February, 2012

Should Amazon Charge Authors To Publish For Kindle?

February 29, 2012 Michael Hicks Blog, 20

I actually hadn’t planned to post anything about this, but a number of folks have asked me about it and I figured I’d blurt out my opinion, for what little it’s worth.

By way of background, this discussion stemmed from author Rob Guthrie’s post, Amazon Charging For Digital Publication? and a follow-up post. And let me be clear on one thing right up front: I mean no disrespect to Rob or anyone else. This is one of those “differing opinions” things. So if you agree, great. If you don’t, that’s great, too! Just be nice, either way.

Anyway, the premise is that Amazon should charge authors a steep fee (Rob suggests $500 for the first book and $100 for any subsequent titles) to publish their books for Kindle. Right now, the process is entirely free. The premise of the argument has two major planks: one, it would purportedly make Amazon a guaranteed profit up front and that it’s almost inevitable that Amazon will do this, anyway; and two, it would weed out a lot of the crappy books that indies publish (I’m an indie, so I can say that).

I’m sorry, but I think the cases for both of those arguments are failboats.

On the “it would be in Amazon’s best interests profit-wise” to charge $$$ up front, many of the arguments on the pro side revolve around how much Amazon pays for infrastructure and support costs vs. what they might be making from book sales. Basically, are they making a net profit from KDP-published (KDP is Amazon’s publishing arm for Kindle) Kindle books.

While there’s no question that there are costs involved with digital book publishing, storage, and distribution via KDP, the undeniable fact is that none of us outside of Amazon’s budget department have a flipping clue about what any of those numbers really are. And if I hear the old “Amazon is selling at a loss now, and has been for years!” thing again, I’m going to hurl. If that was true for as many things as I’ve heard, Amazon would have gone bankrupt before they moved their operations out of Jeff Bezos’ garage. Or maybe that was Bill Gates and Steve Jobs. Whatever.

Yes, storage and distribution costs money, but when you take into account the byzantine rules of business operations like tax deductions (I can’t imagine how many millions Amazon writes off), discounts for services like the 3G for Whispernet connectivity (i.e., I’m sure Amazon doesn’t pay the telecom providers what WE pay for data transfer), etc., this whole argument becomes entirely academic because we simply don’t have any data, and can’t even speculate intelligently.

As far as the profit goes, charging $500 up front would certainly be nice for Amazon’s coffers. But let’s see how the numbers work again. Here’s how many books Amazon would have to sell at different price points to gain that same $500 in terms of gross revenue, vice net profit. Sure, you can argue that there would have to be more sales to account for $500 net profit (which would be what’s left after all the operations costs are subtracted out), which is true, but let’s just stick with this because we actually know the numbers (and this only applies to KDP titles at regular prices, not the Big 6, freebies, etc.):

At $0.99: 777 (65% x $0.99)
At $2.98: 258 (65% x $2.98)
At $2.99: 502* (70% x $2.99 – $0.10)
At $9.99: 173* (70% x $9.99 – $0.10)
At $10.00: 77 (65% x $10.00 and higher)

* I’m assuming an arbitrary delivery cost of $0.10 that goes to Amazon for books in the $2.99-$9.99 range at the 70% royalty option. The bigger the file, the higher the delivery cost. This also means that, in the 70% royalty realm, the author is picking up at least part of the tab for getting the book to the reader.

To some authors, those may look like big numbers. But they’re really not, in terms of the scale that Amazon is looking at. The books that are in the top 100 are selling well over a thousand copies a day. Let’s take a specific example: John Locke sold a million of his $0.99 ebooks in five months. Amazon made $640,000 from those million book sales, and wrote off every aspect of the operating costs to store and deliver them. And yet we’re supposed to believe that they didn’t make a net profit? Pardon my skepticism. I haven’t had my coffee yet this morning.

The most important thing is that all those books will continue making money for Amazon and the author *forever*. $500 up front is peanuts in the long game. Even books with low sales numbers, over time, are going to make some money.

As for item #2, that making authors pay a steep surcharge is going to help filter out the crap…it’s just false logic. For many years, tons of authors paid lots of money, far more than $500, to have garbage printed by vanity press services. Many still do, with some folks paying thousands for the privilege of having a garage filled with boxes of horrible books. The only thing such a surcharge guarantees is that those folks who can’t afford $500 won’t be publishing with Amazon. That would probably account for a lot of undiscovered talent out there, people who don’t have $500 to blow, plus – in Rob’s hypothetical model – another $100 for every additional title.

