Special Guest: Mark Coker, Founder of Smashwords

Hi I'm Len Epp from Leanpub, and in this episode of the Frontmatter podcast I'll be interviewing special guest Mark Coker.

Based in Los Gatos, California, Mark is an entrepreneur and investor with a background in public relations, and the founder of Smashwords, the biggest distributor of indie ebooks in the world, both through its own bookstore, and through numerous services, including Apple, Kobo, OverDrive, and more.

You can follow his on Twitter @markcoker and check out Smashwords at smashwords.com.

In this interview, we’re going to talk about Mark's background and career, professional interests, the history of Smashwords and where it might be headed in the next few years,, and at the end we'll talk about some of the hot topics being discussed in the book publishing industry as we head into a new decade.

So, thank you Mark for being on the Frontmatter Podcast.

Mark: My pleasure, Len.

Len: I always like to start these interviews by asking people for their origin story. So, I was wondering if you could talk a little bit about where you grew up, and how you first became interested in technology and startups and PR?

Mark: Oh boy. Well, I grew up here in Los Gatos, California. I actually grew up across the street from where I live now. My dad worked in technology - though I didn't really realize it was technology, but he worked at IBM. And he was an inventor at IBM - one of his big inventions was the magnetic credit card strip that's on the back of your credit card.

Len: Oh, wow.

Mark: He and a team of people at IBM invented that.

I've been entrepreneurial ever since childhood. I was selling my chicken's eggs door-to-door, probably by the age of six or seven. I've always been interested in entrepreneurial ventures.

I never really imagined myself entering a career in technology. I was always interested in building things, making things. I always imagined something with manufacturing, something that would involve my hands. I never imagined that it would be in publishing.

But, so basically, my story is - I grew up here in Los Gatos, went to college at UC Berkeley, majored in business, graduated with a degree in marketing. While I was at Berkeley, still working out of my dorm room - actually at Berkeley, they were co-ops - I started working for my father. My father had quit IBM and started a software startup, an email software startup. And on a whim, he printed up business cards for me that said, "Mark Coker, Vice President of Marketing and Sales".

That was really exciting for me. I'd always dreamed of running my own company. I never thought it would be in software, because I didn't consider myself a technology person. But I leapt at the chance to work with him. And I quickly learned that as VP of Marketing and Sales, I had a zero-dollar marketing budget. My job was to make the phone ring, so that we could sell our software. And since I didn't have any marketing budget, I thought, "Well, maybe I should explore, how do we get free press coverage?"

So I started researching the different computer trade magazines and PC Magazine, and magazines like that, started contacting the reporters and saying, "Hey, would you like to review our software? Would you like to write a story about us?" I remember calling a reporter once who was incredibly friendly, and spent much more time with me than he should have. And he said, "Well, that sounds interesting. Why don't you send me a press kit?" And I said, "What's a press kit?" And he said, "Well, it will have data sheets and a press release in it." "What's a press release?" I was asking him these really basic questions, because I didn't know, and these weren't things that they taught us at the business school at UC Berkeley.

But, just with his feedback and self-study - I learned how to write a press release, and how to work with reporters, and how to get press coverage - free press coverage, free national and international press coverage. That's what I was doing, for working I did that while I was still going to school in the business school. I almost dropped out of UC Berkeley, I was so excited to be working for my father. But, thankfully I stuck it out and graduated.

And then I went to work for him. It was a true garage startup. We worked out of the garage, I worked with him for about three years. But he didn't have any money. The company, always was fairly small. And when I shared ideas with him for how we could grow the company, he said, "Well, we don't want to do that. We'd have to hire people." So - I love my dad, and he's brilliant, and I credit him with so much of my passion for entrepreneurship, but it became clear to me that we had different visions for where we were going to take this company together.

So I left his company, which was called Coker Electronics, and that was right before the first Persian Gulf War. It was during a recession, and really difficult to find any jobs. And with my odd job doing PR for my dad, I wasn't really sure what I could get a job in. So I got a temporary job at IBM working in manufacturing. I was building mainframe hard disc drives with my hands, and it was so much fun. It was fascinating to me - to be in a manufacturing operation and thinking about process, and how to make things more efficient, and how to improve the quality of the product. That was all fascinating to me.

Also, during that time, I had applied to graduate school to go to business school, to get an MBA because my degree at Berkeley was an undergrad. And so - while I was there working at IBM, I found out that I got accepted to Carnegie Mellon for their business school - they had an entrepreneurship program that looked really interesting to me. But I was having so much fun at IBM, I decided to defer that and continue working at IBM.

And then about a month after that, IBM laid me off. So there I was, in the middle of the recession - no job, and I wasn't really sure what I could do. I just knew that I was interested in business. So I decided to start applying to PR agencies.

I was lucky enough to get a job, an entry level job, at one of Silicon Valley's largest PR agencies at the time. That's how I fell into PR. And as it turned out, one of my first clients was a storage company. So who knew that my experience building mainframe hard disc drives would apply to PR?

PR was a lot of a fun. I did well at it. And after about a year and a half at that agency, I decided to leave and start my own agency. One of my first clients was a storage company, and my second client was a company called McAfee Associates, the antivirus company.

Len: If I could just interject for a moment, here. Thank you for sharing this great story. It's just fascinating. I didn't know a lot of these details. But one thing I should mention is that - tje moment in history at which you chose to go into PR for yourself was right in Silicon Valley, at the time of the explosion of the World Wide Web.

So, when you were talking about magazines and contacting reporters before, they were in print, and the reporters were being called on the telephone, I imagine - and finding out what a press release was wasn't as simple as going onto a search engine and going, "What's a press release?" Because there were no search engines.

Mark: Right.

Len: And so, there you were, with all this sort of like, pre-Cambrian explosion kind of experience.

Mark: Yes.

Len: But right in the right place at the right time. And then - and for those who might not know - antivirus software was a really important thing at the time - I mean, it's also important for a lot of people now. But at the time in particular, people were often afraid of their computers. They were really, really afraid of going online sometimes. And as dangerous as things can be online now, you could only imagine what things were like 27 years ago, if you tried going on the World Wide Web.

Mark: Yeah, well, when I first started working with McAfee, it was 1992, and McAfee had just gone public. They were the first shareware company to go public. And their founder, John McAfee, was - I think he was brilliant, but he's also kind of crazy. He had these ideas that people thought were crazy. Like, I remember sitting in on an interview with him with the magazine InfoWorld - and he was telling the reporter how he viewed his company as being like an apple tree, and the software was the fruit of his tree. And he didn't care if people stole his software, because he would just grow more.

He had this crazy idea that he was just going to give his software away for free, and let people pay him on the honor system, if they felt like paying him. And the model was incredibly successful for them. All of their software was distributed online, electronically - over bulletin boards, before even there was the internet. They didn't even have a sales team - they just had a bank of fax machines that were spitting out purchase orders, like 24 hours a day. And when I first started working with them, they were like a $12 million company. When I stopped working for them, they were like a $300 million company.

Len: That's amazing.

Mark: It was a really interesting time - we would call reporters and, well, try to introduce them to antivirus software, and to McAfee associates. I remember a reporter at PC Magazine telling me, "Oh, I don't think viruses are real. I think you guys are just a bunch of hype." It turned out that they were real, and they were more real than anyone ever expected.

But, the McAfee experience, for me, was really important. There would be no Smashwords today if it wasn't for McAfee. Because McAfee pioneered many of the concepts that we kind of take for granted today, like shareware, like freemium - giving things away so that you can make more money. Electronic software distribution - so, selling things outside of a box and outside of package.

When I first started working with McAfee, John McAfee was adamant that his software would never be put in a box. That changed in later years, when new management came in.

But it was an amazing experience, doing PR. There I was, a 20-something year old kid - and when you're doing PR, you're working with the CEOs and the VPs of marketing of these really large companies. Large, publicly-traded companies, and really cool startups. It was just so amazing to be exposed to so many different ways of marketing, so many different views on marketing, so many brilliant minds. And I was just a sponge. It was just an amazing experience for me.

Len: And you've had experience multiple times with - not only with small startups, but with actually being there as they grew. You said you were there with McAfee from, I think you said $12 million to about $300 million. But you've there was another company you were involved with a little bit later called RightNow.

