The only way is up

Have we reached the digital royalties tipping point yet? Minds have certainly been focused by Andrew Wylie's launch of Odyssey Editions, and that exclusive two-year deal with Amazon, which as HarperCollins UK chief executive Victoria Barnsley noted in a news piece on this morning, leaves Amazon as "the only winners".

In what now appears to be fluid situation, here are today's digital dispatches:

First, Marjorie Scardino, head of Pearson the world's largest book publisher, has publicly stated what is becoming increasingly apparent, e-book royalty rates will rise. Speaking at a press conference covering Pearson's interim results, Scardino said the industry was still in "the foothills" of the transition to digital books, but added "we will see a rise in royalty rates". She said: "Publishing digitally is cheaper - but paper, printing, that is only 25% of the price [of a book], so even if we could do away with that totally, it's not going to make a huge difference. But it will make some difference, and then we'll have to make sure we do right by the author."

Second, Penguin boss John Makinson has told The Bookseller that though he is not entirely comfortable with Wylie's move, there are bigger issues at play. "We need to keep it in perspective. We are talking about a very small number of backlist authors where the ownership of those digital rights is either ambiguous or owned by the author or the estate."

Makinson added that what was at stake was the primacy of the publisher as both the print and digital home for an author's work. He said: "On principle we will not acquire physical rights to new books unless we have e-book rights. And it's very important that the work of our authors is made available in as many channels as possible. Wylie's Odyssey venture strikes at those two principles because it separates the exploitation of digital and physical rights and enters into an exclusive relationship with Amazon."

While, not threatening to do a Random on Wyle, Makinson added: "If a major agency were to say to us, 'We will no longer sell you digital rights', at that point I would have no hesitation in saying 'I will no longer buy from you.' This is not that situation."

Third, the ever reliable US Authors Guild has sent out a statement headlined: "Wylie-Amazon: Publishers Have Largely Brought This on Themselves. Amazon Exclusivity Is Major Concern." As with Barnsley's comment, it captures the situation well.

The Authors Guild reckons that authors under the Odyssey-Amazon agreement could be receiving as much as $4.50 per unit more for each $9.99 Kindle book sold, when compared with a typical publisher's e-royalty rate—a 300% increase in author income.

The Authors Guild continues: "Bargain-basement e-book royalty rates will not last. Low e-book royalty rates will, as e-book sales become increasingly important, emerge as a dealbreaker for authors with negotiating leverage. Publishers will, inevitably, agree to reasonable royalties rather than lose their bestselling authors to more generous rivals and startups. We suspect publishers are well aware of this and are postponing the unavoidable because it seems to make sense in the short run. We believe this is short-sighted.

"A major agency starting a publishing company is weird, no matter how you look at it. This sort of weirdness will only multiply, however, as long as authors don't share fairly in the rewards of electronic publishing. Publishers seeking to manage this transition well should cut authors in appropriately. The sooner they do so, the better. For everyone."

But it also notes: "Adding to Amazon's strength may yield short-run benefits, but it's not in the interests of a healthy, competitive book publishing market."

Last (for now), are e-book rates, at least for backlist, already on the increase in the US? ICM agent Amanda Urban told the FT that they were: "We feel much more comfortable in giving our valuable backlist to publishers at very good royalty rates, which we are now winning." Urban said her agency had secured e-book royalty rates of between 40% to 50% from some of the big six major publishers, including Random House.



Royalty Rates

I can not see how any UK publisher could offer 45% of the retail price. With retailers asking 50% and VAT taking 20% (17.5% ), plus a standing charge to a digital warehouse to store the file and distribute. The publisher is left with less than 30% to pay that royalty. That is without any conversion costs.

If the royalty is net receipts it may work but not with the figures quoted above from the Authors Guild, that appear to be based on sale price.

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