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The Economics of Writing

Written by Eric Flint

I ended my last essay by posing the two major objections to the policy of using free or cheap online distribution of an author’s works as a promotional method, which I both advocate and practice personally.

So, in my next essays, I will deal with the two most important—and rational, let me say—objections to my approach to the problem.

The first is this:

What might work for one author, won’t work if all of them do it. To put it another way, it may be true that if a few authors use free or cheap distribution online of their work it rebounds to their advantage, because it helps them penetrate the opacity of the book market. But if all authors did it, that same opacity would close down again—except that the level of income of all authors would have been lowered in the process . . .

Similarly, so the argument goes, if a few authors start handing out their work for free, because they get an immediate promotional benefit from doing do, sooner or later all authors will be forced to do it simply in order to compete—and all authors will see an overall decline in their income. Including the scab idiot who started the ball rolling, because he was too short-sighted to see the inevitable end result.

Both argument are closely related, and both of them—even if the proponents don’t realize it—are based on making an analogy between an author’s labor and the kind of wage labor which can be and often is organized by trade unions. The arguments amount to saying that an author who hands out his or her work online for free is the equivalent of a scab, a strike-breaker.

Let me begin by disposing of the obvious rejoinder to these arguments, which is that authors are not on strike to begin with, so how can an author be breaking a non-existent strike? That’s true, of course, but it’s also begging the question a little. The underlying argument, whether there’s a strike going on or not, is that a worker who agrees to work for less than the prevailing wage in a given industry is in effect lowering the wages for every worker in that industry.

This is true enough, and it’s the reason some trade unionists will routinely refer to anybody who works in a non-union job in a given industry as “scab labor.” I disagree with that usage of the term myself, and did so during the quarter of a century I spent as a trade union activist. Quite strongly, in fact. But my disagreement doesn’t stem from a different assessment of the net effect of non-union labor. The ridiculous and none-too-hard-to-figure-out-who’s-paying-for-it claims of “right to work” advocates notwithstanding, it’s a simple fact—which anyone can check for themselves quite easily—that states with “right to work” laws typically have lower wages and benefits for labor in any given industry than states without such anti-labor laws. Often, much lower wages and benefits.

The reason I disagreed with the usage was because I felt and still do that the underlying problem was and is the continuing default of the labor movement, whose overly paid and usually bureaucratic leadership is generally sluggish and inept at the task of organizing trade unions in non-union shops. So, the charge that non-union labor, as such, is “scab labor” is simply a dishonest way of covering up their own failings. It’s a variant of the old sour grapes defense mocked by Aesop in one of his fables: “Ah, that labor is scab labor anyway.”

Still, coming back from the digression, we’re left with the underlying issue. Whether or not non-union workers who agree to work for lower wages than union workers deserve the pejorative term “scab”—which they don’t, if there’s no actual strike-breaking taking place—it’s still a fact that non-union labor generally lowers the wages and benefits in any given industry.

(Yes, yes, yes, there are some exceptions—but, on closer look, even those exceptions typically disappear. The most common reason, by far, that some non-union companies pay wages and benefits that are equal to or even better than union shops, is simply to keep the union out. The owners or management are willing to pay what amounts to a premium so they don’t have to deal with trade unions in their ongoing operations. Fine and dandy. But if the trade unions were to suddenly disappear, those high wages and benefits would drop like a stone.)

That being the case, why wouldn’t the principle apply to what I’m proposing? In other words,. why wouldn’t a generalized policy of handing out many works for free online, applied by many authors, produce over time a decline in the overall compensation for writing fiction as a form of labor? It seems obvious, after all, that if customers know they can get fiction for free, they will be increasingly unwilling to pay for it; or, if they are, won’t be willing to pay as much as they did before.

Yes, the argument seems obvious—but it’s just as obviously wrong. In fact, it’s as full of holes as the proverbial Swiss cheese.

Let’s start with the most basic problem with the analogy between authors and wage laborers. It’s simple: With the exception of authors who work on a work-for-hire basis, authors are not wage laborers to begin with.

