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Getting ready for our eBooks for Everyone Else conferences, I discovered an author named Bob Mayer who impressed me with his self-publishing zeal and apparent success. Bob has written lots of military fiction, science fiction, even a romance novel, and some non-fiction: dozens of books over the years for major publishers. Most of it was mass-market, most of it reverted relatively easily and Bob systematically secured those rights reversions for years.

He caught my attention with the bare bones of his story. He started putting his work up as ebooks in January, when he sold a few hundred books. By July he had more than 40 titles available and was selling a total of over 100,000 units a month. I had long wanted to put an author before my conference audiences who had achieved self-publishing success to talk about how s/he’d done it.

Joe Konrath and, more recently, John Locke had politely turned me down. I booked a 1-on-1 conversation with Barry Eisler at our Publishers Launch Conference at BEA right after he announced his decision to turn down a 6-figure advance to self-publish. Alas (for this objective of mine), the morning of the event Barry signed a contract with Amazon to do his next book with them. Although he has self-published some short fiction. Eisler’s story became that he is an Amazon-published author, not a self-published author. That’s a good story and we had a good session on-stage that the conference audience benefited from, but it was not a a self-publishing report from an author who truly did it on his or her own.

(Eisler’s wife, the literary agent Laura Rennert, reported at eBEE in San Francisco that Amazon is succeeding very well with Eisler’s current book, The Detachment — which I read and enjoyed – and that his substantial advance has already been earned out.)

So I was pleased to learn with a phone call that, not only was Mayer an enagaging talker, but that he was willing to make the journey from his home in Seattle to San Francisco to discuss his success with a conference audience.

But what became clear when I had a further conversation with Mayer the day before our conference, buttressed by what was said by many other participants at the event, is that the Hocking-Konrath-Locke story — an author managing all the pieces of their publishing program and and achieving a totally private success — is a Dodo bird. Unless we consolidate down to an only-Amazon ebook world, which, despite Amazon’s best efforts, doesn’t seem likely anytime soon but would undoubtedly create a whole new rule book if it ever arrived, the work and expertise required for successful publishing will lead inexorably to one of two results.

Either an author will get help to publish their own material — a distributor like Constellation or Ingram or a publisher — or they’ll find what they built to serve themselves would be better and less-expensively maintained with the work of additional authors to go along with their own. There’s enough work and expertise involved in what had first seemed to many such a simple process that it requires building a bit of a machine to do it. And once a machine is built, it is just wasteful to leave it idling between the works generated by any one writer.

This point was made by Mayer when he told me that he is now recruiting other authors to publish. He started out by finding a partner to handle the technology component and mechanics of his efforts. In his already-substantial experience in less than a year, he has learned that proper editing is essential, as are eye-catching covers, as is the right metadata. He told me and our audience that a single complaint from a reader to Amazon about a typo in one’s book can result in the ebook being taken down for a required correction. He has learned, as others have, that maximizing revenue requires changing and re-changing your prices, which is more work.

Bob says he has even fixed plot errors that were pointed out by Kindle readers.

(Another view of this aggressiveness to satisfy customers was offered to me by a Big Six executive a few months ago when he related the story of a book published by his house that had been taken down. There the “culprit” was vernacular language that was interpreted by a reader as poorly copy-edited grammar. There was nothing wrong with the ebook, but one reader thinking there was resulted in a takedown that cost everybody sales for several days until the ebook could be put back up!)

Bob says books can disappear from major retail sites for no apparent reason as well. He says that anybody who believes that ebook publishing is like “sending the book to a printer, after which you can forget about working on it” is mistaken.

And he believes that any author whose work is good and wants to take a self-publishing route would be wise to cede a percentage of sales to him, or somebody else, who has learned what he has and equipped themselves to prepare books properly for sale and manage them after they’re launched.

This is establishing ever so much more clearly that publishers are right when they say there’s a role for them in an ebook world. Amazon itself makes that clear by the difference in the deals it offers self-published authors and authors it signs for its imprints. Although authors will continue to self-publish, the debate that matters in the future is what the basket of services will be that authors require and what will be the right price for them. The lines are drawn for that discussion and the opinions are really all over the lot.

There are ebook publishers — the granddaddies eReads and Rosetta, Scott Waxman’s Diversion Books, and the giant in the space: Open Road — who are saying the “right” ebook division between author and publisher is 50-50. (We should make clear that this is the division of the revenue obtained from the retailer or “sales agent”, which would normally be 65-70% of the selling price or 50% of a publishers suggested list which could be discounted, depending on what kind of sales arrangement is in place.) Smashwords, an entirely automated service, and BookMasters, a service provider, provide distribution for 15% of the take. Two agents speaking on our panel in San Francisco, Deidre Knight and Laura Rennert, are capping their agency’s take at 15% of the revenue as well, as they walk the ethical line that is perceived by some to require that they make no more money self-publishing an author than they would selling the rights to a publisher.

Then there are many other service offerings with prices that fall in between 15% and 50%.

