Tuesday, October 11, 2016

Marketing Fiction In A Changing World Part 22 - Making a Profit At Writing In A Capitalist World

Marketing Fiction In A Changing World
Part 22
Making a Profit At Writing In A Capitalist World

Previous Parts of Marketing Fiction In A Changing World are indexed here:


"Profit" is a term considered anathema in some circles - with fairly good reason.  The term "profit" has come to signify getting something you didn't earn, something actually earned by the sweat of others.

Those who oppose Capitalism could not destroy Capitalism because it is so good at racking up Profit.  Everyone wants "profit" when it is defined as "something for nothing."

But "something for nothing" is not the definition of profit nor has it anything to do with Capitalism.  Capitalism is about personal, individual ownership, which makes copyrights a form of capital.

-------------quote from a quick Google search------------

an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.
synonyms: free enterprise, private enterprise, the free market; enterprise culture
"the capitalism of emerging nations"
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Google's definition of Capitalism calls it a "system" -- a political and economic system.

Capitalism is not a system and has nothing to do with politics or society.  Capitalism is "not a bug in the social system; it's a feature of Reality."

I saw this item on Quora back in June 2016 and admired the precision of this definition.


First please understand that you can't really compare the two since they are different things. Communism is a socioeconomic concept while capitalism is a solely economic concept. Therefore there are no social policies which can be definitely associated with capitalism, which means the comparison needs to be exclusively economic or based on specific cases (e.g. USA vs. USSR). Also, no country on earth practices or has practiced true communism; by definition communism supersedes the concept of the state with small, self-organized communities, therefore neither the USSR nor China were "true" communist systems.
Now, why would a working class person prefer capitalism? I'd say because they would not enjoy living in a communist society.
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I could write this entire blog entry about the concept "working class" and how it can not possibly be applied to the USA.  The US Constitution can only function well if the populace understands there is not now nor never has been any such thing as "class" in the human species.  
SCIENCE FICTION ROMANCE WRITERS NOTE: all bets are off if you are depicting Aliens. Create a species where "class" is a biological imperative, then launch your Love At First Sight story and see what happens next.
But where only humans are involved, the USA Declaration of Independence and the Constitution nailed it perfectly.  These founding documents are based on "All Men Are Created Equal" and we've fought out the battle over the idea of "all men" (which now includes males of different colors) and the idea that "men" includes women, too.  In other words, our social history has been directed along the lines of enhancing Individualism by turning individuals loose to craft their own destinies in their own pursuit of happiness ever after. 
These ancient words mean that in the USA, there is no such thing as class, working or otherwise.  There is no such thing as "the" 1% -- the ultra rich are "a 1%" not "the 1%."  
Social systems that divide humans into classes are called Aristocracies.  The USA views Aristocracy as resoundingly repudiated by thousands of years of utter failure.
Without a "working class" you can not have an Aristocracy.  
So in the USA, there are people who make a living by working, but they are not a "class" -- at any time, any given individual, can become independently wealthy, self-employed, employ others to work for him/her/whatever, go back to school on a scholarship, or get injured (perhaps in war action) and go on the dole or a well earned pension. Humans do not come in "classes."  Humans are resilient and adaptable - ever changing.  We all work.  There is no such thing as "working class."   
Writers work, but do not form a "class" in any sense.  We have nothing in common with one another, which is the exact trait we have in common -- unique individuality. 
That is the precise condition under which Capitalism thrives, flourishes, and produces far more than is invested.  Capitalism is an "undocumented feature" of the Reality Matrix that writers are uniquely suited to exploit.  
The term Capitalism has been co-opted by politicians and redefined.  Academics subsequently wrote a lot of books for Economics courses (often required for various majors in college) because of their Publish Or Perish business model.

To understand Capitalism, think about raw, basic survival, say on Mars or some other harsh planet among the stars. To understand what a Main Character or Hero is and does that is so admired, the writer must understand the reality of Capitalism with all the mis-directions and academics stripped away.

By stripping away that co-opted idea-grab that Capitalism is a system (thus created by humans), a writer creating fictional worlds peopled by Aliens or driven by Romance can use the core concept Capitalism to
a) create alien worlds that are truly alien but comprehensible and
b) to run their own writing business.