Mark: Oh yeah.

Len: Which grew from, you said - Greg Gianforte's bedroom to a 300-plus employee company that was - I'm just reading from your LinkedIn bio - it was a SaaS CRM company. But this was early on in the days of that kind of thing. And this was, like, 1998 to 2001.

Mark: Yeah, so Greg Gianforte was the former founder and CEO of a company called BrightWork Development, which McAfee acquired for about $10 million. So it was a small acquisition. And he was one of the very first people I was working with when I started my new agency. It was great fun working with him, another really smart, brilliant guy. And then when he left McAfee to start RightNow Technologies out of his bedroom, he contacted me and I agreed to work with him. And the first $4,000 in services that I provided him, I provided him in stock, and that worked out pretty well. because they eventually went public, and then later they were acquired by Oracle for over a billion dollars.

Greg Gianforte, unfortunately, went on to become the Greg Gianforte that was elected to the US House of Representatives, who punched a reporter in the face, and basically went far-right freaky.

Len: I thought I recognized the name.

Mark: Yes, he is now a member of the US Congress. I'm not real thrilled about that, but it's funny where people's paths take them.

Len: Yeah, I should say, with respect to heightened passions, we're recording this on January 22nd, 2020, with impeachment hearings going on in the US Senate right as we speak. For those who aren't aware, I think you could probably Google that, and find out what's going on there. It's an incredible moment.

I should say, actually - that it seems to be a feature of my interviews with American interviewees, that there seems to be a passionate moment happening all the time in the last few years.

Mark: It's been crazy. I find myself, whenever I'm speaking with or meeting with someone from outside the country, I find myself just apologizing. My personal opinion is that our government is an embarrassment right now. And it's just really tragic, what's happened.

Len: Yeah, I think that view is shared by a lot of people. I imagine - we'll be talking about writers later. But maybe we could tie it into a little discussion of politics if you wanted to, because this is something I've thought about a great deal in the last few years.

But, we'll get there. Here's a little teaser for later.

Mark: Okay.

Len: Carrying on - so you've had this experience with the beginning of this sort of tech explosion - doing PR, working with companies, seeing them grow, and helping them grow. And then, ultimately - you've had some successes, and you've also become an angel investor in various companies as well.

Mark: Right.

Len: I wanted to ask you about that, because you're the founder of your own company - which I will be talking about shortly. This is sort of a typical question that people ask of investors, but a lot of the people listening to this podcast are probably themselves working for startups, or people who are thinking about founding a startup. What do you look for as an angel investor in a founder? And how you do you like to be approached when people cold approach you, or if they do?

Mark: Well, I still do get approached with investment opportunities. I basically stopped angel investing, or really curtailed it, when I started Smashwords 11 years ago. Because Smashwords was funded just by myself. And that was a pretty big angel investment.

But prior to Smashwords - I have had some investments since then. I'm looking for somebody who's smart, passionate. Passion's really important in an entrepreneur, because most startups are going to fail. Most original business ideas - even if they are an original idea, even if they're a great idea - the founder is going to need to pivot multiple times before they find the formula upon which they can have a successful company.

So I'm looking for someone who's got the smarts, the passion, the perseverance, the nimbleness and flexibility to constantly question yourself. Just because you've got a strong idea in your head, and you've done all your research, you've got to be willing to change your opinions over time, as the facts on the street dictate.

Len: It's really interesting - in my limited exposure to this world, there seems to be a type of person who believes that there's just a playbook that you can follow - and this isn't just true in tech startups, it's sort of true in business, generally. And sometimes, like if you have a ton of money - maybe there is a playbook. Like, if you want to buy a franchise restaurant or something like that - do your market research, make sure you hire the right manager, things like that.

But, when you're talking about pivoting, this involves a lot of self-questioning. It involves passionate, rigorous self-analysis, and self-critique. It can't just be - if you have a self-celebratory mindset, you'd better already be successful, or climbing the ladder in an established company. Because if you're out there on your own, you can't have blinders on. You need to be looking in the mirror, directly at yourself, all the time.

Mark: Definitely. And it's also a balancing act. Because you need to have confidence in yourself. But, not so much confidence that you become obstinate and pig-headed, and blind. So it's a balancing act.

Len: Which is hard - it's hard not to appear that way when you're passionate about what you're doing.

Mark: Right. I mean, there are a lot of entrepreneurs that make a really great first impression, because they're schizophrenic. Their passion is just off the charts. They're seeing things that no one else can see, because they're crazy. But again, that's the fine line. Because often a great entrepreneur, with a great idea - they're going to see something before anyone else sees it. They're going to see solutions to problems that other people aren't seeing. And so they will be accused of being crazy with their idea, and for their passion.

I certainly ran into that myself, starting Smashwords. People thought it was a crazy idea; it was. But you've got to find the strength inside yourself, the grounding, to know that you're on the right path or to believe in yourself.

Len: That's a great opportunity to segue into the next part of the interview.

So, there you were - you had this experience in PR and with startups, and tech companies, and IPOs - and you decided to co-author a novel about the soap opera world.

Mark: Yeah, let's talk about that. Talk about pivots! So ,around 2000, 2001 - it was right at the end of the dotcom boom. It was a time in Silicon Valley where we were probably turning away - there were times where we would turn away four or five clients a day who wanted to pay us $10,000 or more a month for our services. It was that crazy at the end of the dotcom boom. We just couldn't hire people fast enough. And we had just taken on Sun Microsystems - which was a huge, publicly traded company, and had to double the size of our PR agency in just the course of a couple months.

One of those people that we hired was this reporter, her name was Leslie Anne, this reporter from Soap Opera Weekly Magazine. And she obviously, eventually became my co-author, and my wife. But that was was shortly after that rapid expansion at Dovetail Public Relations, which was my PR agency. And then the dotcom bust hit - and within the course of a couple months, we lost like 60% of our business. Because a PR agency is the first to get cut when a company has to cut expenses.

So it was at that time, where I had been doing PR for like 15 years or longer - I was getting burnt out on it. I met this wonderful, new, young woman, and we were in a relationship, and I was hearing about her crazy stories, about what it was like being a reporter for a soap opera magazine.

Her job was to interview the actors on the set of these soap operas. And she was telling me these stories about how the actors were crazier in real life than they were in front of the camera, in their crazy soap opera story lines. I suggested she should write a book about it. And she said, "Well, why don't we do that together?"

And I thought, "Well, what the heck?" I'm ready for a break from PR. I'm ready for something different.

I'd always dreamed of writing a book; I just never thought it would be fiction, never thought it'd be about soap operas. But I jumped into it whole hog, and it was just the most amazing experience.

We moved to Burbank, California for a couple months, and started interviewing insiders. We interviewed about 50 soap opera industry insiders for their dirt.

And then we moved to a cabin in Vermont that was owned by a guy who had acquired my prior company, which was called BestCalls, which was another startup I did while I was still doing Dovetail.

And over the course of four months, we wrote the novel together, and then we did what every new author learns to do. We talked to experts, we did research, we read books, we hired book doctors, editors, we did multiple revisions on the book. Eventually the book was in good enough shape for us to start shopping it to agents, and so we shopped it to literary agents, and we were lucky enough to get offered representation by two top-tier agencies. We got to interview them and choose one.

So we worked with Dystel and Goderich. We were thrilled by that. We had visions of seeing our book on the shelves of Barnes and Noble, which was where we went every Friday night for date night. But after two years of them trying to sell the book to every major publisher in New York of commercial women's fiction, they couldn't sell it. They shopped it to all the publishers, twice. So we finally had the "come to Jesus" meeting with them, and they said, "Look, we've done everything that we can."

It was actually our agent who suggested that we consider self-publishing. By that time, I had already read Dan Poynter's book, his self-publishing manual, so I knew a little bit about self-publishing. But it didn't seem like a satisfying solution for us, because I knew enough to realize that if we couldn't get the book into bookstores, it was going to be really difficult to sell the book. And I didn't like the idea of filling our garage with thousands of unsold novels.