Amazon’s rules offer some insight on this. If you work with them through their KDP service, you get 70% (if you set your price within their accepted bands). But, as Mayer and others at our conference made clear, through KDP you can’t even purchase any special merchandising or promotion. But if you are published by Amazon’s imprints, the take is cut in half and the author gets 35% of retail, but you get lots of promotion by positioning. (Deals are private, and the details of Eisler’s deal have not been revealed, but the presumption would be that he earned out his rumored six-figure advance from Amazon at the 35% rate.) Thirty-five percent matches what a 50-50 publisher could deliver if they had an agency-like deal with the retailer.

Amazon agreements also come with the requirement that you participate in their other programs, including library lending in cooperation with OverDrive and, presumably, the new subscription program they have just announed. (It appears they chose not to include all KDP titles in the subscription program; there are only 5,000 titles announced for that initiative and since we know that Smashwords has nearly 100,000 titles, it is likely that KDP has more than that. On the other hand, late reporting by Publishers Lunch on Thursday spells out that Amazon will simply “buy” copies of any non-agency titles it wants to lend. That means they make one purchase for each loan, so it is expensive for them, but it demonstrates again that only publishers with agency arrangements have control of their distribution and how their books might be used to strengthen any one distributor’s ecosystem.)

The comparisons get complicated, but, if a conventional publisher is providing the full range of services that our speakers said is needed to maximize sales: good covers, changing covers, dynamic pricing, constantly improved metadata, monitoring to catch glitch take-downs, as well as developmental editing, line-editing, copy-editing, and proofreading, the author wouldn’t be doing badly at all to get 35% of the consumer’s dollar for an ebook. Throw in real print book distribution and sales and the royalties and marketing from that, plus a publisher’s core marketing effort (being part of a “legitimate” list gets attention from reviewers, bloggers, library collection development, and other places that matter), and, perhaps, some dedicated marketing as well, and it can be a relatively profitable exercise for an author to be with a publisher for even less than that.

When agency publishers pay 25% royalties, they are giving the author 17.5% of the paying customer’s dollar. Everybody will draw their own lines, deal by deal, but that doesn’t strike me as totally crazy as long as print sales remain more than half the total and the publisher is paying an advance that carries with it some risk that the actual royalty paid will be higher than what the contract stipulates.

That’s a moving target, of course, I personally don’t expect print sales to remain at half the total very much longer. But if major publishers were paying 50% royalty on a 70% agency sale, they’d be matching the 35% Amazon pays the authors it publishes. Amazon can do much more to promote on Amazon (which panelists at eBEE said is what really moves the needle); but publishers make noise in a lot of other places Amazon (yet) doesn’t. Presumably Open Road and Diversion and eReads and other 50-50 ebook publishers can’t match the agency terms with Amazon (they can get 70% through KDP, but that comes with pricing restraints and required agreement to those other deals we discussed earlier), so only the Big Six, who can apply agency across all accounts, can offer a comparable deal with a manageable percentage payout.

Amazon is demonstrating what they see as the value of securing the loyalty of digital book consumers for its ecosystem by their willingness to pay full wholesale price for an ebook that will then get lent once, as well as their penchant for pricing for sale well below their cost. The evidence that agency pricing is the only wall between a multi-channel ebook business and a single-retailer monopoly continues to grow. But as long as print in stores matters, and it will for a while longer, the Big Six have a legitimate commercial argument to defend ebook royalties between 25 and 50 percent. After that, everybody except Amazon will be hoping that that the Nook, Kobo, Google, and Sony market share is enough to keep it essential to an author to cover them all. And that means of discovery and merchandising will emerge that are a meaningful alternative to what is provided by the world’s biggest virtual retailer.

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There are lessons that can be taught or learned in one segment of publishing that can then apply to another. Well over a decade ago, Mark Bide and I were discussing the business model for journals. The way it works is that the university pays the professors a salary and rewards them with promotions and tenure for writing publishable material for the journals. Then the journal publisher pays nothing for the article (although they spend lots of money managing peer review and doing other things associated with editing, curating, and delivering the content.) Then the university pays for the IP all over again by buying (now licensing) the journal.

From our earliest understanding of the Internet and its potential for disintermediation, this seemed like a very vulnerable model. “How will we know when there’s a problem developing with the model?” I asked Mark. “When the publishers are having trouble getting submissions,” he said. “The problem will become obvious on the supply side before it becomes obvious on the demand side.

One of the challenges for a retail player trying to be a publisher is the difficulty of getting other retailers to play along. Even the most dominant US retailers, Amazon in the online world and Barnes & Noble in brick stores, don’t have a total monopoly on the customer base. People buy books online through outlets other than Amazon and people buy books in stores that aren’t owned by Barnes & Noble. And, of course, either of the two delivers grossly incomplete access to the total customer base without the other.

Barnes & Noble has been acquiring content directly for a long time. They’re very aware of the dichotomy between having a monopoly on content for your stores’ benefit versus making it more broadly available in the content’s best interests. Almost from the minute B&N acquired Sterling, Borders stopped stocking Sterling books (a problem that matters much less today than it did a few years ago.) And Sterling had a real sales force, retailer-friendly sales policies, and all of the systems necessary to support moving their books through intermediaries. Amazon does not.

Amazon took the first steps to fill that gap by making a deal with Houghton Mifflin Harcourt a few months ago, giving HMH a right of first refusal (apparently) to purchase paperback rights (excluding Amazon, we’d assume) to the books Amazon was publishing through their proprietary imprints. I have no inside information, but I would assume that one of the things Larry Kirshbaum will figure out early in his new role there will be how to get real print book distribution for the books he will be acquiring.

