Penguin’s Modest Self-Publishing Gamble
In 2011 Author Solutions generated revenues of approximately $100m, growing at an average annual rate of 12% over the past three years. Its business is split broadly evenly across three key areas: publishing, marketing and distribution services, with revenues generated primarily from services to authors.
Yesterday’s news that “Big Six” trade publisher Penguin’s parent company, Pearson, had acquired the biggest “traditional” self-publishing player, Author Solutions (ASI), for a mere $116 million caused quite a stir among publishing’s chattering class, and my own first reaction was pretty cynical, based on the press release spinning it as related to “ASI’s expertise in online marketing, consumer analytics, professional services and user-generated content.”
My cynicism was driven partly by my own experience working with several of ASI’s units, before and after they acquired them (back when I worked for Writer’s Digest in 2007-2008), and partly based on their relatively low revenues of $100m in 2011, spread across 11 different brands and services, while employing 1,600+ people in Bloomington, Indiana and Cebu City, the Philippines. While ASI almost definitely has more experience with digital marketing and analytics than Penguin does, those skills could easily be internalized for much cheaper than $116m, and I wouldn’t be at all surprised if a lot of that work is being done by staff in the Philippines!
[EDIT: I found this breakdown of ASI’s 2011 revenue from Publisher’s Weekly after I hit publish, but it’s both fascinating and disturbing, and it confirms my snarky comment about outsourced staffing: “Its workforce totals 1,565 full-time employees with by far the greatest number, 1,215, located at its facilities in the Philippines which handles not only production but sales and marketing as well.”]
Seriously, though, being sold for only slightly more than the revenue you brought in the prior year isn’t exactly a signal that anyone believes the company has a lot of growth potential, especially not one whose roster theoretically covers the full gamut of shiny author services so many seem to believe are publishing’s revenue streams of the future. Plus, ASI was apparently on the block for a while with no buyer, so I find Penguin’s CEO John Makinson’s claim odd, as reported by Publisher’s Lunch, that he expects there will be a “new and growing category of professional authors who are going to gravitate towards the ASI solution rather than the free model.”
Jane Friedman, former publisher of Writer’s Digest (whom I worked with, and remains a good friend), pretty effectively dismantled that notion last year in her smart essay, “The Future of Self-Publishing Services“:
There will always be some level of demand for full-service, fee-based publishing companies. But it’s now a mature business that has seen its peak, and that will sharply decline. Given the transformational changes taking place throughout the industry, very desirable industry professionals (agents, editors, many others) will find ways to offer high-quality services that can make a perceptible difference to an indie author’s book marketing and sales.
Makinson also seems to be ignoring the burgeoning middle ground of services that are carving out a niche between pseudo-DIY via Amazon’s KDP, et al, and ASI’s overpriced vanity publishing services, like The Atavist and Hyperink, two of the more intriguing ones among many others.
BUY IT… OR BUILD IT?
Meanwhile, Penguin already has one foot in the self-publishing/author services pool with Book Country, an online community for aspiring genre writers that launched a suite of self-publishing services last fall in the inevitable step towards monetizing its modest user base:
The BookCountry.com site has attracted more than 120,000 unique visitors since going into public beta in May and has close to 4,000 members who have posted over 500 works of genre fiction and offered thousands of constructive critiques of those works…
While there are dozens of book packagers and self-publishing sites, Book Country is the only one that allows writers to create an eBook and a print book in one simple flow. Book Country combines a robust peer review process, a staff with decades of book publishing experience, and groundbreaking browsing tools to help writers be discovered. Book Country also provides a cover creator tool and suggests fonts and styles that would be appropriate for the book’s genre. And unlike other self-publishing sites, the author can make up to 15 free formatting changes if they need to make small refinements late in the process. Three options—user-formatted eBook only, user-formatted eBook and print, and professional eBook and print—are available. Start to finish, the Book Country self-publishing process is streamlined and simple, while offering flexibility and customization.
Oddly, during the same conference call where Makinson claimed there was a future in the ASI fee-based model, he admitted they “haven’t thought in detail” yet how the acquistion might affect Book Country, but he expects it will benefit from “gaining access to all of the functonal skills within ASI.”
