Penguin Buys Self-Publishing Platform Author Solutions for $116 Million

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By Jeremy Greenfield, Editorial Director, Digital Book World, @JDGsaid

In a bid to take a leading position in the growing self-publishing market, Penguin has acquired self-publishing platform Author Solutions from Bertram Capital, a San Mateo, Calif.-based venture-capital and private-equity firm, for $116 million.

The acquisition comes less than a year after Penguin launched its own self-publishing platform, Book Country, and at a time when self-publishing firms are jockeying for favor with authors by offering new features and lower prices. A company statement about the acquisition did not mention Book Country.

“It’s early days. We haven’t thought in detail about Book Country,” said Penguin CEO John Makinson on a press conference call.

According to the company statement, Author Solutions generated $100 million in revenue in 2011 and has been growing at about 12% per year for the past three years. The company derives its revenues from self-publishing authors paying for publishing, marketing and distribution services — roughly one third of its revenue from each business. Author Solutions has 150,000 authors who have published 190,000 books. By comparison, competitor Smashwords claims to have published approximately 140,000 titles by about 40,000 authors.

Neither company will be laying off employees or executives. “We are looking at up-sizing, not downsizing. There are no plans to alter the strategy, to lay off anyone. This is an opportunity for growth in our view,” Makinson said.

Author Solutions CEO Kevin Weiss will report to Makinson and will have a seat on the Penguin Group board. One reason for this organizational structure is that an early focus of the companies will be developing the Author Solutions international strategy, which Makinson will oversee.

Self-publishing platforms have been in a price and services arms race to attract more authors. Recently, Author Solutions had a promotion where it offered authors 100% royalties on books published and distributed through the site, making its primary service free for many of its customers. The strategy was to sell authors marketing, editorial and other premium services. Weiss, the Author Solutions CEO, told Digital Book World in June before the promotion ended on July 4 that it had seen some success. The company also recently launched BookStub, a service where authors can sell their e-books in person using a credit-card sized voucher with a picture of the book cover on one side and a product code on the other.

A new company called Your Ebook Team just launched and says that it offers authors “360 degree” service, from editorial to distribution. Self-publishing site Lulu.com recently launched an “author advice” tool.

Author Solutions will be integrated into Penguin’s corporate structure but will continue to be run as a separate company. The company has about 1,600 employees, mostly in Bloomington, Ind. and Cebu City, the Philippines.

“As part of Penguin, we will be on the front-end of that change and have the broadest set of offerings of any publisher today. That means more opportunity for authors and more choice for readers,” said Weiss in the statement.

For now, the brands will be kept separate, but that could change in the future as the companies integrate, according to Weiss.

When asked about the possibility that Penguin’s reputation could be damaged, Makinson said that Penguin will take steps to make sure that buyers of Author Solutions books don’t think they are getting Penguin books.

Penguin, however, will take a look at the Author Solutions database of writers and titles to see if any are worthy of acquiring for the traditional publishing process. The company might go one step further and investigate new models for publishing somewhere in between self-publishing and traditional publishing.

“It will be interesting to explore opportunities that lie somewhere between self-publishing and traditional publishing as presently defined by Penguin,” said Makinson.

Author Solutions was founded in April 1996 by Tim Jacobs and David Hilliard as 1stBooks and was initially meant to be an e-book company.  The company was acquired in 2002 by Gazelle Tech Ventures, an Indiana-based venture capital firm. Bertram Capital purchased the company from Gazelle Tech Ventures in 2007.

With this acquisition, self-publishing may have turned a corner, according to Weiss. “When IBM gave its stamp of approval to the PC industry, what happened next was nothing short of remarkable. This feels like what happened with the PC industry back in the early eighties,” he said.

“The industry is changing rapidly and we don’t know where it’s going, but I think we have a much better opportunity working together creating change in the industry rather than having change thrust upon us,” said Weiss.

Write to Jeremy Greenfield

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10 thoughts on “Penguin Buys Self-Publishing Platform Author Solutions for $116 Million

  1. Did anyone think to ask them…

    1. About the huge and misleading number of imprints owned by ASI and how that leads to a false sense of choice for consumers?

    2. About Penguin’s stance on outsourcing jobs to Philippines. Does this mean Penguin will now get the Indiana tax breaks for laying off Hoosiers?

    3. How they plan to deal with the broken royalty/payment system at ASI that has led the company to breach nearly every contract with it’s current authors?