Amazon’s strategy appears to be that they’ll use their checkbook, the offer of 70% ebook royalties from the most powerful ebook platform, and their close connection to the online consumer, to get the books they want on the terms they want. And what they seem to want most for the books they pay for is “Kindle exclusive”: the ability to build up an inventory of titles available through Kindle but not through Nook, iBookstore, Google, or Kobo, let alone the stores here and abroad served by Ingram and OverDrive.

Barnes & Noble is familiar with that idea. They wouldn’t let other stores sell their Sparknotes study guide line. They never made it generally available through Sterling’s organization because they perceived value in having it be uniquely available through their stores and online channels.

But they didn’t avoid that dichotomy. The value they perceived is to the retailing entity, not to the content holder. Since their retail business was something like 50 times bigger than Sterling, it might not have been seen as a terribly difficult decision even though the content holder is always better off if the book is sold in as many places, online or offline, as possible.

Last week, PW did a story introducing Amazon’s “summer list”: ostensibly the books being published by them in the next few weeks. Obviously, these books were signed up before Kirshbaum’s arrival.

I’m not a bookseller. I have no expertise to apply to look at a list of books and decide what should be in any particular bookstore. But nothing on this list looked like a “must have” for an independent bookseller. To make sure, I reached out to a smart one I know and asked her to look at the PW list. “Would you stock these books?” was my question.

Her answer was interesting. “I don’t know about any of these,” she said. “For the most part, I learn about books by sales reps visiting our store and telling us about them. Nobody has ever told us about these.”

I had my staff do a little bit of searching. We couldn’t find a consolidated list of Amazon’s summer offerings online. What we found was the press release announcing 32 titles that PW referred to, but that release only listed 19 of the 32. We couldn’t find anything on any of these books at the Houghton Harcourt web site. We were able to find 14 more titles by looking under the various Amazon imprints (including Seth Godin’s Domino partnership with them) for a total of 33 coming or having been released from last March through November. Is this the “summer list”? Maybe, with global warming…

We found nothing about any of the titles on the Houghton site. Oddly enough, they did publish a prior title by one of the Amazon authors, Max Allen Collins, but they haven’t listed the current one, a collection of short stories.

(Here’s an ironic thought. You think Amazon will place an ad in the PW Announcement Issue to get this all straight?)

So, as far as we can tell, the Amazon summer list contains very few books that the old publishing guard, publishers or booksellers, will suffer much for having missed.

Except, of course, that maybe Amazon can create demand among the millions of online customers they have for books and ebooks. If they do, and the word of mouth grows to a point that independent booksellers find they must stock these books, Amazon will really have created a new publishing paradigm. That certainly seems to be what Godin is counting on.

Nobody — or at least very few — outside Amazon knows what new capabilities will be put in place to support the publishing programs Kirshbaum will build. Barry Eisler indicated at our Publishers Launch BEA conference that he had received a six figure advance for the book he just signed directly with Amazon to publish. He seemed to expect, or at least had hopes for, a robust bricks-and-print strategy along with his high ebook royalty. But he’ll have the same problem with Barnes & Noble and independents that Sterling had with Borders: it will take the perception of a very high level of demand to compel them to stock a book from a company they think is taking the bread right off their table.

A related development is that Arthur Klebanoff, one of the original ebook publishers founded on the idea that the big publisher standard of 25% ebook royalties creates opportunity for entrepreneurs, told the British AAA (the agents) this past week that he’d be delighted to publish their backlists and pay a 50% royalty. To agents who are already planning to do this themselves (and quite a discussion has broken out in the UK about whether that is a legitimate thing for agents to do; the AAA has decided it is) Klebanoff points out that things can go wrong with ebook publication (it might not sell, for one thing) and agents would be wise not to jeopardize their relationship with an author client when there are alternative ways to get a high royalty.

Klebanoff seems here to be jumping squarely into competition with Jane Friedman’s Open Road, which has been signing up content with very much the same pitch. (Open Road also has other attributes to tout, primarily some very talented digital marketers and a focus on developing tools and techniques to do that work effectively.)

Meanwhile, other agents are setting up their own digital publishing capabilities and service offerings continue to mushroom. Agents tell me — two were in the office this week talking about this — that their authors are frequently asking about self-publishing.

Does the insight Bide offered to me late in the last century about scholarly journals end up applying to trade publishers? Will the most obvious sign of a challenged model become the resistance of authors to their blandishments and their advances? There seem to be a lot of entities betting on the idea that it will.

It is worth noting here that there’s one dog that hasn’t barked. Richard Curtis was the first ebook publishing agent. He set up his E-Reads business over a decade ago. He also pays 50% royalties. Richard did not create E-Reads to compete with publishers on royalties but because when he did publishers just wouldn’t do the ebooks. He has built his enterprise since that time to nearly a $1 million annual business (meaning that he’s delivering half-a-million a year to authors for properties that, at least until very recently and perhaps still, would never have been put into ebooks by a publisher.) But his name is noticeably absent from the chorus using higher ebook royalties as a public prod to bedevil publishers.

