The Death of Traditional Publishers? Part 3: Death, Thy Name is “Smashwords”

Smashwords and other e-book retailers are the real threat to agency pricing and the future of the Agency 6 (Random House, Macmillan, Hachette, Simon & Schuster, Penguin, and HarperCollins). The reasons are simple: they offer quality and low prices.

Most consumers find it hard to justify paying $14.99 for a fiction e-book unless they are already extremely loyal fans of the author. Even then, many are inclined to pass, believing that at such a high price point, the publisher’s profit margin on electronically delivered products amounts to usury.

Now take a look at Smashwords, currently the most successful independent e-publisher: they sell e-books in all genre categories for prices low enough to encourage readers to try someone new. Risk $14.99? No. $3.99? Sure, why not.

But Smashwords’ real threat lies in the fact that all of their authors are available in all e-book formats including Kindle, Nook, Sony and Apple. The Agency 6 are competing face-to-face with books that are priced significantly less than theirs. As we discussed before, it isn’t the publisher who sells a book; it’s the author and the story. No one goes around saying, “I bought a great HarperCollins book yesterday.”

Traditionally-published mid-list authors now have to compete against Smashwords authors, and for readers for whom price is key in their purchasing decisions. All books sold on the internet look the same: they display a cover, offer a sample read (up to 50% of the book on Smashwords – what a great way to hook a reader!), and have similar story blurbs. The differences are price and publisher name. But publisher name has minimal power, especially when you get down to the subsidiary names with which few readers are familiar. There is no reason for readers to care; publishers aren’t the brand.

On the other hand, one advantage that the Agency 6 do retain is the level of professionalism in producing e-books – the only reason that noting the publisher does matter. Expert editors and cover design artists are unarguably better than most e-publishers. But that gap is closing rapidly.

Another advantage the Agency 6 hold is the – sadly – lowered expectations of e-book consumers. When e-books were new and still considered the ugly stepchildren of publishing, anything that might sell was tossed up on the web. Readers are much more forgiving of a $1.99 e-book than a $14.99 e-book, whose price indicates that the manuscript has been professionally vetted and edited.

Now e-books are doubling their share of the market every year. Erudite consumers switching from paper books to electronic ones expect well-edited e-books with enticing covers. And rightly so! The big gamble that the Agency 6 are making is that readers will associate quality with their houses and be willing to pay an inflated price for that quality.

(I think they are very, very wrong; I do all of my new-book purchasing on Kindle and refuse – on principle – to pay more than $9.99 for any e-book. There’s always the library.)

The bottom line is simple: combine an interesting and well-written story with a reasonable price. The reader doesn’t care if the e-book is from Smashwords or Macmillan. And the more e-book sellers do to increase the quality of their books while continuing with low prices, the more of a threat to agency pricing and the Agency 6 they become.

There is another HUGE aspect to Smashwords that I don’t think the Agency 6 publishers are taking seriously: authors can publish themselves for free. They can have a manuscript professionally edited, have a cover designed, and upload their own books; books that are well-written but make skittish Agency 6 sales departments nervous because – gasp! – they are unique.

And because these authors don’t have the overhead costs of the Agency 6, they can price their books at $2.95 and pocket $2.18 with each sale. The same book, sold as a $7.99 paperback, would net the author only $0.80 – or $0.68 after an agent’s 15% take.

Can you imagine readers having so many more choices? Or all the new authors that will be discovered? Can you see authors who are internet-savvy and promotion-competent skipping agents and traditional publishing houses altogether?

It’s already happening. Agency 6 – are you listening?

ADDENDUM: Right after posting this I opened my email and saw this: ” Introducing PubIt! by Barnes & Noble” for authors to SELF PUBLISH ON THE NOOK! Kindle already has this option, and Sony readers can download from Smashwords. It’s the trifecta!