Penguin’s New Business Model: Exploiting Writers

Penguin’s New Business Model: Exploiting

Writers

My first attempt at re-blogging, important for anyone writing today!

David Gaughran  •  Jul 20, 2012

Penguin’s parent company, Pearson, has announced the purchase of Author Solutions for $116m – news which has shocked writers, especially given Author Solutions’ long history of providing questionable services at staggering prices.

Author Solutions are the dominant player in the self-publishing services market – via their subsidiaries Author House, Xlibris, Trafford, and iUniverse – and had been looking for a buyer for several months. According to the press release, Author Solutions will be folded into Penguin, but will continue to operate as a separate company. Penguin’s CEO John Makinson stated:

“This acquisition will allow Penguin to participate fully in perhaps the fastest-growing area of the publishing economy and gain skills in customer acquisition and data analytics that will be vital to our future.”

What does Author Solutions bring to the table? Well, for starters, around $100m in annual revenue. Roughly two-thirds of that money comes from the sale of services to writers, and only one-third from the royalties generated by the sale of their books.

Pause for a moment and consider that statistic. Penguin isn’t purchasing a company which provides real value to writers. They are purchasing an operation skilled at milking writers.

This is not a new accusation against Author Solutions. Industry watchdogs such as Writer Beware have received a litany of complaints about Author Solutions and their subsidiaries over the last few years: misleading marketing, hard-selling of over-priced services, questionable value of products provided, awful customer service, and, after all that, problems with writers being paid.

For example, Author House will provide you with a “web-optimized press releasefor the bargain price of $1,199. In case it isn’t obvious, you would likely receive greater promotional value from setting fire to that money on YouTube.

How do writers fall into the trap of such an awful company? In short, disingenuous marketing. According to Victoria Strauss at Writer Beware, “marketing efforts include maintaining sites like Findyourpublisher.com, which purport to be utilities to help writers choose a publishing company.” That site, of course, will only give you the false “choice” of various Author Solutions subsidiaries – all of which have similarly awful services.

After falling for this marketing guff, writers don’t tend to make the same mistake twice. According to the above-mentioned press release from their new owners Penguin, 150,000 writers have used the services of Author Solutions, but they have only published a combined total of 190,000 books.

Before they leave the clutches of Author Solutions, however, writers are subjected to never-ending phone calls hawking a string of overpriced, useless services, including the press releases described above. As such, the average customer spends around $5,000 over their “lifetime” with the company, but only sells 150 books.

The performance of Author Solutions is so poor that the press release announcing the purchase by Penguin can’t even tout their own customers’ success, and instead lists self-publishing stars such as “Lisa Genova, John Locke, Darcie Chan, Amanda Hocking, Bronnie Ware and E.L. James” – none of whom used Author Solutions to publish their work.

This kind of disingenuity is standard for Author Solutions. Tireless blogger Emily Seuss has been watching the company, and has provided a handy catalogue of recent complaints. I should note that this is just the beginning where Author Solutions is concerned.

The last time I blogged about the Author Solutions subsidiary iUniverse (scroll down), I highlighted a typical marketing move. Just before Christmas last year, iUniverse mailed their existing customers with a very special “deal” where they offered to turn their print books into e-books and upload them to the various retailers for free.

The catch was that customers would then have to fork over 50% of their royalties from every single sale to iUniverse. Needless to say, formatting and uploading is a trivial task. For those unable to do it themselves, that service can be purchased for a nominal up-front fee, leaving a writer’s royalties intact.

After I blogged about this severe over-charging, two iUniverse customers complained in the comments that after they didn’t respond to that offer, iUniverse published their e-books anyway – without their permission. One of those writers is still trying to get her unauthorized edition removed, several months later.

As I mentioned already, this is just the tip of the iceberg. Following all the links above, and reading the comments to those pieces, will reveal hundreds of such complaints regarding Author Solutions and their subsidiaries.

None of this should come as any surprise to Penguin. I think it’s safe to presume that basic due diligence was undertaken before purchasing a company for $116m.

Defenders may point out that none of the above occurred on Penguin’s watch, and that they should be given an opportunity to turn the company around. But let’s not forget that Penguin have a little history here. Last year, Penguin unveiled their own self-publishing service, Book Country, which over-charges for basic services, and then puts its hand in the writers’ wallet a second time by taking an indefensible portion of their royalties.

In any event, no inference is needed regarding Penguin’s opinion of Author Solutions’ business practices. We only need to look at Penguin’s own press release to read CEO John Makinson’s thoughts:

“No-one has captured this [self-publishing] opportunity as successfully as Author Solutions, which has rapidly built a position of world leadership on a platform of outstanding customer support and tailor-made publishing services.”

Welcome to Penguin’s new business model. Exploiting writers

http://indiereader.com/2012/07/penguins-new-business-model-exploiting-writers/

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2 Comments (+add yours?)

  1. John F. Harnish
    Jul 23, 2012 @ 04:14:39

    Bravo Anna on your reblog about the Penguin purchase of ASI. I fear wannabe authors will see this connection as a way to have their books published by a traditional publisher and that’s not likely to happen.

    Your estimate of ASI authors selling 150 books is a bit high, I’d place it at less than 100, and most likely closer to fewer than 50 books sold that actually earned a royalty.

    I would also wager that less than 1% of their claimed 150,000 author have even come close to surpassing the breakeven point and earning a return on what they paid ASI.

    Enjoy often…John

    Reply

    • annarashbrook
      Jul 23, 2012 @ 09:24:33

      Thanks for the comment. The credit and the stats for the article goes to David Gaughran! All power to the self publishers. Having a kindle transformed my reading as its expensive and difficult to get English books in Austria. Then being able to publish ‘Tom’ after over 20 years was wonderful. I had so many rejection slips I could paper the loo1 Yet I must say, as a reviewer, there’s an awful lot of rubbish out there, but at least its out there!

      Reply

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