    • /blog Mike Shatzkin

      I think it will. Locke is “hiring” Simon & Schuster to sell and distribute his print books. They’re very good at doing that and I’m sure they’ll do a very good job for him. But at least half-a-dozen other companies can do an equivalent job. It is possible this becomes a “deal template” that is replicated widely. In some form, it is bound to be.

      Mike

      • Chris

        Every self-publisher should be hoping that John’s deal does become the ‘deal template’.

        I’m actually surprised by how quickly this model came into play… I really thought there would be far more resistance. The fact that it is a big name like S&S surprises me even more. 

  • John Locke

    Mike, I have been a huge fan of yours since “finding” you six months ago. Just wanted to applaud your “spot on” analysis of this announcement. Your comment that this is a “real self-publishing play” is so astute I had to pause, shake my head, and marvel at your ability to get right to the heart of the deal. You continue to impress and amaze me! Best wishes.

    • /blog Mike Shatzkin

      Thanks, John. You know if you’ve been reading me that I’m a fan of your work too.

      And congratulations to you, Jane Dystel, and Carolyn Reidy and her colleagues at Simon & Schuster for being the first ones to put together this model. You ought to ask that it always be referred to as the Donovan Creed commercial model for publishing.

      Mike

      • John Locke

        That works for me!

  • http://claudenougat.blogspot.com Claude Nougat

    Like John Locke, I’m a great fan of yours (I too “discovered” you about 6 months ago!) and taking your article together with John Locke’s comment, I can only conclude tha the is confirming that your reading of the situation is correct: Locke has turned himself into a full self-publisher – including printing his books – but relying on Simon &Shuster just for the distribution and nothing more. That makes business sense: the Big Publisher notoriously know how to distribute books in the physical world, something that someone who’s an e-book wonder like Locke obviously can’t do!

    So everything is for the best in the best of worlds, as Voltaire’s Candide said…Perhaps not the best of worlds but a fast changing one! And Locke’s model is one any self-epubbed author can follow, whereas Rowling is in a class all of her own. She makes me think of Walt Disney: a great cartoonist who founded a global corporation…Just watch Rowling doing the same!

  • http://davidgaughran.wordpress.com/ David Gaughran

    Hi Mike,

    Great analysis of the deal, and you were pretty much the only person who got it right – there were the usual hysterical reactions that either John Locke was a “sell out” for abandoning the indie path from true blue self-publishers, or that this move was proof that the traditional path is where it’s at – neither of which are close to being true.

    This is a radical, progressive deal where everybody wins – my favorite kind. The publisher gets a slice of the considerable action. Booksellers get a new bankable star in print for the first time. Readers who haven’t switched to e-books yet get to enjoy his work in print. And John Locke both gets a wider audience, and millions of book-shaped John Locke advertisements across America. Even Amazon will win because all this publicity will raise the sales of the digital editions too. And if you are right, and I hope you are, and this emerges as a new model where publishers are willing to do print-only deals and/or distribution-only deals, writers/self-publishers win too.

    I just wanted to hear your thoughts on price points and formats. Obviously, John Locke has had huge success at 99c. Presumably, this will be factored into any pricing/format decisions that are made. I seem to remember that his books are reasonably short – 60k to 70k. That, along with what is expected to be a massive print run should drive down costs. Do you think they will go hardback, trade paperback, then mass market paperback? Or could we see something radical where they go straight to mass market paperback? The reason I ask is that perhaps S&S are wary of debuting in a format that is too radical a leap in terms of price from 99c. 

    The whole thing will truly have gone full circle if John Locke instigated a resuscitation of MMPB.

    Dave

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