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Week 24: Know the business model of those you partner with

In the first edition of The Business of Being a Writer, I spent a lot of time describing the business models of the book, magazine, and online publishing industries. If writers better understand how publishers or publications earn money, and the business problems they have to address, I believe it avoids writerly frustration and sets the right expectations for negotiation and long-term partnership.

In the new second edition, I drew back on these explanations partly because the magazine and online publishing industries are in flux. Business models vary and are in fact still being determined. Some online media still depend on advertising, some depend on paying subscribers, but most have a mixed model. One thing is clear: the magazine media industry will never be like it was in the 1980s or 1990s, when magazines could pay freelance writers a luxury wage. (One such freelancer recently wrote an essay describing how he was paid six figures for a single article.)

Magazines haven’t become miserly; rather, they’ve lost enormous income, and many have closed because their main source of income—advertising—moved to online channels (namely: Google, Facebook, Amazon). Most readers never realized that their favorite magazines couldn’t survive solely on subscription revenue.

It’s easy to lament this state of affairs or have nostalgia for the way things used to be. (How many writers still talk about the good ol’ days 100 years ago when the Saturday Evening Post paid four-figure sums for short stories?) But when you become upset with the business practices of any industry, or any publisher/publication, try to stay curious and ask questions.

Let’s take the example of literary journals charging submissions fees, a practice far more prevalent today than it was when I started working in publishing 25 years ago. Have literary journals become less ethical or more greedy? I would argue no. They are under a different set of pressures today. Consider:

• Most literary journals, even in the best of times, are break-even operations. Few have enough subscribers or advertising to cover their expenses. Many are affiliated with or supported by universities or nonprofit institutions and have to keep justifying their continued existence, typically through prestige or acclaim. A handful of lucky publications have endowments (see Poetry).
• When Submittable entered the scene about 15 years ago, it made submissions to literary journals incredibly frictionless for the writer. But Submittable is not free—it directly increases the costs of literary journals and also indirectly increases costs because more time and energy is needed to go through the additional submissions.
• Meanwhile, the ability of literary journals to be visible and market and promote themselves is more challenging than ever, and the audience for these publications has not increased, unless you count the increased number of writers who now submit to them.

So who is the market for these publications? Mostly writers. Writers pay more submissions fees because they are the ones who benefit from the publishing credits and/or benefit from the literary journals’ continued existence. Is this a problematic state of affairs? I find it unsettling, but it’s an entirely natural outcome given the predicament that journals find themselves in. I’m reminded of Dana Gioia’s essay from 1991, “Can Poetry Matter?” He addressed how poets and poetry was increasingly for other poets, not the greater reading public. The problem has only become worse.

Know the business model of publishing startups (especially those from Big Tech)

As someone who reports on the publishing industry, I see countless startups come and go. Unfortunately, startups in the writing and publishing space have long tried to “disrupt” an industry they do not understand and end up having short lives. So when you read media coverage, look at the people behind the startup and who’s funding it. Then look for context and insights from people without an interest in the company or its success. What problem does the startup solve? What is their business model—where will the profits come from?

For example, Substack is one of the most successful companies to enter the writing and publishing space in the last decade. But some people don’t realize it still isn’t profitable. Substack might say that’s by design (e.g., they are still investing in the product), but if I were a writer depending on its continued existence, this state of affairs would make me a little nervous. At some point, they must become profitable, so how will that happen? Currently they take 10 percent of all subscription fees; they only earn money if the writer is charging for subscriptions. Despite attracting big names and big publications to their platform, Substack is still in the red. What will have to happen for Substack to become profitable? Will they have to start charging writers who don’t have paid subscribers? Will they have to resort to inserting ads in people’s newsletters? Will they take a bigger percentage or offer premium services? I don’t know, but a company can’t run in the red forever.

Here are four questions to ask about any potential business partner:

• How do they primarily earn money or stay afloat? (This is what will motivate their actions.)
• Are they profitable today? (If not, they will make decisions to increase the chances of profitability.)
• What are their plans for growth? (Again, this will motivate their actions.)
• Is your involvement with this partner simply costing them money, or do you bring in profits?

Exercise

Some literary publishers operate as nonprofits, and every US nonprofit has to file with the Internal Revenue Service a Form 990, Return of Organization Exempt from Income Tax, which includes information on how the organization raises and uses its funds. This form is open to public inspection, so you can find and view it. Look up the 990 for a literary publisher and study how much of its operational budget comes from book sales versus other forms of revenue, such as fundraising and government grants. (You can use a site like Guide Star to find this information, or try Googling the publisher name + 990.) Graywolf Press is a good one to start out with if you’re not sure which literary publishers are also nonprofits.

Explore further

• ​The Business Model of Literary Journals (or Lack Thereof) by Jane Friedman
• ​Can Bindery’s Business Model Succeed? by Jane Friedman
• ​Spines: AI Has a Role in Publishing, But This Isn’t It by Jane Friedman

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