Perhaps Booktango, Author Solutions' ebook platform, is what Penguin really wanted? http://t.co/1EjvrOAP h/t @selfpubreview
— Guy L. Gonzalez (@glecharles) July 19, 2012
In the spirit of half-full glasses, I’m going to give him credit for being a little too cagey for his own good, and make the assumption that the BookTango platform is solid and the ASI acquisition is really an infrastructure move, bolstering their digital platform across all of Penguin, and expanding upon whatever positive signals they’re presumably getting out of the Book Country experiment.
A MODEST GAMBLE, WITH NOTABLE RISKS
Laura Dawson, one of my favorite people in publishing, seems to back this line of thinking up in her own take, via two key points:
- Penguin emphasizes infrastructure. This is something I know from previous experience with them – as an institution, as part of its corporate culture, Penguin is actively investing in workflow and interoperability between divisions. To a company who values infrastructure, $116 million for services and tools that are proven in the marketplace is a solid investment.
- Author Solutions certainly has its own brand(s), but one of its core strengths is providing white-label solutions.
Looked at from that perspective, the acquisition is a relatively modest upping of the ante on Penguin’s part, though one fraught with several notable risks, not the least of which is the potential for brand confusion as Author Solutions isn’t exactly the most beloved of brands.
Writer Beware’s Victoria Strauss nails several of them, including:
– Will ASI begin to advertise itself more transparently? So far, the company has put out twowhitepapers that promulgate the misleading claim that it is an “independent publisher” (along with other inaccuracies about the publishing industry). Other less-than-transparent marketing efforts include maintaining sites like Findyourpublisher.com, which purport to be utilities to help writers choose a publishing company, but which all default to ASI brands.
The press release says “Author Solutions will be integrated into Penguin’s back office and technology infrastructure but will continue to be run as a separate business,” and in a new post today reflecting on the deal, Friedman skeptically notes that “it seems unlikely that Pearson would meaningfully change any business practices that made ASI profitable in the first place.”
What struck me as particularly odd is how quickly ASI was able to slap “a Penguin Company” onto their logo, while Book Country seemingly went out of its way at launch to keep itself at an arms-length distance from its parent company, and even today only references Penguin in the footer of their site, not above the fold as part of the logo.
While I don’t agree with some observers that this is a particularly “innovative” move for Penguin — pitfalls aside, the upside is incremental, at best — it’s definitely an intriguing one that’s worth watching. It also represents one of many examples of traditional publishers not standing still, but exploring all avenues, experimenting with different models, and risking failure, things they’re so often criticized for not doing by pundits with no skin in the game and pageviews to accumulate.
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Excellent analysis!
I’m very curious to see if Pearson/ASI/BC plans to compete head-to-head with Amazon KDP as far as direct e-retailing of ebooks to readers, or if they’ll focus on distribution … or both (similar to Smashwords). Will also be interesting to see what kind of services package they offer, and if it forces their authors to be exclusive to them or play the field of services out there.
Penguin is one of the big publishers behind Bookish, so it will be interesting to see if there’s any connection there, or if Bookish is ultimately scrapped in favor of Penguin’s own initiative. But if they let ASI run as is without making any fundamental changes and allowing the Penguin brand to be directly associated with it, they’re crazy!
I have to confess, I don’t quite understand why the acquisition of Author Solutions by Penguin is worth all the digital ink. As you say yourself, Guy, “pitfalls aside, the upside is incremental, at best.” I have a feeling we may all be trying way too hard to read the tea-leaves of every corporate publishing action and transaction. My feeling is this acquisition like most for what passes for news these days is just more spaghetti on the wall.
It’s an intriguing move by a major player in an industry so many love to claim the major players are standing still; it’s the most aggressive move to embrace self-publishing of any major publisher to-date; and, it’s a potentially troublesome acquisition for Penguin thanks to ASI’s history. In that light, I totally understand the attention it’s getting, and I’d take 50 of these stories over the Penelope Trunk nonsense, or another article about Seth Godin.
It’s also got hints of being another step in the direction of customer engagement and direct sales (albeit with aspiring authors rather than readers as the customer), so I’d think you of all people would find it noteworthy.
Thanks, Guy. I see. I’ll follow the link you provided to Jane Friedman’s piece.