Writer Karen McQuestion spent nearly a decade trying without success to persuade a New York publisher to print one of her books. In July, the 49-year-old mother of three decided to publish it herself, online.
Eleven months later, Ms. McQuestion has sold 36,000 e-books through Amazon.com Inc.'s Kindle e-bookstore and has a film option with a Hollywood producer. In August, Amazon will publish a paperback version of her first novel, "A Scattered Life," about a friendship triangle among three women in small-town Wisconsin.
Ms. McQuestion is at the leading edge of a technological disruption that's loosening traditional publishers' grip on the book market—and giving new power to technology companies like Amazon to shape which books and authors succeed.
Much as blogs have bitten into the news business and YouTube has challenged television, digital self-publishing is creating a powerful new niche in books that's threatening the traditional industry. Once derided as "vanity" titles by the publishing establishment, self-published books suddenly are able to thrive by circumventing the establishment.
"If you are an author and you want to reach a lot of readers, up until recently you were smart to sell your book to a traditional publisher, because they controlled the printing press and distribution. That is starting to change now," says Mark Coker, founder of Silicon Valley start-up Smashwords Inc., which offers an e-book publishing and distribution service.
Fueling the shift is the growing popularity of electronic books, which few people were willing to read even three years ago. Apple Inc.' s iPad and e-reading devices such as Amazon's Kindle have made buying and reading digital books easy. U.S. book sales fell 1.8% last year to $23.9 billion, but e-book sales tripled to $313 million, according to the Association of American Publishers. E-book sales could reach as high as 20% to 25% of the total book market by 2012, according to Mike Shatzkin, a publishing consultant, up from an estimated 5% to 10% today.
It's unclear how much of a danger digital self-publishing poses to the big publishers, who still own the industry's big hits, whether e-book or print. Many big publishers dismiss self-published titles, noting that most disappear, in part because they may be poorly edited and are almost never reviewed.
But some publishers say that online self-publishing and the entry of newcomers such as Amazon into the market could mark a sea change in publishing.
"It's a threat to publishers' control over authors," said Richard Nash, former publisher of Soft Skull Press who recently launched Cursor Inc., a new publishing company. "It shows best-selling authors that there are alternatives—they can hire their own publicist, their own online marketing specialist, a freelance editor, and a distribution service."
Amazon has taken an early lead, providing service tools for authors to self publish and creating an imprint last year to publish promising authors in print and online.
This month, Amazon is upping the ante, increasing the amount it pays authors to 70% of revenue, from 35%, for e-books priced from $2.99 to $9.99. A self-published author whose e-book lists for $9.99 on Amazon's Kindle e-bookstore will receive about $6.99 for each book sold. The author would net $1.75 on a similar new e-book sale by most major publishers.
The new formula makes digital self-publishing more lucrative for authors. "Some people will be tempted by the 70% royalty at Amazon," Mr. Nash says. "If they already have a loyal fan base, will they want 70% of $100,000 or 15% of $200,000 for a hardcover?"
Digital self-publishing, or "vanity" publishing, is creating a powerful new niche in books. WSJ's Geoffrey Fowler joins the Digits show to discuss how this is threatening the traditional book industry.
Traditional book-industry players and tech companies are jumping on the digital self-publishing bandwagon. Apple last week announced a digital self-publishing program for its iPad giving 70% of revenue to authors, similar to Amazon's formula. Last month, Barnes & Noble also announced a service called PubIt!, allowing authors to post and sell e-books online.
Last fall, Jane Friedman, former chief executive of News Corp.'s HarperCollins Publishers, started Open Road Integrated Media LLC, which focuses on e-books, including authors who are willing to be published digitally before going into print. Traditional publishers such as Nashville, Tenn.-based Thomas Nelson Inc., a religious publisher, have struck alliances with Author Solutions Inc. for print and online self-publishing.
And a flurry of tech-focused startups now offers self-publishing services, including Smashwords, FastPencil Inc. and Lulu Enterprises Inc. Website Scribd.com says it publishes 290,000 independent books annually on its site, which authors sell at a price they set themselves.
One of the largest repositories for digitally self-published works for sale is Amazon's Digital Text Platform. Steve Kessel, an Amazon senior vice president, says the company launched Digital Text along with its Kindle in 2007 to give writers and small publishers simple tools to add books to the Kindle store. Today, the Kindle store accounts for about 70% of the U.S. market for e-books.
Amazon has used its retail clout to make deals directly with brand-name authors. It has won exclusive e-publishing deals from authors such as Stephen King and Stephen Covey.
And in May 2009, Amazon launched its own publishing imprint, Amazon Encore. From a sea of self-published titles, Amazon plucks a few with promise, then edits and distributes them online and through print retailers. It began with the book "Legacy," written by then-14-year-old Cayla Kluver. Amazon Encore has announced 19 books so far.
CEO Jeff Bezos says Amazon wants to be a partner, not a threat, to publishers. "I think the real risk is that there are a multitude of publishers. Some of them are really forward leaning, and are really going after this new e-book area," he says. "If you are not one of those publishers, then I would be worried."
