The authors and consumers Upper management wages and bonuses $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ Rent, utilities, taxes, middle management, corporate retreats, marketing, returned books, high advances that didn’t earn out, distribution chanels, etc. $$$$$$$$$$$$ General staff, royalties to authors $$$$$$ Misc expenses $$ A Random Traditional Publishing House: really top Heavy It’s all balanced on price point and product quality. The authors and consumers Writer $$ Distribution $ $$$$$ $$ Big publishers can’t function on a low price point. Their over head is too high. They have been taking cuts cutting measures for years. These include, but are not limited to spending less on marketing and not providing editing Big publishers can’t function on a low price point. Their over head is too high. They have been taking cuts cutting measures for years. These include, but are not limited to spending less on marketing and not providing editing Independent authors and startup publishing houses have expenses that vary widely. But in all cases, their overhead is significantly less. Independents are learning how to produce a quality product and are able to sell it for a low price point. Independent authors and startup publishing houses have expenses that vary widely. But in all cases, their overhead is significantly less. Independents are learning how to produce a quality product and are able to sell it for a low price point. Independents: A little top heavy, but not really

While the Big Dogs fight to put the genie back in the bottle instead of innovating: Startups are springing up like kudzu. No matter how many fold, there are thousands more. And we’re very, very dangerous. We erode customer base. While the top ten publishers are able to control the price point of certain books, they can’t stop the deluge of material. They count on poor quality to be an issue. Buying trends suggest its not. Many independents are offering free books on the hopes of making sales on second and third books. And it’s working. Consumers will purchase work from authors who gave away books, if they liked the book. Readers don’t care who published it. These readers are being lured away by cheap prices and limitless choices. This also includes the back inventory of famous authors. There are only x number of people who will by books and each of them will only spend so much. The volume of book sales will increase as price point drops but higher volume doesn’t mean a larger customer base. Each Circle represents the total number of people who buy books. Customer base of the top ten publishers Customer base of middle tier publishers Small Houses Each of these lines in the blue circle represent the potential erosion of customers to independents, backlog, and small publishing houses. A few big companies will survive, but they’ll have to be fiercely competitive.

How I speculate the future will go Some companies start to see authors as a liability. (Those darned authors. They want royalties!) These publishing companies may collapse, and if they do, many writers will face ownership issues over work sold to these companies. As the publishing industry becomes less and less stable, more writers will turn to the independent route, if only to protect their intellectual rights. Success stories will be minimal as lots of people take small bites out of the proverbial pie. As writers are unable to eek out a living they’ll go one of two ways: become hobbyists or quit. Even if Amazon undercuts publishers, it doesn’t matter because at some point Amazon’s distribution networks for authors will become direct competition to its publishing endeavors. Steps will be taken to close some of the independent distribution channels.

Eventually, the erosion will peek. After many of the mighty have fallen and lots of people haven’t made any money, a new top tier will emerge. This top tier will include the publishing houses who adapted to survive and start ups who successfully innovated. They will have to share the space with a handful of successful independent authors. Most agents who tried their hand at publishing will probably choose one or the other, but a handful will survive as both. There will still be lots of moderately successful authors and small companies. However, as time progresses this will narrow. But, unless distribution channels are closed, the new landscape will always include some successful independents, the bulk consisting of hobbyists. These writers will always pose some threat as business can never compete with the price point of someone who does stuff for fun.

In summary Few will make any money. Even for the Big Dogs, some lean years are coming. Publishing companies shouldn't underestimate the independent threat just because the independents aren't getting rich. This not really important at this point. Innovation and adaptation are key to future success for both independents and publishing houses. The novices who innovate today and get a little bit lucky, will be the leaders of tomorrow.