This episode is presented by Mercury. When I started How I Write, I expected finances to be an absolute nightmare. I’ve got team members in four different countries. Things like taxes, currency exchange, expenses — I was dreading it. But here’s the crazy thing: four years in, banking has been maybe the easiest part. I honestly can’t remember running into a single problem! And that’s because I’ve been using Mercury.
I switched over from other, more traditional banks because Mercury is so well designed. It’s easy to get started and easy to use, while also feeling totally legit and secure. Mercury gives me all the tools to run a global company like virtual cards, unlimited users, and the ability to customize each user’s access level to exactly what they should see. And you know what: if anything goes wrong, their support line is super responsive (and actually thoughtful), which is really rare these days. I genuinely can’t imagine trying to run my business without Mercury.
Jon Yaged runs Macmillan, one of the five biggest publishers in the world, so I asked him to explain the book publishing industry to me.
My main question: why should authors work with a traditional publisher, especially when self-publishing is taking off?
What I got was a full tour of how book publishing works. Everything from how authors make money, to how publishers choose which books to back, to the traditional vs. self-publishing debate.
Enjoy!
Transcript
00:02:01 Consolidation in book publishing
00:04:01 Are celebrity books the new trend
00:07:57 How many books get published
00:09:48 How to get your book published
00:10:43 Deciding what to focus on
00:14:15 Why publishing stays in New York
00:16:26 Can data and algorithms find great books
00:19:03 Predictability vs creativity
00:27:06 The problem with formulas
00:29:33 Should authors push back on publishers
00:31:11 The economics of a book deal
00:36:42 What makes sequels work
00:42:21 Why children’s books are evergreen
00:47:30 Why Waterstones is so successful
00:48:42 American vs European book covers
00:50:25 AI in publishing
00:54:40 What if AI wrote my book
01:00:57 How books get printed and shipped
01:02:53 Who should self-publish
01:04:52 What matters in book marketing
01:08:16 Finance vs cultural mission
01:09:52 What a publishing CEO does
01:11:06 AI vs human-narrated audiobooks
01:15:17 The literacy crisis
01:18:20 Are publisher catalogs like venture portfolios
01:19:08 How Macmillan makes money
01:21:17 What makes Macmillan unique
David (02:01–02:15):
Why don’t we start here: there’s been so much consolidation in the publishing industry, going back 20 years. I was looking at this chart of Penguin Random House and how it became Penguin Random House, and it’s like 45 different companies that consolidated to one.
Jon Yaged (02:16–02:16):
Right.
David (02:16–02:28):
How does consolidation impact the book publishing industry? Who makes the money, and what kinds of content, what kinds of books, are published?
Jon Yaged (02:29–03:21):
I think the ultimate goal of consolidation is to get scale so you can deliver the same kind of results with more profitability. The tradeoff is you get combinations of businesses that may overlap and some may get more attention than others.
I think more often than not, you lose a little bit along the way because one plus one doesn’t equal two anymore. One plus one equals something less than two. That’s, in my experience, what happens to consolidation in terms of the output, in terms of the books that are entering the world, in terms of the financials.
I think it depends on how you execute it. But the ultimate goal is how do you get scale? We’re a relatively small margin business, and there are more and more pressures on the cost side of the business over the last several decades. Consolidation is an attempt to grab back some of that value chain for the publishers.
David (03:21–03:23):
And those pressures are coming from where?
Jon Yaged (03:23–03:39):
A lot of those pressures are coming from retailers getting more discount, big retailers asking for more discount, retailers asking for more assistance with promotions, authors commanding more advances, and then freight salaries, printing costs going up.
David (03:40–03:45):
Why are those other people getting power relative to the book publishers?
Jon Yaged (03:47–03:57):
Amazon got pretty big. Barnes and Noble is the last traditional retailer left standing outside of the independents. The mass accounts still control their shelf space.
David (03:58–03:58):
Yeah.
Jon Yaged (03:58–04:01):
So it’s leverage. It’s the old story about leverage.
David (04:01–04:09):
Right. It seems to me like there has been a bigger push for celebrity books. Is that true?
Jon Yaged (04:09–04:40):
I get this question a lot, and I haven’t sat down to do the math and say, are we doing more celebrity books than we used to? I’ll say it this way: they’re definitely more visible. And when they work, they’re working at a higher level. But there’s also a lot more risk because the cost to get them is a lot more.
I can’t tell you off the top of my head if we’re publishing more celebrity books than we used to as an industry. It feels like probably a little bit. When they work, they’re incredibly successful, but there’s a lot more risk with them than there used to be.
David (04:40–04:42):
And that’s because the advances are...
Jon Yaged (04:42–04:43):
Yeah, the advances are.
David (04:44–04:50):
How do you think about when you’re in a boardroom how much of an advance to give for a celebrity book or any book?
Jon Yaged (04:50–05:38):
The first thing you do is compare it to something else that you’ve published or something else that’s been published in the world. You come up with comps. It’s the age-old thing for editors and sales folks. What’s the comp for this title? Even when the sales team sells them in, they’re looking at comps because that’s what they tell the buyers at the accounts.
This book is like this. So the first thing we say is this book we think is going to behave like that book. It might be a book we published, it might be a book someone else published.
Then we reverse engineer it. We have Bookscan, which gives us the data for physical sales. It’s a database of point-of-sale information. We can look at the sales and track where we could be. Agents also give you sales numbers of books because they want you to jack up the advance.
Then we just do the math and say, okay, if we think this book is going to perform like that book, how much can we pay for it?
David (05:39–05:42):
Does that Bookscan account for Amazon sales?
Jon Yaged (05:42–05:53):
Yeah, absolutely. Bookscan counts for something like 85% of the industry, including some of the independence. Again, this is physical. It doesn’t count ebooks or audio.
David (05:54–06:01):
In terms of where the margins are, my understanding is that the hardback has much higher margins than the paperbacks. Is that right?
Jon Yaged (06:02–06:42):
Again, it depends. The price point and the royalties are different. We pay a higher royalty on a hardback than on a paperback. It’s part of accounting. How do you account for your unearned advance? Because you’re paying in advance. If you don’t sell enough copies to earn back that advance, we eat it. The publisher eats that cost.
Some people write it off against the hardcover; others spread it out across the life of the book. So that becomes an accounting treatment.
I would say the paperback on a long tail will be more profitable because generally you’re not spending as much money on the marketing side because the marketing money has been spent, and the book’s going more by word of mouth. That’s a rough estimate on the profitability of a book.
David (06:42–06:54):
And then when a book goes from hardback to paperback, is that always after nine months or a year, like that’s priced in? Or is there something that happens in the volume or the behavior of the book sales that accounts for that change?
Jon Yaged (06:54–07:46):
More often than not, we try to say roughly one year out for general commercial fiction, you would often switch from hardcover to paperback. Then there’s going to be exceptions. Really big bestselling books, you’re going to put them on a two-year cycle: hardcover year one, paperback after two years of hardcover. Then you sort of monitor it.
Now you have books that are surprises, books that are selling incredibly well in hardcover, and their track is continuing to do well. You’ll keep pushing out the paperback because there’s no reason to change it if it’s still selling at this higher price point.
Also, the ebook pricing is dictated by the physical price. If you’re selling a book for $29 or $30, your ebook price is going to be in that $12.99 to $14.99 range. Once you go to paperback, you’re going to drop the ebook price too.
David (07:46–07:50):
Are the margins the same for authors and for you guys on the ebooks as the paperbacks?
Jon Yaged (07:50–07:57):
No, there’s less production costs on the ebooks, so the margins on ebooks are slightly better.
David (07:57–08:26):
Could we just zoom out real quick? Will you give me a sense of how many books are submitted to you guys every year? How many books do you publish? I’m an author, and I’ve worked so hard on my book, night and day. Now I’m showing up, and you are going to reject me. Come on, it’s me. I want to get it from your perspective. Maybe you wrote a great book, but this is how many books we’re dealing with. I want you to see it from our side.
Jon Yaged (08:26–08:38):
I’ve never done a count to say how many books are submitted versus how many we publish. If I had to guess, I would say we conservatively publish less than one in ten. It’s probably more like one in twenty or thirty.
David (08:38–08:39):
That come to you.
Jon Yaged (08:39–09:17):
Right. That doesn’t mean someone else doesn’t publish those books. That’s another beauty of that creative process. Books that I or the editorial team don’t think are going to work for us, someone else thinks that they would.
A book that I might want to pay $100,000 for, someone pays $500,000 for. So those differences are out there.
We’re publishing as an industry probably somewhere in the area of 20 plus thousand books a year, round numbers, maybe 25. That’s a lot of books. But there are still that many more people that want to be out there publishing.
David (09:18–09:19):
And how many books do you guys do?
Jon Yaged (09:19–09:20):
We do about 1200.
David (09:21–09:25):
You do about 1200. So you do about 1 in 20 of the books that are published.
