Kristine Kathryn Rusch regularly posts important and insightful blogs at KrisWrites.com. Her series The Business Rusch and The Freelancer’s Survival Guide are invaluable for both new and experienced writers. The following blog was so relevant that I asked if I could repost it here in its entirety.  Please read it—then go read her other articles. (Okay, her fiction is well worth reading, too.)

Sheinberg decided to amortize costs by sending hundreds of prints of the film to theaters all over the country, and to run a nationwide advertising campaign at the same time.  The movie he chose to do this with? Jaws.

That little idea changed the way movies got marketed—and did so damn near overnight.  All the President’s Men got released just after Jaws, while this system was still in flux.

“Jaws was a good, populist movie,” Robert Redford, star of All the President’s Men, said. “But it became the flagship for a campaign that overtook American movies.  It became a slick package, advertising-directed, about selling popcorn and product placement. I thought the timing of All the President’s Men very fortunate, because it was a very honest and unpolluted film.  I’m not sure if we could have managed it in its purity a decade or two later.”

Over the years, Redford has fascinated me because he has always had one foot in the business world even as he built his artistic career.  He started the Sundance Film Festival when it became clear that the smaller films—which All the President’s Men was—had no shot in the changing market.  The festival helped give films like that, films that didn’t have the benefit of timing, a shot.

Why am I talking about movies here? Because I want you to see the rapidity of change in that industry.  A marketing and business decision that was quite wise from a studio’s point of view ended up having a major impact on the kinds of films that got produced, distributed, and sold to film audiences.  Say what you will about the auteurs in the 1970s, most of them wouldn’t have had a chance had they started in the 1990s.  And it had nothing to do with their talent.

It had to do with the way the business had changed.

The publishing industry is going through the exact same kind of rapid change.  It’s extremely fast—so fast that I mentioned in a blog a few weeks ago that I now give out different advice to newer writers than I would have given them just months before.

Writers have to learn business and they have to learn the new business.  If they don’t, they’ll go by the wayside quickly.

I’m worried about this, so worried I’ve mentioned it several times in this blog.  And I’ve been worried that my friends and fellow established writers aren’t moving with me.  Here’s why:

Over the last month, it has become increasingly clear to me that the publishing industry is making changes that emulate the music industry.  Those of us who exist on the periphery of the music industry have heard for years that new artists and even established ones can’t make money in the traditional music industry.

I didn’t understand that until I read Jacob Slichter’s So You Wanna Be A Rock ’N Roll Star several years ago.  He wrote about a system in which a musician who signed a deal with a major record label could end up owingthe label tens if not hundreds of thousands of dollars.  He delineated it all out in a long book that showed just how the label ended up taking a naïve artist and putting him into debt.

Slichter said this was why so many rock bands disbanded—because the band itself was a legal entity and as a legal entity it was in hock to the studio. The only way the musicians could continue to perform and try to earn money from their music was to create a new legal entity and abandon the old one.  Otherwise, they were working in a kind of indentured servitude.

Think this is just sour grapes from one musician who didn’t make it big?  Look at a link that a reader from last week gave me.  It’s from a magazine I’ve never heard of called Maximum Rock ’n’ Roll and was written by rock producer named Steve Albini.  I’m not so sure how dodgy this website is that I’m sending you to—I don’t know if they violated Mr. Albini’s copyright by reproducing this piece.  I’m going to trust that they didn’t, because y’all need to see these numbers.

For those of you who can’t be bothered to check the link, Albini lays out the line-by-line “costs” that the musicians agreed to when they signed their record deal.  The musicians received a $250,000 advance.  But by the time the album got released and the tour was completed, the advance was gone—and the musicians owed the record label $14,000.

You’re understanding me right.  The “standard” contractually negotiated costs that the musicians agreed would come out of their pockets came to $264,000.  The only way for the artists to recoup that loss was to sign a new deal with the label, often at lesser terms.  If the label even wanted to sign them.  (That part is courtesy of Slichter)

How much did the label earn—with the same costs deducted?

$710,000.  In 1990s dollars.

Albini also lists how much each “player” made.  He includes a producer ($90,000), a manager ($51,000), an agent, ($7500) and a lawyer ($12,000).

He writes, “The band is now ¼ of the way through its contract, has made the music industry more than 3 million dollars richer, but is in the hole $14,000 in royalties. The band members have each earned about 1/3 as much as they would working at a 7-11, but they got to ride in a tour bus for a month.  The next album will be about the same, except that the record company will insist they spend more time and money on it. Since the previous one never ‘recouped,’ the band will have no leverage and will oblige.”

When I read Slichter’s book, I thought, “Thank God publishing hasn’t figured out how to do this to writers.”

Well, folks, guess what.  It’s 2011.  Publishing has figured it out.

Just this afternoon, as I looked over  yet another contract addendum for a friend—this addendum sent by a big-name agent who didn’t even bother to check the addendum against the original contract terms—I saw the agency rider added into my friend’s contract.  The agency rider—the thing that says the writer authorizes the publishing house to negotiate with and pay the agent in the writer’s name—was awful.  My friend had edited it down to something similar to what was offered ten years ago, but I know dozens of writers who probably never did.