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It looks like we’re going to have a bit of an unintended debate stretching across several of our panels at the Publishers Launch show in London. Since I’m the guy who put the show together, I can speak with authority to the fact that it was really unintended. But I consider it serendipitous and proof of Branch Rickey’s axiom that “luck is the residue of design”.

I first started probing the question of new business models for agents two years ago when I was organizing the first Digital Book World conference. I had been asked by F+W Media to create a program that would be (in their words) “more practical” than they found Tools of Change to be. I was in partnership with O’Reilly at that time working on a “StartWithXML” show to take place in London. I wasn’t really looking for a reason to compete with them; we were collaborators.

But as I thought about what they did (which I like) and what I might do, I realized that our approaches would be different and our shows would be different. In my mind, the clearest delineation of the difference was that I put agents squarely into the middle of our show planning. This move is a bit counterintuitive in the conference business since agents have never been big ticket-buyers for the industry’s digital education events. But I thought then — and events have subsequently confirmed — that agents were key actors in the digital transition. You can explore the tech challenges of digital change without them, but you can’t really think about the changing economics of trade publishing without bringing them into the conversation.

What seemed logical then — also confirmed by subsequent events — is that agents might become ebook publishers. This had actually happened a decade before, when agent Richard Curtis set up his E-Reads business at a time when most publishers just wouldn’t do ebooks for most titles, if at all. Richard had run into political problems with the agents’ association (AAR) which I believe he headed at the time. They have a code of ethics which could be interpreted to prohibit an agent-publisher such as he had become. In fact, I was a bit surprised (but definitely sensitized and enlightened) when a good friend of mine who is a successful and highly ethical agent told me she couldn’t possibly participate in a conversation that might be seen to endorse the idea of agents becoming publishers.

We put together a panel on “new models” for agents at DBW 2010. We repeated it last year (even though there’s a natural reluctance to repeat things year to year), and we surely are going to include the topic at DBW 2012 next January.

And that brings us to what is going to happen in London on June 21.

We have four prominent agents speaking on different panels on the program. At least three of them are likely to renew the conversation about whether an agent can become a publisher and still be a credible representative for an author.

One of the panels I’m most looking forward to on that day is called “An Emerging Opportunity: Selling into the US”. Charlie Campbell, an agent at Ed Victor Ltd., will participate on that one. We wanted Charlie on the panel based on a conversation we had with him a few months ago about the possibilities he saw for his office’s clients to capture sales in the US through ebooks. When Victor’s office announced the creation of a new publishing operation to handle their own authors’ books, our interest heightened. So Charlie will be explaining how that publishing operation will work and how it benefits the authors in their stable within the context of capturing US sales from a UK or Ireland base. His fellow panelists will be publishers.

Our last panel of the day has Michael Cader and me interviewing four leading luminaries of UK publishing. Three of them are publishers, but the fourth is the agent Jonny Geller of Curtis Brown. Curtis Brown is frequently rumored to be about to start an operation similar to what Victor has announced. (In the US, by the way, agent Scott Waxman — a member of the DBW Conference Council and one of the original participants in our conversations about this — has created a publishing adjunct to his business called Diversion.) Our focus in that panel was not intended to be on the ethics of agents starting publishing companies, but now I think the topic is likely to arise.

Why? Because a third agent on the program that day, Peter Cox of Redhammer, has placed it front and center with a post he published yesterday called “Your Agent Should Not Be Your Publisher”. Peter is on a panel about “Innovation in Marketing and Business Practice.” He caught our attention because he’s been training his authors in digital marketing for years and because he told us he was thinking that the agent’s model had to change to handle fewer clients for a higher-than-standard percentage of the revenue. We didn’t ask Peter at the time how he felt about agents becoming publishers.

It turns out he is very firmly against it and is very clear and articulate about why he thinks that. The moderator of that panel is Richard Mollet of the Publishers Association. I’m sure his membership will very much want him to invite Cox to expand on his ideas. Cox’s panel takes place after Campbell’s but before Geller’s. The juxtaposition of the commentary across the panels will probably be of great interest to the audience and should make for some very interesting tweeting. Maybe we’ll need a special hashtag just for #agentsaspubs!

It was the fourth agent on the program that we thought was going to have the trickiest assignment. David Miller of Rogers, Coleridge and White Ltd. will be discussing “Territorial Rights and Open Markets” with Richard Charkin and Toby Mundy. Since the future of both practices depends very largely on what agents will agree to as the publishing landscape changes, I had thought David had the most politically challenging conversation of the group. It turns out that he’s excused from what will certainly be one of the most controversial aspects of the day’s discussions, although in our very open format, everybody’s free to say pretty much what they want. Perhaps Philip Jones, the moderator of that panel, will want to touch on this question with his panel as well.

It might be that at Publishers Launch Frankfurt we’ll stage this more directly as a debate (but that’s a crowded program and it might be hard to fit it in). You can bet it will be aired thoroughly at Digital Book World next January. And you can be pretty damn sure we’ll be generating some news on this topic (and others too, I’m sure) out of “A Global View of Digital Change”. If you’re in (London) town on June 21, you ought to be there.