The industry says that most authors will stay with their print publishers. More than 90% of sales still come from physical books. In addition to the editing and marketing support for their manuscripts, many writers depend on the advances they get from their print publishers. For some, this means seven-figure payments long before their titles hit the bookshelves. Self-published authors only generate revenue when their books are sold to consumers.
Yet as tens of thousands of authors self-publish their work, publishers' control continues to weaken over how titles are distributed and which books are offered for sale. Some publishers fear that one of the big technology companies now distributing e-books will compete for the industry's best-known authors, by offering advances in a bid to gain market share. Some best-selling authors write several books a year, and may be tempted to test the market if they have a manuscript that isn't under contract.
The market is likely to shift into two tiers, "branded/high-quality" and "cheap/good enough," predicts author and lecturer Seth Godin. Mainstream publishing houses have long depended for much of their profit on selling backlist titles, books in print for more than a year. In coming years, there will be adequate substitutes for many of those works at a quarter of the price, he says.
"Not for the books of J.D. Salinger or George Orwell, but for a book on stretching, certainly," he says. "And books on stretching have long helped pay the bills at many publishing houses."
The proliferation of cheap digital books concerns even publishers who don't think readers will defect to self-published titles. "There is some truth to the idea that low prices will drag down our prices," says Dominique Raccah, owner of Sourcebooks Inc., an independent publisher in Naperville, Ill.
Pricing was at the heart of a public spat between Amazon and five of America's top six publishers this spring. Amazon had been retailing most top e-books for $9.99. Publishers argued that price devalued work they sold for more than twice as much in paper form.
Publishers worried that readers would get used to paying so little for e-books that it could devalue the industry's cash cow, hardcover books. The publishers won, and Amazon adopted an "agency" model, in which publishers set prices for books, and distributors such as Amazon take a cut of the proceeds.
Digital self-publishing is attracting even top-selling authors. F. Paul Wilson, who writes the popular "Repairman Jack" thriller series published by Tor, an imprint of Macmillan, says he posted on Amazon five science-fiction novels published earlier in his careerat $2.99 each.
"This stuff was just sitting around, out of print, doing nothing," says Mr. Wilson, who has written about 40 books. He thinks he'll eventually make as much as $5,000 to $10,000 a month when he lists all his older titles.
Mr. Wilson doesn't foresee abandoning print, but some authors do. Thriller writer Joe Konrath says that, as more consumers buy e-books, the economics will tip.
Under the pen name Jack Kilborn, he sold 50,000 copies of his last novel, "Afraid," published by Grand Central Publishing, an imprint of Hachette Book Group, in all formats. He earned about $30,000. But if he sold it as an e-book on his own, he could make that much in 18 months by selling 800 e-books a month, he estimates.
Mr. Konrath says he's already earning more from self-published Kindle books that New York publishers rejected than from his print books. In the past 14 months, he has sold nearly 50,000 Kindle e-books, and at the current royalty rate, he makes $58,000 per year from his self-published works. When Amazon royalties double this summer, he expects to bring in $170,000 annually.
"I'm outselling a bunch of famous, name-brand authors. I couldn't touch their sales in print," Mr. Konrath says.
Most self-published authors don't have popular followings and see modest sales. Caroline Weiss and Margaret Wallace self-published their novel "Stalking Bret Easton Ellis" last year. Ms. Weiss estimates sales of the book at fewer than 400 paper copies and 100 digital copies. "It's a lot of work to promote your book, definitely," says Ms. Weiss. "Social media helps, but you have to be very aggressive."
Still, the success of Ms. McQuestion's debut self-published novel, "A Scattered Life," illustrates perhaps the biggest long-term threat to traditional publishers: a replacement for their ability to curate and market books.
Ms. McQuestion, who lives in Hartland, Wis., says she wouldn't have entertained a self-funded print run of her books. But she uploaded her first e-books to Amazon's Digital Text because she read that it worked well for another author. "I thought, if nobody buys it, I can just take it down," she says. When people began buying her e-books, she says she wondered: "Who were these people, and how did they find my books?"
The answer: Amazon has proven adept at using its technology to merchandise the so-called "long tail" of niche goods. While traditional publishers rely on name-brand reviews, Amazon has millions of customers posting reviews. Amazon offers free, instant, sample chapters to hook readers. And it makes computer-generated recommendations based on other readers' purchases. So, the more people that bought Ms. McQuestion's books, the more often the site recommended her work.
For new writers, Ms. McQuestion says, Amazon levels the playing field, since it doesn't differentiate between self-published and big-publisher titles. Ms. McQuestion says low prices—the novel sold for less than $2 on Amazon's Kindle—play a role in her success.
Amazon executives say they signed Ms. McQuestion to the Encore imprint after noticing the positive user-generated reviews of her books. Thanks to its vast database, Amazon not only knows what people buy but also how they consume e-books—such as which passages readers most often highlight.
Ms. McQuestion and Amazon won't disclose the terms of their deal for "A Scattered Life." Seattle-based Amazon will issue a new version of her e-book and produce a paperback version targeting book clubs.
"All of this time I have been trying to get traditionally published, I was sending my manuscript to the wrong coast," says Ms. McQuestion.