And the assertion that “If someone’s serious, they’ll find a way to come up with the money” is, again, false logic. Just because you’re determined doesn’t mean you have any talent. In my career at NSA, I saw lots of people who were extremely determined rise through the ranks, but many of them couldn’t find their way out of a paper sack with a blowtorch and a pair of scissors. By contrast, there were many incredibly talented people who, because they were focused on the job and the mission (like most authors good authors are focused on their writing) despised jumping through hoops and never rose as high as they should have in the great scheme of things.

This hypothetical model is the same. There are probably more than a few authors out there now, making money and pleasing readers, who wouldn’t be if they’d been confronted with a major monetary obstacle to being published. Heck, I probably wouldn’t have published had such a system been in place, and for me, writing as a career never would have happened. Or, authors might say, “Screw Amazon! I’ll publish with someone else.” And that is something that Amazon does not want to have happen.

Anyway, this is another one of those things that authors will argue about until the sun blows up, but the bottom line is that – pro, con, or somewhere in between – none of us really know. It’s all pointless speculation, and the word count people are putting into these posts (I just blew a thousand words on this post) and comments are words that we should be putting into the chapters of our next books…

Should Self-Published Authors Pay For Advertising?

February 27, 2012 Michael Hicks Blog, 11

The other day I happened across a post from an author who had spent several hundred dollars in a single month on Facebook ads to help sell his books. I wanted to stick a pen in my eyeball.

I’m probably going to take a bit of crap for this post, but what the heck. Listen, there are some folks who are experts who can pull a rabbit out of the hat with targeted marketing using Facebook ads and other types of advertising. I’ve also seen some strategies like Jeff Bennington came up with that look pretty slick and, at least in his case, have certainly worked. However, as a general rule, most paid advertising campaigns don’t bring a good return on investment. Or, put it another way, you can promote your book more effectively through social media – for free.

The hundreds of dollars you can sink into Facebook ads or Google Adwords – and yes, I’ve slit my wrists and bled money out on both of those, and others – simply aren’t going to translate into enough book sales to make them worthwhile. Buying banner ads and spots on various web sites is popular, but because it’s popular, it’s getting more expensive on a lot of sites. In some cases, I saw price tags of several hundred dollars. You might experience a spike in sales while the ad is running, or you might not. But then your gig is up unless you cough up more money. Did you really make enough sales from that ad to justify the cost?

“But hey, I did better than break even!” You glare at me indignantly. I get that a lot.

Listen, if your writing is your business (and if you’re spending hundreds of bucks on advertising, you’re definitely in a business!), breaking even shouldn’t be in your vocabulary. You should be out to build up a big readership base, have one or two loss leaders (books that sell at a steep discount or are given away), and maximize your profit margin on everything else. If you’re doing this for a living, you don’t have time or money for things that only provide marginal returns on investment. Books from indie authors aren’t sold with Facebook ads or Google Adwords, they’re sold by word of mouth, either yours or your readers. Ads can sometimes help, but unless you really know what you’re doing and have money to burn, I advise caution.

Instead, consider spending your buckazoids on social media tools like Tweet Adder that keep on giving, helping you build a community of interest on Twitter. Or spend it on classes or books to get an education how to use social media effectively. Heck, spend it on cover art or editing.

Just my two cents.

Adjusting To Being A Full-Time Author – Part 5

February 20, 2012 Michael Hicks Blog, 10

Death and taxes. You know the saying. Well, I’m here to warn you that, if you’re not careful when you make the transition to writing full-time (or any other form of self-employment), one might quickly lead to the other. Figuratively speaking, of course.

Here’s what I mean. When you’re working for a company or the government, Uncle Sam and your state normally take their cut right off the top before you get your paycheck. Sure, you have to juggle standard deductions and some other stuff, but the bottom line is that most or all of what you owe gets vacuumed up first.

Not so with your book royalties, especially in what I’ll term your “breakout year”, when you go from maybe making a little to really making a lot like I did in 2011. I’ll give you a little bit of advice that sounds obvious in hindsight, but that I wish I would have had someone beat into my skull:

Find a good tax consultant who has experience with small businesses and the self-employed, and have them put a tax strategy together in the first calendar quarter when you’re paid royalties of more than a couple thousand dollars.

