How fast can the book industry remake itself? We’re watching it happen before our eyes today, as e-books finally explode from negligible sales to a third of the market. The relentless pace of change is fracturing book publishing and exposing all of its weaknesses.

Here’s the rundown of the latest events:

  • On Tuesday, Thomas Catan, a writer for The Wall Street Journal‘s Law Blog, reported that the U.S. Department of Justice is conducting an antitrust investigation of five major book publishers and Apple Inc. over collusion in e-book pricing. WSJ has an interview with Catan that explains the issues.
  • On the same day, Nick Clark, a business columnist for The Independent, reports that the European Commission is investigating a large group of U.S. and European publishers regarding e-book pricing collusion.
  • On Thursday, in a related story, The Wall Street Journal‘s long-time publishing correspondent, Jeffrey Trachtenberg, reported on how high e-book prices have climbed — so much that the e-book version of The Help costs more than the paperback.
  • Last Friday, in a front-page “Friday Journal” feature, The Wall Street Journal lifestyle reporter Alexandra Alter wrote a major article on “How to Become a Bestselling Author” based on the success of Darcie Chan’s novel The Mill River Recluse, which has sold over 400,000 e-book copies but can’t get a contract for print publication.

Chan’s path, like that of so many other successful e-book authors, was to lower the price of the book to 99 cents, then spend a good deal of her own money promoting the book online. Her marketing included reaching out to influential bloggers. A review from Ereader News Today sparked initial sales. Alexandra Alter continues the story:

She spent about $1,000 on marketing, buying banner ads on websites and blogs devoted to Kindle readers and a promotional spot on, a book recommendation site with more than six million members.

Chan then paid for reviews from websites, including $575 for an expedited review from Kirkus Reviews. She took blurbs from these paid reviews and posted them on her Amazon Author Central page and her book page at Barnes & Noble Online.

Her book went from selling 14,000 copies in July, when it was featured on two major sites for e-books, to 77,000 copies in August, when it hit The New York Times e-book bestseller list. Major publishers were still not interested when offered the novel again; they feared sales were tapped out and only due to the book’s low price.

The major publishers just don’t get it. There was a reason to give the publisher 50% of the retail price of a book (with the author getting 7.5%) back when the publisher had manufacturing and distribution costs. There is no reason for publishers to get 70% of the revenue from e-book sales, where they face negligible production and distribution costs. E-books should be less expensive, on average, because their reproduction costs are so low.

For many years, book publishers have been responding to the new economics of publishing by offering authors smaller advances and pushing the publicity and marketing costs onto authors. It’s the author’s responsibility to make the book a hit, for which the author gets 7.5% of retail price. It’s natural for authors to explore the new path of e-book self-publishing. What do they have to lose?

Publishers can try to collude to prop up a ridiculous level of profit on e-books while they pay authors with crumbs off the table, but the market will move right around them. More writers will go it alone, pay for the marketing themselves, and reap the lion’s share of whatever sales they can generate.

At SixEstate, we know what authors are going through and where book publishing is going, too. We’re here to help you build thought leadership in your niche. We’ll help you build the platform that major publishers insist on before taking on a new author. And we’ll help build a path around book publishers and directly to your audience if publishers fail to see the merit of your work or the road to success.

Source: “How Darcie Chan Became a Best-Selling Author,” The Wall Street Journal, Dec. 9, 2011.
Source: “EU investigates Apple and five publishers over e-book pricing,” The Independent, Dec. 7, 2011.
Source: “E-Book Readers Face Sticker Shock,” The Wall Street Journal, Dec. 15, 2011.
Source: “Justice Department Confirms E-Book Pricing Probe,” The Wall Street Journal, Dec. 7, 2011.

Steve O’Keefe is co-founder and Chief Operating Officer of SixEstate Communications, and the creator of Newsblogging. He has taught Internet PR at Tulane University since 2001, as well as courses for Stanford University, UCLA Extension and PRSA, among others. Steve wrote the bestselling book “Publicity on the Internet” in 1996.

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