The Tenured vs. Debut Author Report
In our most recent earnings report, one chart jumped out at us and begged for deeper analysis: It was a look at daily author earnings according to publication date, and it revealed the heavy reliance Big 5 publishers have on the sale of their backlist titles. The same chart showed, less surprisingly, that self-published authors are making the vast majority of their earnings on recently published works. In a single chart we were witness to the economic effects of new participants entering an industry in which they were formerly uncompetitive. The same chart made it apparent that the effects self-publishing will have on the trade book industry have only just begun.
Because of this chart, we began looking more deeply at authors from two different camps: those who debuted prior to the explosion of self-publishing and those who debuted after. Authors getting their start today will of course be joining the latter camp. And we believe those authors will want to know the following:
• Big-5 publishers are massively reliant on their most established authors to the tune of 63% of their e-book revenue.
• Roughly 46% of traditional publishing’s fiction dollars are coming from e-books.
• Very few authors who debut with major publishers make enough money to earn a living—and modern advances don’t cover the difference.
• In absolute numbers, more self-published authors are earning a living wage today than Big-5 authors.
• When comparing debut authors who have equal time on the market, the difference between self-published and Big-5 authors is even greater.
In this report, we will also reveal how e-book earnings represent roughly 64% of a traditionally published fiction author’s income, and therefore why authors should focus less on statistics geared toward publisher earnings and trade bookstore sales and consider their own incomes instead. Finally, we will tackle the difficult question of just how many authors are earning a living wage today. The results are sobering. I’ll spoil it for you and say that there aren’t many. But there are reasons to celebrate. Read on to see why.
First, to see how we arrived at these startling conclusions, let’s look again at the chart that started it all:
This chart, as well as the churn chart, got us wondering how much of traditionally-published author revenue was coming from new releases by long-tenured authors, and how much of it was coming from debut authors. This is a crucial question for a new artist hoping to break into an entertainment sector. What we were hoping to discover is how many seats are left on the traditionally published bus. So we divided authors and books into “New” and “Old” using January 1, 2010 as a cutoff date, and checked. Below you’ll see four charts, one for each of the four main categories of publishing type (explanation of each type here). Each chart shows the percentage of revenue from long tenured authors or debut authors. Note the differences between the first three charts and the last:
This final chart reveals a startling insight: If the Big 5 hadn’t signed a new author since 2009, and simply released new works from their long-established authors, they would still be making 63% of the e-book revenue that they are making today. Ownership of backlist and long-tenured authors is quite clearly big publishing’s most powerful commodity. This goes a long way toward explaining ever more restrictive reversion and non-compete clauses in publishing contracts. It also lends credence to rumors that some top-name authors are already receiving ebook royalties higher than 25% of net. Publishers rely heavily on these established authors and may be willing to violate their own most favored nation clauses in an attempt to retain them.
What does this mean for aspiring authors hoping to join the “New” authors group? After seeing the above charts, we were curious to find out how many of today’s living-wage-earning authors were considered “New,” and how many were the same long-established “Old” authors who were simply releasing their latest books. In one of our charts from the last report, we took a combined look at author earnings by combining our February data with our April data to gauge sales churn over time. Here it is again:
Along the horizontal axis, we have–for each publishing type–the 1,000 top-earning authors. They are ranked by their Kindle author earnings from adding up our two snapshot days, taken three months apart. The curves for each publishing type start at the far left with their highest-earning authors, and then slope down with diminishing author income until we reach the 1,000th-highest-earning author for each publishing type on the far right. The vertical axis shows their two-day author earnings in dollars as we move from the highest-earning on down to the 100th-highest-earning, 200th-highest-earning, 300th-highest-earning, etc..
