If you already have a publishing career,like Seth Godin does, you likely will also be successful on KickStarter

Seth Godin had runaway success with the KickStarter project for his book. His stated goal was $40,000, but the project reached that goal in little over two hours of its launch. The total, at last check, stands at $256,691 with two more weeks to go. Likely it will go on to add few more thousands before the final date.

What does this success tell every aspiring writer who wants to use KickStarter as a way to self-publish their books?

According to Godin,

“What this shows is that if you build a tribe, you can use it to calmly build a publishing career that doesn’t involve a roulette wheel experience where you only have a week to succeed.”

Godin neglects the fact that he is a popular published author, speaker, Idea Man and most importantly someone with thousands of loyal followers (who seem to have remarkable cognitive similarity). It is not a surprise that his first KickStarter project, launched through his extremely popular blog as marketing channel, became a tremendous success. He can thumb his nose at publishers seeking to control what we get to read.

His success is irrelevant to the rest of us. Godin got the causation backwards. If you are already popular, have a sucessful publishing career, built an online following then you can translate that power to any channel. Not the other way.

What is the base rate of success on KickStarter? According to their statistics page,  1,617 of  62,032 total projects reached their goal of $20K to $99K (picked this range to line up with the $40K target Godin set for his project).  That is 2.6% of all projects secure funding that is big enough to provide career income to the author.

But wait, that is the average across all projects. As an aspiring author who wants to “calmly” build a publishing career you should look at the success rate for Publishing projects. For this category the number drops to 1.5%.

If you are not Seth Godin and you started a KickStarter Publishing project today, your chances of making your $20K-$99K target is no more than 1.5%.

Getting successful funding for one book is one thing, turning that into a career is another. The chances go down quickly for repeat successes.

Finally let us not forget the fallacy of composition in his argument. These are early days for KickStarter. Just because they showed up (first) some  may get successful, but will that extend to every new author trying to make a career through KickStarter? As Thomas Sowell, succinctly put it,

If one person stands up in a stadium, she can see better than others. But if everyone stands up …

Cost Allocation Obfuscation – eBook Pricing

Cost, especially fixed cost allocation, has nothing to do with pricing. Unless you are selling to the Government which allows you to quote only cost plus pricing. Government contractors are more than happy to do so because they not only include the variable cost of making a toilet seat but also add to it its share of all their fixed costs. So when you assign each toilet seat its share of building cost, executive salaries, etc etc you get $2000 as price tag.

Allocating each unit produced, its share of fixed cost is a financial accounting artifact – required by GAAP accounting rules. When convenient, like in obfuscating the true marginal cost to justify higher prices, some businesses are happy to adopt it.

Now publishers are adopting the same obfuscation to justify their eBook prices. Since they  are not selling the value of the book, they are facing challenges from customers expecting lower prices on eBook over hardcover books.

Michael Connelly’s recent legal thriller, “The Fifth Witness,” has more one-star reviews on Amazon than five-star reviews in part because some angry reviewers focused on the e-book’s $14.99 price.

Customers expect publishers to pass on cost savings from paper and printing charges in the form of lower prices. What are publishers resorting to? Obfuscation

Publishers argue it’s impossible to break out a profit per title that includes a percentage of all their costs because all books have unique one-time costs which are broken out over an unknown number of copies. It’s also hard to apply corporate overhead costs against the sales of individual titles.

They are hiding behind cost argument to say their “margin” per eBook is still low and hence it deserves prices that are comparable to hardcover.

If they are not willfully obfuscating, they are just plain ignorant in their cost allocation. Hard to believe.

All these because publishers are not addressing , “what job is the customer hiring a book for”. There is no attempt to sell the value. If the publishers are not differentiating on the content and the customers are not seeing difference between different titles (not their fault), both sides argue about the cost.

Does the customer get any less information value from a eBook than a hardcover book?

The real disruption of the publishing industry is yet to come. We will start seeing, substitutable, undifferentiated, and copious content sold as commodities for less than 99 cents and high value content sold at prices that capture a fair share of the value created for customers.

Until then, publishers, customers and all the media bloggers will focus on costs.