Jon Yaged (09:25–09:28):
Yeah, we’re about a 5% market share business.
David (09:28–09:31):
And then Penguin Random House is the biggest. And why is that?
Jon Yaged (09:32–09:47):
They’ve acquired different companies, they’ve done consolidation over the years. They’ve bought up a bunch of companies.
If you look at their market share over the last decade, it’s been pretty consistent. But over the years, they’ve added and added to their business.
David (09:47–10:05):
If I’m an author and I want to get in touch with Macmillan, what is the best way to do that? I just assume that emailing the people at the front door, like on the official thing, doesn’t work.
Jon Yaged (10:05–10:43):
It doesn’t work. This is one of the challenges with our business and why people are so mystified by it. We generally don’t accept submissions unless it’s coming from an agent or someone we know already. The process of getting an agent is also incredibly challenging for authors.
Generally speaking, we have agents we work with, they submit books to us. Or we have authors that we’ve worked with and people that we know, and an editor might come up with an idea and say, oh, this would be a great idea for this author. They go to that agent and say, look, this is the idea I came up with; would so and so want to write it? Those are the two ways that we get 99% of our books.
David (10:44–11:18):
What do you think about with nonfiction? I was out with some authors last night, and one author was saying, I’m working on my email list, I’m working on my Instagram; I really want to start building that up as I ramp up my novel. I paused him and said, I’m not saying that this is what you should do, but what if you just burned the boats and said, I’m going to write the best damn book I can?
He said, you know what, I think about that all the time, but also I try to look at the realities of this business. I feel like having my own distribution channels is super valuable. What would you say to him?
Jon Yaged (11:18–11:28):
I’d say, do both. Write the best book you could possibly do, but also build up your own channels. The best way to sell a book has not changed in hundreds
David (11:28–11:29):
of years, which is write a damn good book.
Jon Yaged (11:29–12:12):
Well, it’s that and word of mouth. The best thing you could see is if you saw marketing, if you saw something that tells you, “Oh, I should buy this book.”
If your best friend or someone you trusted told you to read the book, that’s going to get you to buy the book sooner.
Word of mouth just looks different today. It used to be the trusted reviewer, a scholarly review. Then we had bloggers, independent booksellers, and librarians in particular, who were really influential bloggers. This is going back maybe 15 years ago, and they were really driving sales. Then it became Instagram, and now it’s TikTok. But it’s still what it is: word of mouth. It’s a trusted source giving you a recommendation.
David (12:12–12:30):
How do you have crazy ways of tracking things at Macmillan? When you think of the John dashboard, what are some really cool things that you have, and what do you wish you had that you can’t have because of technology limitations or legal limitations?
Jon Yaged (12:30–13:47):
Well, what I really wish I had was something that monitored how a person was reading the book: when they put it down, when they decided to stay up late and not stop reading, when they did that bender to finish the whole book in one.
Some people try to approximate that. They might say, “I have this group of readers, and if someone tells me they’ve read 30% of the book within the first day that they get it, I know I have a hit on my hands.” People actually send it out to folks to help do that in the manuscript stage.
For me, if I could really track readers’ behavior, that would be great because self-reported information is always less reliable than actual behavior. If I knew what people were actually doing and I could interact with people more directly than we can now, that would be valuable. Most of our interactions are indirect. If we market to someone, it’s a somewhat indirect action because I’m putting it out in the world, and then a bookseller makes the sale.
If I could track how my ad actually generated a sale, that would be incredibly valuable because then I would know how to change my ads, maybe change the demographic that I’m reaching. We approximate it. We have pieces of it we can track. We just can’t track it the same way an online retailer can when you buy toothpaste. They put that ad out, and someone clicks on that and buys it through that click. We can’t do that the same way.
David (13:47–14:00):
Do you feel like the tools of tracking are basically equal amongst the big five publishers, or is one of the publishers more data-driven and one more field-driven?
Jon Yaged (14:01–14:14):
I honestly don’t know. If I did, I’d go to antitrust jail, which is a big thing in our world still. My instinct is that, like anything else, some are probably better than others. I think we’re probably somewhere in the middle.
David (14:15–15:25):
What are the pros and cons of being in New York? I remember I had this experience many years ago. I was going to interview Ryan Holiday at the Penguin Studios. I got off the Q train and saw Universal Music Group. I think I went by CBS on 53rd and 6th. I just had this moment of being like, “Oh my God. The home of radio, the home of TV, the home of books, the home of music, all right here within a few blocks. This is crazy.”
At the time, I was living in Texas and remember going back and having this distinct sense that culture in New York is so different from culture in other parts of America. On one hand, the benefit of being in New York is you’re right by everybody. You can easily just pop over four blocks and talk to somebody else who works in the industry. There are parties for people there. At the same time, New York is one of the most different places from the rest of America and the rest of the world. How do you think about the advantages and disadvantages of being here?
Jon Yaged (15:25–16:24):
I think about it all the time because there’s a bit of a bubble effect, which is essentially what you’re saying. That’s good because you have a lot of people in like-minded areas working toward similar things. So there’s an energy, a scale, an excitement around it. But then we sometimes miss trends or don’t know what we don’t know.
I personally believe a reason self-publishing is so big is that traditional publishers were just not seeing trends that were developing outside of New York. Here’s a great story. Years ago, when I was running the children’s division at Macmillan, we were seeing a rise in self-publishing, and we wanted to acquire this book, but it didn’t happen. What we realized in that process was there were a bunch of people out there reading things or wanting to read things that we weren’t publishing. So we created something at the time called Swoon Reads. We ran it for a few years, and it didn’t work out exactly the way we wanted, but we had some great successes with it.
David (16:25–16:41):
What do you think is the downside of being data-driven? So much of the world has moved toward data-driven decision-making. If you walk into a boardroom and say, “I made a data-driven decision,” that’s an unequivocal good, but let’s poke holes in that. What’s the downside of it?
Jon Yaged (16:41–17:12):
Well, I wouldn’t say it’s an unequivocal good. I always say I want all the information so I can make a gut decision. Yes, I like information. I like data. But there’s an element to what we do that is still feel. I haven’t seen the algorithm yet that can identify the outlier, and the biggest books we have are often the outliers. You go back through history. Harry Potter is the best example. Almost all the New York publishers, I think all but one, rejected that book.
David (17:12–17:13):
Is that right?
Jon Yaged (17:13–17:18):
Yeah. And that’s not the only book that that’s happened to. So that’s the outlier.
David (17:19–17:23):
What do you make of that? It’s just so hard to know what’s going to resonate.
Jon Yaged (17:24–18:10):
If I had a crystal ball, I would have used it a long time ago. Things that we think are slam dunk winners don’t work, and things that we think will be nice turn out to be huge successes. It happens all the time. There’s also a lot of stuff in the middle that we get pretty close to, but that’s what makes this business fun. If it were plug and play, I don’t think we’d like it as much. Creativity isn’t an algorithm.
I want the data. I want to A/B test my ads and maximize my metadata. I want to make sure that I know what’s working in the things I control, but I also have to realize that there’s magic to the outliers and creativity. If you get the right editor who just has that feel, you have to go with it.
David (18:10–18:11):
Oh, tell me about that.
Jon Yaged (18:11–19:02):
I’ve had this throughout my career. There have been people who ask why I let a certain editor buy a book, but when you look at the other hundred books she’s bought that have been huge successes, maybe this one won’t be a hit, but her track record’s great. She knows how to deliver. It doesn’t mean it’s going to happen every time, but certain folks just know how to look at a book and make it the best it can be.
Maybe even more importantly, they know how to read through something and say, “That’s the next thing.” I think we’re losing that a little bit. To combat that, you have to read a lot, read a lot about the competition, and be out in the world. It’s becoming harder to do that because we’re publishing a lot of books, and the marketplace is crowded. But certain editors just have that innate ability to know, and you’re not going to give them carte blanche, but you’re going to give them the benefit of the doubt when they come asking for money.
David (19:03–19:47):
We were talking earlier about risk. There are almost two sides of it. There’s the “take more risk” side. The problem is that you’re a business, and you need some predictability. You can’t have super high variance when you think of your fixed costs. There are stakeholders that you specifically report to, and you need to deliver financial results.
Then, there’s the other side. My critique of Hollywood would be that the rise of sequels means that we’re just regurgitating the same thing. The risk tolerance is getting lower and lower. People are looking more at the franchise than the underlying quality of the content, and that’s not risk-averse enough. How do you think about the tradeoffs between those two?
Jon Yaged (19:49–20:45):
That’s a really good question that we struggle with. One of the benefits we have at Macmillan is that we focus on the books and authors. We are also a privately held company with two shareholders, so we can take a long-term view of things.