The blue and purple lines reveal a neat overlapping of self-published and traditionally published best-selling authors. Both of these groups are riding out the rise and fall on the bestseller lists equally well over a 3-month period. But as we’ve seen, 63% of the Big-5 revenue comes from “Old” authors with Kindle debuts 2009 or before. We’ve also seen from the data that titles by more recent Big-5 authors experience the same churn characteristics that indie authors do. We were curious how those “New” Big-5 authors were faring relative to “New” Indie authors. So we ran the same report again, but this time, we only looked at “New” authors (with Kindle debuts 2010 or later), and we went deeper into the lists, comparing the Top 3,000-earning authors from each publishing type:
Note: Amazon’s publishing imprints (Montlake, Thomas & Mercer, etc.) only publish a few hundred authors each, likely fewer than than a thousand authors in total, so it’s not surprising or troubling to see the green curve drop away so steeply after the first hundred or so. That’s as deep as their pool currently runs.
This time, when comparing only the earnings of “New” authors who debuted after 2010, we see that below a tiny handful of mega-selling Big-5 debuts (like Veronica Roth), far more “New” indie authors are making a good living from their Kindle e-books than their “New” Big-5 peers. This is a logarithmic scale, which means a little separation signifies quite a difference in outcomes.
Some might argue that this comparison does not reveal the entire picture, because best-selling traditionally-published authors have a healthier complement of print sales than their indie counterparts. However, non-ebook revenue for traditional-published authors makes up a smaller percentage of their author earnings than you might think, and this is especially true for authors of fiction. To see this requires a digression, one that may be just as important for the aspiring author as our larger analysis in this report.
How Much of a Traditionally-Published Author’s Earnings Comes from e-Books?
Total revenue from e-books is already 29% at Simon & Schuster and 34% of overall trade revenue for Hachette (40% in the UK for Hachette), making 32% a fair industry-wide estimate for the portion of trade-publishing revenue from e-books. But what does that 32% really mean for the author with a manuscript in-hand and a decision to make? It’s important for authors to understand that publisher earnings should not factor into their decision on how to publish. What we should consider foremost is how much of our earnings have gone digital. This is a difficult question to answer, but we believe we’re in a position to give a rough estimate.
We know from our own author-earnings data pulled from the largest e-book distributor in the world that gross revenue for e-books splits roughly 30% nonfiction / 70% fiction:
We can see from above two charts that more than two thirds of e-book revenue must be coming from the smaller orange fiction half of the trade publishing pie. Which simply means that fiction sells far more titles in e-book form than does non-fiction. Given that 32% of trade publishing’s total revenue is from e-books, we can now calculate what percentage of fiction trade-publishing revenue, and what percentage of non-fiction trade-publishing revenue, is coming from e-books. We broke both halves of the above trade publishing pie out to show total percentage of each publishing format:
Roughly 46% of traditional publishing’s fiction dollars are coming from e-books, while the other 54% comes from print sales, audiobooks, and other formats. On the non-fiction side, e-books make up a far smaller fraction of gross dollar revenues: only 20%.
But traditionally-published print books carry higher average list prices than traditionally-published e-books. In our 4/24/2014 dataset, the average price of a Big-5-published e-book was $8.80. According to Nielson BookScan, the average price of a print book (hardcover & paperback) around the same time was $14.79. We can incorporate those average prices into our calculation to arrive at the ratio of traditionally-published e-book to print book unit sales for fiction and non-fiction:
For the average traditionally-published fiction author, this means 59% of unit sales are now e-books. But what percentage of their earnings come from e-books? Remember that industry numbers are usually focused on how the corporations are doing. Since authors earn a different rate for print vs. e-book sales, we need to look instead at a breakdown of their earnings. Incorporating average traditionally-published royalty rates for e-books (25% of net) and print (8% on paperbacks, 15% on hardcovers) into our calculation, we arrive at the average percentage of author earnings coming from e-books for traditionally-published fiction and non-fiction authors:
While only 32% of the publishing industry’s gross revenue currently comes from e-books, nearly 64% of the average traditionally-published fiction author’s earnings is coming from their e-books. Earnings for the average genre-fiction author will skew even further toward their e-book sales. Perhaps an e-book-based comparison between publishing types is not so unfair a comparison after all. Especially when considering that the gain of 8% – 15% royalties on print sales means taking a massive cut in e-book royalties—from 70% of gross to 25% of net. (We demonstrated this tradeoff graphically in an earlier supplemental report.)
