Indie Thoughts: Publishers know profit, but haven’t tapped best seller lists

In The Business Rusch: Generational Divide Kris Rusch points out that the new on-demand and long-tail market for books has changed the duration of the opportunity a book has to be successful, but that it seems the industry still isn’t recognizing this in how they measure success.

The problems come from the fact that those of us who run things—people in our forties, fifties, and sixties—use metrics that were developed by our parents for their world, that tightly controlled Mad Men world where everyone was expected to be the same, not just in what they wore or bought but in what they listened to or watched or read as well.

The bestseller list?

It measures velocity. (A good essay on this topic, “The Meaningless Metrics of Fame,”  came from Mike Briggs, husband of Patricia Briggs, earlier this week. I’ve also dealt with it.)

Reviews?

They only want new books, and then only at the time of release.

Brick and mortar bookstores?

They only have room for the latest releases, and then only the ones that are the most popular with their customers (whoever those folks might be).

Books have come late to this fight. Books have been available on demand for only about four years now, in the U.S. In other countries, there’s been even less time.

And we’re all still fighting over meaningless metrics, to use Mike Briggs’ term, because those metrics only measure things that were important around the water cooler, not things which are important now.

What’s important now?

She goes on to say:

The publishing industry isn’t even talking about new metrics. That idea hasn’t occurred to traditional publishing, and indie (or self) published writers are constantly seeking validation from the old system—trying to figure out ways to game the bestseller lists or to get a fantastic review from somewhere that has old-world prestige . . . But at some point, traditional publishers are going to have to develop new ways to figure out which products sell well and which ones don’t. All of their systems—from sales figures (which measure books shipped not books sold) to bestseller lists to critical acclaim—are based on the old models.

Kris is a very experienced with publishing, but her last point conflates internal accounting with marketing. Publishers DO know which products sell.

The primary measure of success in a financial enterprise s not new. It’s been around for 100’s of years. And on demand and long-tail markets don’t change it.

The measure is how much a product or service contributes in profit to the bottom line. You take revenues, minus expenses, and that’s the contribution that product (a book in this instance) makes to your total profit. Or to covering your fixed costs.

Booksellers have measured the success of their books with actual or estimated profits for quite some time. Publishers already know which books sell well and which don’t. No accountant in the world is going to report books shipped as the measure of success. And they don’t. The very fact that publishers have a profit and loss statement and show returns on royalty statements demonstrate that. They look very closely at actual and estimated profits. And to they do this by channel, which is reflected in a small way when they break out ebooks on royalty reports. This is all basic accounting.

Here’s an example. Until Ender’s Game the movie, Ender’s Game the book hadn’t appeared on any best seller list since it was first released. And its release was 30 years ago! Yet over the years Tom Doherty touted its sales numbers many times. Tom knew that book was gold. Of course, he did. Because he doesn’t use best seller lists to tell him what’s selling well. He knows those lists are marketing devices. He has the real data in house. Why would he need a list to tell him anything?

And Tom isn’t going to use books shipped either. Tor may report those numbers to Publishers Weekly for marketing purposes, but he will always multiply that number by an expected return rate to estimate sales. He wants to do that. Because books shipped is meaningless to the bottom line and everyone knows it, including the auditors.

Publishers are well aware of the long tail. They see it with books that have been rotated out of the brick and mortar channels but are still selling in the online ones. They report it in their annual statements. They know the online channels work differently from the brick & mortar ones.

The measure of success is still the same as it ever was—how much profit is this property contributing to our bottom line?

Marketing, however, is a whole other ball of wax.

What the long tail and on-demand allow are marketing campaigns that are impossible in the brick & mortar channel. In brick & mortar you have a limited time to advertise (roughly 8-15 weeks). After that period, most books are rotated out of the store. This means that any marketing for those brick & mortar buyers MUST coincide with the period when the books are in the stores.

But the online channels open up all sorts of other opportunities. You can market forever. And the contribution margin is always positive. The online and POD costs are easily recouped with each sale. (Publishers are well aware of this profit potential; this is why we have so many making grabs for backlists.)

And I see publishers taking advantage of these new marketing methods. This last week I saw publisher books not currently stocked by brick & mortar retailers on BookBub, BargainBooksy, and Book Sends. And the industry isn’t totally focused on new books for reviews. I just had a large newspaper agree to look at my book that was published four months ago. Still, Rusch is right when she says that the publishers haven’t adapted one of their biggest marketing tools to take advantage of the new opportunities–they haven’t done anything with the best seller lists.

Amazon has lead the way in creating new ways of marketing books to different types of readers with their best seller lists. These lists create the excitement of discovery.

But every one else is still reporting weekly sales on the big lists.

If I were a publisher, I’d be asking USA Today to provide more than just the weekly view of the top 150 books. And USA Today is THE list to watch because their numbers are not based on units shipped to a sample of stores, but actual sales. Here are some lists that readers would be interested in.

1. Most anticipated this week: based on pre-order totals
2. Most anticipated this month: based on pre-order totals
3. Hot new releases: based on weekly numbers
4. Hot new releases for the month: based on monthly numbers
5. Books with legs: last 3 months; I know it needs a different name (grin)
6. Best sellers of the last 12 months: annual total of units sold
7. Best sellers of the last 18 months: total units
8. Contenders: for each of the lists above show the next 150 books (I always want to see the next 100 books after the top 100 on Amazon’s lists; why not show readers the top 300?)
9. Movers: for each of the lists above show those that have the biggest rise in percentage sales and meet some unit minimum (you don’t want to feature books with 2,000% increase because they went from selling 1 unit to 20), even if they don’t break the best seller lists
10. Genre: allow all of this to be sliced by genre.

Let the reader select the view they want to see!

Avid readers will gravitate towards the shorter time periods. Those that read fewer books will gravitate towards the longer periods. Everyone who wants to discover something new will go to the contender and mover lists.

This is about marketing. Not publishers measuring success.

And then armed with those numbers guess what the publishers will do? They will go back to the brick & mortar venues and pitch to have some of these same books carried in the stores for the first time (some publisher books are printed digital first) or carried again.