The shareholders are Stefan von Holzbrink and his niece Christiana Scholler. They’re the owners, and they have a passion for what we do, so they enable us to take a slightly longer-term look. It’s a gift not to work for a publicly traded company in a creative business, because creativity doesn’t work on a quarter-by-quarter basis. I don’t take that for granted. We invest in authors and the books themselves. We believe we have a personal touch in how we do it, and that creates an atmosphere where we think we can have success. Creating an atmosphere where creativity can thrive is my biggest job.
David (20:45–20:46):
Tell me about that.
Jon Yaged (20:46–20:52):
My background is the business side. My grandfather was a professional musician, and I played music, so I have creativity.
David (20:52–20:53):
What kind of music did you play?
Jon Yaged (20:53–20:57):
I was a guitar guy, playing blues and classic rock.
David (20:57–20:58):
Who are your favorites?
Jon Yaged (20:58–21:28):
B.B. King and Albert King in terms of the straight blues guys. I love Stevie Ray Vaughan. But I’m also a big Pink Floyd fan. I was also a child of the late 80s and early 90s, so Nirvana, Pearl Jam, Jane’s Addiction, and Violent Femmes. It’s across the board.
I love jazz, too. My grandfather was a jazz guy, a swing guy, but I like that straight-ahead bop. Art Blakey and the Jazz Messengers and Wes Montgomery are some of my favorites.
David (21:28–21:31):
Real quick, what’s the best jazz club in New York City?
Jon Yaged (21:31–21:38):
It’s so hard. I still love the Village Vanguard.
David (21:38–21:39):
Oh, yeah.
Jon Yaged (21:39–22:27):
It’s more about history and vibe. I’m supposed to go out with someone tomorrow night who’s only been in New York for a short time, and she wants to see music. My immediate reaction was the Vanguard.
It’s the quintessential jazz club experience. It hasn’t become just a venue like many other places. You can still go in, especially during the week, and almost anytime you want to stay for a late set, just buy another drink.
That’s the way I grew up with my grandfather: you’re here, you’re listening to music, and you just keep listening. If you need to buy another drink, you buy another drink. It’s not, “Come in, take your seat, be quiet, and leave in 45 minutes.” Many places have become that. Jazz is interactive, so you have to make sure you have that interactive experience. Creating the environment where that can thrive is important.
David (22:27–22:28):
Yeah.
Jon Yaged (22:28–23:08):
I try to create a space where the editors can be their best, the designers can be their best, and the marketers can be their best. Everyone focuses on the book and the creativity, and how to take it to the next level.
Authors feel this, and in conversations with them, they say, “Thanks for giving me the time to do this,” or “You created a really welcoming space.” It matters.
When I started over 15 years ago, I told our owner I was going to create an environment where creativity could thrive. He gave me a look, but he understood. We had some great success, so it worked out.
David (23:08–23:14):
What companies have done a really good job of creating that environment, and what specifically have you taken from them?
Jon Yaged (23:15–23:28):
I think it changes over time. I’d like to believe Macmillan has had it for a very long time, and not just because of me. I think that’s been an ethos that we’ve had in the company for a while. I worked at Disney for a little bit of time, back when I did a show.
David (23:28–23:29):
You were in their publishing department?
Jon Yaged (23:29–24:10):
I was in their publishing division, which was part of consumer products, and I did a little bit of both. To go to Pixar’s campus and watch how they approach creativity was inspiring. It was all about the movie, the story, and the animators.
You’d sit there and watch John Lasseter talk about whatever he was doing, and you could see it was 100% about what would end up on the screen. They got it right.
I also think about my grandfather when I watched him on stage. He could be a tough taskmaster; he wanted perfection. Perfection wasn’t getting every note right; it was getting the vibe right. How do you capture that in the setting of a publishing company? That’s what I try to do.
David (24:11–25:14):
It’s funny you talk about the note versus the vibe. Last night I saw Wicked. At the end of the play, after the bows, a guy got up with a card. It was kids’ night, where a kid could get in free with a full-paying adult.
This wasn’t quite the vibe I was going for. But then he said, “When I was a kid, I came here on kids’ night and sat in row 27. At intermission, I told my mom I wanted to be on stage one day.” My heart was so warm; I was almost moved to tears. It was so sincere and endearing.
He then looked at his paper to say exactly what he needed to say, and it completely killed the vibe. I turned to my friend and said, “That is a great example of how speaking from the heart, even imperfectly, is so much better than speaking from the head and being perfect.”
Jon Yaged (25:15–25:22):
One of the biggest compliments I ever get is, “You’re incredibly authentic. We can tell that you’re being genuine when you talk, even if we don’t—”
David (25:22–25:23):
“—like what you’re saying.”
Jon Yaged (25:24–26:00):
That’s important to me because I can only be myself. I try to do it with kindness, caring, and listening to what people need. Being able to bring that is not something everyone does.
In a creative industry, it’s quintessential to making people feel good about where they are. In publishing, there’s an altruistic nature to what we’re doing. It’s never bad to read.
If we can create an environment where people can bring everything they have to the business and do it in a way where they’re not scared of making a wrong call, we’re going to win in the long run.
David (26:00–28:12):
So, we’re talking about how you get your writing done, and if you’re thinking about work and how you can be more productive there, I recommend a tool called Basecamp. Basecamp is a project management tool. It’s different from the other ones, which are loud, noisy, and cluttered, with feature bloat.
Basecamp keeps things simple so you can focus on what matters, which is getting the work done. For us, Basecamp is a place where we can track what we’re doing with How I Write, when episodes are being recorded, where we’re recording them, the publishing day, and all those sorts of things in one place for our entire team to look at.
I had Basecamp founder Jason Fried on the show, and I noticed that he really cares about writing. He cares about manifestos, great copy, and telling a great story. He and his co-founder have written five books, and they bring the same care and attention to detail to their books as they do their software.
If you’re thinking about work and asking, “How can I be more productive? How can I make my team more cohesive?” I recommend Basecamp.
All right, back to the episode. I’ve seen formula creep into the publishing industry in two places, and I’m going to be deliberately uncharitable just to be provocative. The first is fiction. When you walk into a bookstore, it seems like all the covers are exactly the same. You could look at 50 images, and they all look the same. It feels like the Crazy Rich Asians look was just copied and pasted onto 74,000 different titles.
I hope AI changes this, but there was this formula in nonfiction: start with the story, make your point, share a few anecdotes, and just do that over and over. It was so monotonous, so laborious. It felt like the charge of great writing that used to be there—like the crazy independent writer we’re talking about, Hunter S. Thompson, with Fear and Loathing. You’ve never read writing like this. It felt like maybe there wasn’t room for that. Maybe writers were too scared. What was going on?
Jon Yaged (28:12–29:33):
Well, I don’t think this is specific to the publishing industry. As long as I can remember, when things work, people want more of it. So if something works, let’s try to do the same thing. Whenever I go somewhere, everything looks the same except for the ones that don’t. Those that don’t are a lot of times people taking the risk, and that might become the trend of tomorrow.
I remember back in the day when I was at Disney, one of our designers created this cover look that had an oversized image of a person’s face wearing glasses and a reflection in the glasses that became de rigueur after that for a while. She was the first to do it, so you need some courage. You need to strengthen your belief in the book and in your marketing positioning.
But we’re like everything else. People chase what’s working for a while, and then you get pressure to do it, too. You might get a call saying, “Well, if you make that cover look a little bit more like this other one, I’ll take it. Instead of taking 3,000, I’ll take 10,000.” So that becomes part of the calculus, and you as a publisher have to say, “Look, I believe this is the cover that’s going to work. And if they only want three, they’ll come back for the other seven later because the book’s going to work.”
Or you say, “No, this is one where I got to get the books in the store and see what happens.” You’re not always right with the call you make, but it happens. Look at what you see in Hollywood. You’re seeing a lot of things that are just some other version of what you saw before, too. It happens in all creative businesses.
David (29:33–29:47):
Yeah. It’s kind of a weird question to ask, but I think it’s an important one. How much should writers be pushing back on you guys? I feel like a lot of writers are scared because you’re the big publisher. What would you tell them?
Jon Yaged (29:47–31:10):
Pushing back depends on what you know. It’s a partnership, and I think we approach it that way with many of our books. So we need the author to be there, not just to write the book, but to help promote it. It’s more important now than it’s ever been.
Some authors are saying, “Hey, come on, you got to do some more.” Everyone wants more. We want more, they want more. We have to find that right balance. We should have a conversation and make sure that there is healthy pushback.
Healthy pushback is when an author says, “Hey, here’s what I’m thinking about the jacket.” You want that truthful back-and-forth in the editing process. I was just speaking to one of our editors yesterday about a major author we have on our list and the conversation they’re having about editing their next book. I love the fact that the author trusts her enough to give her the unvarnished truth.
Some authors don’t want to hear it. Other people are like, “Give it to me, give it to me.” I’m living vicariously by hearing their editorial conversations, and it’s really great.
