Publishing's Winner's Curse

In the climactic scene in Frank Norris' classic novel McTEAGUE, the two antagonists find themselves in the desert. Shady San Francisco dentist McTeague has murdered his wife to steal her money (Belated spoiler alert!). He is then pursued by his former best friend Marcus, who wants revenge slash money slash I only vaguely remember this I read it in college and that was kind of a long time ago.

A scuffle ensues in Death Valley. It's hot! Water is lacking! Tensions running high! Bad guy McTeague nearly kills Marcus in the fight. But just before Marcus dies he handcuffs himself to McTeague.

And thus McTeague finds himself handcuffed to a corpse, the keys are back in San Francisco, and Marcus has successfully ensured that even though he has lost the battle, McTeague will also die in Death Valley.


Book publishers are currently in retrenching mode. The slumping economy has not been kind to the print world. It has exacerbated many existing weaknesses (rise of e-tailing, rise of e-books, creeping omnipotence of e's and hyphens), and has forced publishers to examine their business models.

The publishing marketplace has been plunged into a great deal of chaos. And if, as I detailed in my last post, publishers can no longer accurately guess at an audience even for formerly safe categories like adult trade nonfiction, will they continue to gamble so much money on big advances for a small number of books whose success is increasingly difficult to predict?

Well, from a publisher's perspective, they're often willing to pay big advances because their profits hinge on a relatively small number of hits and bestsellers. Thus the authors/celebrities who can reliably deliver an audience become hugely valuable. If a publisher doesn't pay a healthy advance they risk losing their bread-and-butter authors and the most promising new projects to their competitors.

From an agent's and author's perspective, there's not always a strong incentive to move away from traditional advance/royalties either, simply because it's often appealing to bank the guaranteed money and head for the desert.

In economics they call this the Winner's Curse, which is the theory that when you don't know what an object is truly worth (e.g. how many copies a book will actually sell) the winner of an auction will tend to overpay relative to the actual value of the object. The theory goes that someone who wins an auction is often worse off than if they hadn't bid at all. (Was that Gladwellian? I hope it was Gladwellian.)

And so here we publishers and agents are, McTeague and Marcus style, handcuffed to each other in the desert, stuck with the advance and royalty model even if it's ill-suited for a time when success is nearly impossible to predict. (Who murdered whose wife probably depends on whether you work at a publisher or an agency. Also: send water!)

Is it time to think outside of the desert?

Nathan Bransford is a literary agent in the San Francisco office of Curtis Brown Ltd. and the author of JACOB WONDERBAR AND THE COSMIC SPACE KAPOW, which will be published in 2011 by Dial Books for Young Readers. He blogs at