I dealt with some of this last week in my blog post and my husband Dean Wesley Smith has a post on something similar that you absolutely must read.

But we both know that most writers won’t listen to us.  And it has us both scared for our industry.  Writers are signing away their rights, just like the musicians listed above did, because these writers aren’t savvy enough to understand industry change and how it impacts art.  (Like Redford mentioned in that above quote.)

Once upon a time, publishing was a monopoly.  I’ve used this chart before.  From about 1920 to about 2006, this is how publishing worked:

Writers provide content (product) to Publishers.

Publishers distribute that content to Distributors.

Distributors distribute books to Bookstores.

Bookstores distribute that content to Readers.

Now, however, writers can do this:

Writers provide content (product) to Bookstores

Bookstores distribute that content to Readers

The middleman is no longer necessary.

Many writers find this scary.  They don’t understand that they are—and always have been—in business.  So they don’t act like business owners.

Business owners invest capital up front to start a business.  They recoup that investment over time, and eventually earn money from that investment.

When publishers started paying advances, they—in effect—told writers not to bother their pretty little heads with business.  “Write,” the publishers said.  “We’ll take care of your bills while you finish that book.”

Writers got used to this.  Writers forgot that they had to take risks of their own like other small business owners.  And right now, that attitude is biting writers in the ass—and most of them don’t even realize it.

As I have written these blog posts all year, I’ve gotten e-mails and private comments from long-time professional writer friends which, in effect, say things like, “We need agents. We can’t market our books otherwise.”

Or

“Publishers are the only ones who can get us into national bookstore chains.”

Or

“I have no way to reach foreign markets/Hollywood/the gaming industry without my agent.”

And you know what? Ten years ago, that was all true.

Publishers had a monopoly on distribution.  Unless a writer became a full-fledged publisher, invested tens of thousands of dollars on a single book, and knew how to work the system, the writer could not get his book into a bookstore.  How do I know this? I owned a publishing company twenty years ago.  I know how hard it used to be.  I remember the footwork Dean used to do to get one bookstore, two, five, or ten on board.  It was labor-intensive.  He courted distributors for years, before one took on our company.

It’s not that way any more.  Now, I can reach you with this blog.  I can take the novel I finished on Monday, pay a savvy editor to go over the book, pay a copy editor to make sure I don’t change my main character’s name midway through, pay a cover designer to make me a lovely cover—all for a flat fee—and put the book up in two major national bookstores by the end of the week. One of those bookstores has sister stores in the U.K. and Germany.

Of course, this is an e-book.  Putting up an e-book is spectacularly easy—and suddenly  you have a worldwide market.  If you’re willing to go to other distributors, you can have your book in more than 20 major national bookstores within two weeks.

If I spend about $50 on CreateSpace and add a small fee for my cover designer to design a  wrap-around (front and back) cover, I can have a trade paper edition of my book that will be listed in the catalogues of major distributors.  I don’t have to do anything else.  I don’t have to court those people for years, like Dean did twenty years ago.

And if I’m really willing to put myself out by designing a small catalogue of my work, I can send that to independent booksellers, give them a discount, and have CreateSpace produce and send them the paper books.

And suddenly, I am a publisher—with as great an ability to reach the consumer as any of the so-called Big Six publishers.  In fact, I can reach more readers because I control all of the rights, and I can opt to go into overseas markets that they can’t penetrate.

The monopoly isn’t just broken.  It’s shattered.

Most writers don’t realize that.  Most don’t want to do the “work” because they don’t know how little work they have to do.

What, really, must they do? They must pay someone up front instead of letting that person take a percentage of the work in perpetuity.  See Dean’s post on this.  Please.  See Dean’s post.

So let’s discuss agents, because that too is important.

Once upon a time, I had an agent.  Hell, I’ve had a lot of agents.  And I needed them.

Every writer did.

In the days before the internet, before the ubiquity of e-mail, before instant messaging and Skype, agents had a purpose.  Writers hired agents for their connections.  Agents got books in the door with a reluctant publisher.  Agents found partner agents overseas.  Agents got into Hollywood studios.

And writers paid the agent for those connections.  Writers, essentially, needed an agent to open all the closed and locked doors.

Some writers, salespeople all, did the work themselves. They booked a trip to New York, managed to get into the editor’s offices, and got their work looked at.

But those writers were rare.

Then the internet came along.  And web pages. And e-mail.

The doors became open.  All that secret information that agents got—which editor was buying what, who edits for the biggest publishing house in France, what’s the  name of the literary scout for such-n-so studio—could be Googled.

What’s more, if you had a successful book or hell, even a midlist book on a hot topic (say, vampires), then the foreign editors and the Hollywood scouts came looking for you.

On the internet.

Through your e-mail.

I get letters all the time from interested foreign publishers, and from movie people.  I just closed an option deal last week with an independent producer who found me through this very website.

And that is not unusual.

It’s now a myth, an old and tired myth, that you need agents to open these doors.  In fact, agents will often close the doors by believing that if some young producer is interested in Property A, then the agent can leverage that interest with a studio so that the studio will pay big money for Property A.  I’ve had agents promise that kind of thing all the time, and it has never panned out.

