Friday, March 27, 2009

Print-on-demand migrates from books to movies

Earlier this week, Warner Bros launched the Warner Archive, where consumers can order DVDs of movies from the Warner vaults. These will be made-to-order, in much the same way that publishers have been trying out print-on-demand options for their back catalogs of titles.

The Warner Archive DVDs will be sold directly from the Warner site, giving Warners the full retail revenue stream (cutting out both wholesalers and retailers). The $20 price-point is a bit higher than many films of similar vintage at retail; but these are films otherwise unavailable to the fans at any price. Some online discussion has even hypothesized that Warner under-priced them; but we'll need to wait until the first flush of excitement passes amongst the fans. Once they've paid their first credit-card bills with payments to Warner Archive, we'll see whether they're still clamoring for more.

Warner will not get rich from this scheme. The titles available via Archive were deemed to have too small a demand for the expense of manufacturing and shipping a significant volume to retail (where DVD shelf space is in short supply already). This is a way for Warner to accomplish 3 things: (a) keep some die-hard fans happy, (b) squeeze some money out of deep-catalog that might otherwise circulate in pirated copies, and (c) test the waters on unique direct-to-consumer product (without seriously ticking off their very valuable retail partners).

Monday, March 16, 2009

360-degree deals for book publishers?

As the record labels watched CD sales plunge, they started to move their focus away from suing fans (though several suits against file-trading sites remain in progress), instead trying to encourage fans to buy music online through legitimate sources. Apple's iTunes is the most visible example.

But the record labels also began looking at the underlying economics of their business: pay advances to sign artists for multiple albums, fund the production of said albums, and hope that enough artists sell enough albums to cover the losses on the many others that never bear fruit. As CD sales dropped, and online sales have made up only a portion of that, the labels considered something else -- although they front much of the money to launch and establish new artists, the labels don't participate in revenue streams such as concert tickets, nor in things like t-shirts and tchotchkes sold at concerts.

What if the labels could instead sign artists to all-encompassing deals? In addition to CD sales, the label and artist would be "partners" in the cashflows from live shows and tours. Thus, the so-called "360 [degree] deal" was born. The labels now boldly tout these deals as reason for optimism about their business.

Could such a scheme work in the book business? Publishers traditionally acquire only the rights to print and distribute an author's work in book form. The publishers never have rights to movie or TV adaptations; they often don't even participate in revenues from sales of the book in other languages or countries.

I noted in an earlier post that publishers have been loathe to negotiate "net" deals, as opposed to the "gross" deals authors ordinarily receive. But perhaps some sort of packaging of rights could make this more palatable. Obviously, established authors like Stephen King would refuse; but it might be a reasonable business-proposition for an unpublished author.

What about 360 deals for publishers and authors?

(As an aside, I'll note that Stephen King is not averse to experimenting with the publishing business model, in that he recently released a Kindle-only exclusive of a new work.)

Thursday, March 5, 2009

Unlike studios, book publishers prefer gross deals to net

The "Kindle Revolution" story today on Slate's Big Money says that "publishers have been ferocious in defending the fixed royalty", which is the percentage of retail price typically paid to authors. Many agents have tried to get back-end deals for their authors, whereby a larger percentage of the "net profits" would go to authors. The publishers don't want to risk a potentially huge "net" payout on a blockbuster title, and they'd rather pay authors huge advances against the royalty.

This is the flip-side of the movie business, where the studios desperately want to eliminate "gross" deals for stars and move the talent to a "partner" level where they would share in the "net". Movie talent much prefers the "gross" deals, typically not trusting the studios to fairly define the breakeven point for "net" deals". (as I've discussed earlier)

The article in Big Money also says with regard to the large advances, "Since no one really knows which books will succeed or why, this is actually a strangely rational system, even if it has created a terrible overhang of unearned advances." [my emphasis]

In fact, there is nothing "terrible" about an unearned advance. A book can be profitable to a publisher, even if the advance is not yet earned out; or a book could have earned out its advance, yet still show a loss for the publisher. There is no direct correlation between "profits" and earned/unearned advances.

The same situation exists in movies, wherein a star may not have earned out her huge advance, but the movie may show a "profit" for the studio. Or, a star may have earned back her advance and be receiving overages, yet the movie is a real "loss" for the studio.

Wednesday, March 4, 2009

Amazon : e-books :: iTunes : music ?

Amazon announced a new app for the iPhone, allowing its formerly Kindle-only e-books to be read on multiple devices. And Apple is not competing on the e-book front, perhaps because Steve Jobs last year said "people don't read anymore."

Will this further cement Amazon's power over the book business? Will Jeff Bezos be able to dictate terms and prices to publishers, in the way that Steve Jobs has dictated to record labels and movie studios?

Will the book publishers band together and try to create a competitor to Amazon? Just as the movie studios are attempting to learn from the mistakes of the record labels, will book publishers do likewise?

Time will tell.