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TenPages.com Makes Book Publishing More Accessible But Buyer Beware

February 24, 2010 By 8 Comments

In this post, I’ll discuss TenPages, which I think is a great social platform but presents numerous caveats at the same time.

Description

Last week, Dutch startup TenPages launched. TenPages is a crowdfunding platform that aims to give (aspiring) authors the opportunity to have their book published. Authors can submit a 10-page manuscript that will be publicly listed on the website. To go from manuscript to publication, the author needs to gain the support from the public.

The public can support the author by buying shares of the book. There are 2,000 shares available at a price of €5 per share. All 2,000 shares need to be sold for the book to be published. Once the book is published and put on sale, shareholders also get a slice of the profit pie. Now, there are rules as to the minimum number of shareholders and the maximum amount of shares per person, but I’m not going to bore you with that.

Shareholder ROI Model

Instead, I want to take a look inside the business model. From a social perspective, it’s a great initiative. If a friend of mine submits a manuscript, I’d definitely be willing to help out by becoming a shareholder. However, from a financial perspective, the financial model is very unfavorable to shareholders.

Let’s look at the exact model:

  • Price per share: €5
  • Immediate return per share when all 2,000 shares are sold: €1.25
  • Shareholders’ revenue percentage: 10% of the retail price (ex. VAT) per book sold in retail
  • Return on a single share per book sold in retail: 1/2,000 * 10% * retail price (ex. VAT)
  • Profit formula: ((PERCENTAGE OF SHARES * SHAREHOLDERS’ REVENUE PERCENTAGE * RETAIL PRICE EX. VAT * NUMBER OF BOOKS SOLD IN RETAIL) + (IMMEDIATE RETURN * NUMBER OF SHARES OWNED)) – (PRICE PER SHARE * NUMBER OF SHARES OWNED)

That looks rather complex, but here’s a simplified example:

  • I buy two shares at €5 each so my PERCENTAGE OF SHARES is 2/2,000 = 0.001
  • The shares sale is a success, all 2,000 shares are sold and the book gets published. I will get an IMMEDIATE RETURN of €1.25 per share, €2.50 for my total of two shares.
  • The book is sold at a RETAIL PRICE EX. VAT of €10 and the NUMBER OF BOOKS SOLD IN RETAIL is 10,000.

I can now calculate my profit using the profit formula above: ((0.001 * 10% * €10 * 10,000) + (€1.25 * 2)) – (€5 * 2) = €10 + €2.50 – €10 = €2.50

This means that 10,000 books sold in bookstores will net me only €2.50. The break-even number for this example is 7,500 books sold. That’s quite steep.

Additional Caveats

The financial model I described above is the true profit model for shareholders. The profit calculator TenPages displays on its website uses the word “profit” but it actually only calculates “revenue”. They’ve recently added the sentence “with an investment of €X” but they still use the word “profit”, which is misleading.

Moreover, the shareholders’ revenue (and subsequent profit or loss) is calculated based on sell-through. I won’t bore you with all the intricacies of retail and distribution but there are two forms of sales that need distinction:

  • Sell-In: This is what companies generally put in their annual reports as “sales”. It is the sales to the retailer. In the case of books, sell-in represents what the publisher sells to the bookstores.
  • Sell-Through: This represents the sales to end-consumers. In the book example, this would be the actual number of books purchased in bookstores.

Suppose a publisher manages to sell 20,000 copies of the book to bookstores, but only 100 copies are actually sold to end-consumers. As a shareholder, you’ll only get a revenue share over the 100 copies and not over the 20,000.

The other stakeholders obviously also receive a slice of the revenue pie:

  • The author also gets 10% over the retail price (ex. VAT) per sold book
  • The publisher gets 30% over the retail price (ex. VAT) per sold book
  • TenPages gets 18% 8% over the retail price (ex. VAT) per sold book

It’s no shocker that the publishers benefits the most, but flamin’ nora, TenPages gets almost as much the author and the shareholders combined! And they didn’t even have to invest in the books themselves. Edit: Valentine van der Lande from TenPages let us know in the comments that of the 18% TenPages gets, 10% goes to the shareholders. Thanks, Valentine!

Conclusion

I really like the social aspect of TenPages. In fact, in its first week, one manuscript has already managed to sell all 2,000 shares needed for publication.

However, for a shareholder—in essence, an investor—the model isn’t particularly rewarding. These people make the publication of the book possible and the financial gratification is seriously lacking.

What do you think? Should shareholders be rewarded more for their effort?

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  • http://www.tenpages.com/ Valentine van der Lande

    Hi Kenneth, good to see that even a non Dutchman has picked up tenpages.com and I think you wrote a very good article, thanks.
    I would like to add some comments: shareholders don’t get 1,25 euro directly when the manuscript has sold all the shares. Nevertheless, we think that it is doable to reach a higher than regular amount of sold (debute) copies of the upcoming book, because of the fan base already existing before the book has even come out. Books are all about spreading the word.

    The 18% that TenPages.com receives is not for TenPages.com itself, we pay 10% of it through to the shareholders (so we actually take the least percentage compared to writer & shareholders ;).

    Apart from the possible earnings as a shareholder (that I would like to raise as much as possible, but this is the highest we could go still leaving the concept interesting for all parties), it might also be attractive for shareholders to find their name in the actual book as one of the people who discovered the talent. And, of course, as a shareholder you also help a writer possibly fulfil his writing dreams.
    BTW, very right on the word profit, we’ll adjust it asap!

