Publishers should improve their royalty rates

The first thing I would like to stress is that, contrary to what publishers might think, I am not out to destroy the publishing industry. We are literary agents and our business relies on publishers so it will be very foolish of us to jeopardize the industry as it will in turn seriously jeopardize our business.
What I have done, which is to go out alone with e-books is meant to be a wakeup call for them so that they can rethink their strategy and build on their business of publishing books.  I am fortunate enough to represent an estate with a big enough backlist to make a bold statement that publishers, hopefully putting aside any resentment they may have, will understand what they will have to do.
For the record, I’m not the first to go direct. The Ian Fleming Estate has already done so, the Barbara Cartland Estate has announced they will do the same, and more significantly, the thriller writer Barry Eisler who walked away from a US$500,000 2-book deal from St Martin’s Press (crime imprint Minotaur Books) so that he could self-publish, and said that “I think I can do better in the long term on my own.” Although it wasn’t all financials, he did point out that “the 17.5% ebook royalty publishers are offering was looking less and less attractive compared to the 70% I can make on my own.”
In fact, Eisler is not the first to self-publish e-books although he may be the first to turn down such a lucrative contract. But it is happening to hundreds of authors all round the world who are doing the same. So how many more authors need to go it on their own before publishers realise that the deal they are offering at the moment, 25% of net proceeds, is just not enough if they are to hang on to some authors and their e-book rights?

Authors are pretty savvy today and they know what’s being offered by Amazon and other online retailers and they can compare these with the rates offered by publishers. The situation with publishers has gone so bad that they refuse to negotiate rates even with bestselling authors and have instead threaten not to offer to publish if the author is not prepared to agree to their fixed rate.
The world is changing fast and sadly, ostensibly not in the right direction for the publishing industry. Booksellers are having such a hard time: Borders in the UK have gone bust, in the US, they are in administration as with other chains; Waterstones in the UK is up for sale and in all likelihood 100 or so bookshops will close down irrespective, which means less books will be sold through the traditional bookshops.  Publishers are already finding that e-books sales are beginning to be a significant part of their business. The e-book revolution has already started and in the next decade, there will be a whole generation of young readers who will think nothing of reading a book electronically.
It must be emphasized that e-books are not a different ‘book’ from that of the printed version. It is just a different medium in which books are sold.  But what the e-book revolution has done is to enable anyone to get their own books published online bypassing a publisher. If publishers no longer have control over the rights available, what kind of a business will they have for the future? 
Publishers can so simply redress this threat: their main concern therefore must be to secure book rights and this they can easily do by offering a fair rate to authors for their e-book rights. If any publisher offers an author 50% of net proceeds from the sale of an e-book, an agent will be hard pushed not to go with them even if the author can get 70% from the online retailers.  And I will be happy to go with a publisher because I believe they can still publish a book better than anyone else. 
But does this mean that a publisher will lose out financially? I really don’t understand why the financial guys in the publishing world don’t do their sums properly. No matter how a publisher tries to gloss over the figures, there are huge profit margins in the sale of each e-book. There are no paper, print, production costs; no distribution costs in a time of ever increasing fuel prices; no need for inventory control and yes, let us not forget the bane of all publishing companies – return of books! And one last big plus: every sale is a cash sale!
It does not take a wizard to work out that what e-book publishing does is to bring in profit margins that, even at a 50% share with the author, are greater than the margins that they can make from traditional bookselling where discounts to the trade are soaring at the 60/65% rate! If the ratio of sales from e-books is greater than that from printed books, the profitability of the publisher will surely increase and with time, companies will work out how their overheads ought to be structured so that they can return to real profitability once again.                                                             



Publishers should improve their royalty rates

Darren Laws's picture

I am appalled at the level of so called industry standard royalty rates many publishers are offering authors for eBooks. At Caffeine Nights we are giving 50% against net profits. I have seen rates as low as 10% with many capping at 25% and putting a spurious argument that there are costs which stop them from raising this rate. With this attitude it is not a shock that both authors and agents are cutting out publishers, and with many publishers having a conceited approach that theirs is the only way, it won’t be long before this house of cards starts to look shaky.


Don't forget about marketing cost


I agree that royalties should go up, as production and distribution costs go down, but don't forget about marketing and publicity expense. My big concern--after 25 years in the book business--is that authors won't realize how much of an issue "discoverability" is in a world with few bookstores and tons of self-published works in e-book format. To borrow a term from the audiophile world, as the abundance of content increases the “signal-to-noise ratio” decreases, directly effect on rate of sales of any particular e-book. The marketing cost of getting an audience to “discover” any particular e-book may in fact justify the margin publishers are asking of authors in the royalty split.



Hard to argue with this

Lane Ashfeldt's picture

The move away from print to ebook is happening faster than people imagined, and publishers are likely to lose out if they do not adapt by offering an e-book royalty more in keeping with the split of development and production costs. Writers who have a publishing deal that is working for them may be reluctant to rock the boat, but many others will be tempted.



I totally agree with this post - since we started working with both publishers, agents and individual authors, we have offered a 50% revenue share on all income, and we make no deductions at all for the creation, sales and global distribution of the eBooks on all formats. Not only that but our monthly reports and payments to the content owners has been very popular.


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