And so I started thinking about e-books. I started thinking about the situation that my wife and I were facing - that here we had written a book that we really believed in; the feedback from beta readers, our target readers, was fantastic. And I imagined the thousands of other writers around the world whose books would never see the light of day - whose books would go them with them to their grave - unpublished, simply because a publisher didn't see the commercial potential in the book. And I thought, that's just wrong.

This was the time when blogging was coming on big, YouTube had just come on the scene in a big way, so people were self-publishing videos on YouTube. They were self-publishing with blogging, and reaching massive audiences. And so I thought, "Well, why can't self-publishing be ubiquitous and free?" I thought about that, and it was pretty obvious that print publishing is very expensive. But given my background in Silicon Valley, I thought, "Well, what about digital? What about ebooks?"

And so I started researching ebooks. That's kind of how I came across the idea to create Smashwords. I thought, "Wouldn't it be cool if somewhere, someone could say, 'Yes' to every author in the world?" Give every writer a chance to publish, and let readers decide what's worth reading. So that was really the genesis of Smashwords.

Len: And this was around 2005 that you had the idea?

Mark: Yes, it was about 2005 that the idea hit me really hard, and I started doing my research. I started researching the publishing industry, researching ebooks, researching different file formats and the technology. I even remember going onto LinkedIn and posting a survey there forwriters. I said, "What word processor do you use?" That was part of my market research. And so we built our systems around that.

Len: And there were two really important features around self-publishing at the time, particularly with respect to ebooks, that actually have changed quite a bit since then. One is that e-readers were still in a relatively primitive phase. The Kindle had not come out quite yet, and the iPhone was not out yet.

For those who are unaware of this history - it's getting to be quite some time ago now. Prior to having smartphones, you couldn't really tap your screen and do stuff on your phone. And the screens were much smaller and much less sort of nice to look at.

And so, I believe actually when I researching for this interview, I listened to an interview you did where you were describing something about the history of the e-reader. And when the first ones came out - I think maybe in the late 90s, they could cost hundreds, in late 90s terms. And the idea that you could just add an app, and click a link, and be reading a book on your phone - on a device you carried around with you all the time in your pocket, was not an idea that existed anywhere.

But also, the other thing was that at the time, self-publishing had quite a stigma attached to it. This is a complicated thing, that - actually if you wouldn't mind taking a couple of minutes to describe the atmosphere around self-publishing?

Mark: Sure. As you described, yes - in the late 90s, there was a lot of hype around ebooks. People were predicting that ebooks were going to take over print, and that print books were going to go away.

And there were some early e-book reading devices that came on the market, but they were clunky. I think your word that you used to describe them is perfect - primitive. They weren't quite ready for prime time yet, and the amount of content out there for these e-reading devices was limited. And along with the dot com bust, at the same time, ebooks busted, and people pretty much wrote off ebooks.

So there we were in 2005, and I was looking at the market data, and ebooks, when I first - in 2005, ebooks accounted for, it was either 1/8 or 1/4 of 1% of the book market. Just miniscule. But, the data that was published by the Association of American Publishers showed that that number was increasing each year, going from like 1/8 of 1% to 1/4 of 1% to 1/2 of 1%. And I thought, "Okay, well - maybe in 10 or 20 years, there might be a sizable market here?" But I saw potential there.

And then researching self-publishing, it was - to your question about the stigma, yes. In 2005, in 2008 when we launched Smashwords - there was tremendous stigma around self-publishing. No writer with any brain cells wanted to self-publish. It was the path to perdition. It was the path to failure. It was what writers would do if they couldn't get a publishing deal anywhere else - they would self-publish. And those early self-published authors were called "vanity authors," because they were just publishing for the vanity of it.

I remember reading these criticisms and hearing that, and thinking, "Well, that's just crazy." I'm seeing the same types of criticisms leveled against bloggers. "How dare bloggers think that they have a right to write online?" Or to publish online? Or to act like journalists?

Yet, this was the story of the day. Any time that you allowed ordinary people to publish something, some small percentage of them would publish extraordinary stuff. Whether it was on a blog, or on a video, they were reaching massive audiences.

I also realized very early on, that self-published authors couldn't get print distribution into the bookstores. So, of course they were going to fail. And that just perpetuated this myth that self-publishing was for sucky authors, for failed authors - that there was no promise in it. But, I had faith that if we could just give ordinary people a chance to publish, that the market would find the great works and bubble it up. And that's what happened.

Len: Thank you for sharing that. That's a great description of the way things were conceived around time, and why they were mistaken.

I know that you've spoken in the past - going all the way back to the invention of the Gutenberg printing press, and Martin Luther, in the discussion of self-publishing. One thing that - I'm sure probably most people listening to this podcast are sort of on board with with self-publishing as an idea, but a lot of people fell for this idea that I would say was more or less invented around the early to mid-20th century - that being a published author meant you were an especially elevated person in a social and intellectual hierarchy.

Prior to that, Walt Whitman self-published. Nietzsche self-published. There was a time when there were no publishers, and everything was self-published.

There's a weird dialectic in the establishment of the negative connotations of vanity presses, because you have to buy into the idea that being selected for publication by someone who owns a publishing company elevates you in the first place, in order to believe that that's what someone's trying to do illegitimately. You have to believe in legitimate hierarchical elevation to think that someone's going after it illegitimately.

I won't go on too long about this, about my own views on this. But - I conceive of myself as a pretty intellectual-type person, and to see the insanity of people who set themselves up as the defenders of intellectual tradition, actually falling for this, basically, marketing ploy on the part of publishing companies, was just incredibly frustrating to encounter.

I mean, like I said - the more you actually understand the history of books and publishing, and intellectual activity generally, the less likely you are to fall for this weird notion that there's any problem with self-publishing.

Mark: Right, you're exactly right. There was this notion in 2005 and 2008 when we first launched, that only a publisher possessed the divine wisdom to determine which books were worthy of publication, and which books weren't. Only a publisher could determine when a writer was ready to graduate to become a published author.

This was all hogwash, and I recognized it as hogwash very quickly. The reason publishers accept or reject books often comes down to the publisher's perceived evaluation of what the commercial merit of that book would be.

And so here we have major publishers, and an industry that's been consolidating for the last 30 years, focused on trying to acquire works that have the greatest perceived commercial merit. So, they're making commercial merit the measure of a book's quality.

And that should not be the measure of a book's quality. I don't care if your book has a potential market of just one person - and that one person is your daughter, or son, or grandchild. Your book has a right to be published.

And often, the books that do go on to become massive best-sellers, are books that are so original no one saw it, no one would have expected it. It came out of nowhere, and it became a huge hit. And so as I thought about this, I thought, "Wouldn't it just be cool that every writer in the world can become a published author?" Just imagine the amazing works that are going to be surfaced for the benefit of humanity.

And then, thinking about the flipside of that - imagine all the literary treasures that have been lost to humanity, simply because a publisher didn't see commercial merit in them.

So, from a very early time, I viewed self-publishing as liberating, a chance for someone to blaze their own path of independence, to be in charge of their own destiny.

And a lot of that stigma that we encountered early on, the purveyors of that stigma were the writers themselves. I'll just never forget how - some of the viciousness I saw, of writers leveling criticism upon fellow writers. Like, "How dare you self-publish? How dare you sink that low?" And, "How dare you not believe in my religion?" Which is that, if you keep working hard, when you finally get good enough, then a publisher will bless you, and anoint you an author. That's crazy.

Len: I couldn't agree more. You're reminding me of I was at the Book Expo America conference - which happens every year, every summer, in New York City. I was there in, I believe, 2013 [Len wrote about the experience here - eds.]. And I remember, there was one panel on self-publishing. This was 2013. There was a single panel on self-publishing. Guy Kawasaki was the main speaker there. And he was talking about how the last time he'd spoken to a publisher, they said, "Well, how are you going to use your Twitter following to help increase sales of this book?" And he said, "Wait a minute. What are you going to do for me? Is the question here, why am I with you at all?"

And there was a very, I'm going to say - supercilious person who asked a very supercilious question of Guy Kawasaki in the Q&A afterwards. And when they were asked, "Well, why was it so important to them to have a publisher?" They said, "Dignity." And not externally, internally - I just exploded. I was like, "Please don't write a word, and don't take yourself seriously, if your dignity is contingent on some company deciding that they're going to publish your book - because it's a business."

