Lulu.com is a platform where authors can publish their books for free. It takes care of the digital and physical distribution by providing an ISBN, charging a 20% share of the profits. Through this platform, authors that got rejected from the huge publishing houses have the opportunity to promote their work and make it accessible to the public. Among others, this happened to J.K. Rowling as well as Stephen King. Have a look at this link (http://londonstime.blogspot.com/2011/05/7-famous-rejected-writers.html) to see other famous books that were rejected repeatedly in the first place. In addition to the independence of the huge publishing firm, the platform offers the authors to keep the full rights of their content as well as artistic freedom in writing, layout, cover, etc.
To get a general overview of the industry, I will briefly explain the value chain of publishing.
Value chain in Publishing
Content
After writing the content the author presents his work to the publishing houses. Often there is an agent as middleman that recommends writers to the companies and at the same time keeps his writers informed about latest trends and preferences of the publishing firms.
Editing
If the company decides to publish the book, the editing phase starts. Professional editors go through the text and match the style and grammar to the standards of the company. In some cases, especially for non-fiction books, fact checkers are employed to review the text.
Design
After the modifications are completed, the design stage starts. The cover is designed and typesetting, page layout, binding method, etc. are chosen.
Advertising
As the front cover is produced, sales people start raising interest for the new book. In some cases, they also ask for feedback and incorporate it before going to the printing stage. Depending on the interest, the print-run may be reduced or the marketing budget cut.
Printing
If there is a huge interest from oversee publishers, a co-publishing agreement can be made to increase the number of books printed and therewith take advantage of lower per-unit costs. Once, final changes are done, the text is finally checked for errors and sent to the printing department.
Distribution
The first finished books are sent to publishers as sample copies to aid sales as well as to pre-release reviewers. Shortly after, the publisher uses its distribution channels to make the book available to the public.
Sample value chain in self-publishing
So, how does this publication process work for self-publishers as lulu.com and in what differentiate those platforms themselves from traditional publishing houses?
After writing its book, the author can directly publish it without having to go through an editing process. Usually, this is in interest of the author because it provides him the freedom to publish his work without having to compromise with the publisher. On the other side, I think that there also are some authors who see this review phase as valuable in terms of quality and accuracy. However, according to my research most writers see it as a restriction in their artistic freedom.
The design also lies within the responsibility of the author. He can design his own cover page and after upload it, lulu.com offers a great number of advanced layout options. For writers that are not familiar with publishing or want to assure to produce a high-quality layout, lulu.com offers three categories of premium design services from basic to professional.
Promotion is done by the writer himself. There are several tools, premium and free of charge, offered by lulu.com to advertise the book.
The book is mainly distributed digitally but lulu.com also offers the service of printing on Demand. In this case, costs only occur after assuring future revenue. In terms of distribution channels, the author chooses himself. The listing of a title and ISBN in the major bibliographical databases and on Amazon.com is for free. GlobalReach, a service priced $75, offers the most extended reach and in addition to the channels above, the title is made available to further major retailers like Baker & Taylors, Barnes & Noble and NACSCORP, a subsidiary of the National Association of College Stores.
This process shows that in self-publishing, the author is in charge of most stages of the value chain.
Effect on income statement
But how does self-publishing affect the income statement of publishing companies? The logical answer would be that it causes a drop in the number of sales. I think this is a valid answer due to the fact that the publishers attract fewer new talents and famous authors may leave the company since they prefer to work more independently and their success is no more dependent on huge promotion and advertising campaigns. On the other hand, it may be the case that the companies attract fewer but more talented writers that prefer working with a publishing house to boost their success. I think this is also possible because the number of books sold is a good indicator for the future success of a book and this data make the search of talent for effective.
Analysis of Income Statement: Barnes & Noble, Inc.
The extent of the effect of self-publishing on the income statement of publishers however is unclear. There drop in sales of physical books is caused by the general trends towards digital media which also explains the increased number of books sold through Barnes & Noble, Inc. online distribution channel, B&N.com. Furthermore, the average distribution cost per unit decreased. This is true due to two factors: optimization of operations in the distribution center as well as the increased through the online channel which has much lower per unit distribution costs that the physical sale.
Conclusion
Summing up, I think that self-publishing is a great opportunity for authors to publish and promote their book. For many of them, who got rejected by the publishing firms, this is the only way to make their work effectively available to the audience. Many people argue that the revenue share when self-publishing is much higher. This is definitely true but what matters is the total profit that is the profit per book times the number of books sold. With the support of a publisher and its advertising and promotion campaigns the quantity sold will be much higher. For this reason, I tend to say that, especially for unknown authors, it is still more profitable to seek for a contract with a publishing house and in turn accept the lower per unit revenue share as well as comprises during the editing process.
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