PayPal, You've Met Your Match: Erotica Writers

Mark Coker of Smashwords became the leader of indie e-book writers—including some with dirty minds—in a fight against censorship and PayPal. He also has strong feelings about the DOJ's e-book pricing lawsuit.

Mark Coker is the CEO of Smashwords, an e-book publishing and distribution platform. Coker recently won a highly publicized battle against PayPal, which briefly refused to work with Smashwords unless Coker removed certain naughty titles from the site. Fast Company caught up with Coker and learned, among other things, that writers of incest erotica can be very articulate.

FAST COMPANY: What is Smashwords?

MARK COKER: We’re probably the world’s largest distributor of self-published e-books and e-books from small independent presses. We were founded in 2008. A writer comes to Smashwords, uploads a Word document, which we instantly convert into multiple formats to be read on a Kindle or other device. Those are then available for sale at Smashwords.com at a price set by the author. 85% of all proceeds go to the author, so we flipped the compensation model upside-down. In traditional publishing, in the best case, an author earns 17.5% off an e-book’s list price. In 2008, we had 140 titles; in 2009, we had 6,000 titles; today we have just over 115,000.

You recently came to prominence by picking a fight with PayPal, which threatened to stop working with you if you failed to remove some smutty titles from your store.

On a Saturday, I received an email from PayPal notifying me I had about five days to remove all books containing themes of rape, bestiality, and incest. That was upsetting; we’d been working with PayPal for almost four years. I offered to meet with them, but they responded that they didn’t take meetings, and this was their policy. By luck, I called in to the general customer support line, and person who picked up happened to be an author, a member of the Romance Writers of America. She knew who Smashwords was, and knew it was a legitimate platform for indie authors, and that kind soul volunteered to walk us through the process and connect us with people who could actually listen to us.

Initially, your outlook was bleak.

I did not think we were going to be able to prevail, so I tried to mitigate the damage. I pushed back and counseled them that I needed their help drawing a finer line, because these themes appear in mainstream fiction, and we can’t ban all mainstream fiction. Finally I made my own interpretation of how we would enforce the rules, and I announced a policy change that would give our authors about three days to remove books of theirs that contained themes of rape, bestiality, or incest for the purposes of titillation—that’s the line I drew. Though PayPal hadn’t explicitly said this, my interpretation was that they were targeting erotica. Erotica is very popular, about 20% of the sales on Smashwords, but the specific titles PayPal were targeting make up probably somewhere between 3-5% of total sales. I sent out the email, and instantly the protest erupted. I received hundreds of emails. I tried to assure people, “No, I didn’t throw you under the bus. I’ve been working nonstop for over a week to mitigate damage to you.”

Did you find purveyors of underage incest erotica to be surprisingly articulate?

We’ve never allowed underage erotica—we’ve always had a strict policy about that. But for the other folks, yes, I found them incredibly articulate and well spoken. Writers are great at communicating, and they were pissed off.

What happened next?

On Monday I received a phone call from a higher-level manager within the PayPal enforcement division. In that call we agreed to continue discussions in good faith, and that PayPal would not turn off its services while we gave it time to work this out. At that point I put into place a new strategy. PayPal had said that they were doing this only because of the credit card companies and banks they worked with. I thought if we could put enough pressure on the credit card companies, that would open the whole thing up. We got the press to start contacting credit card companies to ask if they were behind this or not, and we also escalated the email campaign to all our authors and then all our customers. The public anger rose, and ultimately PayPal wanted out, and the credit card companies relented and gave permission to relax the policies. I think with this incident, a lot of authors realized Smashwords was standing behind them. I think if anyone tries to push the indie author community down again, we’ll be there to help stand behind these authors. In the end I think it was a great victory for free speech, and shows the rising power of self-publishing authors in the publishing community.

What are your feelings about the recent Department of Justice lawsuit over e-book pricing?

In my view, the six big publishers were drowning in a swimming pool, with Jeff Bezos and Steve Jobs on the edge, each with an outstretched arm offering rescue—and five of those big ones went for Steve Jobs, because he was offering a pricing model that was superior. I don’t think there was any collusion, though it looks like some of the publishers made stupid decisions in terms of the appearance of collusion. And then I was just sad to see three of those five publishers roll over and agree to settle with the DOJ, because if you read the fine print of the settlement, they’re selling their souls. They’re agreeing to some very onerous terms, in terms of compliance, reporting to the DOJ, and even their ability to communicate with competing publishers. Now if the CEOs of those publishers walk past each other in the hallway at a conference, can they say hi? Can they talk about anything? These things they agreed to will slow down business and increase expenses at the very time these publishers need to become more nimble. If all the large publishers go away tomorrow, that probably benefits my business, but that’s not what I want to happen. I want there to be a healthy ecosystem of large publishers, because they have a lot of value to provide to readers, authors, and the entire culture of books.

Since you recently won a battle against censorship, I won’t censor myself here. When I look at publishing today, I tend to think, “What a clusterfuck.”

I don’t see it that way. No, I think we’re on the cusp of a global literary renaissance. I think this is the best time for anyone to be a writer. The opportunities for writers to reach readers with their words have never been better. This is just a golden age, an incredible time. All of the traditional gate-keeping systems have fallen away, and power is shifting from traditional publishers to the authors themselves. We’re witnessing a confluence of multiple disruptive revolutions happening at the same time. We’ve got the rise of self-publishing, and the rise of e-books. So between these big events, now it’s possible for any writer, anywhere in the world, instantly publish a book at no cost.

This interview has been condensed and edited.

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1 Comments

  • MoneyforMainStreet

    I think this is an even better example of the old adage that it’s
    sometimes better to be lucky than good. If Coker's call to the general customer
    support line, would have fallen on deaf ears the story would have been over
    before it started.  But, because of this luck, Coker gained one of the
    most important things we small business can hope for - an internal champion!
    Glad to hear it was a positive outcome but in many more cases we know what
    happens. So remember you never know where you will find a friend...