Sort of touching on the politics here, that idea of internalizing your own oppression by wedding elevation in the hierarchy, to money, that way, is a real trick that's being played on you - unless you already stand to benefit from it. Don't be a sucker, is the sort of crudest way of putting it.

But that reminds me, actually - so the other thing I remember from that conference was a panel of VIP's that included the CEO of Simon and Schuster and the CEO of OverDrive - I hope not getting that wrong, but -

Mark: Yeah, it would have been -

Len: Steve Potash from Overdrive. This was 2013, and I remember - speaking of passion - Steve Potash just waving an iPad in front of - he was sitting next to the CEO of Simon and Schuster, I think? Just waving this iPad aggressively and saying, "This is not a science experiment. This is not a science experiment." And this was because there was a lot of - well, this is another topic. But even to this day, in the print publishing - in the legacy publishing industry, the opposition to ebooks runs deep. And what he was trying to say is like, "This is an opportunity, this screen device - not a threat, if your underlying goal is to get people to read books, is to publish books and read books."

But this ties into a point that I know you've made in the past, which is that publishers aren't there to publish books; they're there to sell books, which is a really interesting -

Mark: Yeah, that's kind of a dirty little secret in the industry. Although the publishing industry is made up of people who truly love books, the publishing decisions are not made necessarily out of love, and that leads us to some of the issues that you talked about

Len: That remain true to this day. And so now we've set the stage for the passion, and the deep cultural and social mission that was behind Smashwords.

So to go from 30,000 feet to ground level - there you were starting a startup in the ebooks world, that was going to have an online store, and engaging in e-commerce and stuff like that. How did you go about setting it up? How did you find programs?

Mark: So, as I mentioned, it was around 2005 that I started working on the business plan. By the end of 2006, early 2007 - I was done with the business plan, and I was ready to hire somebody. But it took me about a year to find somebody to hire. And finally I did find somebody that I could hire, through a connection with my brother, Doug - who at the time worked for Google. And so I hired our first full-time hire as CTO. He built the site, built the platform. I designed it, it was all designed on paper, and Microsoft Word - the user interface, and the features and functionality, and the flow. And so the developer developed it.

The initial idea of Smashwords was to create an ebook self-publishing platform, so anyone could come to the site for free, and self-publish an ebook. They'd upload a Microsoft Word document, and we would automatically convert it into the major ebook file types - so EPUB, MOBI, PDF, and then some other obscure file types that don't really matter so much anymore. We offered a store, because our authors needed a place to sell their stuff. So it was February 2018 that we first unveiled the idea of Smashwords to the world. It was at the Tools of Change Conference in New York City.

Len: 2008 you mean, I think.

Mark: Oh, sorry.

Len: You said '18.

Mark: What's a decade between friends?

Len: Just wanted to be clear, yeah, yeah.

Mark: Yeah, so 2008. February 2008, New York City. That's when we announced Smashwords, and we opened up our beta, started accepting beta testers. And then in May, we publicly launched.

By the end of the year, we had 140 books, from 90 or 91 authors. And on a good day we were selling about $10 worth of books in our little bookstore. And our commission is only about 10% of the list price, so we were bringing in a whopping $1 a day in that. And meanwhile, I was burning a $10,000 a month hole in my pocket.

Len: And what were your early adopter customers like, if you can recall? Were they already people who were kind of technically-minded themselves, or they people who were just like, "Wow, this sounds interesting. Let me give it a try."

Mark: They were just ordinary writers facing the common challenge. They were unable to find a publisher. They had written a book, fiction or nonfiction, that they had great passion for - and wanted to get their book out into the world.

Certainly at that time, self-publishing was not the option of first choice for anyone. But these were brave authors, and I've got mad respect for them. They were the early adopters. But yeah, it was just ordinary writers.

Len: And so, your group of writers grew and grew over time. And I imagine you were adding more and more features to the site. And then eventually it became - actually, my first entry to Smashwords, when I learned about it years ago, was actually as a distribution service, rather than a bookstore. How did that come about? Because you provide - as I mentioned in the intro - you're the biggest distributor of independent ebooks in the world. And you do this by - people just have one point of entry, where they can even upload an ebook file that they've made, add some information around it, and then it can be distributed to all these different services at once.

Mark: So, going back to the end of that first year, when on a good day we were netting $1 a day. At that point, the business was not looking very viable. And so, I had to do some serious self-reflection. I knew that if we had been backed by venture capitalists, they either would have wanted to pull the plug on us, or had us move in a new direction, like doing something we never wanted to do, like charge authors for our services.

But, I eventually realized - it took me a year to realize this - that readers go to bookstores to buy books, to discover books. And no one had ever heard of this dinky little Smashwords store. And I looked around, "How do we get our books into the main bookstores?" And it became clear that we needed to find a distributor. But, when I looked at the major distributors out there, like Ingram, the world's largest book distributor, they only worked with large publishers.

And so I went to my CTO - and I remember suggesting this. I said, "What if we became the Ingram of self-published books? What if we became a distributor?" And we just laughed at ourselves. We didn't know anything about distribution. So it was in 2009 that I started putting out some feelers, and got connected with Barnes and Noble, and got connected with Sony - and had discussions with them. And to my surprise, they wanted all of our books. So by that time, mid-2009, I think we were up around 1,000 or 2,000 books - and they wanted them all. And so we began distributing the books to these major retailers. And our books started selling.

That was a smart move for us. And from that point forward, we decided, "Okay, we're a distributor." That's what we're going to focus on. And we're going to focus on growing our distribution network.

And when I first heard rumors that Apple was coming out with the iPad, I started calling into Apple. I didn't know anyone at Apple. I heard that they were going to do a bookstore, and we got connected with the people at Apple.

And they, I still remember this to this day, they said, "Look, we're doing this store. If you want, we're going to be working with a small number of aggregators" - which is their word for "distributor" - "And you're welcome to be our aggregator, if you can jump through all these hoops in the next two or three weeks." And there were a lot of hoops and a lot of requirements. And my CTO, Bill Kendrick, did an amazing job, and we dropped everything. We were even in discussions with Amazon at the time to distribute to Amazon. We just put Amazon on hold, went whole-hog into Apple - and managed to have like 2,200 books in their bookstore on day one, when they launched their bookstore. That worked out really well for us. By early 2010, it was clear that our future was in distribution.

Len: That's a really amazing story. I should mention - you've just reminded me - a few years ago, I interviewed Derek Sivers for this podcast, the founder of CD Baby, which was the first independent CD distribution service online. And he was there in the early days of iTunes and things like that, and had some interesting stories about interacting with Apple - that sounded like they might not have been quite as positive as yours were.

But the idea of being there with a big company like that on the ground is just - something like that is just so exciting and such an interesting part of the history of these -

Mark: Yeah - our relationship with Apple has always been awesome. I've just always been impressed by Apple. They are pro-creator. There is a deep respect within Apple for people who create stuff - authors, musicians. And it really shows in their policies and in their technology and their sophistication, and how they engage with distributors and with authors. They've really been fantastic to work with these last ten years. I can't point to a - I even put this in my end of year post). I can't point to a single policy change that Apple has made over the last 10 years that did anything that was harmful to authors. And that can't be said for some of the others. Yeah, we might.

Len: I think we'll be getting to some of these others a little bit later in this interview. But I mean, there's so much that we can talk about, so many of the innovations that you've seen in self-publishing over the years. Like, for example - convincing authors that giving away a free book can actually help you sell more books.

Mark: Right, and that's something that we were doing from the very beginning. That was one of these radical ideas when we started working with bookstores. We told them, "We want you to be able to accept our books that are priced at 'free'." And they were like, "What? Why? Why would you want to sell something for free?" I remember Barnes and Noble hadn't even heard of that concept, and they even had to do something kludgy with their system to give the book like an imaginary price of a penny. They've obviously evolved beyond that now.

I even remember speaking in those early years at conferences, and encouraging authors to have at least one book that's priced at "free," as a way to make more money. And I remember people in the audience just looking at me like I was smoking opium, like I was crazy. But I knew that it would work going back to my years of experience at McAfee, 15 years earlier. That was viable.