People often ask me what I like most about being able to make a living as a full-time writer, working entirely for royalties. (I.e., I do no writing on a work-for-hire basis.)

Most of the time, I think they expect me to respond along the lines of: “It’s nice doing creative work that I enjoy.” And, indeed, that’s my second reason for enjoying my occupation. But it’s not the first reason, not by a long shot. First, because it wouldn’t be true anyway. The notion that “non-creative” work is dull and tedious is often wrong on all three counts. True enough, some non-creative labor is genuinely dull and tedious. I can well remember working in an auto forge in Detroit running a trim press. My job, all day, consisted of punching out the auto parts made in the steam hammer whose crew I was part of. In the summer, in temperatures that often exceeded one hundred degrees Fahrenheit. Oh, joy. I also spent several years working in the meatpacking industry, usually at jobs that were every bit as dull and repetitious and sometimes just as hard.

But much “non-creative” labor is not only not dull and tedious, it’s very far from being “non-creative” in the first place. Nor do you have to ascend to the rarified heights of being a rocket scientist to discover that fact. To give a personal example again, I spent many years as a skilled machinist, usually operating a horizontal or vertical boring mill and often doing highly complex and challenging work. Anybody who thinks such labor is simply rote labor and doesn’t require a great deal of intelligence and, yes, creativity, is either a fool or a snob or both.

Granted, the work I do now is more interesting to me. But the main reason I love being a full-time writer is as crude and simple as it gets:

I don’t have a boss. I don’t have to punch a time clock. As long as I produce sufficient work of good enough quality for my customers at reasonably regular intervals—which is a given for almost anybody who works for a living—my time is my own and I answer to nobody.

Or, to put it as simply as possible, I am not a wage-laborer any more.

In narrowly economic terms, in fact, I am a small independent businessman. Granted, it’s a one-person business and I employ no laborers of my own. But that’s not particularly unique to writers. There are lots of one-person businesses in the world.

That being the case, it’s not only fallacious but even dishonest for writers to try to use an analogy between themselves and wage-laborers. The analogy washes over—tries to, rather—the essential and critical difference.

The reason wage-laborers generally need a trade union is because, as a rule, their labor is interchangeable. That’s true even in cases where the labor itself is very highly skilled or in short supply. Even the most skilled machinist—or airline pilot or air traffic controller, to use another example—can be replaced. Not easily, perhaps, but they can be in a pinch.

So, if you allow unregulated competition between workers, you will invariably see an overall decline in wages and benefits. And if anyone doesn’t believe me, I can only shrug my shoulders and recommend you study the history of economic relations over the last quarter of millennium, since the beginning of the industrial revolution. It’s blindingly obvious to anyone who doesn’t have an ax to grind.

My labor today, however, is not interchangeable. I don’t get paid by an employer in the first place. For a writer, a publisher is not a boss—even if he or she typically only publishes through one house. What the publisher houses actually are is a service that the author contracts with to produce and distribute their work. But an author’s income doesn’t come from the publisher. It comes from sales of the author’s work, the proceeds of which are divided between the author and a publishing house according to specific terms laid out in a contract for a specific book.

In short, my income derives from royalties, not wages. Those royalties, in turn, derive from sales of my books to my customers—or “fans,” as customers are normally referred to in the entertainment industries. The ultimate economic relationship is between me and my fans, and no one else. All the other parties involved in the process—publishers, distributors, retail outlets—are simply intermediaries.

An author’s fan base may be large or small. In my case, it’s large enough to enable me to make a full-time living from sales of my books. In the case of most authors, it’s not. In fact, it’s not even close. Most published authors derive only incidental income from their writing, and even most writers who get published regularly don’t make enough from sales of their work to be able to make a living as full-time writers.

