The Upside of “Black Wednesday” Part 1: What’s Happening to the Publishing Houses?

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There are upsides to the market even after “Black Wednesday”.  In this first article of three, a list detailing the biggest (and most shocking) changes, the upside to those changes, and what it will mean to you (the author) can be found.   Part 2 and Part 3 will be in the next two newsletters and will discuss the new Distribution Changes and PR Trends for 2009.  So check back next month, and read on to see what’s happening in publishing houses.

What were the results of “Black Wednesday” for Publishing Companies?

1.      There have been Massive Publishing Layoffs:  On Black Wednesday, many of the bigger publishing houses throughout the industry laid off editors and other staff.  Why?  Simply put, October and November were “slow” months.  With lower book sales across the board, stock prices plummeted and investors took their money elsewhere.  So, to save their stocks and prove themselves to their investors, large publishing houses cut expenses to turn a profit.  Thus, jobs were among some of the many expenses cut, and editors and other staff found they were suddenly unemployed. 

a.      The Upside:  There are now tons of editors who have to make a choice:  Switch publishing houses, create their own new publishing houses, or become agents.  The best of the best will choose to start their own fresh new company where they can put the skills they’ve learned from the big houses to use.  They will get the opportunity to do the things they’ve always wanted while racing to sign new authors and buy great books.  They already have the contacts in place (bookstores, distributors, even staff from their previous companies); all they need are the stories to sell.

b.      For Writers:  Like the editors who choose to start their own companies, writers will have to make a decision: Follow an editor to a brand new company, or stay with their target publishing house.  Then, the questions for writers to consider become:  “Do you want to be the big fish in the small pond, or the small fish in the big pond?  Is it the editor who will make your manuscript a success, or the house?  Who is going to work harder to promote you and your book?” 

2.      Some Publishers are paying Smaller Advances or NO Advances:  According to an article in Publishers Weekly (“Against All Odds, Small Presses Prosper”, published 3/2/2009), many smaller Indie Presses have decided to cut or forego author advances in lieu of higher royalties.  For many smaller companies who chose this path in 2008, their sales were nearly double their sales of 2007.  Thus, this one simple choice has helped many companies stay afloat when they should be sinking. 

a.       The Upside:  For a publishing company, this is a no brainer.  The less money spent on upfront production costs, the more they can spend on marketing.  More marketing = more book sales; more book sales = more profit.  The more profit, the faster they can grow their house.  As an added bonus, the publishing houses which make this choice are more willing than bigger houses to take a chance on new authors and stories that don’t “follow the trend.”

b.      For Writers:  A smaller advance could mean little or no money for the next two years.  However, when writers do get paid, they have the opportunity to make more money than they would have made with an advance (8% to 10% on average versus 4% to 6%).  In the long run, a writer could make a lot more money and become less likely to get cut from the publisher if their book doesn’t sell well “right out the gate”.  Plus, they can still find a place for the “book of their heart”, which may not have existed in 2008.

3.      Some Publishing Houses Dropped Genre Lines:  There’s a common theory in the Business World called “80/20.”  This theory revolves around the concept that 80% of a business’s income will come from 20% of their clientele.  For a publisher, the concept would be that 80% of their business comes from 20% of their authors and genres.  So, to cut the fat, many small and large publishers dropped genres they were having difficulties selling.  This meant many authors had to scramble to find new publishing companies despite name / brand recognition and any accolades acquired while publishing for that company. 

a.      The Upside:  For genres that weren’t cut, those books will now receive more attention than they would have received before Black Wednesday merely because the company is relying more heavily on each and every book to make money.  As an added bonus, there will be more money available for enhancing those genres and more money available for marketing.  Furthermore, certain companies will soon stand out as being “better” than other publishing houses for the genres they publish. 

b.      For Writers:  The upsides for the publishers are similar to the upsides for writers.  Your published genre will now have more money to promote your book, more attention to detail, fewer “missed” mistakes, and possibly better covers.  In addition, it will soon become less confusing as to where a writer should publish their book because they will want whoever is best in the industry.

4.      Freezing Salaries:  One of the ways publishing houses are trying to ensure a profit is to freeze the salaries of their editors and staff.  Although the negatives seem obvious (i.e, Editors may jump houses, less focus on new book in lieu of well established authors, or being ignored altogether), freezing salaries is upping a company’s stock – thus the company is thriving.

a.       The Upside:  Companies that choose to freeze salaries are less likely to have to lay anyone off.  This can create a sense of relief within the staff to know their jobs are secure for the moment.  Plus, the staff is going to work harder than ever to make sure if job cuts do come, they will not be among them.

b.      For Writers:  You will continue to work with the editors and staff you know and love.  In addition, publishing staff may now be on a mission to prove themselves “worth keeping.”  Thus, they very well could be doing a better job on editing your book then they would have done before Black Wednesday simply for the fact that they want no damaging marks associated with their reputation. 

5.      Budget Cuts:  If a company cannot increase their income, then the next best thing is to cut their expenses.  A lower budget means cuts throughout.  Less money for promotion, less distribution, changes in the rules.  It may seem unfair, but a publishing company has to stay afloat, and the best way to do that is to ensure a profit. 

a.       The Upside:  Every dollar spent at a publishing house in 2009 is only going to be spent if it brings money back into the company.  This means some publishers are only going to attend conferences they know will be worthwhile (like RWA’s national conference).  They will also be more diligent in spending marketing dollars where it will have the most effect, and they will make new rules and regulations within their company to ensure no money is wasted.

b.      For Writers:  When published in 2009, a writer can reasonably expect their publisher to “teach” new ways to promote themselves and their books on their own.  In fact, publishing houses will most likely tell a writer to promote themselves “or else.”  It will also be reasonable to expect that books will have smaller print runs than expected, and will probably be e-published as well as printed.  (Expect to work harder in 2009 than you would have in 2008.)

All in all, the changes are not as scary as everyone is thinking.  Yes, some authors had to scramble to find new publishing houses that would publish their genres.  Yes, some agents and editors are saying to “write for the market” right now, not “the book of your heart.”  Yes, many people got laid off.  But with new grants for small business owners, a massive increase in e-publishing, smarter spending within publishing houses, and creative new ideas to make publishing companies thrive, there is no logical reason that the romance industry will not become more profitable than ever before.  So, take heart.  “Keep at it.”  And check back next month for the new PR Techniques Agents and Editors are suggesting for 2009.