Len: Another battle that I know you've probably had to fight over and over again - convincing authors, talking to authors about, is also DRM, and concerns about piracy. What's the of official Smashwords position on whether or not authors should be worried about piracy, and whether people should use digital rights restrictions on digital products?

Mark: Well, I've always been an opponent - I've always been opposed to DRM, to copy protection schemes. DRM and these different copy protection schemes just penalize honest readers. They make it impossible for an honest reader to enjoy their book, to read their book across multiple devices.

Piracy is a problem in the industry, it always has been. But my advice to authors is that there's really only one surefire way to prevent piracy, and that's to never publish. If you do publish, and you achieve any amount of success - you are going to get pirated.

Most of the piracy that happens is going to be what I refer to as accidental piracy. So it's that enthusiastic reader who discovers you for the first time - you rocked their world, and they want to share your book with their friends and with their family. And that's going to happen. When that happens with a paper book, no one calls it piracy. But when it happens with an ebook it is piracy. I just encourage authors to consider this the most effective, lowest cost form of marketing that they're ever going to enjoy - is word-of-mouth marketing.

We, I would never encourage piracy. I know there are authors out there that will actually upload their own books to the pirate sites, because they believe it helps them sell more books. I don't advocate that. But piracy is - it's going to be a fact of life. I don't want authors to go out there and sign up for those anti-piracy services. It'll send you an email multiple times a day that they found a book that they suspect is your book pirated on some pirate site. If you are bombarded with emails like that throughout the day, you're never going to get any writing done.

Len: It's really interesting you bring that up. It's a mindset, and a set of feelings, that drives a particular type of person to be really concerned. And not just concerned - we should all be concerned about things like piracy. But to get emotionally wrapped up in it, right? I think anyone who's been pirated knows the feeling of shock you get when you see your thing pirated somewhere.

Mark: You feel violated.

Len: You feel violated, that's very true. But don't be like the guy who recently published an article in the New York Times where he talked about keeping a folder in his email called "Thieves," where he stores links to all of the places online where he finds his books stolen. I remember reading that and just thinking - how sad - this idea of authors sitting alone in front of their computers, looking at the internet for pirated copies of their books and feeling really bad about it. Just like - I know how bad it feels.

Mark: Exactly.

Len: But you need to get over it, and get active writing, which is what you should be doing. Please write. Don't let these people, in addition to sort of stealing your work, steal your mind, and your time—

Mark: And your productivity.

Len: And your feelings from you, as well.

Mark: Right, yeah. Because otherwise you're just going to be in a state of constant anxiety.

I'm in touch with writers every single day. I'm very accessible. I mean, anybody can email me any time, and I will do my best to respond to you. I've lost track of the number of times that writers have contacted me, angry that the reason that they've only sold one book over the last year is because their book's been stolen millions of times. And no - that's not what's happening.

I remember the very first year of Smashwords, some guy said to me, he said, "Do you think I'm a fool? The moment I upload my book to your site, it's going to get pirated millions of times." And my response was, "If I could pay $10,000 to have my novel read by a million people, I would love that." I would love my book to be stolen by a million people. It would probably lead to movie deals and all kinds of great benefits that I can't even imagine, if only I could get read that widely with my novel.

Piracy's going to happen. There are things that you can do to minimize it. And this is what we encourage authors to do. Number one, distribute everywhere. Often piracy is a symptom of creating demand for a product, but not fulfilling the demand. If some reader in Brazil sees on Facebook from their American friends, they learn about some new book - but they can't buy it from a Brazilian bookstore, and they can't buy it in their country - then, well of course they're going to try to find some way to get that book. So make sure your book's distributed everywhere. Make it easier to purchase than to steal. That's a big thing to do.

Price your book so it's fairly priced. If you're writing a novel, don't try to sell the book for $25 as an ebook. Customers don't want to pay that.

And then the other thing that we recommend is, there's something called the "Smashwords License Statement." I've put this into the public domain. I encourage anyone to take it, steal it. It's just a statement that you put at the top of your book, along the lines of, "This book is licensed for your personal enjoyment only. If this book was not purchased by you or expressly for your enjoyment, then please honor this writer's hard work and purchase your own copy." It basically says that.

So it appeals to a reader's moral and ethical obligation, without fire and brimstone threats of $500,000 fines for stealing this book. I think that's a really good way to just gently remind people, remind readers of their obligation to support the author. If you do those three things, I think piracy's not going to be as big of a deal for you.

Len: Another really interesting thing that's been learned or known, or communicated to authors over the years - one is, as we've mentioned - is to give away a free book, that often can really help. Another one is, don't get preoccupied with piracy all the time.

And a third thing is preorders of books, that I know you've talked about being really important. So, this is the idea that if you can have a web page out there where someone can buy your book in advance, then you get their attention and their money - you get their money when you've got their attention, and you're more likely to get a sale that way than if they have to remember to come back and look later, or wait around for an announcement of the book sale.

But in addition to that - and anyone, on preorders, can probably Google online and find all kinds of self-publishing blogs where you hear all about the value of that, and indeed from Smashwords - does annual sort of data posts. You've got a new thing, which is presales), which you've indeed filed a patent application form for. So, I was wondering if you could talk a little bit about what, what presales are?

Mark: Sure. So, let's talk about preorders a little bit more first. We've been doing preorders at Smashwords now for close to eight years - seven or eight years. And yes, preorders are one of the most impactful, best practices that any indie author can take advantage of, because of that ability to capture the order in advance, at the moment you've got the reader's interest and attention.

Presales is different. With a preorder, you're placing a reservation on that book. And then you have to wait until the book's public release date to be able to pay for that book, and to be able to read that book. With presales, the author is able to make their book available to the reader in advance of the public release date. This has been my focus in much of the last year.

We're really excited about it. We're so excited about it - as we were developing the feature at Smashwords to do presales, and to be able to manage multiple release dates for a single book, I realized that this is something that, if we just put it out like everything else that we've put out in the past, that everyone's just going to copy it. And so we wanted to protect the idea, we decided to file for a patent.

Developing the patent took a long time. We filed it this year, on October 22nd. It was a 65-page patent application. In December, so a couple months ago, we got notice from the US Patent and Trademark Office that they approved our application for fast track consideration.

So this means that we've been assigned a patent examiner, and that they're going to look at the patent, and evaluate it faster than they would have otherwise. We're eager for them to look at it, to react to it - and to get the patent ultimately approved, if we can. No guarantee that we can, but I think there's a pretty good chance that we will.

Len: Best of luck.

Mark: Thanks.

Len: I've been tangentially involved in a patent application process in the United States before, and I have some awareness of how many lawyers, and how many hours, and how much money -

Mark: Yes.

Len: Goes into the process. I should say in the context here, I guess two things. One is that Amazon patented one-click buying on its site. I believe that's - in some sense, kind of expired now. But the idea of patenting processes like this is not new, and it's there to protect people's intellectual property, and to encourage innovation, and things like that.

And just to maybe give people a sense of the scope of this idea - it's not only intended to be used by people for selling ebooks. It can basically be used for any sale of digital products online. And so in the same way that, like, the one-click ordering actually is a real - like, there aren't really so many deep e-commerce innovations that you really see all the time. But this idea, of having a process for letting customers get involved in a presale of something is actually a really sort of deep e-commerce innovation.

Mark: Thanks, yeah. So yeah, Amazon's one click patent expired about a year ago. But that was a tremendous innovation that gave Amazon incredible strategic advantage over the last 20 years. It's really difficult to get that type of patent. People refer to it as a software patent. So I have no illusion - it will be difficult for us to get this patent. But if we can, it will be all the more valuable.

One of the reasons I'm so excited about presales is I think it's going to help - it’s going to create a new competitive arena. It's going to create new opportunities for product creators, for authors.

Because I think there's a lot of value, from a consumer perspective. Consumers value timeliness. If there is a product that they are looking forward to receiving, some new upcoming product - there's a lot of value attached by the consumer to be able to purchase that product early, or to be able to enjoy it early.