The basic idea of Capitalism goes like this:
A) Person One has a resource they can't use
B) Person Two has an ability to use that resource but does not have the resource
C) Person One LOANS that resource to Person Two
D) Person Two uses that resource
E) Person Two gives that resource back to Person One with some extra from what using the resource produced (amount determined by prior contract)
F) Person Two keeps all the rest produced by using that resource as personal property.
G) Person Two now has the resource and the ability to use it to create more resources
H) Person One now has the resource and more but still no ability to use it

That resource is CAPITAL, and the process of loaning it and collecting the return OF Capital and ON Capital is Capitalism.

And the story of where that Capital goes repeats the cycle as Person One finds something else to invest the resource into and Person Two keeps on producing more and more, reinvesting excess resource to grow the business and employ more people.

In the Publishing Business, the writer is Person One who has a Resource (unpublished manuscript) they can't use, and the Publisher is Person Two who has ability to use that resource but does not have the resource.

Writers LICENSE their copyright (not SELL, license, a kind of loan) to the publisher, thus loaning the publisher the resource under terms set by contract.

The Publisher uses the manuscript, turns it into a book and gets people to buy it.

After the set term of the contract, the license the publisher holds expires, and all the licensed rights revert to the author (capital is returned) plus all the royalties paid in between.

Today, in this new world, Person One now puts the book up on Kindle or other e-book format and the reputation for that byline or title created by Person Two (the publisher) continues to sell the book, fewer copies but at a greater profit to the writer per copy. Thus the writer "capitalizes" on the Publisher's hard and expert work creating reputation.

Publishing is a perfect example of Capitalism in action and has nothing at all to do with governmental forms or academic economic theories of "society."

Capitalism has to do with combining talents of individual people whose individual talents would not earn them a living -- but when "packaged" by an organizer (like a publisher or producer) those individuals' resources can be transformed into potatoes and oranges bought at the supermarket.

The problem for working writers is that what they get paid, net-net after decades in the business, about averages out to potatoes and oranges.  A good, widely published, widely reviewed writer can cover a modest lifestyle of room, board, clothing, transportation, -- today, maybe not medical care.

SFWA (the Science Fiction Writers of America) carries a healthcare policy for members that is very expensive but better than nothing.  Few can afford it, yet all need it.  Writing is way too sedentary a profession to maintain health well. The future of Obamacare is not certain, and switching policies can elevate the cost.

Nobody I know works harder, longer hours for less profit than fiction writers.

When all the time is accounted for, time mastering craft skills, time learning, time researching, time dreaming, time writing, time re-writing, time in copy-editing, time formatting, time repairing computers used to write, time marketing, time interacting with readers, time studying markets, -- already the writer of fiction makes less than minimum wage (even if they don't raise that dollar amount of minimum wage soon!)

In my experience, the most creative, sharpest minds contributing to gross domestic product get paid the least per hour worked (over say, 25 years average annual income) if they are working writers. There will be years topping $100,000 income, but then the IRS takes a chunk of that calculated on the idea that this income level will be sustained year after year.

Long ago, the tax code allowed writers to "income average" over 5 years, smoothing out the spikes and valleys of tax owed, taking into account the irregularity and unpredictability of writing income.

So to the TIME spent creating and writing and marketing (even with an Agent, it's a lot of time spent marketing), add the time spent on bookkeeping and accounting and tax preparation -- or the expense of out-sourcing that work.

You aren't "making a profit" at writing until you have paid all those bills, plus your own salary, rent for your home-office and business machines and their supplies (yes, ink for your printer is a business expense paid before declaring a profit).

And that does not even begin to account for capital invested before a career can take off, money for classes, lessons, travel to and from such schooling, computers, phones, tablets of various types constantly upgraded and the professional-level software necessary to produce copy that can be submitted in the proper formats.

See?  There's that word, capital.

Running a business is all about capital investment vs. return on investment (called ROI).

The point of Capitalism is to invest a resource, then turn the crank of the business model, and return that invested Capital, keeping what's left over (after all expenses) as Profit which is then REINVESTED into that business or another business.  Capital is recycled Profit.  They are the same thing. Capital is not MONEY -- Capital is a resource, like a copyright or a house you buy with a mortgage and then rent at more than it costs you.