    4. Author Solutions business model which includes marking up services available to authors without the middle man by thousands of dollars?

    • Hey Emily–

      Maybe I can answer some of your questions.

      1. On the press conference call, there was discussion of their imprints but nothing about how many there were or \how that leads to a false sense of choice for consumers.\

      2. The company said that they would not be laying off or relocating anyone. The Penguin CEO said it was a growth opportunity, implying hiring (though no confirmation on that).

      3. There was no discussion of the royalty/payment system or on contracts with authors. Sorry I can’t be more helpful on this one.

      4. There was much discussion of this part of the business model. I don’t think it was discussed in the terms you used :) For Penguin and ASI, they would probably consider that an important part of their business and would probably describe it differently.

      Thanks so much for the comment and I hope my answers were helpful.

      • Thanks, Jeremy.

        Here in Indiana we think “not laying off” and “growth” are just ASI euphemisms for “firing based on ‘performance'” and “growing into the Philippines.”

        After covering ASI on my blog for some time as a sort of consumer interest/watchdog writer, I’ve submitted questions directly to Pearson/Penguin and hope to get a direct response on these and other questions. Not holding my breath though. I appreciate you taking the time to respond.

        • Good luck in your queries with Penguin. You should also definitely reach out to ASI.

          As a journalist, my job is to ferret out the truth. Sometimes when a company tells you something, thought, you have to take their word for it. Not always, certainly.

          If you do find out more, please keep us informed — leave a comment here or email me. Curious minds want to know!

  2. “…opportunities that lie somewhere between self-publishing and traditional publishing…” surely Mr. Makinson knows when you straddle a fence you’ll get a pain in the ass.

    Historically Xlibris and iUniverse had arrangements with traditional houses that went nowhere. I believe Xlibris had an in with Borders that failed to produce significant sales for their authors, likewise iUniverse cooked something up with Barnes & Noble with dismal sales. All these entanglements produced were another pitch to hook wannabe authors—“…and your book will be for sale through the bookstore chains.” Hit their hot button right on with the dream of many authors to see their books in the chains. Of course for many the dream went unfulfilled, but profits were made when the “dream” was sold.

    It will be interesting to see if Penguin will use their influence with Ingram and Baker & Taylor to automatically distribute ASI titles and discontinue charging authors a distribution fee. Of course a more realistic approach to returns that isn’t a revenue producer for ASI is another area needing attention.

    Ever since the time of Mark Twain, authors have felt like they’ve gotten the short end of the stick when it comes to earned royalties—this motivated Twain to establish his own publishing company. The free, direct publishing avenues for ebooks through Amazon and B&N have established the benchmark for real time reporting of ebook sales and promptly paying royalties monthly. I don’t see ebook authors giving up 100% of a 70% royalty paid on the selling price of an ebook to have a publishing service take a 25% to 50% cut of the author’s earned royalty for doing nothing but processing royalty checks and eventually paying the author.

    Likewise I don’t believe ebook authors will embrace the agency pricing model that Penguin is tied to along with Apple and the other mainstream publishers. Especially when there’s a consumer boycott strongly opposed to ebooks priced at more than $9.99. This could cause Penguin to straddle the pricing fence while trying to keep their authors happy.

    My concern is ASI will use the potential for a Penguin publishing contract as the brass ring on an endless merry-go-round with 99% of the rings being wooden. With an increasing number of traditionally published book falling short of selling through their numbers, a mainstream publishing contract doesn’t have the enticement it had a couple of decades ago—except for the vanity factor of having a big name imprint on the title page. Any ebook achieving and sustaining high sales will generate the attention of the corporate style publishers.

    Mr. Weiss made the observation that the publishing industry is changing. Gee, I do believe the change started happening in the mid-1990s when Amazon leveled the playing field in favor of authors by announcing their goal to create the world’s largest bookstore. However, the first major change occurred at the turn of the 21st century when the big publishers unsuccessfully attempted to squash the evolving POD publishers by keeping their books out of the national bookstore chains. The most significant change is the increasing popularity of ebooks and the free, direct publishing platforms that connects authors’ ebooks directly with the consumers. The continuing change is authors are more knowledgeable about the how to successfully profit from their publishing venture by staying clear of grossly overpriced publishing services.

  3. I am the Author of Texas Sun my name is Marsha Darlene Bain. I would like the ISBN number to purchase copies for Christmas presents.

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