It’s that fact, of course, that gives so many authors the illusion that they are comparable to wage-laborers. But they’re confusing a general relationship of economic power—“clout,” to use a slang term—with the specific relationship between wage-laborer and employer. Yes, it’s true that because most authors don’t sell very well, that publishing houses can often push them around or dispense with their services altogether. They don’t always behave that way, mind you. There are plenty of cases of publishing houses who actually go out of their way to keep an author in print even thought they don’t sell particularly well, at least for a while. But it’s certainly true, especially in the modern era where publishing is dominated by giant corporations instead of being—as it was in decades past—an industry dominated by independent houses, that it’s far more common for low-selling authors to be given short shrift by their publishers.

Being blunt, so what? The same is true in any entertainment industry. For every movie star who can pull in millions of dollars for making one film—who can, in fact, more or less make or break that film—there are thousands of part-time actors scrabbling at the edges. For every top athlete making millions of dollars a year, there are thousands scrabbling at the edges. For every top-selling popular singer or musician, the same is true.

We do not therefore conclude that the basic economic relationship in a given entertainment industry is determined by the bit players and the wannabes. It isn’t. Rather, and exactly the opposite from industries dominated by wage labor as the principal form of labor, the basic relationship is developed from the top down. It is, like it or not, the superstars and the most valuable players who primarily determine the level of compensation and the principles of that compensation.

Why? For the good and simple reason that, push comes to shove, they are the ones who draw the customers. Not their “bosses,” who aren’t bosses to begin with.

People came and paid for tickets to see Michael Jordan play basketball or Reggie Jackson or Nolan Ryan play baseball. They did not come to see the owners of those teams sitting in their sky boxes.

People pay for movie tickets or buy DVDs to see Will Smith or Tom Hanks or Meryl Streep or Julia Roberts perform. Some of them are also drawn by the name of the movie’s director. But I can assure you that the number of people sitting in a movie theater who know or care who the producers of that movie were can be counted on the fingers of one hand—and the number that comes up will usually be zero. The same is true, even more so, for people sitting at a musical performance.

The same is true, as a rule, for people buying a book. Almost every reader can tell you the name of the author of the book they’re reading. Not more than one in a hundred are likely to notice the name of the publishing house. There are some exceptions, of course, but not many. In science fiction, over the decades, one or another publishing house would develop such a distinctive identity that at least some readers were drawn by the identity of the house itself, and an even larger percentage recognized the identity. But, even there, the main reason for the distinctiveness was that a publishing house or magazine developed a very popular set of stable lead writers.

And that’s why it’s ridiculous to try to make an analogy between independent workers in an entertainment industry and wage laborers. The identity of any individual wage laborer vanishes in the process of the work. Indeed, as a rule, it has to vanish or the end product is deficient. When I worked as a machinist, for instance, any shaft I made on a lathe or housing I machined on a boring mill had to be indistinguishable from any other in that line. Why? Because what the customer was paying for was a product all of whose proportions fell within a very narrow range of tolerances. However creative may have been the work of figuring out how to make that product, the individual worker’s creativity became invisible in the product itself.

The opposite is true in entertainment. Much as they might like to—in some cases, fervently wish to—it’s just a cold fact of life that a movie producer can’t use actors interchangeably. He can’t produce a “Tom Hanks movie” without Tom Hanks. He can’t tell the real Tom Hanks that if he doesn’t agree to work for peanuts he’ll go out and hire another Tom Hanks.

Granted, a producer—or a publisher, or the owner of a sports team—can decide that he’ll make as much money if he contracts for the services of a different actor or writer or athlete. But then he still has to deal with that actor or writer or athlete, and he’ll still have to deal with them on whatever economic basis is determined by that individual’s performance in the market place.

So, over time, certain basic contractual terms become established for everybody—or most people, at least—in a specific entertainment industry. To use commercial fiction publishing as an example, the standard contract for any writer (except writers on a work-for-hire basis) is as follows, in terms of royalties paid:

For a hardcover title, the author will get either 10% or 12.5% or 15% of the cover price of the book for each and every copy sold. The difference is determined by the level of sales: an author gets 10% for the first 5000 copies sold, 12.5% for the next 5000, and 15% for any copies sold past ten thousand. For a mass market paperback, the percentages are 8% for all copies sold up to one hundred and fifty thousand, and 10% thereafter. For trade paperbacks, there’s a slightly wider fluctuation in terms—some houses pay the same rates as for hardcovers—but the general rule of thumb is that an author will get 7.5% of the cover price for every copy sold.