Find that balance. Have an open conversation of what your expectations are, what you need from the publisher, and the publisher should have the same kind of open conversation about what we need from them. You can try to find that balance, but it doesn’t always work. Someone always feels like maybe they should have done more. Maybe we feel like the author’s being a little unreasonable. It happens, but if you have that open dialogue, it gives you the best chance of everyone feeling good about the process and the book having the best success.
David (31:11–31:31):
Right. Talk to me about the economics of a book and who gets the different cuts at different levels and how that changes over time, going from hardback to paperback to ebook to audible. Then also, as a book becomes more successful...
Jon Yaged (31:31–31:42):
The biggest cut goes to the retailer. So if it’s a $30 book, more than $15 of that is going to go to the retailer.
David (31:42–31:43):
So that’s a Barnes and Noble.
Jon Yaged (31:43–33:41):
That’s an Amazon. Generally speaking, we’re getting less than 50 cents for every dollar cover price as a starting point. That’s the revenue that comes to us as a starting point. I think I could say that without getting myself in trouble because it’s broad enough.
Then the author is going to get a royalty, and the royalty is based on the $30, generally speaking, not the money that we get from the sale. That dynamic changes based on the cover price. But the day a book comes out, an author’s going to get on a hardcover anywhere usually from 10 to 15% of the cover price. So you’re talking on a $30 book somewhere between $3 and $4.50 for every copy that’s sold. This is separate from the advance that we’ve already paid them.
We usually give the authors upfront money that’s considered an advance against the royalties that we will pay them over time. If we sell enough books to earn out that royalty, we give them more money. If not, they keep the advance and we eat that cost.
So the author cost is the single biggest charge. Then you have the printing costs, which will be the second biggest charge. Depending on the length of the book, a cookbook costs more to make than a novel. There’ll be different dynamics there, and that will probably be the next biggest cost.
Then you have freight. You have to get the books from the printer to the warehouse, from our warehouse to the booksellers. That’s another cost. Then you have marketing, distribution, and freight marketing. Probably around the same. Depending on the book, maybe marketing will be a little bit less.
Those are ballpark figures, and that’s before any of our overhead. That’s before we pay the editors and the designers. That’s before we pay for our facilities. I don’t know. I can go into some more detail if you want. It’s hard to...
David (33:41–33:43):
I want all the detail. This is fascinating.
Jon Yaged (33:43–34:30):
Having worked in the music industry and the film industry, I can say there is no more creator-friendly business than the publishing industry. Authors get a bigger percentage of total revenue than in any other creative output, working with a traditional outlet. Self-publishing or hybrid situations will differ.
In traditional forms of media and entertainment, nothing is fairer. The creator gets a bigger cut in publishing. That’s the starting point. Also, the contracts are pretty clear about what you’re going to end up getting. In the entertainment industry, there are these crazy stories, and...
David (34:30–34:31):
They call it Hollywood accounting.
Jon Yaged (34:31–34:51):
Right. We don’t have that. Maybe we have a small amount, but it’s very straightforward. That’s the biggest takeaway for me, and it makes me feel good because I started my entertainment career after doing concert stuff as a lawyer representing talent.
David (34:51–34:51):
Right.
Jon Yaged (34:51–35:26):
In the publishing world, we’re paying people a fair amount of money. The biggest percentage of the revenue a publisher collects goes to pay the author.
Over time, backlist books are more profitable because you maybe need to put less marketing into them. Maybe printing the paperback printing costs is less than a hardcover printing cost. You do sell them for a little bit less. Those are some of the big broad strokes of how it goes.
David (35:26–35:43):
How does all that change per market? I sell in America, then the UK, France, Canada, India, Vietnam, Taiwan, whatever. How do the royalties change internationally?
Jon Yaged (35:43–36:41):
Different markets have a similar royalty structure to us. In many European markets, you might have a slightly lower royalty scale than in the US. It depends on who’s selling the rights.
As a publisher in the US, we often just get North American rights, the ability to publish the books in North America, and maybe some open market territories, meaning maybe we can go into Europe or other places around the world, in English.
Sometimes we get world rights, which means we can sell translation rights around the world. If we do that, the bulk of the share of what we collect goes to the author after the advance is earned out.
It’s not uncommon for an author to get 75-plus percent of any money we receive from licensing a book for foreign language translation. Fifty percent is maybe for a newbie author, but a 75% share to an author for a foreign rights translation license is fairly common.
David (36:42–36:55):
How do you think about sequels? I just had Lee Child on the show. I think he’s written 25 or 26 Jack Reacher books. How do the economics of sequels work out?
Jon Yaged (36:56–37:58):
If people want sequels, you should write sequels. There are different kinds of publishing for different kinds of audiences, and it depends on what they’re paying the author for the book.
I’ve heard so many stories about big authors saying, “I don’t sell what I used to. I’ll take a little bit less on this one.” That’s great. Then when the books take off a little bit, they’ll say, “Maybe you should give me a little bit of a kicker this time around.”
That kind of partnership does not exist in many other forms of media. On sequels, profitability boils down to if the market is still there and how much the advance is going to be, determining whether the book is successful.
We take smaller margins on some of those sequels because we know they’re more guaranteed. We say, “This book has a built-in audience. The authors developed that. We’ve helped the author do it. We’ll give you a couple more bucks even though it means we might not make as much, or we’ll make the same amount even though we’re selling more copies.” It becomes a calculus in your business calculation.
David (37:59–38:03):
How much of your business is back catalog versus new books?
Jon Yaged (38:03–38:08):
We’re about half back catalog. That’s probably low in the industry and definitely low on the kids’ side.
David (38:09–38:11):
Wow. So back catalog is really just huge.
Jon Yaged (38:11–38:23):
When we say back catalog, we’re talking about everything that’s basically over a year old. If we publish a book in 2025, that’s considered backlist right now.
David (38:24–38:29):
Has there been more M&A in back catalog over the years, or less?
Jon Yaged (38:29–38:59):
When you talk about consolidation earlier, a big driving factor is backlist because, yes, you have books under contract, and you have to believe those books are going to work. But you’re acquiring that 50-plus percent of the list that you think is tried and true and that’s going to repeat. You’re almost like buying an annuity.
Whenever you’re doing an acquisition, it’s often driven by the backlist or talent you want to bring into the company, either author or editor.
David (38:59–39:10):
Let’s define back catalog as 10 years or older for the purposes of this right here, right now. How is marketing different for 10 years and older back catalog versus a new book?
Jon Yaged (39:12–39:56):
Publicity is completely different. I’m a big believer in publicity to sell books because it’s a form of word of mouth, which is what I talked about earlier. That trusted source might be coming from a talk show or something that is creating buzz. So publicity for front list, I think, is the single biggest thing you can do to get the word out.
Front list is the new books. A book that’s 10 years old, you’re not getting it on a morning show, except in rare instances like a news event. So it’s really how do you raise the visibility of that book? How do you take that 10 year old book and make it discoverable today? This is where technology can help us.
David (39:57–39:58):
Movie TV.
Jon Yaged (39:58–40:40):
Movie TV is a publicity moment, that’s a completely different thing. Last year we had the 10th anniversary of “The Nightingale,” one of Kristin Hannah’s books. We did an anniversary edition, created a moment, and it worked.
People loved the special edition, and we made a really beautiful copy. Kristin is doing so well, so it was a great way to celebrate her and that book.
Anniversaries are a great way to create buzz, but outside of that, it’s how do you tweak that metadata to make it more relevant so that in search, when people are searching for a topic, it rises up? That’s how you would do it on a much older backlist title.
David (40:40–40:51):
If you have a book like “Antifragile” by Nassim Taleb or “The Black Swan,” every time there’s a Black Swan event, you could basically tweak the metadata so that something happens there.
Jon Yaged (40:51–40:51):
Right.
David (40:53–40:58):
You spent many years working in the publishing industry for kids. How is that market different?
Jon Yaged (40:59–41:16):
It’s a lot more complicated. For starters, four color books make up a big portion of the list. Picture books are expensive. There’s a different process. There are often two creators: an author and an illustrator, although sometimes you have the same person doing both.
David (41:16–41:19):
When you say expensive, you mean expensive for you, the publisher?
Jon Yaged (41:19–41:25):
Yes, the print. A 32 page picture book costs as much to print as a 400 page novel.
David (41:25–41:25):
Wow.
Jon Yaged (41:25–41:32):
And you charge $30 for the adult novel, but $19.99 or $18.99 for the picture book.
David (41:32–41:34):
How are you making up for that margin?
Jon Yaged (41:34–41:34):
You don’t.
David (41:35–41:36):
Huh?
Jon Yaged (41:36–41:44):
Kids books have a smaller margin, and you hope that over time you sell a lot of copies for the dollars to work.
David (41:44–41:48):
How is the cut distributed between authors and illustrators for kids books?
Jon Yaged (41:48–41:52):
Almost always 50/50.
David (41:52–41:52):
Oh, really?
Jon Yaged (41:52–41:52):
Yeah.