    • http://intensedebate.com/people/kennethlim kennethlim

      Thanks, Valentine, I appreciate it that you stopped by to clarify.

      I'll edit the article based on your feedback. It's good to have transparency :)

      I agree that the social aspect–whether egoistic as in getting your own name mentioned in the book, or altruistic as in helping someone else reach the next level–can act as a great incentive for shareholders.

      Nonetheless, I think there are some variables that offer playing room. An example is using a % of the margin rather than a % of the retail price, because I assume that different distribution channels and publishing formats can have different prices and profit margins. Suppose you're introducing a title as both a printed book and an ebook, priced at €10 and €6 respectively. As a shareholder and with the current revenue model, I would seriously discourage people to buy the ebook, heh ;) What are your thoughts on such situations?

      Thanks again!

      P.S. I actually am Dutch :)

  • http://www.tenpages.com Valentine van der Lande

    Hi Kenneth, good to see that even a non Dutchman has picked up tenpages.com and I think you wrote a very good article, thanks.
    I would like to add some comments: shareholders don’t get 1,25 euro directly when the manuscript has sold all the shares. Nevertheless, we think that it is doable to reach a higher than regular amount of sold (debute) copies of the upcoming book, because of the fan base already existing before the book has even come out. Books are all about spreading the word.

    The 18% that TenPages.com receives is not for TenPages.com itself, we pay 10% of it through to the shareholders (so we actually take the least percentage compared to writer & shareholders ;).

    Apart from the possible earnings as a shareholder (that I would like to raise as much as possible, but this is the highest we could go still leaving the concept interesting for all parties), it might also be attractive for shareholders to find their name in the actual book as one of the people who discovered the talent. And, of course, as a shareholder you also help a writer possibly fulfil his writing dreams.
    BTW, very right on the word profit, we’ll adjust it asap!

    • http://intensedebate.com/people/kennethlim kennethlim

      Thanks, Valentine, I appreciate it that you stopped by to clarify.

      I'll edit the article based on your feedback. It's good to have transparency :)

      I agree that the social aspect–whether egoistic as in getting your own name mentioned in the book, or altruistic as in helping someone else reach the next level–can act as a great incentive for shareholders.

      Nonetheless, I think there are some variables that offer playing room. An example is using a % of the margin rather than a % of the retail price, because I assume that different distribution channels and publishing formats can have different prices and profit margins. Suppose you're introducing a title as both a printed book and an ebook, priced at €10 and €6 respectively. As a shareholder and with the current revenue model, I would seriously discourage people to buy the ebook, heh ;) What are your thoughts on such situations?

      Thanks again!

      P.S. I actually am Dutch :)

  • http://www.tenpages.com/ Valentine vd Lande

    Thanks Kenneth!
    We have thought about offering a percentage of the margin instead of the retail price excl tax, but the difficult thing is that the bookseller discounts vary and that makes it more difficult (less transparent) for the shareholder to predict his possible profits. Furthermore, this percentage was the highest we could do without making it unattractive for the other parties (the publisher, the author keeping his regular royalties and of course ourselves).
    When it comes to e-books, a survey we did at bol.com showed that e-books tend not to cannablise the sales of real books, but stimulate it. Of course, the e-book sales numbers in the Netherlands are still rather low (approx 0,15% of total book sales) so it's difficult to completely predict what it'll do and if more (e-)books will be sold with a lower pricing.

    PS your English is great for a Dutchman :)

    • http://intensedebate.com/people/kennethlim kennethlim

      Thanks, Valentine, I truly appreciate the insight here! Having worked at a publisher in the past, I understand the challenges to make it all work. The current earnings model does (or should) stimulate investing shareholders to critically look at manuscripts to prevent making any loss ;)

      Also, in spite of some of the harshness in my first take, I do think TenPages offers aspiring authors a great platform to get traction, encouragement and opportunity.

      I plan on monitoring the TenPages platform and revisiting it on this blog in 6-12 months to see how the works are coming to fruition :) Best of luck and thanks again for the inside scoop!

  • http://www.tenpages.com Valentine vd Lande

    Thanks Kenneth!
    We have thought about offering a percentage of the margin instead of the retail price excl tax, but the difficult thing is that the bookseller discounts vary and that makes it more difficult (less transparent) for the shareholder to predict his possible profits. Furthermore, this percentage was the highest we could do without making it unattractive for the other parties (the publisher, the author keeping his regular royalties and of course ourselves).
    When it comes to e-books, a survey we did at bol.com showed that e-books tend not to cannablise the sales of real books, but stimulate it. Of course, the e-book sales numbers in the Netherlands are still rather low (approx 0,15% of total book sales) so it's difficult to completely predict what it'll do and if more (e-)books will be sold with a lower pricing.

    PS your English is great for a Dutchman :)

    • http://intensedebate.com/people/kennethlim kennethlim

      Thanks, Valentine, I truly appreciate the insight here! Having worked at a publisher in the past, I understand the challenges to make it all work. The current earnings model does (or should) stimulate investing shareholders to critically look at manuscripts to prevent making any loss ;)

      Also, in spite of some of the harshness in my first take, I do think TenPages offers aspiring authors a great platform to get traction, encouragement and opportunity.

      I plan on monitoring the TenPages platform and revisiting it on this blog in 6-12 months to see how the works are coming to fruition :) Best of luck and thanks again for the inside scoop!