Money is to be spent on expenses.  Capital is to be invested and recovered plus a profit.


If your house's roof starts to spring leaks, it can cost less to patch it if you only consider the money you will spend this month. But then another leak will happen, and another patch.  You also have to consider your time as money -- to go get the materials and climb up there and patch the roof yourself is time spent not-writing, and money just spent.

Your time and your money regarded as capital would lead you to a different approach to solving the problem of a leaky roof.  Call the best roofer in town, replace the entire roof this month with a top professional job and materials (not Home Depot).  You do it that way, you have made a "Capital Investment."  Your capital (time and money) will now "work for you" and pay back in "royalties" (a little each year the roof does not cost you anything).

If you plan to charge the cost on a credit card, and pay it back slowly, the interest the card charges you is NOT a capital investment by you.  It is money spent. Calculated carefully, it can turn out that getting a whole new roof will not "pay for itself" (return your Capital) because "revolving credit" is way too expensive.

A roof can cost the entirety of a book advance plus a royalty payment or two.

Your copyright is your capital.

You invest it into a Publisher, trusting them to use it to make a profit.

You can invest the "interest" you get from loaning your capital (advance+royalties) in a roof. Your house is capital.  You've taken your "profit" (advance+royalties) and reinvested that capital in a capital investment which itself pays dividends. And you still own your copyright.

Your copyright is your capital.

Capitalism, the definition specifies, is a system that assumes you own your copyrights and can rent them out, or sub-license them how you choose.

Is Capitalism a "system" -- or is it a simple fact of surviving in the real world where no individual has all the skills and resources necessary to survive?

Capitalism is the system of contract law that allows a person with a resource to loan that resource to someone who has the ability to use that resource.

The ability to write songs is a resource, the songs written are capital -- but it takes an orchestra and maybe several singers to make a profitable YouTube Video of that song and get millions of hits and launch careers.  The song writer still owns the copyright on the song.

His or her heirs can inherit that copyright.

Copyright law specifies a number of years before it goes into public domain -- i.e. is taken from the rightful owners, the heirs -- but there is no statute of limitation on owning a house or a farm property. There is no difference between a copyright and a farm.

Art, paintings or photographs, fabric patterns, animations, all kinds of art we create become our capital which we license but still own.

Whether creating such works of art is profitable depends on the size of the market that will pay for it - i.e. depends on popularity.

Commercial Art is a different field from Fine Art.  Both create capital. Usually Commercial Art is the only kind that turn that capital into capital+profit.

In the sharing economy, the open source economy, you are free to give away your copyright, and get paid in enhanced reputation - name recognition, publicity, or just spiritual gratitude.

To some extent, people using your open-source resource will toss some money into your PayPal account from time to time, but the "open source' movement is thriving without money.  It runs on pure capital alone, or maybe some bitcoin here and there.

Fan Fiction is that kind of sharing-economy, open source resource, where the writer gets paid in name-recognition, reputation, and writes things for other people to pick up and write about.

So there is a profit to be made off the capital investment of time/skill etc., but that profit is not convertible to money.

Capital and profit are not money.

In Capitalism, capital and profit can be converted to money, and money can be converted to capital and profit.  If your unusable resource is money, you can loan that money at bank-interest+risk, and if the gamble does not fail, you get your money back, plus inflation, plus a profit.

One thing writers must understand about making a profit is that bank interest is not profit.  The tax law treats it as profit and taxes interest, but banks deliberately calculate and set the rate of interest on CD's and savings accounts to cover all their expenses (accountants, tellers, Cloud Megs, hacker intrusions, etc) and give you just exactly enough more dollars to keep your purchasing power going down.  Yes, you lose purchasing power by putting money in a CD and reinvesting the interest.  The interest rate is calculated to be less than inflation, but in such a way that you don't see it.  You look at your numbers and think you have more, but you actually have less.  That is what retail banks do for a living, and they are good at it.

Writers and other artists, being in one of the lowest paid professions, must understand this quirk of tax law - retail bank interest is return of capital, not a payment of a profit, so when you pay taxes on interest, you are actually giving the government some of your capital, reducing your ability to earn in your old age.  The only way out is to get out of the retail level of finance.  Deal wholesale.