So if you’re a new author trying to decide which publishing path to pursue, it’s worth looking at the following graph one more time while keeping in mind that even for traditionally-published authors, 64% of earnings now comes from e-books. Again, this graph shows comparative earnings of the top-earning 3,000 debut authors by publishing path:
Now consider the 3 – 6 months your print work will sit spine-out on a dwindling brick & mortar bookshelf. Compare this narrow window with the rise of print-on-demand physical book sales, and the surge in the audiobook market, which is open to all authors. These factors and the above graphs highlight the difference in long-term viability of each publishing path. And now that we’ve seen what share of total author earnings have gone digital, let’s return once more to the question of churn.
Title Churn, Revisited
Churn is a measure of how e-books rise and fall through the bestseller lists. As we’ve seen, almost two thirds of the Big-5′s earnings currently comes from their “Old” authors, those who debuted more than 5 years ago and whose frontlist and backlist titles now comprise 63% of Big-5 earnings. The more modest financial prospects facing “New” Big-5 authors become starkly apparent when we break down the count of today’s decent-selling e-books by author tenure (the year the author was first published).
As before, the green portion of the bar shows at least a 25% increase in revenue. The red portion represents titles that dropped by more than 25% in revenue. And the yellow is for titles that remained within that range. The height of each bar represents number of titles on the bestseller lists that exhibited this behavior:
This is one of those charts that data geeks can stare at for ages. It neatly captures so much of what is going on in the e-book market today, mainly that there are far more indie debut authors from 2010, 2011, 2012, and 2013 who are now holding spots on the Amazon bestseller charts than Big-5 debut authors. Even more striking, the number of today’s bestsellers from these “New” indie debut authors increases steeply year-over-year, while the number of today’s bestsellers from “New” Big-5 debut authors stays flat. The number of today’s bestsellers from small to medium publisher debut authors is also growing year over year, although not at the same explosive rate with which indie debuts are grabbing and holding slots on the charts.
We can also see that most of the stability from the Big-5 publishers is from books published by the very longest established authors—those whose first book was published prior to 2007. For self-published authors, most of the volatility on the bestseller lists is from recent works, both positive and negative. For self-published and traditionally-published authors alike, the red portion for recent works shows how new releases often debut high and then take a slide. Interesting for self-published books is the tendency for older works to rise in earnings, something that’s flat for Big-5 publishers.
So What Does This All Mean To a New Author?
Taking all of the above into account, let us now pose two frequently asked questions facing new authors today: What are my chances of being able to earn a living from my writing? And which publishing path gives me the best shot at eventually being able to do so?
For the first time, we can look at a large enough cross-section of author earnings data that, despite its acknowledged limitations (Amazon-only, e-books only), can help light the way to some answers. We know that Penguin Random House (PRH), the largest of the Big-5 publishers, currently publishes 15,000 authors and adds another 200-250 debut authors each year. PRH makes up roughly half of the Big-5′s gross sales, so doubling those numbers to 30,000 authors and 500 new annual debuts yields a reasonable estimate for the total number of signed Big-5 authors today. With these numbers in mind, take a look at the following charts (and please note that the scale on the Y axis roughly halves for each subsequent chart as the earnings threshold roughly doubles):
Of the 500 or so Big-5 debut authors in 2013, only 245 (fewer than half) are today earning $10,000 or more from their Kindle e-books. Surprisingly, despite having more books published and on the market, even fewer of the roughly 1,500 Big-5 authors who debuted in 2012, 2011, and 2010 are earning $10,000 or more. Referring to the earlier blue-and-orange pie chart showing what portion of the average traditionally-published author’s earnings is from e-books, we might convince ourselves that print and audio (as well as other e-book retail channels) could on average double this author-earnings number. But few folks would consider $20,000 per annum a living wage, and only 637 (fewer than a third) of the Big-5 debut authors from the last 4 years are earning that much today.