Ironically, it is much more important to do this right away if your royalties suddenly zoom upward.

Why? Because you will find an extremely unpleasant surprise waiting for you come tax time. Yes, you made a load of moolah, and you probably went a little gonzo spending it. “Hey, but I’ve set aside enough for taxes. No biggie!”

That’s where we get to what nature photographer John Shaw once said is Rule of Life #1: Don’t be dumb.

Remember that the retailer or distributor (Amazon, B&N, etc.) just forks over your money. They do not withhold any taxes. Zip. You’re responsible for figuring all that stuff out on your own.

In addition to federal and state or other local taxes, you’re also most likely going to be in for the good ol’ self-employment tax, which can add another 15.3% to your tax burden (with all the attendant bazillion variables that affect the exact amount and percentage that you would actually have to pay). This is a chunk of money that essentially covers your cut for Social Security and Medicare. You have to pay this as an employee of a regular company or the government, but it comes as a surprise to a lot of people who are just starting out in the self-employed realm because, like regular taxes, these deductions were taken off the top by your company before you got your paycheck.

Another factor is retirement. You’re responsible for that now. Yeah, you. There’s no company annuity, no retirement office, nobody looking out for your future but you.

Now, the good news here is that if you set up something like an LLC or other qualifying business, you can establish an SEP-IRA, which is a great vehicle tax-wise. Similar in many ways to a 401k, the money you put into it can be deducted from your gross income, and the interest grows tax-free. So check with your tax consultant to see if this is a good option for you.

And that brings me to the last item to beware of: pulling out your retirement funds. There are going to be cases when you’ll want to cash in your funds. Just make sure you get a tax consultant to give you a projection of your tax liability when you do. With many funds, if you withdraw before a certain age you’ll be hit with a large (10% seems to be common) penalty, on top of the income tax you’ll owe. If you’re pulling out a lot of money, it will likely push you into a higher tax bracket than normal. That can add up quickly, and that’s not a surprise you want to have come tax time.

Another thing about the higher tax bracket: if your royalties come flooding in, be prepared to pay more in taxes than you think, because a ton of new money could easily push you into a higher tax bracket.

Again, I cannot emphasize enough the importance of ongoing dialogue between yourself and your tax consultant. I would touch base with him or her every quarter. Why? Because, unlike a typical salaried job, your income is likely going to vary a lot (sometimes by as much as 400%, possibly more) from month to month, and your tax burden, which you’ll typically pay on a quarterly basis, is going to become a moving target. Your tax consultant can help you make sure that you’re withholding close to the right amount as the year progresses, so when the following April comes you’re not going to be slammed with an ugly surprise.

Managing Author Expectations For Non-Paid Book Promotions

February 6, 2012 Michael Hicks Blog, 12

I’ve read several author blogs lately where people have expressed disappointment with results from Amazon’s Kindle Direct Publishing (DTP) Select program or other venues where the author can give a book(s) away for free. I wanted to give my impressions of my own experiences with freebies to help authors find ways of getting the most leverage out of them.

Freebies, regardless of the method or channel through which you offer them, are neither “bad” nor “good”. It’s a promotional tool that, like any other tool, has strengths and limitations. There are two cases to look at: one for an author who only has a single book out, and one where the author has multiple books, some of which are likely part of one or more series.

The Single-Book Author

Let’s get something straight right off the bat: just because you’ve written and published a book doesn’t mean you’re going to be the next Amanda Hocking. Unlike John Locke, Joe Konrath, and a number of other bestselling authors who have either paid their dues in the publishing industry or already had an in-depth business background, I consider her a genuine phenomenon. She won the lottery, and her success is not directly replicable.

If you wrote your book with the intent of eventually writing as a career, consider your first Great American Novel – and probably your first three or four – like the drawings or paintings an artist creates to build their portfolio. While your first book may indeed earn you some money, its main value is in helping you build up a readership over time that will nag you constantly for your next book, and the one after that, etc.

“So you think I should just give away my first book for free? But…but…my effort deserves to be rewarded!” It will be if you stick with it. But your first book is just that: your first. You’re not going to be making $300,000 a year and join the Kindle Million Club with one book. Take the long view and do everything you can to get it into as many readers’ hands as possible (this assumes you’ve had someone edit the hell out of it, it has good cover art, and a good blurb that draws potential readers in to read a sample) while you’re working on the next one, which is where you’ll really start building your paid sales.

