The Hunger Games Economy

Alexandra Pringle was at her office in London’s Bloomsbury neighbourhood in April last year when she got the kind of phone call every book publisher is hoping for these days. Literary agent David Godwin, who for 14 years has shopped Pringle, the top dog at Bloomsbury Publishing, works from prestige authors like historian William Dalrymple and journalist Janine di Giovanni, was offering something outside his usual comfort zone. “He literally said, ‘I’ve got this manuscript, and I don’t know what to think of it,’” Pringle recalls. “‘You might hate it, and that’s fine, but I’m going to send it to you because I think it’s something  special.’” This August, Bloomsbury will publish The Bone Season, the first installment in what will eventually be a seven-part series about clairvoyants in a dystopian future struggling against a totalitarian government and its supernatural overlords. The writer: Godwin’s former intern, a previously unpublished 21-year-old Brit named Samantha Shannon. “It’s been very overwhelming,” says Shannon. “It’s a lot of pressure. There’s a lot of expectations.”

She and her fellow scribes of the addictive fantasy-fiction ilk carry the expectations of the entire industry, actually. Incubating franchises is increasingly the only game that matters for major publishers. Bestsellers have been a part of the book business for decades, increasing in their importance since JK Rowling’s Harry Potter series went on to sell more than 450 million copies worldwide. But now, thanks to disruptive changes in technology and consumer appetites, the traditional book business has come to resemble Hollywood’s movie business in its reliance on ‘tent pole’ blockbusters to stay afloat.

To understand the scale of the trend, think about this: Of the total number of copies sold in 2012 of the 400 highest-selling titles, two authors, EL James (Fifty Shades of Grey) and Suzanne Collins (The Hunger Games), together accounted for a full 25 percent, according to data tracked by USA Today. Between them, the Fifty Shades of Grey and Hunger Games trilogies claimed all six top slots on the year-end bestseller list. In fact, James’s Fifty Shades may be the most dominant fiction franchise in history, selling 13.4 percent of the copies among the top 400—more than the Harry Potter or Twilight books in their peak years.

The unprecedented success of the Fifty Shades series was the principal factor in a 75 percent jump in profits—to $431 million—at publisher Random House from 2011 to 2012. So immense was the windfall, the company gave each of its employees a $5,000 bonus—laughable on Wall Street but a very big deal in the threadbare world of publishing. Sales are likely to surge again when a promised film version arrives in late 2013, just as the March 2012 release of the first Hunger Games movie pushed those books back up the bestseller lists. “They’re subject to some pretty wild revenue swings,” says Michael Norris, an analyst who covers publishing for Simba Information. “If you publish the right property one year, your numbers are going to be up. Then the following year, in the trough of the bestseller wave, your numbers will be down.”

For writers who can deliver franchises, the potential financial reward is unlike any other in the history of publishing. By Forbes estimates, James raked in $95 million last year, outearning long-standing fiction factories like James Patterson ($91 million) and Stephen King ($20 million), who are also on the Celebrity 100 list this year. Shannon got a mid-six-figure advance for her series, virtually unheard of for a first-time author just out of her teens. If it pans out as her publishers hope, she will make millions (and millions) of dollars more—as will they.

There’s a problem with all this, though. Practised as they’ve become at marketing, amplifying and exploiting their biggest hits, publishers still have to find them in the first place. Much as their business has come to resemble Hollywood (especially in their quest for material that crucially straddles the border between adolescents and adults), there’s one big difference: Tinseltown thrives by adapting proven material like Star Trek, Superman and an endless stream of Marvel comic book characters. New book franchises must be invented in the first place. And without them, major publishers are in major trouble.

While books are still viewed as the romantic last bastion of old-school media consumption, this shift is a direct result of technological disruption, “the ability”, as Michael Pietsch, CEO of Hachette Book Group, puts it, “to connect with more and more readers more instantaneously in more retail environments and in more formats”.

The biggest part of that are ebooks, which didn’t exist 15 years ago and now make up 20 percent of all unit sales and are rising rapidly. As that number climbs, it changes readers’ relationship with books—as well as the books themselves. The instant-gratification factor is turning garden-variety bestsellers into juggernauts by removing the friction from the purchase. Readers who finish one installment can immediately start the next without the interruption of a bookstore trip or an Amazon delivery wait. Lower ebook prices also encourage binge buying. All of which encourages multibook series.

The other big change driving franchises is the bookstore business. A thousand chain bookstores have closed over the past 10 years, and more than a thousand new big-box department stores have showed up. Stores like Walmart, Costco and Target aren’t interested in discovering the next Martin Amis. They “like to carry books they know are going to sell, and that’s the blockbusters”, says Norris, the analyst. The result: The fat head of the sales curve gets ever fatter. And series create certainty. Add those two effects up, says Pietsch, and you get books that “grow with a violent speed that was never possible before”.

Given the stakes and the difficulty of finding great original material, publishers are more than happy to chase trends, copying whatever seems to be working at the moment.

Just as Harry Potter ushered in a wave of teenage-magician stories and Twilight brought a deluge of vampire romances, the booths at the annual Book Expo America this May were rife with erotic fiction, and a few of the Fifty Shades manqués have even managed to do quite well. One, Beautiful Bastard, managed to snag its co-authors both a five-book deal with Simon & Schuster and a six-figure sum for the movie option.