After years and years of querying and jumping through gatekeeper hoops, it appears that even the less-than-1% who are lucky enough to land an agent and a Big-5 publishing contract can’t manage to quit their day jobs. (This is an observation in the data that matches what we have seen anecdotally in the publishing and bookselling trenches).
By contrast, we see over 700 Indie-published authors who debuted in 2010, 2011, 2012, and 2013 who are today earning more than $25,000/year from their Kindle e-books alone. For these authors, e-book sales on other platforms and POD print sales will add another 20%-30% on average to this total. It’s easy to see that, for the past 4 years, and even taking lost print sales into consideration, far more Indie authors than Big-5 authors are earning a living wage from their writing.
Again, this is something many of us have seen evidence of in the trenches for several years. Very few aspiring authors who query agents end up with publishing deals and their works displayed in bookstores. Having worked in bookstores for years, we have personally seen how seldom a debut author breaks out and sells enough to make a living. Advances are no longer high enough to support debut authors. And yet, at the same time, we have met and heard from hundreds of self-published authors who are not household names but are making a full-time wage from their works. All we and others have had to go on thus far has been anecdote when making the decision on whether or not to self-publish. But now we are seeing the same answer in the data that anyone can see in the trenches: The number of seats on the full-time writer bus have greatly expanded.
Does this mean that earning a living as an author is likely? Absolutely not. Here is where optimism for self-publishing is often mistaken for naïveté. It’s where excitement leads erroneously to a gold rush mentality. Let’s take an example from sports: Aspiring basketball players know precisely how many roster slots exist in the NBA. (30 teams with 15 roster spots each). Aspiring writers are not so lucky. We have no idea how many slots are open for us as we begin to dream of writing for a living. Many of us hopeful writers grew up browsing bookstores with the misguided impression that all of those tens of thousands of authors we see on the shelves were writing for a living. The vast majority are not.
Back to basketball: When the sport caught on overseas, the number of paying jobs for professional basketball players exploded. Your favorite college player might not make it into the NBA, or even want to play NBA ball, but they could still earn a living wage doing what they loved in Canada, Italy, or elsewhere. The number of open seats for professional basketball players expanded by a factor of ten or more. However, the odds of grabbing one of those seats only slightly improved, as so many millions of people dream of a career playing professional basketball.
This distinction between the absolute rise in the number of seats compared to the chances of grabbing one is crucial, because the same thing is happening for fiction writers today. And while this is a story that no one in the media is covering, it is without a doubt the most critical and interesting development in the modern publishing landscape: More people are earning a living with their writing than at any other time in human history. And it’s because of the adoption of e-books and the ability to self-publish.
Yes, millions of people dream of writing for a living. Yes, becoming one of those people is difficult. But it’s never been more likely for those willing to put in the effort. You don’t have to be in the top 200 to 300 of fiction writers to earn a living these days. You can be in the top 2,000 to 3,000. That’s an enormous improvement. And yet it goes largely uncommented on and unnoticed. We hope to highlight this trend for all those with manuscripts in-hand and a decision to make.
The picture that is emerging from our data collection and our look at bestseller churn is that the number of Big-5 debuts at each earning level is relatively flat, year over year, while the number of living-wage-earning indie author debuts is growing exponentially year over year. Even ignoring the hurdles and roadblocks that are a built-in part of traditional publishing’s drawn-out querying process, it’s easy to see which method of publishing represents the greater and faster-growing opportunity to earn a living wage as a writer. Again, the data matches everything we are seeing in the publishing community trenches. And these observations help to explain many of the restrictions we see in modern publishing contracts.
To combat these trends, we believe that major publishers are going to have to pay higher royalties on e-book sales in the very near future. We have heard from some authors and industry insiders that this is already taking place. Unfortunately, the sweetest deals are going to existing bestsellers, which means the rich get richer while debuting authors are left behind. This must change. Higher royalties will have to become the new standard across the board. Otherwise, the word will keep spreading—both anecdotally and through hard data—that the choice on how to publish keeps tilting toward retaining ownership of one’s art. We’re not saying this decision will ever be simple. But it sure seems to be getting easier and easier.