Amazon’s KDP Select is a great compromise for a first book, because you can alternate between offering it free (5 days out of 90) and paid (the other 85 days). And while I’ve become disenchanted for various reasons with Smashwords, that’s still an excellent venue for free book offerings, because aside from direct sales, they feed all the big retailers, including Barnes & Noble and Amazon (note: while you can select Amazon as a retailer, I don’t know for certain if books you list for free on Smashwords will show up for free on Amazon, but they definitely will on other retailer sites).

For those authors who have one book and have been disappointed in sales through KDP Select, the bottom line is that your readership is still in its infancy. You have to have hundreds or thousands of existing fans to create enough word of mouth, fanned by consistent promotional efforts through social media, to sustain sales in significant volume. Most of the time after you put your book on a free promotion, you’ll see a spike in sales after the book goes back to paid status. But it might not be a big spike, and it probably won’t last for long. You shouldn’t expect it to until your following reaches critical mass.

It’s impossible to predict exactly when that will happen. But to give you something to use for comparison, I published IN HER NAME in 2008, but hardly did any promotional work other than chatting in a couple forums. Even at that, enough people liked that book and the next two (plus splitting the original one into a trilogy) that when I wrote the next one, SEASON OF THE HARVEST, early in 2011 and worked my butt off promoting it, my sales exploded.

Part of that explosion, I’m convinced, was because I’d been giving IN HER NAME: EMPIRE, the first novel in my bestselling sci-fi/fantasy series, away for free for a while. I’d also built up my Facebook following (5,000 at the time, although I’ve actually pared that down for various reasons) and had about two thousand (now almost 20,000) followers on Twitter. And when those readers found out I’d published my next book, they went out and bought it. And the spike in initial sales drove HARVEST up into the bestseller charts, where it stayed in the top 20 of both the horror and sci-fi categories throughout the summer.

So, the bottom line for your first book: it’s not a profit generator, it’s a reader grabber. If you make some money from it, great. But the main benefit it can give you is to build your following of readers who will eagerly await your next book, which they’ll happily buy (if you don’t overprice it). And the one after that, and after that.

The Author With A List

If you’ve got a list of titles, which ideally includes at least one series, freebies are gold. The basic rationale is the same as I indicated above, except now you have paid titles that you can lead your eager new readers to. Of the almost 150,000 books my readers grabbed in 2011, I’d say around 60,000 were freebies. Most of those were copies of EMPIRE, the first in my IN HER NAME series, but that also included around 10,000 of the first IN HER NAME trilogy and 15,000 free copies of HARVEST that went out the door as part of the KDP Select program over the course of two and three free days, respectively (I haven’t used the rest of the five days for each book yet).

Far from saturating the market, those KDP Select freebies drove paid sales back up into the 200 rankings in the Kindle store for a while for both books. HARVEST doesn’t have great hang time, so it fell off the charts in about two weeks (note: different books seem to have different hang times on the charts, regardless of your efforts at promotion – wierd!). But the IN HER NAME trilogy is right around 1,500 overall in the Kindle store as I write this a month later, and is still in the top 30 of three categories.

The other books of the IN HER NAME series got dragged back up, too. Not nearly as high, but significantly better than before I gave away that big pile of freebies.

In the meantime, EMPIRE (book 1 of the series) is free just about everywhere: on Amazon, B&N, my web site, iTunes, Smashwords, etc. I tell people to download it, read it, and send it to their friends if they like it. Because a lot of people do like it, and those who do are either going to buy book 2 of the series (CONFEDERATION) or the trilogy collection. Ka-ching. Happy reader, happy not-starving-for-another-day author.

Be aware, however, that not all books are going to have this draft effect with freebies. I also have book 4 of the IN HER NAME series, FIRST CONTACT, in KDP Select. While giving it away has helped sales somewhat, and I’ve done it twice now, the number of downloads hasn’t been earth-shattering, and the effect on paid sales hasn’t been that significant. There are other forces at work there that I haven’t yet been able to pin down.

Also, while I’ve only had one go at putting the first IN HER NAME trilogy collection and SEASON OF THE HARVEST out for free on KDP Select, I’m not necessarily expecting the same stellar results from the next round. For one thing, when I put them free the first time, it was right before Christmas for HARVEST, and New Year’s for IN HER NAME. Both of those are big shopping periods, so I probably got a nice boost from that from holiday bargain hunters and newly-minted Kindle owners.