To deal wholesale in capital and money you need a lot of capital -- a lot -- so your capital can be invested and earn money you can spend without reducing your capital.  In fact, well invested (Mutual Funds are a good start, but their fees reduce earnings potential), your capital can grow at or above the rate of inflation while yielding a good living.

The trick of it all is to get your mind around the truth about Capitalism.  It is not a social "system" -- it is a fact of reality: humans are interdependent; no man is an island.

Money can be used as capital, but it is not capital.  When used as capital, money becomes a commodity.  It can be traded as a commodity on the international currency exchanges. Money can be a thing in itself, unrelated to potatoes and oranges. In math, this is called Units Conversion.

So the operational, everyday-useful definition of Capitalism is the contract-structure that allows using other people's resources in a way that benefits them most, and yourself second.

As a writer, who owns copyrights, that means you are the one who is benefited most.

You start out with nothing, create something, loan it out, get it back plus a profit, and can loan it again and get paid again, and you still own it.

The cost of creating that something, the overhead expenses you invest in your business, have to be less than what your copyrights bring in for you to declare a profit -- and that means your business has to pay you a living wage before you can declare a profit.

It is very rare for a writer or any creative artist to make an actual profit from their work.  Only during the (usually few) years when the work is reaching its broadest audience is the income more than the cost of doing business as a creative artist or a performing artist.

A reason for that hides within the structure of the big businesses that own publishing or production.

Yes, movie and TV studios and the independent producers who sell them shows are also owned by other types of businesses.  In the case of films or stage productions, the real owners are often "Investors" (individuals with extra millions to invest on the chance they will get their money back and much more).  Many times "Investors" put up the money for a stage play or other production more for the prestige than profit, and are happy to break even.

In this "Changing World" impacted by electronic distribution, Kindle to Netflix to promoting books on blogs, the vast and significant change in the Fiction Writer's business model is also now impacting non-fiction.

The biggest casualty in 2016 is the NEWS BUSINESS.

Here is an article from FORBES about Snapchat and its impact on the News business


 -- by appealing to the youngest people, Snapchat is setting the stage for adult behavior 20 years hence.  And in this infrastructure shift to electronic media and personal connectivity, which is so deep and so basic (more so than maybe the Printing Press), 20 years is the blink of an eye.  Do you remember cell phones from 20 years ago?


That Wikipedia article shows the evolution of from 1947.  Scan down the article and look at what changes in 20 years. Realize a writing career can be 40 or 50 years because writers don't usually "retire" with a pension.

Facebook is buying these communications start-ups that appeal to specific demographics (target audiences) for a reason, but I doubt that Facebook's execs think of themselves as running a News Service (like AP or Reuters) designed to gather facts and sift out rumors and opinion.

Here is a quote from the Forbes article on Snapchat, tailor made for writers looking to make a Profit off their writing skills in a Capitalist World.

Most adults, if they have even heard of Snapchat, know it as the place where messages disappear after a few seconds. But the company is adding more and more options, and it is now the network on which young people not only use different kinds of messages, and no, not all messages self-destruct in three seconds, some stay in the in-tray for up to 24 hours, and others can be kept for as long as the sender likes. What’s more, young people even read the company’s online magazine, as well as using other channels it has set up, including one to send money.
So while most of us grownups don’t even know what Snapchat is, Evan Spiegel, now elevated to the status of visionary, and his team have created a company valued already at some $20 billion—so far he’s turned down a $3 billion offer, and then reportedly another for $4 billion—and that is now the new television for young people unable to disconnect from their smartphones, and that 23 media partners are now using to reach a younger generation of readers, attaining millions of hits each month, and that other brands are using to advertise their wares during the Super Bowl. This is highly profitable advertising, as well as non-intrusive, unlike the trash that we have to put up with on other networks and publications unless we install an ad-blocker.

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This business model based on advertising is one that novelists have never needed to tackle, but TV Series writers must internalize to get the climaxes (cliff hangers) just before the formulaic commercial breaks.  News (televised or internet) packages are structured the exact same way for the same reason.  A Package is that little bit of actual news sandwiched between commercial breaks.

