Learning from Ellora’s Cave
Tim Brandhorst, Deputy Director, Book Publishing, American Bar Association.
I’ve been meaning to write about my single favorite twenty-minute timespan at the 2010 Digital Book World Conference a couple of weeks ago.
Mike Shatzkin brought in one of the editors of a small erotic romance publisher, Ellora’s Cave, for a one-on-one conversation in the morning plenary session on the second day of the conference. There was a bit of nervous laughter at first from the audience, partly because of the genre and partly because Shatzkin did a great job framing the issue (and the interview): how a handful of women far outside the NYC publishing mainstream have managed to do everything completely backwards from the large NYC houses, yet have, in the process, gotten everything exactly right for their niche.
The laughter was gradually replaced by an awed silence as Raelene Gorlinsky, a charming, smart and unassuming woman, described with perfect clarity how Ellora’s Cave has evolved.
Gorlinsky told the tale of EC’s founding a decade ago by Jaid Black, a writer of erotic romance stories who was told repeatedly that there was no market for such a subgenre, but was convinced that there was a market… if only she could reach it. Out of necessity (lack of capital) and a keen understanding of how her readers would want to obtain her stories — mixed with a bit of luck (she had a computer science background) — Black set up a web site and sold her stories as e-books only, direct to consumers, with no print versions and no intermediary distributor.
Year one sales were $43,000.
Business has grown steadily over the past decade, and annual sales this year are expected to be over $5M.
Ellora’s Cave publishes erotic romance–basically, romance with a much higher proportion of bedroom scenes. Perhaps not surprisingly, the e-book format fits nicely with this genre; purchasers might hesitate to buy printed erotic romance books in a bookstore, but there’s not much danger of embarrassment in downloading an e-book from a web site.
They now publish approximately ten new titles a week, all as e-books, and maintain an extensive backlist (why take an e-book out of print?) of over 2800 titles; and they’ve started offering their bestsellers as print books, too, BUT with a big twist.
Because they don’t want print sales to interfere with their main e-book sales, print editions are released 3-6 months after the initial e-book.
EC also allows various retailers to carry their products, but with a window of at least a couple of weeks, so EC is sure to capture the initial direct-to-consumer sales from their most rabid customers on every new title. And direct-to-consumer purchasers are well-rewarded for buying directly from EC: they receive roughly 50 percent off the retail price. The average price for an EC title on their site is between $5 and $6; on Amazon, the Kindle versions sell for $11 to $12.
In other words, EC has, through disciplined pricing and format decisions, retained its direct to consumer model, and thus retained control and maximized profitability.
Royalties are dramatically different than typical publishing contracts, too. Authors receive 37.5 percent of the cover price of e-books–yes, that’s right, 37.5 percent. They receive a more traditional 7.5 percent on the p-book version; and all royalties are calculated and paid monthly!
Ellora’s Cave experimented with using Lightning Source and other POD providers for a while, but realized the margins just weren’t going to work with POD at their low price point. So EC did something else completely counter-intuitive: they bought their own printing press. They now print their own books, as they receive orders. They do runs as small as 15 books, and have their own warehouse and fulfillment center. (For Amazon orders of print books, EC simply has loaded all their titles into Amazon’s CreateSpace, and Amazon PODs their titles as ordered.)
Having their own press means they can also profit from custom publishing: they can do custom covers and special promotions with very small print runs, at a nice profit. They have tapped a whole new revenue stream by listening to their customers and offering their customers varying formats at varying price points.
Ellora’s Cave’s staff is roughly 40 people, of which fully 20 are editorial. Just think: a publisher that has its own printing and fulfillment, its own e-commerce web site, and is financially sophisticated enough to pay royalties monthly–yet half its human capital is devoted to editorial staff, most of whom generally work offsite.
Content creation is considered the single most important thing, and is appropriately funded.
It was a fascinating twenty minute conversation–I’ve literally thought more about the questions EC’s model raises than just about anything else at this wonderful conference. Translating their model into a more traditional publishing model is now the challenge.
[This article was originally published on the PubForward blog and has been reprinted here with the permission of Mr. Brandhorst.]
Tim Brandhorst is currently deputy director of book publishing for the American Bar Association.