David (41:53–41:59):
The other thing I gathered is that kids books don’t need to sell quite as fast.
Jon Yaged (42:00–42:21):
They tend to backlist. There are new kids every year. Books that work tend to live longer in the children’s space.
It’s still not easy, but you generally can get a longer life out of a kid’s book as opposed to a celebrity memoir. If it doesn’t work in the first six months, it’s probably never going to work.
David (42:21–42:45):
It’s funny that you talk about the back catalog. I was thinking about what my kids read in terms of nonfiction or whatnot. That’s their choice. But they are reading “Where the Wild Things Are” and “Babar,” and this book about Charles Lindbergh. Maybe the reason that the back catalog is so good is because parents really want to share those experiences with kids.
Jon Yaged (42:45–43:48):
I think so. There’s been a conversation for a long time about when ebooks will take over the kids book space. We had a moment a decade or so ago where ebooks were getting some traction. We still sell kids ebooks, but it’s small compared to physical books.
There’s still something about cuddling up in bed with a book as opposed to a device. I would have thought that it might have changed a little bit more by now, but it hasn’t.
My daughter is going to be 19 this year, and she’s not the best sample because both me and her mom are in publishing, so she had books in and around her life. Her friends, people her age, still have the same connection to physical books.
They’re not embracing ebooks. They’ll read stuff digitally, they’ll read on their phone all the time, but there’s still a connection to the physical book. If she ever has kids, I think she’s going to be whipping out one of the classics and reading it in physical form next to her kid in bed as opposed to on the phone.
David (43:48–43:49):
Oh, 100%.
Jon Yaged (43:49–43:50):
I agree.
David (43:50–44:21):
I don’t have kids, but I stayed at a friend’s house in Austin on Saturday, and it was the end of the night. They do prayers every night. So there’s all these books with prayers and songs and whatnot.
Their daughter, Cece, is two and a half years old, and she gets to pick. She has so much fun flipping through the book and looking for something.
That moment is both so much more intimate, personable, and friendly. It’s more intuitive for her flipping through the books rather than going on a screen, which would ruin the entire experience.
Jon Yaged (44:22–44:43):
I love picture books. It was like a dirty little secret of mine because when I started at Macmillan, it was a tough market. They’ve come back, and they’re still great. I absolutely adore picture books. When I got the job at Macmillan running the kids division, my buddies from college said, “Oh, man, you get to do what you always liked for a living.”
David (44:43–44:44):
What do you love about them?
Jon Yaged (44:45–45:35):
There are so many things. First of all, they’re beautiful. They’re physically beautiful, but the storytelling is incredibly complex. Any kind of illustrated book really has three types of storytelling. You have the words, you have the images, and then you have the space between.
It’s almost like you have to be a director when you’re seeing what’s coming next. All the illustrators, all the picture book people, will talk about the mystery of the page turn. What happens when you see what’s on the right side, which is not the next page? You’re flipping the book. You see the right side of the page first, but that story continues on the left.
How do you make that tie together? It’s truly magic. Then there’s the space between. You have to figure out, “Oh, they just showed me this picture. Now the story’s moving on. What happened to get there?” Your brain is processing that, and the kid’s brain is processing it. I just absolutely adore it.
David (45:35–45:36):
What are your favorites?
Jon Yaged (45:37–45:39):
You mentioned one: Where the Wild Things Are.
David (45:39–45:40):
Yeah, right.
Jon Yaged (45:40–46:23):
It’s hard. We don’t publish it, so it’s hard for me to say it, but it’s a classic. I was lucky enough to publish Maurice Sendak when I was at Disney. We did the Brundibar book with Maurice Sendak and Tony Kushner, so that was really great.
When I started at Macmillan, I was very fortunate that we published the Caldecott winner. I started weeks late. I started like the first working day in January, and two weeks later, they announced the ALA honors, and we won for Sick Day for Amos McGee.
What’s so great about that story is it was a husband and wife team that did the book. He wrote it, she illustrated. Phil was the... It’s Phil and Erin Stead, and Phil is also an illustrator. He basically wrote this book for his wife to illustrate.
David (46:23–46:23):
Wow.
Jon Yaged (46:23–46:36):
It was her first book, and it won the Caldecott, the highest honor we have for illustrated books. It is just a marvelous book. That’s another one of my favorites. We can go on and on, but let’s just stick with those two.
David (46:36–46:37):
Man, you love children’s books.
Jon Yaged (46:37–46:46):
Yeah, I know. It’s interesting. It’s a complex business, and I’m the third CEO in a row at Macmillan that was a children’s book publisher at one point in their career.
David (46:46–46:54):
What do you think children’s book authors understand about the human psyche that novelists, nonfiction, more prose style writers might not?
Jon Yaged (46:54–47:30):
I don’t think they understand anything more. I think that they get to be the inner child more, which we all want to do. Adult people in any form of adult media don’t always get to embrace their inner child, but children’s creators do.
I think the one commonality that every children’s creator has is they treat the kids with respect. They never talk down to the kid. They know how smart kids are. They know how insightful and empathetic kids are, and they play to that. They help kids celebrate that.
David (47:30–48:09):
Why do you think Waterstones has remained so successful relative to Borders, Barnes and Noble? I go to London, and Waterstones is everywhere, and Waterstones rocks. The Piccadilly Waterstones is four or five stories.
Maybe this isn’t fair, but I think it’s true. I’m going to be honest. I never really enjoy going to Barnes and Noble. I don’t go in there and have a great experience. It feels very mass market. I rarely find super interesting books that I wouldn’t have found otherwise. I walk into Waterstones, and that is Disneyland for books. It is fantastic.
Jon Yaged (48:09–48:12):
This might be a spoiler, but the same guy runs both stores.
David (48:12–48:13):
No way.
Jon Yaged (48:14–48:14):
Yep.
David (48:14–48:15):
Okay.
Jon Yaged (48:15–48:19):
James Daunt is the CEO of both companies.
David (48:19–48:21):
Wait, is that Daunt from Daunt Books?
Jon Yaged (48:21–48:22):
Yep.
David (48:22–48:25):
I love Daunt Books. The Daunt Books in Marylebone is one of my favorite bookstores in the world.
Jon Yaged (48:25–48:26):
That’s a great store.
David (48:27–48:35):
Okay, then I’m doubling down on my question. My question got 10x more interesting. How can the same guy run both, and Waterstones is so much better than Barnes?
Jon Yaged (48:35–48:40):
I think you have to bring him on the show and ask him, because I think I know what he’s going to say, but there’s no way I’m going to give you his answer.
David (48:42–49:18):
Okay, well, here’s another international question. Why is it that when I look at American books, they’re so loud? They’re so blunt, almost. It’s like punching you in the face. Business really dominates.
I go to Montreal, I go to Paris. The books tend to be way less artistic. They tend to be gray, black. They’re not screaming for your attention. Then I go to England, and England has these very beautiful, artistic versions of books that we don’t quite have in America to the same degree. What’s going on with that?
Jon Yaged (49:22–50:18):
Particularly with French and French based companies, there’s always been incredible amount of care and interest in the art of the book and the art of bookmaking. They have an economics that works for them. I can’t remember if they still have price stability at books, but they used to. That helped keep prices up and kept some margins higher for publishers, so they could maybe invest more. I don’t know if they still have that or not, but historically that was part of the reason.
I do think there are different aesthetics. You go to the UK, and the covers that they put on our books sometimes, I can’t believe that’s going to work. But it works for their market. It absolutely does.
I’m not going to be so arrogant and say, “Well, you don’t know what you’re doing. You got to use my jacket.” That’s part of what the publisher does. The publisher knows their market. How do they make that book work for their market? So it’s different sensibilities.
I’ve heard people say Americans are loud and in your face. I don’t know, is it true or not?
David (50:19–50:57):
It might be more true than I would like to admit. Tell me about AI. It seems like the party line is AI is bad; don’t use it. Humans are always going to be better than AI. There’s something special about the human in the publishing loop.
If that’s true, then why is there so much fear around it? Those two things don’t quite logically work. How do you respond to that?
Jon Yaged (50:58–52:12):
There are so many things going on. First of all, people get scared of anything new. It’s human nature. I think it’s even more so in publishing. We tend to take a wait-and-see approach, which has happened with everything. I think that’s what’s happening with AI right now.
We talked about outliers earlier. If AI works on algorithms and predicting the next word, that’s what chatbots do. Maybe with further advances, it could change, but the beauty comes from the outliers, which is a very human thing.
I was a Star Trek fan. There was an episode where Data and Jordi were talking, and Jordi was trying to explain to Data the expression, “a watched pot never boils.” Data said whenever he watched it at 212 degrees, it boiled in one minute, 33 seconds every time. Jordi said, “Turn off your internal carometer.” I think that human part will continue in books.
Does that mean we can’t benefit from AI? Absolutely not. One thing that editors hate doing, especially the junior folks, is writing tip sheets.