We'll explore more of that Forbes article in Part 23 of Marketing Fiction In A Changing World, looking at the future of our business model.

Fiction publishing and news publishing (such as newspapers on paper and magazines printed on paper, even Radio and TV News or the old fashioned News Reel at the movies) were never "profitable."

Historically, book and Magazine Publishers were owned by other bigger businesses or investors specifically for the "tax write-off" and the Prestige, entree to "the right" cocktail parties and social networks.

In non-fiction, the News business also grew up as a hybrid "public service" or charitable way of paying society back for profits made on other products.  From the 1700's and "movable type" the local town newspaper was a low-margin business at the very best.

News (whether you view it as fiction or non-fiction!) is a capital intensive business.

To gather the product (information), individual people have to go out where the events are occurring, observe, gather and check facts, then cast all that data into the format of "information" by writing the article.  The article has to be transported back to the editing office,  edited, shaped to fit the newspaper's available space, laid out, compiled into print, printed on paper (which has to be trucked in from a manufacturer -- likewise ink -- never cheap), then the paper has to be hauled off to be offered to reluctant buyers.

All those people have to be paid, and all that stuff has to be bought, and all that transportation costs.  This is also true of online newspaper distribution operations such as Huffington Post.

Print papers combined the advertising model with the pay or subscribe model and survived right up until now.  They are still trying to find a way to make money online.

So historically, print and broadcast news operations are labor intensive, capital intensive operations that were owned by larger businesses, mostly for tax write-off, a public service, and prestige (in the case of "news" of course, power over political processes is another form of profit).  Even with advertising and subscriptions, even at their most profitable, news operations have never been stand-alone operations that made a profit.

Publishing and News are two kinds of business that have traditionally been designed specifically to lose money.  So they paid writers and journalists as little as possible to keep them providing material.  These businesses weren't cheating.  They simply could not afford to pay wriers and journalists more and still break even.

Today, in this changing world, Publishing has been moved from being a prestige-crown-jewel to a profit making operation.  That is one reason the price of paper books and e-books are so high, relative to what those prices were in terms of a loaf of bread a hundred years ago.

With razor thin margins, publishers had to 'consolidate' (buy each other until there are only a handful of publishers left who cover the whole world).  So they don't publish books that "ought to be published" or "deserve to be published" any more. They publish books the computer algorythms predict will sell very broadly and very quickly.  Likewise "News" publishes what will captivate the most eyes.

Even though writers are paid a percentage of the cover price for a book, and thus have a built-in wage hike for inflation, that percentage has not gone up, but agent's fees have gone from 10% to 15%, taxes (state, federal and local) have gone up.  Writers' margins have narrowed while publishers are just barely making it unless they have a few blockbusters in a year.

News, likewise, is now making a transition to a stand-alone for-profit business, and therefore needs a much wider audience for commercials and subscriptions.  The only strategy available to get that broad an audience is to make the News more Entertaining (fictionalize it, jazz it up, create a "narrative" that will keep people glued to their screens).

This shift in the non-fiction writer's business model has caused less capital (time, effort, energy) to be expended on fact-checking, thoroughness, meticulousness.  Non-fiction (News) that is fact-rich is a very expensive to create, and the truth is the market is too small.

Very few people will pay (by watching commercials or subscribing) to get a listing of un-exciting, dry, boring fact after fact.  A few will tune in for a "story."

The cure is, of course, to make fact-gathering much cheaper (Go-Pro cameras in drones?), so that news can be published in fact-rich but boring summaries to that tiny audience that prefers it.

Sometime soon, a Science Fiction Romance writer will write a book set in a world built around a new business model for publishing -- both fact and fiction publishing.

The technology is being implemented rapidly.  Something obvious is staring us all in the face that we are just missing.  The writer who sees it will write the classic everyone refers to for the next hundred years (like 1984, or The Cold Equations).

It may be as simple as what some indie bloggers, and web-radio and YouTube personalities are already doing, gathering and presenting the facts that contradict the "narrative" adopted by the bigger news operations, broadcast network or cable news.

News and Book Publishing may become, once again, not-for-profit operations that just break even in a good year and are tax write-offs in other years.

Where would your career fit into that future?

Jacqueline Lichtenberg

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