Those established percentages are not and were not set by little-published authors. They were established, over time, between publishing houses and their bestselling authors and the agents for those authors. And having been established, became generalized throughout the industry for all authors. (It’s true that new authors often have to sell a first book on a slightly sub-standard basis—for instance, 6% and 8% for paperback royalties instead of the standard 8% and 10%. But that’s a passing phase, one way or another. If they can’t sell any more books, it’s a moot point. And if they do, they’ll soon start getting the standard rates.)

Okay, so much for the basic economics involved. Now let’s go back and look at the question posed directly.

Given these specific economic relationships, what is the net effect on the income of authors as a whole if some of the authors start handing out some of their works for free in electronic format?

Well, the first and most obvious effect is that the authors who do so will become better known to the reading public at large. And, as a result of their greater visibility, will generally see an increase in their sales.

I need to stress that this is not guesswork on my part. It’s something that has been proven in practice over a period of years—by me, among other authors.

I can demonstrate this concretely, by using two of my novels as my examples.

The first book I put up for free online—in fact, it was the first volume in the Baen Free Library—was my first novel, Mother of Demons.

Mother of Demons was published in September of 1997, and it was only published in a mass market paperback edition, as was the standard practice at the time for first novels. (Most science fiction novels, actually.)

The initial sales were decent—good enough for the publisher to contract for more work from me—but hardly spectacular. Within two years, by which time the vast majority of books will have had most of their sales, the book had sold a little over ten thousand copies, with a 55% sell-through. (To remind you, “sell-through” refers to the percentage of books shipped which are actually sold.) That was slightly above average for a first novel in science fiction at the time, but only slightly.

At that point—partly because, being frank, I knew I had nothing much to lose—I put Mother of Demons up for free online in the Baen Free Library. Jim Baen and I, after discussing the matter, both thought it would be an interesting experiment. Jim was convinced that an author would lose nothing from doing so, and might very well gain as a result, and I was willing to be the guinea pig.

What happened next, over the many years that have followed, is both fascinating and instructive. Here are my royalty figures for Mother of Demons, for each successive royalty period. For those of you who don’t know, there are two royalty periods a year in publishing, at six month intervals. As a rule, though not always, the periods end on June 30 and December 31.

You probably have to be an author to grasp immediately just how anomalous these results are. Here are the basic rules of thumb in commercial publishing when it comes to sales:

Rule Number One. 80% of all the sales of a title will happen in the first three months after it is published.

Rule Number Two. Thereafter, sales will decline steeply.

Rule Number Three. Within a few years—almost always less than five, and usually only two or three—sales are so low that it’s no longer worth it for a publisher to pay the warehousing costs to keep the title in print.

Rule Number Four. Sell-through rarely improves, and usually declines over time.

But with Mother of Demons, none of those rules applies.

As of the end of the last royalty period, almost nine years after the novel was first published, more than half of the sales came after the initial sales period. Almost 60%, in fact.

Although no other period, of course, came close to that first period in total sales, there was no noticeable decline thereafter until June 2005. For the first six years, though the end of 2004, the book sold an average of 873 copies each period. Then, even the clear drop that took place after six years simply seems to have set a new plateau for regular sales. In the two years that have elapsed since then, average sales dropped to 515 copies. But that “average” has seen hardly any fluctuation at all, and certainly no decline.

As of the day I’m writing this essay, August 29 of 2007, I am only three days away from the tenth anniversary of the publication of Mother of Demons. My first novel, mind you, and a novel which has been available for free in an electronic edition for the last seven years—and which has never gone out of print.