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The New York Times published two apparently unrelated articles over the weekend which address questions raised by the rise of digital content creation and distribution. One was an op-ed piece in the Saturday paper by author Mark Aronson about the challenge of collecting the permissions necessary to include copyrighted material in enhanced ebooks. On Sunday, the Magazine published a piece by Randy Cohen, “The Ethicist”, about the rights and wrongs of downloading a pirated book file in a situation where the file’s acquirer had already bought and paid for a copy of the book presented in the file.

These are both thoughtful pieces to which I hope to add some useful observations.

Aronson’s piece elaborates on the challenge facing authors and publishers who want to include useful material in enhanced ebooks, particularly for non-fiction. He is an experienced non-fiction writer who knows about the challenge of collecting permissions for material in his books. He’s right when he says that the problem really escalates for enhanced ebooks. Aronson’s focus is on material from the “archives of the world’s art (now managed by gimlet-eyed venture capitalists” and other material controlled by museums and academic libraries.

We have lived for a long time with a very cumbersome permissions world. To use a picture of a great painting or a museum’s invention or artifact requires painstaking individual requests for permission and negotiations (usually) by the author, who is charged by contract with delivering this material with permissions already secured to the publisher. The usage matrix has been pretty well defined for print: what kind of book; what size printing; what langagues or territories affected; what number of copies to be printed, but each licensor converts that data into its own pricing policy.

The amounts of money charged are collectively of great value to the licensors. Viewed on an individual project basis, though, they are sometimes painfully high for the author or publisher but small enough for the licensor that lengthy negotiation that could lead to concessions based on mutual self-interest occurs relatively seldom.

Along come ebooks and enhanced ebooks (and, for that matter, web presentations of material in books which might be for promotional purposes.) In many cases, publishers have simply foregone the illustrated material for the digital presentation because securing the rights is either too painful or too expensive a process. The process that publishing has lived with in the print world needs to be fixed, says Aronson, and then we can move on to do something about how this can work better for digital content delivery as well.

So, far, I agree with him. It is the specifics of his remedy with which I’d suggest some modification.

Aronson’s suggeston for print is that the Author’s Guild and Association of American Publishers combined (coincidentally or not, the two entities who are the plaintiffs and negotiators of the Google Books settlement currently pending) establish a “grid of standard rates” and then “compel rights holders to confirm to industry norms.”

Two problems with that. One is that the AG and AAP are really not in the business of securing licenses for publishers. The entity that is in that business is Copyright Clearance Center, the CCC (and, full disclosure: our client.) What Aronson is suggesting is actually a hybrid of two kinds of licensing that CCC enables: “collective” licensing, such as is done for photocopying where companies agree to allow their material to be copied, CCC collects annual licensing fees from corporations and other entities, and shares them based on surveys of actual usage; and individual licenses granted by a copyright-owner for use on the c/r owner’s terms. In the latter case, CCC facilitates many of the transactions but doesn’t tell the rightsholder what to charge (or conversely, tell the licensor what to pay.)

CCC is positioned better than any other entity to attack this problem, but it’s much harder to implement such a simple solution for printed books. The differences in value of different copyrighted material can be vast and the rightsholders know that. The owners of the most valuable material are going to be reluctant to license it for an “average” fee and there is nothing the AG or AAP or CCC could do to compel or persuade them to act against their own interests.

Rightsholders know that when a book is created and printed, many tens, perhaps hundreds, of thousands of dollars of investment are involved. They want their fair share which, from their perspective, would be “what the traffic would bear”, not an arbitrary, standard amount.

But the enhanced ebook problem that triggered Aronson’s piece, and for which he offers the additional “solution” of payments based on actual sales (i.e. downloads), might actually be amenable to a collective-based licensing solution (but still a hybrid.)

In the case of enhanced ebooks, the marketplace is going to be much more challenging. There will be many more rights requests because relief from the minimum investments in printing will put far more creative works into play. And at the same time, the pool of potential licensors is growing by leaps and bounds as we move toward a digital camera in the hands of every cell phone user. Because the barriers to entry for ebooks, enhanced or otherwise, are so much lower than for press-run books, these will reach a point (if they haven’t already) where the cost of the transaction — reaching the right person, connecting with them, describing the potential licensed use and negotiating the price — is going to be more than it is worth, regardless of the licensing fee. And these costs will effectively be driving down the licensing fee.

Imagine if each bar had to negotiate with each songwriter to put their tune in the jukebox. That’s a considerably less complicated problem than the one we’ll have with images and text licenses for ebooks, and still it can only be solved with a collective licensing solution from BMI or ASCAP, which deliver a service close to what CCC does for photocopying.

So we see applying a hybrid similar to what Aronson describes, but with some nuanced differences. The future we’d imagine is for CCC to start gathering rights for a reservoir of content that can be licensed on a standardized basis for ebooks and web use, with the understanding that the fee for each individual use is going to be low enough that it wouldn’t have been worth the transaction cost on both sides to have negotiated it. The most valuable material would remain outside that reservoir (because the rightsholders wouldn’t agree to put it in) and would, therefore, be bypassed by most licensors when they put their products together. So if you hold your stuff out you can sell it for more each time, but you’re likely to sell it less often.

Aronson’s explicit concern is that only the “most popular subjects” will be covered in enhanced ebooks under the present regime. The solution suggested here would probably appeal to the owners of material on the least popular subjects; those that are rarely licensed now and where anything that would encourage more widespread use would be attractive.