And so I'm looking at the millions of self-published authors out there, who are self-publishing their original works, they're out there generating demand in the marketplace for their works. And if they have the ability to offer a presale, which is highly desirable to a customer, then the author has the ability to trade something for that access.

I can give you an example of how we implemented presales at Smashwords. You can upload a book to Smashwords as a preorder - we'll distribute that preorder to all of our retailers, and that preorder has that public release date. But you can do a special presale - either a private or public resale - in the Smashwords store in advance of your general release date. And you have the opportunity to trade something, or to gain something that you wouldn't ordinarily gain from an average retailer.

Something that I think is really important for authors, is to build a marketing platform that they control. Any time that you're selling through a typical retailer, that retailer controls the customer relationship. So your relationship with readers is mediated by that retailer. Or your access to your perspective readers is mediated by a social media platform. And that's dangerous when your relationship with your reader is mediated by someone else.

I think every author should focus the majority of their marketing time on thinking about, "How can I build a platform that I control? How can I build my private mailing list?" Because once you've got your readers on your mailing list, then you can contact them without having to go through some gatekeeper. This is really important. Because if indie authors are going to be the captains of their own destiny, if they want to retain their independence, they need to have a relationship with their reader.

Len: That's really well said. That reminds me, I had a self-published author on here who said basically the exact same thing, about something that happened early in her self-publishing career, where she got kicked off Twitter. She never figured out why. She was back on pretty quickly, but she had a moment of clarity about the importance of being in control of your own relationship with your readers, and with your fans - and so she started her own website, and it's brilliant, and stuff like that. It was a really hard slog - she had to learn how to maintain that too.

But when you talk about independence and control - so there's control that a service might have over your relationship with your current, past, and future potential readers. But there's also control of you, the author - and control of your books.

I'm trying to draw a connection here, because I drew it in my mind when I was researching for this interview. I'm not sure if it's a real connection that was partly driving the focus that you put on developing this presales idea.

But one thing that services like Amazon - which we'll be talking about pretty shortly - I think, do, is they can place restrictions on you. So, if you want to be on this particular platform, you can't price your book any differently anywhere else. Or, you can't price it lower anywhere else. Or you can't even distribute it anywhere else. And so the idea - it struck me that the idea of a presale is a very powerful tool for helping authors navigate around the kinds of restrictions, that they might be subject to, at a later point in their journey with a book.

Mark: Yes, certainly. And it's an opportunity for the author to leverage the desirability of the presale, to negotiate something favorable to the author. I'm imagining a future where retailers compete for the right, for the privilege to carry your presale. So imagine if - your book is on preorder everywhere, but imagine a retailer's able to say, "Okay, Sam Smith, author, you've got a great track record in our store, we want to carry your presale." And they want to carry it exclusively. "And if you'll give us the exclusive right to carry your presale, then we'll pay you an 80% royalty, or whatever." Or, "We'll give you this merchandising support in our store," or some benefit.

So the author's going to have the ability to trade access to their presale for some benefit that benefits the author. That's kind of longer-term what I'm thinking, but even shorter term at Smashwords, we're doing something that no other store does. With the launch of our Smashwords presales, we give customers the option to subscribe to your private newsletter while they're checking out their presale purchase.

Len: It struck me, thinking about this. I'm not a big gamer myself - but man, would this idea be a huge -? I mean, there's something that you can get in exchange for it - like someone's email address on your mailing list. But there's also just straight up money. I can imagine, if you were offering early access to the next Zelda game - if you did a presale of that, you can just imagine how crazy everybody would go. And the thing is, it's a fun idea, right?

Mark: Right, yeah. Well, certainly for games, really huge. Or huge with books, or with music. Like, imagine you're Taylor Swift. You could probably get Apple or Amazon to pay you in advance - just to sell your book, sell your next album two days early on their platform. All of this is covered by the patent, thinking ahead. And not just for digital products like ebooks, and music, and games - but also physical products. Anything that's sold online could be sold as a presale. Anything that customers - any new product that customers desire, could be sold as a presale online and sold in a way that the creator of that product is able to accrue special benefits, simply because of the demand for early access.

And we already see - when most people think about presales, they think about ticket presales for ticketed performances. But those presales that people take advantage of with tickets is, they're really more akin to preorders. You might be able to buy your ticket early as a presale, but you can't enjoy the event until the public event - until the public enjoys it. So this is kind of a radical idea to be able to enjoy the product early.

Len: Speaking of issues of control and independence, one of the reasons I chose this moment to invite you to be on the podcast, which I mentioned before we started recording, was your latest end of year post on the blog, the Smashwords blog. The post was called House of Indie on Fire.

Just for anyone listening, Mark has, for like 10 years now, been writing these end of year posts that make predictions about the future. They're really interesting time capsules.

I'm going to quote you back at yourself, so my apologies in advance for that. I'm going to quote a couple of sentences. But I wanted people to hear these in the context of what we were talking about a little while ago, about the motivation for creating Smashwords in the first place, for unleashing - for making available to the world books that otherwise would not have been made available to the world, and the independence that is required in order to do that.

So you wrote: "I celebrated the virtues of the indie author movement back in 2014 when I published the Indie Author Manifesto. I celebrate the movement and its world-changing potential to this day.

Yet it’s becoming increasingly clear to me that the indie author movement and everything it represents is in jeopardy. Authors liberated themselves from one gatekeeper only to find themselves in the clutches of another."

Mark: So there are multiple gatekeepers. When we first came on the scene 11 years ago - self-published authors, the early self-published authors - for them, self-publishing was an act of liberation, an act of defiance. A way of saying, "Well, screw you traditional publishers. You don't see the value in my work, so I'm going to self-publish. And I'm going to find success on my own terms, without you as a gatekeeper standing in my way."

Yes, thanks to self-publishing, and thanks to ebooks - it's thanks to ebooks, that enabled major retailers to stock every self-published book. So, ebooks are a big part of this democratization.

So there we were in 2009, 2010 - suddenly every self-published author in the world had access to every major retailer in the world. That was wonderful. That was a cause for celebration. Many of our authors that previously were unable to get a traditional book deal, or even unable to get an agent, found themselves USA Today, New York Times bestselling authors. Finding a global audience of readers, that was wonderful. So much celebration. But, what we've seen now over the last 10 years, is that the gatekeepers have creeped in. We talked earlier about how a social media platform, or a retailer, can mediate your relationship with your potential readers. Well, we saw a few years ago - it was a big controversy within the indie author community, Facebook. Authors had invested so many years and so much money, developing their following at Facebook, only to have Facebook turn around and hold your readers hostage, and start charging you advertising fees and promotion fees - simply so that what you're writing can appear in the news feeds of people who already said they want to follow what you're posting. That's an example of a gatekeeper stealing something, there.

And then of course, Amazon is the most brilliant example of a retailer with a really unique business strategy, a strategy that's different from any other ebook retailer. They're in the business of commoditizing everything that they sell. And there's a reason they want to do that. They want products to seem interchangeable to their consumers, because when they do that, an individual author or publisher no longer has any power in their store. And then Amazon has the ability to start dictating terms and prices. So, what is your royalty rate going to be? What can you price your product at? Can you even sell your product at other stores, other than Amazon?

What we've seen with Amazon starting in 2011, they announced KDP Select, which required exclusivity in their store for a period of three months. When they first launched that in December 2011, I did a blog post the very same day, warning authors that this is dangerous - that you're going to starve all these other retailers that want to support you of your books. And if you starve these retailers of your books, you're going to starve these retailers of customers, you're going to starve them of their ability to support you in the future.

I warned authors at the time that they risked becoming tenant farmers, tilling Amazon's soil. I warned authors that they should study the Irish potato famine, because that's what was going to happen. And unfortunately, that's what has happened.

What's happened has even been worse than what I'd predicted. We're in a state today where there are many authors that are exclusive to Amazon, getting 100% of their earnings from Amazon - and even authors that aren't exclusive to Amazon, might be getting 70%, 80% of their earning from a single retailer.

As you probably saw in the blog post, I raised the question - if you're getting 70%, 80% of your sales from a single retailer, can you honestly call yourself an independent author?