Do you have any idea how unusual it is for an author’s first novel to still be in print ten years after it came out? The exact percentages are unknown, but they are undoubtedly less than five percent, and probably less than one percent.

Before much longer—I figure, about a year from now—the existing print run for Mother of Demons will have been sold out. Normally, even for a novel with “long legs,” especially a paperback edition, that’s the point at which a publisher decides to let it go out of print. Even if sales are steady, they simply aren’t big enough to justify another print run, given the economics of mass market printing. It’s not worth doing a print run smaller than five thousand copies, and publishers prefer at least ten thousand. Even with the solid existing sales of Mother of Demons, it would take too many years to sell that many copies.

As it happens, however, Mother of Demons is not going out of print. Toni Weisskopf, who replaced Jim Baen as Baen Books’ publisher after Jim’s death last year, told me a couple of months ago that she was planning to do a limited hardcover edition of the novel. It’ll be a small print run, but that’s economically viable for a book which has small but solid sales.

So. Almost eight years ago, I put up my first novel for free online—as a result of which it got most of its sales since then, and is still selling well enough that even after the mass market edition finally runs out, the publisher is going to keep it in print in a hardcover edition.

Nobody knows exactly what percentage of first novels never go out of print for ten years and then get reissued in a hardcover edition. But the percentage is probably somewhere in the top one-tenth of one percent.

We’ll see the same pattern, in a moment, with another novel of mine. But, before I move on, let me just make a note. The next novel whose sales I’ll analyze, 1632, is the first novel in what has become a long-running and popular series, with (to date, as of this October) six novels and six anthologies in print by January 2008. Some people who argue with me on this subject will claim that the ongoing sales of 1632 are due to that, not to the fact the book has been made available for free online for many years.

Baloney—and I know it’s baloney because Mothers of Demons is not part of any series. It’s a stand alone novel, which has no sequel that might keep stimulating its sales as the first book in a series.

Here are the comparable royalty figures for 1632, which was first published in February of 2000 in a hardcover edition. That edition was followed by a mass market paperback issue that came out exactly a year later, in February of 2001. I’ve forgotten the exact date that I put the novel up for free in the Baen Free Library, but it was sometime in that same year.

One note of explanation. I’m only using the paperback royalty figures because, for our purposes here, it’s the paperback figures that are critical. A book that comes out first in a hardcover edition, followed by a paperback reissue, sees an almost complete stop to hardcover sales once the paperback appears. So you can’t use hardcover royalty figures to gauge a book’s longevity.

Except for the first sales period, ending December 31 of 2001, all of these sales took place after I put the novel up for free online.

What we discover is exactly the same pattern. As before, no period enjoyed the same level of sales as the very first period. But that’s a given with almost any book, certainly a novel. (The rules for textbooks mandated by schools are different, of course. But very few novelists—and practically no living ones—have a phalanx of teachers and college professors to keep maintaining their sales by making their books assigned texts in classes that the students have to buy, whether they want to or not.)

But—this is completely out of whack with normal commercial publishing experience—most of the sales took place after that initial period. And the result is even more striking than it was with Mother of Demons. As of the last royalty period, 1632 has sold almost ninety-five thousand copies in paperback. Fully two-thirds of those sales happened after that first big sales period—and after the book was made available for free to the public in an electronic edition posted in a well-known and well-advertised web site.

There hasn’t been the same steady increase in sell-through that we saw with Mother of Demons. But that’s because 1632 started at 85% and soon reached 90%. If you ask any experienced publisher or publishing sales representative, they will tell you that a ninety percent sell-through rate is just about as high as any sell-through can ever get, in the real world. A “perfect” sell-through of one hundred percent is only theoretically possible—and it wouldn’t actually be “perfect” anyway. Truth be told, I’ve never been that happy that 1632 has maintained such a phenomenal sell-through for all these years.