It is also important to remember that digital presentations have a capability print doesn’t: they can deliver the reader directly to the digital doorstep of the licensor with a link. If you run an obscure museum with an obscure collection of art and artifacts, a linked licensed image could deliver you traffic and customers very effectively. A program such as what we’re envisioning here could make the link a standard component of the licensing arrangement.

The bottom line on this story is that I agree with Aronson that we need a new model for permissions in the digital world or important creativity and commerce will be choked. But we have to start with the pool of material that is of the least individual value in order to start at all. As that pool grows and is used increasingly, the incentive will grow for rightsholders to place more and more of their material in it.

As for the Ethicist…

The question arose because somebody who bought the 1,074-page new Stephen King novel didn’t want to carry it around on a trip and found the publisher had not yet issued an ebook. This person, who says they “generally disapprove of illegal downloads” felt they were okay in this case because they had previously bought the book and the publisher wasn’t facilitating their need for a digital copy.

The Ethicist agreed.

This position outraged my friend, the literary agent Richard Curtis who, on his eReads blog, takes strong exception. Quoting Richard’s two most emphatic paragraphs:

These dirtbags now have a champion in Randy Cohen. Go on, help yourself. The author and publisher have been paid once and don’t need to be paid for another edition of the same book.  While you’re at it, rip off the book club and the mass market paperback editions.

Cohen’s exculpation of this morally challenged idiot buying an e-book from a pirate site is the equivalent of condoning the purchase of black market goods from a fence. Does anybody know what Talmudic tractate he consulted to justify stealing – to describe it as “illegal” but not “immoral?” If so, we invite you to submit chapter and verse.

Personally, I find the characterization “stealing” overblown (obvious to me, but I might well be provoked to explain more by commenters to this post) and the distinction between “ethical” and “legal” perfectly comprehensible.

The Ethicist’s piece already acknowledged Richard’s point of view. Cohen interviewed and quoted his own friend, Jamie Raab of Grand Central Publishing (Hachette) who said:

“Anyone who downloads a pirated e-book has, in effect, stolen the intellectual property of an author and publisher. To condone this is to condone theft.”

I see this as a digital transition problem (it won’t be long before an ebook edition is available for every book for which a print book is available) and, if the author is suffering in this case (and I’m not sure there’s any demonstration here that the author is), it is partly the fault of the publisher whose policies haven’t matured sufficiently to deliver a cash customer what they want to buy.

Would Raab or Curtis have taken a different position if the King book purchaser in question had scanned his or her own copy to make a digital file to carry in their ereader? Or would they consider that a legitimate “first sale” right? (And what would a court say?) It is hard for me to understand how the King reader who, after all, paid more for the print copy than they would have for an ebook if the publisher had made an ebook available should be characterized as a “thief” (Raab) or a “dirtbag” (Curtis.)

Joe Esposito and I wrote a piece almost four years ago strongly suggesting that publishers should declare a clear policy about the digital rights conveyed with the purchase of a print book. We wrote the piece in the earliest period of contention about what Google was doing scanning books, so our point was made from a library-centric perspective. But we anticipated problems like this one and we concluded our piece this way:

Developed, articulated policies about digital licensing are a much better way to protect publishers’ interests than lawsuits against marketing channels. The next decade or two will see the relationship between digital and printed content dramatically recast. Publishers can embrace that relationship, or watch it—and themselves—fall apart.

I’d say that the publisher and author would be standing on much firmer ground to complain if there were a stated policy about the digital rights that are conferred with a print purchase. The mere act of creating this policy would force a publisher to think through situations exactly like this one, which I really don’t think many have.

Where we stand now is that laws and policies written before any of these issues were contemplated (or possible) are transparently inadequate and insensitive to current reality. As a guy who accepts the necessity of DRM specifically to discourage casual sharing that could seriously undermine the commercial basis of publishing, I’m on board with the idea that we in the industry want to steer people away from piracy. But I don’t think we’re going to win many friends, or many arguments, putting no policy in place to cover these situations and then villifying paying customers who try to address their own legitimate needs.

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The Wall Street Journal was the first to announce, on Monday, (behind a pay wall, but Google “Publisher Delays E-book Amid Debate On Pricing” and you’ll get it) that Sourcebooks CEO Dominique Raccah was holding back the ebook publication of a new hardcover YA novel, Bran Hambric, scheduled for release this September. Raccah’s explanation to the Journal was that she was trying to preserve the perception that the $27 hardcover price was reasonable. Since she knew that any ebook would hit the street at just under $10 (the Kindle promotional price is $9.99 and B&N has suggested that their promotional price will be $9.95), Raccah felt that sales of the hardcover would be undermined.

What was left unsaid in the Journal piece was that Raccah might have been leaving money on the table with this decision. After all, the publisher still sells ebooks on roughly equivalent terms to printed books and has lower costs. So, depending on the royalties Raccah is paying the author, she is (most likely) realizing more margin for Sourcebooks on the ebook sale than on the printed book sale, regardless of how the retailer prices it.

Even more startling (in this day and age) is the possibility that the author’s royalty is higher per copy on the hardcover, so Raccah might be protecting author royalties, to the extent that withholding the ebook restrained cannibalization and resulted in more hardcover sales. I mention that possibility because the agent for author Kaleb Nation is Richard Curtis, one of the most ebook-friendly agents in town (and, indeed, the owner of an ebook publisher called EReads), who was quoted in the Journal supporting Raccah’s decision.