This is a really difficult question that authors need to start grappling with. Are we still indie authors? Are we still the captains of our destiny? I would argue that our independence has been slowly stripped from us as authors. I would also argue that we've been complicit in that.

Every time an author enrolls their book in KDP Select, they are casting a vote for every other retailer to go out of business.

Now, I've been talking about this since 2011, and I know that when I talk about it, it can be pretty upsetting to authors. And I totally understand that and respect it. If you're getting most of your earnings from Amazon, and your author earnings are what puts food on your family's table and pays your rent - then can I really blame you for doing what's in your best interest?

Len: It's really interesting. I hadn't quite put together - I'd heard you make the commodification point before, but I hadn't quite put together what was really behind that. Rhank you for explaining that so clearly.

One of the interesting things - you mentioned Facebook changing things up. And that reminded me, another thing you see that can be dispiriting in the indie author community, is people just spending - I talked earlier about people spending all their time looking for pirated copies of their books online. Another thing is spending all your time trying to game the algorithm.

Mark: Right.

Len: This isn't new. This isn't unique to books. I mean, Google will change things up, and all of a sudden your website, for whatever it is you're doing, doesn't get any attention anymore. But the technicalities of it aside, the idea of getting into that mindset that there's this algorithm that somebody can just yank on and change - and is being changed all the time, and when you start applying machine learning and stuff like that, no one - there isn't even going to be some evil genius out there who kind of knows something and is pulling strings to get you.

The idea is that part of being an author now involves something that it didn't involve before. It always involved marketing, it always involved treating it like a business, but the idea that there's this one service with this - basically let's just call it one algorithm - that you're fighting with all the time. Instead of thinking about, "What's going to happen to my character in the next chapter?" You're like, "How am I going to draw attention? Should I have the character do that? Because this software's going to be looking at it and going, 'Oh, no one died in chapter two, so I'm not going to promote your book as much as it would otherwise.'" I mean, just the weirdness of the things that you can get preoccupied with.

Mark: Yeah, well, I've written about this in the past and it's really kind of a - it's sad. Anybody who spends any time online with authors, and looking at what authors are talking about online, invariably those discussions devolve into, "How do I I please the algorithm? How do I get the most out of KDP Select exclusivity, and Kindle Unlimited?" And, "How do I do a better job of running Amazon ads?"

People are focused, so many indies are focused on these things that are really the wrong things to be focused on. You should be focused on writing, not on how to please a single retailer's algorithm.

But again, step back and look at - Amazon is masterful at creating policies and systems that shape a certain behavior among their product suppliers, among their authors. Amazon knows that writers write for many reasons. And, often the number one reason isn't about money, it's about being read. It's for self-expression. And you can't express yourself unless you're read by somebody.

Amazon knows that there are enough writers out there who value readership over money, that they can continue to reduce what they pay authors. The effective royalty rate at Amazon has been dropping for years. Originally, they were paying 35% list. Then Apple came along with their agency price, their agency offer and started paying 70% - so Amazon started paying 70%. That was going back to 2010. Amazon did that because of competition.

But even from the beginning, Amazon has found ways to pay authors less. There's a delivery fee for the file size. Then, when they introduced KDP Select and Kindle Unlimited, and starting paying not based on the price of the book, but based on the number of pages that are read - so they're changing all the metrics that determine how an author reaches readers, how they're discovered by readers, how they're compensated for their books, and in every instance Amazon is finding creative ways to pay authors less, to strip authors of their independence, and make them subservient to their platform.

Len: And so what would you recommend? We can probably infer from what you've said earlier - but what would you recommend indie authors do to change the course of things over the next decade, so it doesn't continue along down this path? Because who knows, if it continued down this path, where it could be in 10 years.

Mark: Well, for the many years that I've been talking about this now - I've been talking about how it's not too late. What you need to do is respect your own independence, fiercely protect it. Any time anyone does anything that strips you of your independence, that strips you of your ability to have self-determination over, what is the price of your book? Where am I going to sell my book? How long can my book be? How short does it need to be? Anything that strips you of that independence, of that free will, of that self-determination - you've got to fight against it.

So the first thing to do is to understand that if you're going to make your book exclusive to Amazon, that that exclusivity comes at a price. So yes, you will make your book more visible, but what is the price? It means you can't sell anywhere else. It means all those other retailers that are spending millions of dollars every year to support you and your fellow authors - they're starved of your book, they're starved of your book sales, they're starved of your readers. They're going to lose readers, they're going to lose business, they're eventually going to go out of business. And when there are fewer retailers competing for the favors of indie authors, that's a recipe for the remaining retailers to say, "Look, we don't need to pay you 70% anymore. We can pay you 10%. Or hell, we can charge you to be read."

And that's what's happening. That's happening today. It's happening today at Amazon. You look at the indie author discussions, it's all about pleasing the algorithms - as we talked about. It's pleasing Amazon Advertising. Amazon ads are a tax on your earnings. It's a way of effectively reducing your royalty rates. So even if you're going to earn close to 70% list on the book, if you've got to spend a whole bunch of money to reach that reader - your effective royalty rate might drop to 50%, 20%, 10%, or even negative. And that's what's happening.

Len: That reminds me - this is kind of like getting into the weeds, which I like to do nearing the end of these interviews. But one example that I think you've written about with the Amazon ads is that - if you do a lot of work to bring attention to your author profile page - say, on Amazon - or maybe I'm just making that up. If you do a lot of work to bring attention to one of your books on Amazon, Amazon can know that, and it will sell ad space at the top of your book page, to other people on Amazon, so that they can benefit in that way, and maybe even draw people away. Like, now they want to read this other werewolf novel instead of, instead of yours.

Competition in marketing has always been a thing, but the promise that Amazon gives you and the reason people go there is, "We're gonna give you eyeballs." But it turns out they're in control.

Mark: Let's talk about that for a second. I would encourage every one of your listeners to do this right now. Go to Amazon. Go to their homepage. Click to the books section, and then type in your pen name. What you're going to see is the first the rows of search results have been sold to advertisers. So, Amazon is engaged in the systematic theft of author platforms. There's no other way to put it. And this is by design. So all these authors that are advertising on Amazon Ads, you are trampling on the platforms of your fellow authors. And as an author, your platform is being trampled on by other authors who are advertising there.

Amazon is selling your platform, selling your brand name to the highest bidder. I mean, think about it. It is such a customer disservice. If I'm a reader and I go and I type in my favorite author, "Sam Smith." I'm just making up the name. And the first three rows of results I get are not books from Sam Smith, what the F is that about?

Len: They're making money off whatever popularity you've gained.

Mark: Yeah. So they're trading off of your brand equity, that you labored years to develop. They're selling it to someone else. In my mind, that's just unconscionable.

Len: I think it's particularly resonant in the indie world. You spoke about the $10 in revenue a day, and the $1 in profit, as it were. What I really appreciated about the way you told that story, is you were telling the same story that a self-published author starts out with. And the thing about being independent as a business person, which includes being a self-published author, is that you really feel this direct connection between - and often without a budget for marketing - you feel this direct connection between all the work that you do, and then the attention that you can somehow scrape together and manage to get.

That's different from if you're like, let's say working in the marketing department for a company selling product. I'm sure that people like that don't like having someone Google, "Colgate," and have some other brand of toothpaste show up at the top of the search. But you'll understand it, you're in the marketing game. You're big companies competing with each other. But when it's these independent authors who are doing their own marketing, it's just - it seems qualitatively different.

Mark: Yes. It is different. Because we indie authors, we are the manufacturer of our product. We don't have big marketing budgets. We can't outsource our writing to China. It puts authors in a really difficult position, and Amazon knows this - that authors are in a vulnerable position. That authors are desperate to be read. And authors are willing to do just about anything to get read.

Len: Moving onto the next part of the interview, I said we can get a little political.

Mark: Alright, I like politics.

Len: And so there was recently - I won't go into detail explaining it. There was recently a huge scandal at the Romance Writers of America organization.

Mark: Yes.

Len: An organization that I know you're very familiar with. I believe you received an award from them?

Mark: Yes, I received the Vivian Stevens Industry Award this year, this last year.