On the other hand, while HARVEST has fallen to a level where it makes sense to put it up for free again (because I’m not going to lose a lot of sales, anyway), I’m not going to do that for IN HER NAME yet. At a rank of 1,500 in the Kindle store, it’s still selling extremely well (the average for the month of January is over 100 sales per day), and it doesn’t make sense to give it away in the hopes of boosting the rankings what will probably be a nominal amount. The old adage “don’t fix what isn’t broke” comes to mind.

My last suggestion is that if you have a list and decide to enter them all (or some portion of them) into a program like KDP Select, don’t offer them free at the same time. If you do, and you give away your entire series free, well, that may not be so good. If a reader can pick up all of your books free, they’re obviously not going to come back to buy more, because there’s nothing to buy. Stagger your freebies, emphasizing the lead titles of any series, and try as much as you can to have your free days (if in KDP Select) bracket any convenient big sale periods.

Anyway, the bottom line if you’re an author with a brace of books under your belt is to offer at least one of them free. Ideally, I’d say offer the first book of each series you have for free once their initial sales taper off. Use them as loss leaders and get them into the hands of as many people as you possibly can, and make sure you’ve got your bibliography prominently displayed at the front and back of the book so people can find your other offerings.

Adjusting To Being A Full-Time Author – Part 4

February 1, 2012 Michael Hicks Blog, 6

In the final edition of this miniseries, let’s talk about keeping yourself from becoming a recluse, along with taking some time out to chillax…

Socializing

Everyone’s going to have their own reaction to this aspect of things, but it’s still something I’m trying to come to grips with. The people that I worked with at NSA were like my second family. Many days, their camaraderie was the only thing that kept me from going cuckoo.

When I left the agency, in some ways it was like leaving home, leaving my other family behind. While it was great staying home with my wife (and amazingly enough, we have no problem being together all day) and the boys, I no longer had those folks to kibbutz with. Sure, I have a lot of friends – real friends, not just acquaintances – online, but it’s not the same. We worked hard and we played hard together, and it’s one of the things about my old job that I do truly miss.

Now, a lot of folks have social groups they hang out with outside of work, and that’s great – no problemo! But for those of us who don’t (yes, I’m an introverted nerd – sorry!), it’s a big part of the transition you’ll need to make that I was totally unprepared for. It’s very easy to just sit at home staring at the computer all day. I know that for some that may sound like heaven, but it’s another case of being careful what you wish for. There have actually been some days when I suddenly realized, just before bedtime, that I hadn’t set foot out the door, even just to take a quick walk around the local park or something.

The bottom line is just this: if you don’t have much social engagement outside of work and you’re planning to take the plunge into writing full-time, do yourself a huge favor and line up some social circles ahead of time. They can also act as a support group for when you hit the rough spots that inevitably will come.

Taking Time Out

On the opposite end of self-discipline is to make sure that you take some time out to just chill. During the low months from September through November, I was whipping myself to death trying to get the next book out. What I was actually doing was killing my long-term productivity and, at the same time, working on a project that wasn’t optimal from a marketing perspective. I wasn’t thinking clearly.

It was time to take a deep breath, back off, and regroup. I took a little time off just to think and relax a little, and that allowed me to refocus.

On a daily basis, don’t work yourself to death. Yes, you have to be disciplined, but if you’re not enjoying yourself, what’s the point? I normally start my work day at around 6 AM. I work (usually catching up on Twitter – it’s nice to be able to call that “work”, isn’t it?) through breakfast, then I try to get in an hour or so of exercise. After that it’s back to the grindstone. I catch up on social media stuff while eating lunch, then sometimes I take a snooze. Why? Because I can! Then it’s back to work.

Now, “work” typically stops at dinner time, which is usually 5:30 or 6:00 PM. Then we go watch a movie, read, blast away at people on the PS3, or whatever. There are, however, days when I’m on a roll. When that happens, I just keep writing.

But the important thing is to do whatever you like to do to give your mind and body a break. Remember, you’re in this for the long-term, not just a quick sprint, so pace yourself!

Any Questions?

I hope you found this useful in some way. I know there’s a lot I probably didn’t cover, so if you have any questions, don’t hesitate to ask. You can contact me by email, Twitter, or Facebook any time…