On Wednesday, Motoko Rich and Brad Stone published a piece in the Times on the same story (in which I was very briefly quoted.) Rich and Stone added some nuance to the story. The Journal said that agent Robert Gottlieb resisted simultaneous ebook publication “when he can prevent it.” In the same graf, they said that only one book of the Times’s Top 15 fiction bestsellers was not available in the Kindle store. Of course, that doesn’t mean that the Kindle editions were available at any particular time in relation to the first release of the hardcover, just that they are available now.

The Times reporting went further than the Journal, speaking to several publishers of upcoming major books about their ebook timing plans. Doubleday hasn’t decided yet about Dan Brown’s book but acknowledges that the impact of ebook sales on the hardcover was a consideration. S&S won’t reveal their ebook release plan for Stephen King’s November novel, Under the Dome. Ditto from Hachette imprint “Twelve” on the Ted Kennedy autobiography, True Compass, coming on October 6.

So the fact that everybody is thinking hard about this is confirmed by the Times’s reporting.

But Cader, who as an industry expert and blogger has more scope and credibility to report unattributed information than reporters at WSJ or the Times, went further in Publishers Lunch on Thursday. He ridiculed the notion that Doubleday was (according to a spokesperson)  ”[more] worried about…security…than particular vendors” and he sees the motivation from publishers being to control the behemoth, Amazon. As Cader reports it, Kindle sales surged when the new device(s) came out, becoming as much as 50% or even 70% of Amazon’s sales of many important books.

Everybody (in the industry, but maybe not outside of it) knows that Amazon pays a standard discount for ebooks, which is about 50% off publisher suggested retail, and that Amazon actually takes a loss on a $25 or $27 hardcover book it sells through Kindle at $9.99 (as B&N will do if they follow through to sell books like this as ebooks for $9.95.) Nobody expects Amazon to do this forever although, as Cader points out, they are temporarily subsidized by the profit they make selling the Kindle devices. The widespread fear among the big publishers is that Amazon will soon demand lower prices for the books they put on Kindle so they can keep the $9.99 price point profitably.  As the Kindle unit sales grow, of course, the muscle behind such a potential demand would grow right along with it.

Cader makes the very important point that sales migrating to ebooks, and particularly to Kindle, weaken the brick-and-mortar channel that publishers depend on for most of their sales and profits. The Times reported that publishers could well be making bigger unit profits on each Kindle sale than on each printed book sale (a fact that I explained to them when I was interviewed and which appeared not to be clear to them before I did). Cader (who of course knew that without needing to be told by me or by the Times) makes the point that publishers do this because they are “looking out for what they believe to be their long-term interests — and are trying to protect the entire system of physical book retailing which supports the whole industry.”

While this was happening, Dominique Raccah posted her thoughts to Peter Brantley‘s Amazing List and Kassia Krozser, on that list and proprietor of the Booksquare blog, turned her space over to Dominique for a version of that post. Dominique made it clear that she considered what she was doing with Bran Hambric to be an experiment. Her focus was on a “sustainable author/publisher model”. She made the point (again, clear to most people in publishing but perhaps not to those outside) that the music business continues to present inapplicable analogies, but one of the most egregious is that authors should give it away like musicians to get performance bookings: in publishing, there are no performance bookings (and few t-shirt sales…)

Raccah made it clear that she supports early ebook releases and her house is going to a workflow that will enable that. But then she gets to what is really the heart of the matter. “Etailers are suggesting that the ‘right’ price point for an ebook is maximally $9.99.  And they are proselytizing the price $9.99.  We can’t control what retailers charge for books or ebooks.” The publisher’s choices are whether and when to make it available and whether to sell to any particular retailer.

From there she explains that exploiting formats with “windows” is an old book business strategy (hardcover, trade paperback, mass-market paperback) and a common film strategy (theatrical precedes DVD release, with TV licensing once part of that picture as well, but not anymore.) And she concludes by saying that publishers need to make these decisions on a book-by-book basis (“strategically”, she says, although I’d call that “tactically.”)

My quote, by the way, was to the effect that ebook readers and print book readers are increasingly separate markets, which I believe to be true but cannot prove. A C-level friend at a large house disagrees with me, as I’m sure many others do, and my evidence on this is highly anecdotal (including myself: I have read one printed book of the 50 or so I’ve read in the past 18 months.) But my friend would have no more evidence than I to support his contrary position, so publishers will have to make decisions without really knowing, for now, whether they can push a Kindle or Shortcovers or Ereader consumer back to paper by denying or delaying a book.

That concludes the summary. I have a few thoughts of my own to add on this. I’ll be posting those shortly, probably over the weekend. I hate going much over 1000 words on any single day, and I’m already past 1200.

An  earlier version of this post had a couple of errors misconneting agents and authors which have been repaired. So if somebody tells you about a mistake they saw that you can’t find, that’s what it’s all about. Thanks to Michael Cader for setting me straight.

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Because of a couple of panels I spoke on last spring and because of the development of FiledBy, I have had more and more conversations lately with agents. They are part of the General Trade Publishing ecosystem. So their lives are getting more difficult and more complicated, like everybody else’s in Book Valley.