Technology helps here, too. Beautiful Bastard originated as a work of Twilight fan fiction, gathering an audience online before making the jump to a more traditional publisher. So did Fifty Shades, which started in 2009 as a work of self-published fan fiction called Master of the Universe, a string of escalating sexual episodes between Twilight’s protagonists. Fans at FanFiction.net couldn’t get enough, and James soon changed the title to Fifty Shades of Grey, reworking the characters into a controlling computer entrepreneur and a pretty college student who comes to share his passion for S&M and spiritual redemption. The trilogy benefited dramatically from the book’s origins as digital media. Beyond the obvious advantages of anonymity offered by downloading, had it been available only in physical form, the unexpected surge of demand would have meant long, hype-dampening waits for back orders. Instead, “readers just had to download it”, says Bob Minzesheimer, a writer who analyses sales data for USA Today’s bestseller list. “It speeds up the whole process of building a bestseller based on word of mouth.”

In March 2012, Random House paid around $2 million for the rights to the Fifty Shades series, industry sources say. It was hardly risky, since the book was, just like those Marvel comic books that furnish Hollywood’s endless blockbusters, already a proven franchise with a massive following. So far the trilogy has sold more than 35 million copies in the US and over 70 million copies worldwide. James declined to comment to Forbes, but Forbes estimates that her total personal take over the past two years exceeds $100 million.

In May, Amazon Publishing, the ecommerce giant’s effort to no longer just sell books but also make them, created the logical extension of the EL James model—a programme for fan-fiction writers, with trademark holders licensing their intellectual property and sharing in any proceeds. It’s like open-source coding, except with words. In a deal with Warner Bros, writers will be able to legally use characters, themes and plots from hot shows like Gossip Girl, Vampire Diaries and Pretty Little Liars as the basis for their own original works. WB taps new fan interest and gains a new income stream, while Amazon’s data analysis gives it the ability to identify works at the moment they begin to gain traction and sell them to the right swathes of its 200 million customers.

“Authors have more options today than they ever had, and that’s just phenomenally healthy for the business,” says Russ Grandinetti, Amazon’s vice president for Kindle content. “For the first time there are really valid alternatives to the traditional publishing model for authors whose books can sell. And that’s a fundamental change.”

if EL James represents publishing’s most promising new formula, another writer named Hugh Howey represents an existential threat. A 38-year-old college dropout passing time behind the register of a North Carolina bookstore, Howey has become publishing’s entrepreneurial superstar after readers turned his post-apocalyptic short stories into online bestsellers starting in 2011, all without the help of the mainstream publishing industry.

Watching how a regional publishing house handled the rollout of his first novel in 2009, he realised that he could access the same tools they did to put the book on Amazon, for instance, or send it off to a printer. When he wrote his first Wool novella, set in a future where humans live underground, scraping by for survival, he decided to bypass the book industry’s traditional route and publish it himself on Amazon.com.

That decision made him a multi- millionaire. Within months he’d sold more than 14,000 copies of his work, including self-published print editions, and readers were clamouring for more. So he wrote new Wool books. By the time publishers and agents caught on, their deals made little financial sense to him. In May 2012, he was already earning more than $125,000 a month. Six- and then seven-figure offers didn’t stack up. Though he eventually found an agent to help him sell foreign rights (a single-volume edition of the Wool novellas has been published in 30 countries), land a big movie deal (with Twentieth Century Fox and producer Ridley Scott) and cut a six-figure agreement with Simon & Schuster for limited US print rights, he’s kept all the core facets of the publishing business, from marketing to distribution, in his own hands.

He sets prices, determines the cover art and makes 70 percent on ebooks and $5 to $6 per paperback he sells through Amazon’s CreateSpace division, versus about a buck a book or less through Simon & Schuster. To attract new readers he gives the first book in his series away for free. He says he could “live comfortably” on what he earns on his self-published audiobooks alone.

The number of self-published  books produced annually in the US more than tripled to 250,000 between  2006 and 2012, according to publishing industry analyst Bowker. A handful of outfits, like CreateSpace, ebook publisher Smashwords, Penguin Books’ Author Solutions and Lulu Enterprises, dominate the DIY industry, charging just a few dollars to hand writers and small houses the keys to a complete publishing system.

“I think this is rating up there with the invention of the printing press,” says Howey. “I think Gutenberg and ebooks have the same kind of democratising effect on publishing.”

But not every writer, of course, is wired for entrepreneurship. Shannon, who just graduated from Oxford, says she never considered the self- published route and is happy to be the talent, with an agent, an editor and a publisher to help guide her. “I’m not a marketer by nature,” she says. “I just want to devote my time to writing.”

Shannon’s path to success is archetypal. Reared in the age of Harry Potter (“I came of age with Harry,” she says), by 15, she’d written her first novel and had it rejected by Godwin—one of the UK’s best-known literary agents and a friend of a friend. Undaunted, she started a new novel set in Britain 2059, where a 19-year-old clairvoyant named Paige Mahoney is arrested by secret police and turned over to a mysterious race of superbeings at the core of a vast conspiracy inside the government.

During an internship with Godwin, she waded through the slush pile learning which novels worked and which didn’t, and why. While at school, she finished the new book— which boasts plot elements similar to The Hunger Games and a central character relationship akin to the one in Fifty Shades—and showed it to him. He read it and was blown away. He sent it to Pringle, who, despite her aversion to genre fiction, couldn’t put it down. “It’s ‘Beauty and the Beast’, written with the imagination of the Brontë sisters,” she says.

Pringle entered The Bone Season bidding against a number of genre publishers and won the rights to the first three books in the planned series with a six-figure advance. Rights have already been sold in 20 other countries, and Imaginarium Studios in the UK beat out three other movie studios for the chance to put Shannon’s ideas on film.

Next month comes the pesky test: Will people actually buy it? If they do, Godwin, who has worked with multiple Booker Prize winners but has never before been associated with a potential franchise, will find himself in an unaccustomed place. “But one,” he chuckles, “I shall welcome very much.”