# Sometimes one more calculation can make what looked first like revolution resemble what it really is: evolution

**Author’s warning: this post is largely wrong! The following post was written based on a fundamental misunderstanding, assuming that Mark Coker’s post was talking about ebook sales in units when he was talking about dollars.**** **

**So while there are some insights that may have value, the post is mostly wrong.**

**I am leaving it up because I have to admit to my errors (this is the first time in five years I have had to do this), and because there were some useful comments. (And who knows? We may get more.) I will write another post (and here it is!) reflecting on Mark’s in the next couple of days, this time giving observations based on a**

*correct*interpretation of what he says in his.Mark Coker, the creator and owner of Smashwords, very likely the biggest service-provider (after Amazon) for ebook creation and distribution for the self-publishing community, wrote an article on Huffington Post today with the headline prediction that independent publishing could be responsible for 50 percent of ebook sales in 2020.

While Coker does engage in some red meat slinging that will please the indie author and publisher cohort that is his bread and butter (painting a Manichean view of heroic indies on one side who believe their growth is inevitable and the blinkered establishment on the other side that considers the indie view “delusional”), his methodology is sound and his predictions are pretty reasonable.

But, unfortunately, Coker’s analysis stops one calculation short of painting a meaningful picture. And that calculation is the one that counts. Literally.

Coker figures that the current share in 2013 of ebook sales garnered by indies is 15 percent. He posits that print is 70 percent, so the indie ebook share gives them about 4.5 percent of the total market. That’s correct, if you are talking about units sold. And that’s where he stopped, but shouldn’t have.

Because indie ebooks generally are priced between $0.99 and $2.99 (although some have pushed that to $3.99 lately), and publishers’ ebooks are generally priced from $7.99 to $14.99, what Coker calculates omits an important reality. We’d have to guess what the multiple should be to translate unit share into dollar share, with publishers’ books listed anywhere from three to ten times, or even more, over where indie ebooks are priced. I’ll guess that a multiple of three times is a conservative estimate, taking into account that publishers’ prices are often discounted by retailers. (And I hope Coker would agree with me which I think is possible because on the numbers he stated, I agree with him!)

If 3x is the right multiple (and it is a *lot less *than the *5 to 1 *ratio Hugh Howey found at Amazon for traditional publisher dollars over indie dollars), then indie ebooks really amount to around one-and-a-half percent of the book market by consumer spend. More than six years into the ebook revolution (if dated from Kindle, which is where I’d begin), that’s not a number that would justify the strutting of the indie ebook advocates and the slamming (and frequently predicted demise) of the publishers.

Of course, Howey and others have insisted that calculating consumer spend is getting the question the wrong way around from the authors’ perspective. What matters, they would say, is what share of author earnings fall to independent authors. And it is, indeed, likely that the well less than 2 percent share of consumer dollars would be a poor proxy for author earnings because sometimes (but not *nearly *always) authors make more money on a lower-priced ebook than they would have from a publisher’s sale of a higher-priced ebook (or a print book.)

The problem is that we have no way to make that comparison. We can’t actually calculate published authors’ earnings from sales and contractual percentages because we know that published authors get a lot of money in unearned advances. And we don’t know what indie authors earn either; it isn’t the frequently-bandied 70 percent of the consumer dollar all the time. (In fact, it isn’t 70 percent all the time even on *Amazon*.) With the price differential and many indie ebooks selling at 99 cents with the author getting about 35 cents of that, my hunch is that published authors actually average more cents per unit sold than the self-published do. At the same time, published authors are getting their take calculated on the price from which the retailer discounted, a higher price than the selling price. That means their royalty on the *selling* price is *higher* than even knowing the contractual terms would lead you to guess. And that is before you even get to accounting for unearned advances. So even getting 4.5 percent of the units would probably give them no more than 2 or 3 percent of the royalty dollars. And almost certainly that 2 or 3 percent is divided among far more authors than the 98 percent that goes to the published.

The heart of Coker’s piece is a checklist of reasons why the indie ebook share will increase. Most of those make a lot of sense. And his ultimate conclusion and prognostication, which is that ebook unit sales will be 50 percent indie by 2020, is not crazy. Maybe it will be 40 percent. Maybe 50 percent will come in 2023. But surely over the next few years the indie share of the total is likely to get bigger and the publisher share is likely to get smaller, even though publishers and other big players will increasingly be providing services to indies and alternative ways for them to work with established publishers on something other than the advance-against-royalties basis that has been the industry standard for many years.

But even then, we’re probably looking at something that is more like evolution than revolution. If indie authors have 50 percent of the ebook units by 2020, they’ll probably have half of 50 to 60 percent of the total market, assuming that print sales slip from 70 percent today to 40–to-50 percent in six years. If indies sold half of what might be a 60 percent ebook share of the market, they’d have 30 percent of the unit sales. But the pricing differential will still exist. (If it goes away, then indie sales won’t grow so fast.)

That means that, even by 2020, and even accepting indie champion Coker’s calculations, indie ebook sales will be around 10 percent of the *dollar volume* of the book business. And their share of total author revenue will be more impressive, perhaps in the teens, but still divided among far more authors than the much bigger number going to the published.

These calculations are not intended to disparage the indie writing and publishing community (most of whom get significant help from very big companies, starting with Amazon, to make them possible). It is intended to provide a reality check. The industry is still run by the establishment, and it will be for the foreseeable future. There are expanding opportunities for independent action and it is the right course for many authors, but the idea that we’re about to see some total reversal of fortune can be, and often is, wildly overstated.

*As it happens, The Great Debate at the London Book Fair is about whether big publishers or small publishers will “win” over time. Ken Brooks of McGraw Hill Education and I have the “big” side; Stephen Page of Faber and Scott Waxman, who is both a literary agent and owner of an ebook publishing house called Diversion, tout the “small”. Michael Healy of CCC moderates. If you’ll be at LBF, check this out.*

Permalink for Sometimes one more calculation can make what looked first like revolution resemble what it really is: evolution Back to blog

Pingback: And If the Readership Pulls in Different Directions? - Porter Anderson

Pingback: And If the Readership Pulls in Different Directions? | Marketing Aces

Pingback: Sharing the Wealth: 03/15/2014 | Story Arcs