The agents’ concern is frequently expressed as “what do I tell my authors?”  Publishers are increasingly insistent that a prospective author have an internet platform to build on before they sign a book. Editors always wanted credentials to back up a writer’s authority on any subject; now they’d like to see that the writer has a following on that subject as well.

But agents are also concerned about themselves. The two most innovative imprint initiatives in recent memory — Bob Miller’s HarperStudio inside HarperCollins and Roger Cooper’s Vanguard inside Perseus — are built on the idea of reducing risk, paying the author a lower advance. Yes, they also promise a higher reward (higher royalty), but experienced agents know most books don’t earn anything beyond the advance.

Miller and Cooper are smart guys and it could well be that their imprints will have a higher percentage of earnouts than most. But, as smart guys, they wouldn’t be willing to pay more on the high side if they didn’t believe they were saving at least that much on the risk side.

The advance pool is probably shrinking. John Sargent, Macmillan’s CEO, said as much at a gathering of agents a couple of months ago when he explained that the de-leveraging that is taking place throughout the economy is also taking place in publishing. Big houses just won’t have the cash available to them that they used to, and that means less money for advances, less money for printing, and less money for promoting.

But in addition to shrinking, publishing advances are taking on much more of a power law configuration, with concentration at the top and a long tail of books getting less and less (and extended by mushrooming self-publishing where the “advance” is actually negative; it’s a cost!)

This is already having an effect. I have heard from people who know that larger agencies are now shopping among the smaller ones to buy them out. It takes more agents working to pay the same rent than it used to. And the smaller agents are finding it harder and harder to make a living so they’re ready to sell out a bit of their upside to get some stability. The small number of agents that have clients at the power end of a power law distribution are doing great; those who have traditionally made a living on making lots of second level deals are really suffering.

Compounding the problem for agents is the changing nature of publishing opportunity. While the sales and royalty potential of the book through the publisher is declining, other opportunities are opening up. There is a multiplicity of ebook channels that in the aggregate do not replace the revenue that print used to provide and doesn’t anymore. Chunks of books and material too short to be published as a book can be sold through them. Agents have for years been trying to split off audio rights to sell to Audible or Brilliance or Tantor Media. The opportunity to sell content to web sites seems to be emerging. But all of these deals require conceiving, pitching, closing, negotiating, and contract reviewing. For fifteen percent of what?

And further comlicating things is the ubiquitous self-publishing option. As self-publishing becomes part of the strategic approach to getting a “real” publisher (and it is), it adds a further complication to the business relationship between agent and writer. Is it fair for an agent to work with a writer on developing a proposal or a manuscript and then, when it fails to sell to a publisher, see that writer self-publish what amounts to a collaborative effort without owing anything to the agent? I think most agents would say, “NO!”

An agent for a book writer carries the same title as the agent for an actor or the agent for a performing musician but that’s a bit misleading. A book writer’s agent is really a business partner, more like the managerof an actor or musician. I see the writer and agent as two halves of a business: the writer creates the product and the agent handles the B2B relationships necessary to turn it into money.

When the book agent’s job, most of the time, was to find the biggest possible up-front payment for an author’s work, a straight commission deal made complete sense. With writer-pays options becoming not only more common and accessible, but more sensible as a commercial choice and, indeed, becoming part of the step-ladder to commercial success, it increasingly will not.

At a conference on “Giving It Away” in Toronto at which I spoke two weeks ago, Carolyn Pittis of HarperCollins was explicit that the publisher buying content and making money by selling it was “one model”, and she pointed out that there is a “fee for services” model as well. The inference I drew was “that’s not what we’re doing today, but every option is on the table for tomorrow.” Why not? Don’t we have to believe that one of the exit strategies for the investors in Author Solutions, the biggest rollup of self-publishing service companies, might be to sell to one of the Big Six who, despairing of the future of their publishing model, tries to buy their way into a new one?

I am old enough to remember that agent’s fees, now standard at 15% of revenue, once were 10% (like the agents in other businesses I referred to at the top.) When that change happened — was Scott Meredith the first? — many of the 10 percenters sneered at the change as exploitation. But eventually they all went that way. About 10 years ago, agent Richard Curtis started EReads, an ebook publishing company which gave his authors, and others, another choice besides throwing the ebook rights in for print publishers who, at that time, seldom exploited them. Curtis was also excoriated in some circles for generating a conflict of interest, which, indeed, it would have been if he steered his authors away from better ebook options with their publishers. (He doesn’t do that.) It would be like a doctor owning a medical testing business, for crying out loud! (And they do do that…)

A friend of mine in the financial business wrote a book 20 years ago and wanted to get an agent to sell it. He knew the advance would be low, but he also knew the book would add credibility to his business. He wanted it sold. An agent told him that the agency only handled books on which they thought the advance would be $25,000 or more, yielding a commission of $3,750 at the normal 15%. This friend told the agent, take the first $3,750. The agent took the book, sold it for $6,000, and everybody was happy. This kind of arrangement, as well as others where the agent actually charges a fee for helping an author manage self-publishing options, are going to have to become more common in the future. Let’s not be too judgmental about the pioneering agents who change the paradigm.

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