David (52:12–52:14):
Writing tip sheets?
Jon Yaged (52:14–54:40):
It’s a summary of the author, the book’s general specs, the author’s demographic background, and a quick summary of the book. It’s what we need to populate our database with the book information and what the salespeople get to sell the book. It also has a BISEC on it, which is a code that we use to describe genre and subgenre. It’s something used throughout the industry.
BISEC is just hundreds of codes. You’ll have one code that’ll be like “romance,” and you’ll get “gay paranormal romance” as one subcategory or “realistic romance” as another category. We have numbers assigned to help catalog the books and identify the genres.
Back to AI. The first draft of the tip sheet could be created by AI and then fine-tuned by a human. Also, metadata is another thing. When we put a book up online to sell, there’s a bunch of keywords and information we use to try to raise it up in algorithms. AI might be better at that than us. It doesn’t remove the human element, but it gives you a good first draft, maybe even a good second draft.
Have AI regularly monitor what’s working. The keywords that work today might not work a year from now. Back to the back catalog: Maybe AI could tweak those keywords so the book can get more discoverability down the road.
These are all things we’re not doing now. It’s not going to take anyone’s job away. People think it’s going to take my job away. There’s a better chance you’ll lose your job to someone who understands AI than to AI because it’s just another tool.
We don’t use typewriters anymore; we use word processors. AI could be like that. At its worst, it could be bad, but almost any innovation at its worst could be bad.
I’m more of an optimist than I tend to admit. I think this will be a tool that can empower us to spend more time on the human aspects, the strategic aspects, the fun aspects of what we do. That’s good.
David (54:40–54:45):
Let me give you a thought experiment, and I want to hear your response from three different sides of who you are.
Jon Yaged (54:45–54:46):
Okay.
David (54:46–55:20):
The creative, the business guy, and the lawyer. Here I am. I’m giving you a book that is fantastic, a top 1% book. You ask if I used AI to write it. I say AI wrote the first draft. I went in after and followed what AI said. I directed AI to do this, but AI’s hands are all over it. I cited Gemini Claude ChatGPT as my co-writer. What do you say?
Jon Yaged (55:20–55:23):
Oh, my God. This is the hardest question I think I’ve been asked.
David (55:25–55:29):
Creative person, business person, lawyer; I want to hear from all three.
Jon Yaged (55:29–56:03):
As a creative person, I’d have mixed feelings. Part of me might think you cheated. If you’re citing AI as a co-author, that’s a lot. Is this you, or is this from someone else?
The business person and the legal would be very similar because our copyright law does not protect things created by AI.
David (56:04–56:07):
If it’s been created by AI, you do not own it at Macmillan?
Jon Yaged (56:07–56:23):
No one can own it. It’s not subject to copyright protection. As a businessman, am I going to invest in something with zero barrier to entry? If I publish that book tomorrow and it’s deemed not to be covered by copyright, everyone else could publish a different version of that book.
David (56:23–56:33):
At what level is it not copied by copyright? Like, if on page 297, I redid the third word and sent 21 on that versus this was written by AI ChatGPT.
Jon Yaged (56:33–56:55):
There’s no clear line for this. That’s the problem. There’s a test—I honestly can’t remember the exact phrase—but it’s along the lines of “substantially created by a human.” Copyright only protects works that meet that criteria.
I think it’s “substantially created by a human,” but don’t quote me on it. I’d have to get the exact information. The point is, there’s a test, but it’s not a bright line.
David (56:56–57:05):
So, if I come in and work with you, do you have to look me in the eye and ask, “Did AI write this? How did you use AI?”
Jon Yaged (57:07–57:47):
In our contracts forever—and I don’t think this is different for most publishers or any publishing contract I’ve ever seen—the author makes a representation that the work is their sole creation. They also represent that they will identify any parts that aren’t.
Here’s a perfect example: Many books might have a song lyric or cite someone else’s book. Part of the editor’s job is to identify those, but really, it’s the author’s job to say, “Hey, I quoted so-and-so here,” and that goes for fiction as well.
This hasn’t changed. I’ve been working for publishing companies for the last 25 years, and in the entertainment business for the last 35. This is no different than it’s ever been.
David (57:47–58:07):
So, back to our thought experiment: I’m sitting down to write a book and want to use AI. What’s your advice? How should I be working with AI? Should I track all the AI I use? How do I do this ethically in a way that speaks to your creative side, business side, and legal side?
Jon Yaged (58:07–58:44):
I think it goes back to what we were just talking about. If you use it as a tool, a great example would be a research assistant. If you use AI as a research assistant—assuming you have permission to dump books into it, because that’s a whole other thing—you could query it.
You could say, “Okay, my theme is this,” or, “I’m trying to get documentation or annotate this thought.” AI could help you find things quicker than having to read through all those books again. I think that’s a fine use of AI, and it’s no different than being able to scan an e-book.
David (58:45–58:47):
I’d call that “Google on steroids.”
Jon Yaged (58:47–59:18):
That’s fair. For fiction, maybe it’s a thought partner. Maybe you say, “Here’s my manuscript. Give me your two cents on this character development.”
Maybe that’s a good example. I haven’t given this a ton of thought, but those are some ideas about how you could use AI as a tool.
David (59:19–59:33):
What keeps you up at night? What do you think about regarding the industry’s direction and the fault lines that could lead it one way or another?
Jon Yaged (59:33–59:38):
What’s going to be the next romance? What’s the next big thing?
David (59:38–59:38):
So it’s about content.
Jon Yaged (59:38–60:57):
Yes, it’s about content. If you had told me ten years ago that paranormal would be back, I would have been surprised. But it is, and it has a lot of romance and sex in it. So what’s old could be new again, and what’s that next thing going to be?
That’s always a question for the industry. You don’t always have to be first, but it helps, and you have to make sure you get there. If we weren’t doing romance at all, our business would look very different now. We happen to be very good at it.
There’s no question that we’re having more connection with data and information. We talked about data earlier, and we have limited access to it. I think that’s going to change more and more over time, and we have to get up to speed with how to use it and make it part of our business. Some folks out there are doing a bit more with it, and it makes a difference. So, that’s something that I think is going to happen next in publishing.
We talked about AI. Another place where it could be great for us is demand forecasting. We have to print these books before we sell a single copy, and if we get that number wrong, we eat that cost. Then those books get thrown away, which isn’t great for the environment. We’ve already started using AI for demand forecasting at Macmillan. Last year alone, we estimate we printed one million fewer copies based on our use of AI, and that saves a lot of trees.
David (60:57–60:58):
Wow!
Jon Yaged (60:58–60:59):
Yeah.
David (60:59–61:08):
Walk me through how a printing center works. It seems like books get magically printed.
Jon Yaged (61:08–61:10):
All of these stores bring them printed.
David (61:11–61:17):
Does Santa bring them every year? Give them to Barnes & Noble?
Jon Yaged (61:17–61:41):
Santa’s side hustle is bringing the books.
We edit the books, design them, and then they go to a printer. We have facilities all over the country that we use to print our books. We work with multiple companies. We also print some in Asia. A lot of the four-color stuff happens in Asia and some in Europe—the picture books, the cookbooks.
David (61:41–61:43):
When you say “four-color,” does that mean black, red, green, and blue?
Jon Yaged (61:43–61:47):
Exactly, as opposed to a novel, which is one color.
David (61:47–61:49):
Ah, now I get what you mean. Okay.
Jon Yaged (61:49–62:52):
We print those books in various facilities with whom we’ve had relationships for years. In many cases, they get shipped to our warehouse. We have one warehouse in the U.S. in Gordonsville, Virginia, and we’ve had that warehouse for over three decades.
Then those books go from there to retailers around the country, and around the world. Many retailers choose to use an intermediary to help organize their books, their book section, and get books packaged and delivered to them in a way that makes it easier for them to fill their shelves.
Readerlink plays that role for many mid-sized and regional mass market stores, and they do it for Target and Walmart. Ingram is another distributor; they’ve historically been selling books to independents, but are also starting now to sell to Walmart as well. We ship tractor trailer loads of books to these folks, and then they get them out to the retailer themselves. Independents will use USPS or UPS, or some other form of packaging.
David (62:53–62:55):
Who should be self-publishing?
Jon Yaged (62:56–63:36):
That’s a really good question. The easy answer is if you can’t get a publishing deal, you should try self-publishing. I think there’s no easy answer, though. Some people should start out self-publishing, and when they have success, it might make sense for them to come to us. It might not make sense for them ever to come to us. It just depends.
More often than not, self-published folks have a burden to doing self-publishing, and none of them really get the print side systematic. It’s hard getting print books into stores. It’s not an easy thing. Ebooks and maybe even audio they could do on their own.
David (63:36–63:40):
Because self-publishing as a percentage is way more ebooks than physical, right?
Jon Yaged (63:40–63:57):
It’s almost hardly any physical. I was just looking at numbers for a super successful self-published author; well over 95% are ebooks. For us, on a best-selling fiction, maybe 30% will be ebooks.