Yeah, yeah, fine, it’s great for bragging rights. But the fact is that a sell-through that high is partly reflecting a bottleneck caused by the fact that the miserable misbegotten distributors—do the jerks pay any attention to their own figures?—aren’t ordering enough copies to begin with. I’d far rather see the sell-through drop to eighty or even seventy percent, if that reflected greater shipping orders and therefore a better circulation of the book.

Still, that grumpiness aside, the fact that 1632 has maintained almost a ninety percent sell-through for many years, despite being available for free in an electronic edition, is actually enough in itself to make a mockery of the argument that putting up works for free hurts an author’s sales.

Notice, furthermore, that the sales have never dropped at all, once we get past that initial period. Since the period ending December of 2002—almost five years, now—1632 keeps selling, period after period, with no discernible decline in sales. There are fluctuations from one period to the next, naturally, but there is no overall decline at all. The average sales for any given six-month period during that five year stretch have been 6,645 copies—and the sales in the last period were higher than that average.

Part of the explanation, of course, is that 1632 is the first novel in a long series. One of the other rules of thumb in publishing is that the first novel in a series will always outsell all the other, later volumes—for the good and simple reason that readers who come into a series midway and enjoy whatever book they happened to stumble across, will typically start the series at the beginning by going out and finding the first book. To a lesser degree, the same phenomenon applies to all later books in the series.

So, if you step back and look at sales of a series over a long stretch of time, what you will almost always discover is that the sales fall on a sliding continuum, with the earlier books selling more copies than the later ones. Mind you, this is a relative relationship of sales, not an absolute limit. With a successful series, all of the books in it will show increasing sales. But the earlier volumes, especially the first one, will always sell more copies than later volumes.

Fine. But I think it’s patently absurd to claim that the fact the novel has been available for free in electronic format during that entire period has nothing to do with it—much less that it somehow hurt the sales of the book.

I will now make two very blunt statements:

One. It is preposterous—downright lunacy—to accuse me of being a “scab” and lowering the pay rates for all authors, when I make far more money than ninety-nine percent of them. For the past several years, my annual gross income as a writer has been around $150,000. In fact, it’s been slowly climbing. That certainly doesn’t put me in the league of really top-selling authors like John Grisham or Robert Jordan or Nora Roberts—much less J.K. Rowling—but it does put me in the top one percentile of all commercial fiction authors, including science fiction and fantasy authors.

To put it another way, you might just as well—and just as idiotically—accuse major league baseball players of lowering the pay scales for ball players in the minor leagues. Or accuse established character actors who get regular work in the movies of lowering the pay scales for bit part actors and extras. (That’s what an author like me is, by the way, if we use the movies as an economic analogy. I’m not one of the top stars, but I get lots and lots of work and make an income that’s at least twice the median income for Americans today.)

Two. It is just as preposterous—downright lunacy, again—to claim that my policy of putting up all of my works for free online after an initial period is hurting my income, and therefore the income of other authors. In fact, it does the opposite.

So much for the “scab” theory.

All right. This essay is already over five thousand words long, and so I’ll have to break until the next issue of the magazine coming out in December. I believe I’ve thoroughly demolished the “scab theory,” but that still leaves the fallback argument. Which amount this:

Okay, fine, jackass. So you’re not a “scab.” What you are instead is a predator, and to make things worse, a predator who is invading an ecology that’s not accustomed to your methods of predation. What’s happening here is that the good sales you’re bragging about come as a result of predating on the sales of other authors who don’t put up their work for free. And, eventually—like any voracious and out-of-control predator—you will wind up predating yourself out of existence. The day will come when the success of predators like you and other authors who do the same will drive out so many authors that the publishers will finally be able to force you to accept lower terms.

There are so many fallacies lurking under this notion that I’ll need a full essay to deal with them. But, as I break off, I will simply urge the readers of this column to spend the next couple of months—occasionally, occasionally—pondering two simple questions.

Where is it written, and in what holy text, that the pie for commercial fiction is fixed and only so large? And, therefore, that the success of one author must come at the expense of another?

The reality is quite the opposite, as I’ll show in my next column.

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