Len: One thing I'd like to say - for those listening who might not know, romance writers have been some of the most innovative and creative drivers of new techniques for independent book selling that there are out there. Genre fiction more generally - those are the authors who've really sort of - What's the cliche? Pushed the envelope, or whatever. They've been there at the forefront, for us.

And the other thing is that - I mean, in particular - romance writers write about sex, but they also write about love - and these are things that people care a lot about.

Mark: What's more important in the world than relationships?

Len: And so what happened was, there was a diversity related scandal at the Romance Writers of America organization. I will put a link in the transcription of this interview, so that people can da very deep dive in that if you want to, and you kind of have to - to understand what happened.

But I said I wanted to talk about politics. And there's something to me that's always seemed like there's - there's something about fiction, and good fiction and good writing, that inherently tends towards what, in contemporary discourse, we call "liberal mindsets." There's something about being imaginative, just being creative - that leads you away from obedience to prior models that have been passed down to you.

And so, although there are many, many, many sort of conservative writers out there, in their entirely conservative genres - it's always seemed to me that there's been something just inherently problematic about engaging in writing and trying to be conservative. Because, I mean - to begin with, why are you writing? Who do you think you are, right? You were talking about that a little bit before, the reaction that people have to self-publishing authors.

Mark: That's true of any writer.

Len: Who do you think you are? Didn't Burke just write it all down in his Reflections on the Revolution in France, and now we're just here to pass that on to future generations? And this spills over into education as well, right? Because you'll see - people say that, "What education should be is about training good citizens." I think Jeff Sessions said this - ithould be about training young people to be good citizens and passing on the wisdom of previous generations.

And it's like - if you have a kind of writer-ly mindset, or an intellectual mindset - that just doesn't make any sense to you at all, and that's what you kind of exist to fight against.

That's how I feel about it. Anyway, I just wanted to ask you, in the context - is diversity inherently is something that will be defended and promoted by writers?

Mark: Well, I've been thinking about this lately - watching what's happening with RWA, and it's really sad what's happening there. I kind of approached - when I started Smashwords 11 years ago, I thought the average writer is going to be more intellectually advanced, more independent-minded than the average person. But I'm changing my views a little bit. I think writers - I mean, one thing that writers have that the average person doesn't have - is intense passion for their ideas, for their stories, for their knowledge - if they're writing non-fiction.

But beyond the passion, which is an incredible quality that I admire, writers are pretty much like everyone else beyond that. There are some of us who are very independent-minded, and will fiercely defend our independence. And then there are others of us who are meeker, milder, wanting to associate ourselves with someone who's going to do the work for us, or associate ourselves with an entity that is large or big or powerful, or that's going to take care of us. They're completely different mindsets - as diverse as humanity is diverse.

At its core, self-publishing is - it's about diversity. It's about celebrating everyone's contribution. Enabling the celebration of everyone's contribution. I mean, I believe that everyone has something useful to contribute, if they want to write a book. But we haven't seen - when we look at like how the indie author movement's played out over the last ten, 11 years - and if you read my end of year blog post this year, my views have gotten pretty dark lately. Do indies really have what it takes to move the ship in a right direction? I've started having serious doubts about that.

When we look at what's happening with RWA - they're grappling with some really big issues - issues of diversity, issues of inclusion. And how do you celebrate all the different voices in your organization and give everyone a level playing field? And how do you deal with some of the gross injustices that have been institutionalized for hundreds of years? There's really difficult questions to grapple with. And so what we're seeing with RWA, is they're struggling with the same challenges that the rest of society is struggling with.

But like most things that are exposed to social media, where people can write - that's one unique thing here, is that RWA members are really good at expressing themselves - and social media makes it really easy to express themselves. Which makes it really easy to love something really hard, or to hate something really hard, or to be angry about something really hard. And I think what we're seeing at RWA is that social media, combined with writers who are really good at expressing their feelings - it's kind of a potent combination that creates a like really intense energy around these issues at RWA. These are really important issues that RWA needs to grapple with.

But the intensity of it all hitting so hard raises questions. Can an organization like that survive? How do you keep your membership happy? How do you serve the diversity of your membership? I think we would all agree that diversity is wonderful, and diversity makes us stronger, not weaker. But how do we get there in a way that serves everybody, and that's equitable for everybody? I don't know what the answers are. I'm glad to see RWA's trying to focus on it. I hope they can pull through it. Time will tell.

Len: Thank you very much for sharing that. I really didn't frame that well, and you managed to give a good response in spite of me doing a poor job of it.

So, the last thing I'd like to ask you, and this is much more light-hearted than many of the things we've spoken about in this podcast, although, still serious and consequential.

Whenever I have someone who's an expert on the book publishing industry on the podcast, I like to ask them about Barnes and Noble. You were talking about steering, riding the ship and things like that. So recently, there have been some big changes - OverDrive. for example, which distributes to libraries and schools, was acquired by KKR, the private equity firm. And Barnes and Noble was recently bought by another investment firm. And they brought, after years of, at least from the outside, apparent disarray - they brought in a new CEO named James Daunt, who is well known in the industry for having turned around the Waterstones book stores in the UK.

And Barnes and Noble, which I know that Smashwords actually has a history with, with respect to ebook distribution and stuff like that -

Mark: Yeah, we were the first to bring them into self-publishing.

Len: It's a great accomplishment, which I think all self-published authors should thank you for accomplishing. But, what's your opinion of the prospects for Barnes and Noble weathering the storm, and the ship being righted?

Mark: Their future - if things continue as they have in the past over the last ten years, their future is bleak. I'm hopeful that James Daunt can turn things around. But they've got a real challenge ahead of them. And the biggest part of the challenge is Amazon.

Now the same challenge that Barnes and Noble faces, any other pure-play book store faces as well. So the other big store of interest to indies is Kobo. You look at Kobo, and you look at Barnes and Noble. These are two pure-play book retailers. They can only survive in the future if they can make a profit selling books.

Yet they're competing against a company, Amazon, that doesn't need to make a profit in books. Amazon - part of their business strategy for the last 20 years, has been about basically reinvesting all of your potential profits back into the business, so that your profitability is driven down to zero - so you don't have to pay taxes. That's a sensible strategy for someone like Amazon, with a long term business perspective. And it's one of the secrets to their success. But if you're operating Barnes and Noble or Kobo, you can't stay in business if you're not making a profit on selling books.

And when you've got a company like Amazon that is effectively dumping books on the market at below market cost - that's what they're doing with Kindle Unlimited. How does a bookstore compete against that? A bookstore that's trying to sell single copies of a book. If you can go subscribe to Kindle Unlimited, you've got a million and a half reasons never to buy another single book again. So how do they compete against that? It's really difficult.

Barnes and Noble's strength is they've got the physical footprint. They can build community around those physical locations. They can do things for readers and for authors that Amazon can't do. Because they don't have that physical footprint, that physical meeting place, the community that is possible when book lovers come together face-to-face in a book store.

So to Barnes and Noble's favor, they've got that as an advantage. But Barnes and Noble, on the print side - they're still very dependent on print. We see what's happening with their ebook sales, and it's pretty dismal. Their ebook sales are dropping double digits, every single year for the last five years. Their print sales are completely dependent on traditional publishers. Yet traditional publishers are under a lot of pressure from Amazon. So what happens if some of the large publishers start failing? Or if the consolidation continues, and it probably will. What happens when those traditional publishers are doing fewer print books? It puts the book sellers in a difficult position.

Len: Thanks very much for sharing that answer. It reminds me that we could probably record an entirely new feature length podcast interview, talking only about book sales numbers for print, and ebooks as well. Which is something - if you're ever up for a discussion about that, I'm happy to ask you questions - because that's something that I've got a bit of an interest in myself as well.

But we have reached feature length, and I wanted to say, thank you very much Mark, for taking the time to do this interview, and for being so forthcoming about so many different projects. I was kind of peppering you from all sides with bits from your past and from the industry.

Mark: Well, thank you for these thought-provoking questions - we've talked about some really important things today.

Len: Thanks very much.

And as always, thanks to you for listening to this episode of the Frontmatter podcast. If you like what you heard, please rate and review it wherever you found it, and if you'd like to be a Leanpub author, please visit our website at leanpub.com.