David (63:58–64:12):
So then the pitch, if I’m here and I’m a super boneheaded crank, like I gotta go self-publish, and you’re like okay, just hear me out. The reason to work with a more traditional publisher is there are a million reasons.
Jon Yaged (64:12–64:34):
For starters, we’re going to give you an advance, so a lot of people can’t give up their day job. They don’t have the ability to work at night. We’re going to help finance you; we’re going to give you money upfront so you can spend some time to get that book done.
We have expertise at printing, marketing, distribution, and editing. And I think you know from listening to your show, the editing process matters.
David (64:34–64:35):
Yeah.
Jon Yaged (64:35–64:50):
So you don’t get that on your own. Now, could you go out and hire a freelance editor? Sure. We have some pretty good ones, but there are some pretty good freelance ones out there too. All of that becomes part of a package that we’re really good at. When you add all that up, I think it’s a lot of value.
David (64:52–65:37):
Tell me about the marketing and how what matters in marketing has changed. There’s a book about David Foster Wallace that I really love, and it became a movie called The End of the Tour. The whole premise of the book is that he’s going to give different speaking talks in bookstores around the country, then going on radio shows.
I have a sneaking suspicion that’s not the best way to do marketing anymore. James Clear, when he published Atomic Habits, went on like 78,000 podcasts in the first week, recorded a bunch, had the embargo boom. I’m not sure that’s the best thing to do anymore. What guidance do you have for authors doing marketing, and how does it change based on their genre?
Jon Yaged (65:38–66:03):
I’m not sure it changes based on genre. My approach to marketing, and I put publicity and marketing in the same bundle, is you have to identify the community you’re trying to reach. Then you identify the connectors, the evangelists within that community, and then you empower them to spread the gospel. That’s that word of mouth.
David (66:03–66:04):
The 12 apostles, right?
Jon Yaged (66:05–66:32):
That’s how every campaign needs to start. There’s also a great line: the best way to market a book is to read it. The book will also tell you what the hooks are, what the things are that will be interesting to that community, and then you have to maximize that.
The tactics are going to be different for every single book that you do. If you approach it from who’s the audience and what’s the best way to reach them, and really reach the people in that community that can help spread the word for you, that’s the way to get the most out of your approach.
David (66:33–66:35):
Who do you think has done a good job of this recently?
Jon Yaged (66:35–67:12):
We’ve done a great job at St. Martin’s Press and at Tor. Our entire company thinks this way about marketing at this point. I named those two because they’re two of our biggest imprints, but it’s happening across our entire organization. This is how people approach marketing.
We’re better on some books than we are at others, and we get it right sometimes, and sometimes we’re not quite as good. The key now with marketing is quickly changing when you’re doing something that’s not working. We get enough feedback that we can say, okay, that ad campaign didn’t work, or maybe that channel we’re targeting isn’t delivering. Let’s pull off that and spend our time somewhere else.
David (67:12–67:30):
Tell me about marketing from your side of the house, which is, as I see it, you have a portfolio of books, presumably you have a budget, a marketing budget. Then what you need to do is ramp up and down what books you’re going to prioritize based on that budget. Is that right?
Jon Yaged (67:31–68:05):
Pretty much. We set a budget, and the publishers set the budget themselves. We give each publisher a marketing budget based on their projected revenue for the year, and they decide where to spend it.
I think the general rule, and one of my guiding principles, is that marketing is about one thing: ROI. So where do you spend the extra time? I’m using “time” here because money matters incredibly, but we can never get time back. If we overspend in one place, maybe I could find another thousand bucks to give them. I can’t get that day back.
David (68:05–68:05):
Right.
Jon Yaged (68:05–68:15):
If we spend a disproportionate amount of time, where do we get a disproportionately good result? That’s how we think about the exercise.
David (68:16–68:41):
You have the private ownership in Germany with two owners. Presumably, there’s a demand for financial return, but also demand for cultural cachet and cultural impact. How do you think about the trade-off between the tangible, quantifiable financial part of your job versus the intangible, unquantifiable cultural part?
Jon Yaged (68:41–69:51):
I don’t think about it as a trade-off; I just do it.
I was interviewing for my job to run the kids’ division fifteen and a half years ago. I asked John Sargent, who was going to be my boss, “I’ve worked in big, publicly traded companies and small, privately held companies. I’ve never worked in a really big, privately held company like Holtzbrinck. How do you measure success?”
He said, “I’ll give you the answer they gave me when I was interviewing for my job: We have to make some money, but we never manage to the last nickel. We have to win some awards, get on some bestseller lists, and, most importantly, publish books that make a difference.” The company has lived up to that every day that I’ve been there.
That is part of our DNA. That’s why there are people at Macmillan for a long time, and we embody this. We need a return, but it has to be a reasonable return. They’re not looking to squeeze every drop of juice out of the orange. We have to win some prizes. Everyone knows this and feels it; it’s part of our DNA at this point at the company. And the newbies pick it up real quick.
David (69:52–69:53):
What do you do all day?
Jon Yaged (69:53–69:57):
I just put out fires. Really.
David (69:57–69:58):
Is your job pretty reactive?
Jon Yaged (69:58–70:18):
It’s more reactive than I would like. There’s always something coming up. Part of it is reactive because people want me to be a sounding board, and I wouldn’t change that for a second. I like that.
A lot of it is reactive, but we’re setting the strategy. We’re saying, “Here are the things we want to accomplish this year. How are we going to go about doing it?” And we’re never Draconian about it.
David (70:18–70:19):
Like, what are the things you want to accomplish?
Jon Yaged (70:19–70:48):
I know I want to upgrade our tech. Our technology infrastructure is a little dated, so I want to update that. We built Gramble over in our Tor publishing group a couple of years ago to take advantage of romanticy. What else could we be doing? I know we under-index in business books. How can we grow the business side of the business?
Everyone is also asking, “What’s the next trend going to be?” I’m having conversations around this all the time.
David (70:49–70:51):
And how do you look for the next trend?
Jon Yaged (70:51–71:05):
I wish I knew the answer to that. You keep your ear to the ground. You have your editors out there saying, “Here’s what I’m seeing.” We’re looking at some things.
I think monitoring self-publishing has been a good way to maybe see what’s going to come next. So we’re doing all these things.
David (71:06–71:18):
We’re talking about the AI thing. I was going to see the Gatsby musical this week, so I watched both Gatsby movies, the Robert Redford one and the DiCaprio one.
Jon Yaged (71:18–71:22):
I’ve never seen the DiCaprio one. I’ve seen the Redford one many times.
David (71:22–72:07):
Yeah, it’s fun. There are strengths in both. Because of this, I was on the road and I was going to listen to the Great Gatsby audiobook. I’m in an Uber in Santa Monica, and I buy the audiobook, and it says, “This has been an automated Great Gatsby audiobook, edited for clarity.” I was like, “Forget that, I am so out.” I don’t care how good the audiobook telling is. I’m listening to a human being.
How do you think about AI audiobooks? How do you think about guest audiobooks in terms of a performer coming on versus the author, saying, “You, David, you have to read this one?”
Jon Yaged (72:08–73:29):
There are so many parts to that. For memoir, it’s really important when the author reads it. Is it required? No. But particularly with a celebrity memoir, to have someone else telling you that person’s story is a little rough. There have been examples of where it worked.
We published Jeremy Renner’s memoir last year, and hearing him tell the story about how he basically died on his driveway was incredibly powerful. I don’t know how he got through it. We did Matthew Perry’s memoir. Unfortunately, he passed, but he read that. What was neat about that? I read that book, and it sounded like he was sitting on the couch just telling me his story. And then, in the audiobook, he is.
That kind of stuff matters. We did Careless People last year, which was the Meta whistleblower. She’s not an actor, and her audiobook won awards. She did an incredible job reading it. The audio form is selling great, both physical and audio, but the audio is really holding on at a very high level. It was the first time she ever did an audiobook in her life, but it’s her story. She wanted to tell it, and it made a great difference.
That matters for fiction. I don’t think you need the author to read fiction. In fact, there’s a skill there, and you might want a professional narrator.
David (73:29–73:41):
I just watched a video of the guy who did the Lord of the Rings audiobook. He gets into all the different voices, and it’s mesmerizing to watch.
Jon Yaged (73:41–73:58):
It’s incredible. These audiobook narrators today are so different than what they were 20 years ago. They are incredible. I just listened to My Husband’s Wife, Alice Feeney’s new book that we published last month, and she’s having an incredible start to the year.
David (73:58–74:03):
My Husband’s Wife is the name of the book. Okay, I was confused.
Jon Yaged (74:03–75:17):
Yes, My Husband’s Wife is the name of the book, and it’s a good one. It’s a multi-voiced narration, so it’s part of the show.