But since I stopped using agents on my Hollywood nibbles—guess what? I have Hollywood deals.  When I was agented, I only had one option in twenty years.

Now I have options running all the time.

Because of access.

And because I’m making my own decision. And because I do worry my formerly pretty little head about these things.

Most of my colleagues do not realize that the industry has changed, that everything they learned when they were starting out no longer applies.  They don’t realize that the business part of their industry has changed dramatically, that the deals they’re signing, the people they’re working with, would fit just as easily into the music industry of the 1990s.

Here’s the flat truth of it, my friends: If you are a midlist writer and you sign a traditional publishing contract with most modern terms, and you do so with an agent—and not an IP attorney—negotiating for you, you will not make any more than your advance on that book.  And the advance is not enough to  live on.  You will not be able to reserve e-book rights to you.  Those rights will be a percentage of net, which in most contracts is undefined.  And you will have to sell world rights so that the publishing industry can adequately exercise those e-book rights, making any money you would receive on foreign rights vanish.

If you have what I’m now beginning to believe is the standard agency rider in your contract, you will also lose a percentage of any auxiliary rights sale to that agent even if you fired that agent in the meantime and someone else negotiated the deal.  Plus that agent will be entitled to a percentage of any work you write using that series, those characters, that world, or anything resembling that.

There is a line item in Albini’s article at the end.  Someone else made money on that album deal.  It was the previous label ($50,000).  Change the word “label” to “agent” and you start to see the scope of the problem here.

If you are a New York Times bestselling author, and you sign a traditional publishing contract with most modern terms, and you do so with an agent—and not an IP attorney—negotiating for you, lucky you.  You have the chance and I mean chance of earning more than your  advance.  You better be a top-ten New York Times bestseller and you better stay on the list for longer than one week.  Because all the things I said above will apply.

The only difference? You’ll get a sizeable six-figure advance, and if you’re smart, you’ll write at least two books per year.  Until the opportunities dwindle, and they will.

Do you know how many former New York Times bestsellers I’m friends with? Do you know how many of them can’t get a traditional publishing deal for more than a five-figure advance?

Most of them.

If they’re offered a deal at all.

Folks, all of the things you learned about agents, editors, and book publishers used to be true.

Ten years ago, you needed an agent to open the doors for you in traditional publishing.

Ten years ago, your editor—who loved books (and still loves books)—could go to bat for you within the publishing house and actually win the fight, protecting you, her author.

Ten years ago, traditional publishing—while not a friendly industry (I don’t think there are any)—did not screw its artists the way that the music industry and Hollywood did.

Ten years ago.

Not any more.

Things have changed so rapidly that the contract I signed last September is not a contract I would sign today.  Not because of the advance or even because of some of the contract terms. But because it’s a multi-bookcontract.  And honestly, y’all, I want to decide from book to book if I want a traditional publishing company to handle everything.

Sometimes I will. Sometimes I’ll use a novel as a loss leader. Sometimes I will want the traditional publishing house to take all of the risk.

Sometimes.

But not all the time.

And certainly not for multiple books in the same series.  Now, if that series isn’t being well handled by my publisher, I want the option to do it myself.  If the book is being well handled, I want to ask for a greater advance and better contract terms.

I have clout for the first time in my lovely little midlist career.  I plan to use it.

Most of my friends and colleagues will slowly discover that they can no longer make a living as a writer. They’ll wonder what happened. They’ll wake up one day—after their latest multi-book contract is complete—and wonder what the hell happened.

They changed industries.  They moved from a hidebound old-fashioned industry to a Hollywood-level shark pit—and they didn’t even realize it happened.

It is happening as quickly, if not more quickly, than Robert Redford described with All the President’s Men.  Redford, savvy business man that he is, saw the writing on the wall and decided to help save the kind of movies that he loved.

I am trying to save writers whose work I love. The only way to do that is to get them to realize that they have moved to a hostile and unforgiving world, one that is willing—no, eager—to take advantage of them.

The agents that they once trusted now answer to their agencies instead of to the writer.  Those agencies are trying to steal a percentage of the writer’s copyrights.

The editors whom they (rightfully) love have completely lost clout in their own industry, and often can’t keep the verbal promises that they make.

These writers need to learn business, and they need to learn it fast. Because as Dean delineated out in his most recent column, the scammers have moved in, willing to take advantage of the writers who are unwilling to invest in themselves, unwilling to pay flat fees to companies that can do the work for them if they can’t do the work themselves.

I’m sorry to tell you to stop trusting people.  I know some of these people are your friends.  Sadly, some of these people are my friends.  In fact, many of these people are my friends.

And it breaks my heart, it really really does.

But please, go look at that music industry link. Then realize that this is what’s happening in publishing now.

If you want to do all the original work, create the content that everyone else is making a profit on, and get paid less than you would earn at 7/11, then don’t learn any of this.

But if that idea scares you, if the idea that you might never earn more than your advance, and maybe not even all of that, then invest in yourself.  Learn to say no.

And stop working on a business model that’s ten years out of date.

—Kristine Kathryn Rusch