Could there be a world where an AI narrator makes sense? I could see instances where that comes into play. I think someone just did a cheat on The Great Gatsby, which is public domain, to make it happen.
We had a great instance with a backlist title where we did it 10 or 15 years ago. The narrator’s voice wasn’t the same anymore, and the author wanted to redo a section of the book. So, we cloned the voice from the original recording using AI and did that section. We got some blowback for it, but I think it’s a great use of AI. We didn’t hide it.
It’s expensive to make audiobooks, and many books we publish never make it to audio. If we can come up with high-quality audio to get those books out in the world, that’s not a bad idea. And if they start taking off, maybe we’ll re-record them with a human. There are elements across the board for how you approach audio.
David (75:17–76:17):
I want to talk about literacy. There are two kinds. The first is how many people can read a book, which is important. I’m more interested in the other kind of literacy: the ability to read deeply, analyze a text, and focus.
I have a friend who’s a college professor, a humanities professor, and he said that he and his colleagues feel people have gotten less literate in that way.
I feel like I’ve become less literate over the last 10 years. I’ve become super distracted by smartphones. I’m not proud of it, but it’s true. What do you make of that culturally and for the future of the publishing industry? If people struggle with attention spans, maybe they won’t be buying books like they used to.
Jon Yaged (76:17–76:38):
It’s a very real fear, particularly with kids. You get kids in the third and fourth grade age when you want them to become independent readers and enjoy reading, and they’re saying they’re not reading at all and that they don’t like reading. Stereotypically, a lot of boys used to be that way, but now we’re getting it with girls, too.
David (76:38–76:38):
Wow.
Jon Yaged (76:39–77:22):
The data shows that both boys and girls are reading less and saying they like reading less. It’s worse for boys, but it’s happening with girls, too. That’s existential for many reasons, particularly in our publishing world. If kids don’t read today, the chance of them growing up into adult readers is less.
It has a huge impact on our society. There’s no better way to develop analytical skills, reasoning, and the ability to discern what’s going on in your life than reading. Research over the years has shown that kids who don’t read at grade level by third or fourth grade in the US are less successful in life than people who do.
David (77:22–77:41):
What’s going on? We’re seeing this decline of literacy on one side, but it seems like the book publishing industry is growing.
If I want to understand the publishing industry better, what books, journals, and publications should I look at? How does one understand what’s going on here?
Jon Yaged (77:41–78:19):
I used to get this question about the music industry and a little bit about film. I don’t think there’s a one-stop shop to get that answer. I think the best thing to do is immerse yourself in the culture and the trade. Look at Publisher’s Lunch and Publishers Weekly, see what people are talking about, and figure out a way to build yourself into the community.
Go to organizations. If you’re a writer, SCBWI is a great organization. The AAP and the Children’s Book Council have outreach occasionally. These are all ways you can bring yourself into the ecosystem.
David (78:20–78:33):
Do you think about your portfolio like venture capital, where most aren’t hits, but the ones that work are so successful they make up for all the others?
Jon Yaged (78:33–79:07):
Not exactly, but there’s truth to that. The big hits carry a lot of weight. We don’t build our list for that. We’re not spending huge money hoping one out of ten works. But the top books do carry a lot of weight.
The ecosystem isn’t such that the wins, even when they’re really big, aren’t still big enough to cover 90% losses if you’re paying the same amount for all those books. In the venture capital world, you could probably pull that off.
David (79:08–79:20):
Okay. I’ve gotten the vibe that it’s tough to make money in publishing. You’ve been in business forever. How do you make money? Where is that coming from?
Jon Yaged (79:20–79:25):
We have a catalog backlist that helps.
David (79:25–79:26):
That’s higher margins.
Jon Yaged (79:26–79:52):
That’s higher margins. We pick good books. We pick more winners than losers. We have a good track record at picking books that work. Other people might have a different history. It does help when you’re buying these back catalogs that you talked about earlier. You’re buying a bit of a hedge against risk.
David (79:53–79:55):
Is the market for back catalog pretty efficient?
Jon Yaged (79:56–79:57):
Which market?
David (79:58–80:07):
Just for back catalog novels, children’s books. It seems like there are only five or six buyers who would buy in terms of the big publishing houses.
Jon Yaged (80:07–80:09):
Oh, you mean in terms of acquiring a company.
David (80:09–80:17):
Yeah, exactly. Or buying the rights to Roald Dahl or Where the Wild Things Are. Do you feel like that’s an efficient market?
Jon Yaged (80:17–80:31):
It’s different because publishing deals in the US generally mean the publisher has the rights for the term of copyright. It’s a really long time, so these catalogs are not coming on the market that often.
David (80:31–80:32):
And that’s 100 years?
Jon Yaged (80:33–80:37):
It’s life of the author plus...Is it 100 years now? I can’t remember.
David (80:37–80:39):
Oh, life of the author plus time.
Jon Yaged (80:39–81:16):
Yes. When people look to buy something, they’re buying companies, and part of the calculation is what is their backlist delivering? Every once in a while, a catalog does come up. There are provisions in the copyright law that allow for a reversion of rights to the author. Then those catalogs come up and people go after them, and we’ve bought some.
Oftentimes they stay with the original publisher for technical reasons that make it easier. You’re buying companies; those catalogs don’t come on the market often. You don’t regularly see Maurice Sendak’s backlist, for example.
David (81:17–81:34):
All right, last question. Talk about Macmillan, how it’s differentiated in the industry, the kinds of authors that you’re looking for, and if I’m writing fiction, children’s books, or nonfiction, who do I call to get in the door?
Jon Yaged (81:34–81:38):
You have to get an agent to get in the door.
David (81:38–81:42):
Tell me about Macmillan, and I guess I have to get the agent.
Jon Yaged (81:42–82:18):
Right. A couple of things about Macmillan. We have eight publishing divisions, including our audio division, so seven divisions that are publishing new books day to day. Our audio division does do some audio originals as well. The competitive advantage for us is the personalities of all those imprints are very different. We might get two or three or sometimes even four or five of our companies competing for the same book, but the book will look really different depending on who gets it. Once the books get to a certain level, they have to come to me for approval for the advance.
David (82:19–82:20):
So that’s half a million or more.
Jon Yaged (82:20–85:05):
I’m not telling you what the number is, but it’s a number. Once they come to me, they’ll send me an email: “Here’s our pitch, John. This is why we think we want this many dollars for the book.”
Sometimes I get the email, and I’m like, “I thought this was the same book as the other one, but it sounds so different.” I’ll read through the emails, and it is the same book, but the pitch is so different. I think that’s a competitive advantage because I think that some of our competitors are a little bit more homogeneous in how they approach their publishing. So, with us, you have multiple stops that you can go to get a different point of view and a different take on your book.
The other thing that’s really interesting is they value the books very differently. Publisher A might think, “Oh, I want $300,000 for this book,” and someone else might say they want $500,000. I don’t go back and tell each other what they’re doing, but if someone asks me for 200 and someone else asks me for five, I’ll tell the person that asked for two, “You’re probably not going to get it at two.” They know that means that someone else is asking me for way more money. It’s never not happened that they say, “I don’t care. That’s what I think it’s worth.” I know that doesn’t happen in other places.
Our people have the strength of their convictions, they have a vision for the book, and I think that gives us a really great competitive advantage. When you come to Macmillan or your agent comes to Macmillan, they have different places to have different takes on the book, and it gives you multiple chances to get in our door.
When I think about Macmillan and what separates us, I talk about this with the company at large. At almost every company meeting, I say, “When people hear Macmillan, I want them to think, Macmillan, that’s the place to be.” What does that mean?
It means that if we’re the place to be, our authors like us, and they want to bring all their books to us, and their agents want to bring all their books to us. It means the retailers think that we’re good partners and they want to go out of their way to make our books work. It means that the vendors that we work with, the printers, will go out of their way for us. If we need that quick reprint, they’ll go out of their way to work with us to make that happen. It means our employees like working for us, and everyone else wishes they could work for us.
Now, when I’m going out to the London Book Fair in two weeks, or when I was in Frankfurt last October, people come up to me and say, “John, I hear Macmillan’s the place to be.” That’s what separates us.
The last thing is, I talk about this all the time and again in company meetings: I want people to have joy in their day. It’s important; we spend more time at work than we do doing anything else. If you have joy in your day, it makes the mundane less mundane. It makes the hard days less hard and makes the good days that much better.
Here’s a quick story about my grandfather. I’d go to see him play all the time. I’d go to clubs, and he’d come off the bandstand. Sometimes he’d say, “You see that drummer, John?” I’d say, “Yeah, Pop, I saw the drummer.” He goes, “You see him looking at his watch?” I said, “I saw him look at his watch.” He goes, “If you got to look at your watch and you’re playing music, you need another job.” If we could approximate some of that kind of love that my grandfather had for music into our day to day, we’re going to win.
David (85:06–85:08):
That was really cool. Thank you.
Jon Yaged (85:08–85:09):
Thank you.
