William Styron

Obviously my day job, consulting, informs a lot of what goes into The Shatzkin Files. I guess it is just as obvious that I can’t quote everybody who tells me something or attribute everything I want to write about to a specific company or individual. I don’t make a living writing this blog and I wouldn’t make a living at all if people in the industry couldn’t trust me to keep their confidences.

But once in a while people inside competitive companies tell me things that they want the world of publishing to know about what they’re doing. That’s happened twice this week and, in both cases, publishers were making it very clear that they are doing things that will add real value to authors’ marketing efforts, things that no self-publishing author could do for themselves. Self-publishing authors could be wrong, but a read through the comment string of a recent post here makes it clear that they don’t much believe publishers add value in marketing.

On Monday, I was talking to Fritz Foy, the senior VP for Digital Publishing and Strategic Technology at Macmillan. My mission was to recruit speakers from Macmillan for Digital Book World. The conversation turned to the question of “collecting names” for marketing purposes. I had learned previously that Macmillan really has a company-wide effort to do that. That’s something I have advocated. I thought it was so important that I went to the unusual (for me) effort of learning some fundamentals of direct contact management and writing about them on the blog 14 months ago. But Macmillan is the only company I’m aware of that makes email address capture an objective across the company, although we see pockets of name-gathering activity in other majors.

Fritz emphasized that collecting names wasn’t the only priority. Using them, using them well, and tracking what happened when they used them were the keys. (I was reminded, as I was again by the next conversation I’ll describe, of the adage “you can’t improve what you don’t measure”.) To demonstrate, he pulled some October numbers from tor.com, which one would assume, based on the relatively longstanding tor.com effort, probably constitutes the company’s biggest single pool of email addresses.

And they had a lot of them, enough to have sent over 650,000 emails to their lists in the month of October. That’s impressive. But what’s positively stunning is that more than 30% of those emails got opened (that’s more than 200,000) and more than 20% of those clicked through: took the action that Macmillan asked them to take in the email. That’s in the neighborhood of 40,000 actions.

Now the actions were, for the most part, to get free access to more content. (Only 15% of the mailings were purely “marketing”.) They weren’t selling anything. But what Fritz was demonstrating was the growth of what I call “investment marketing”: marketing that produces a result that makes subsequent marketing efforts cheaper or more productive. These tor.com numbers are going to grow, inexorably. Another indication of how solid Macmillan’s lists are is that only 0.1% unsubscribed!

If I were an author (or agent) looking for a sci-fi publisher, it would impress me that Macmillan has lists that get a 30% open rate. It would make me feel they could do things to promote my book that another publisher without those lists couldn’t do. I don’t know what the growth rate is on those lists, but most things (sales, device penetration, self-publishing) in the digital publishing world have been more than doubling each year and these could well be too.

The key point to take on board here is that tor.com is a flagship; Macmillan is doing this across their company. They are building other verticals as well. If other publishers aren’t systematically taking names, getting email permissions, and testing what can be done with them, Macmillan will build up marketing capabilities that it will get increasingly expensive to compete against.

There is little doubt that Amazon’s author-recruitment efforts for their imprints include the promise to mail to known buyers in the author’s genre. They almost certainly can send more than 600,000 emails in a month for many books and genres. But can they get a 30% open rate and a 20% clickthrough?

And Amazon, a retailer, can’t get trapped into just pushing the books it signs up when their consumer brand, and their sales, depend on offering full range of selection of available titles across publishers’ lists. That conflict is compounded as they sign up more and more titles as proprietary. (But it will also be ameliorated if the titles they sign are higher profile than they’ve been so far.)

The day may not be far off when agents are going to be asking publishers “how many emails can you send in support of this book on publication day?” If I were in Amazon’s shoes, I’d be pushing that question. It looks like Macmillan is methodically building the ability to provide an answer.

But not everybody with a modern view of marketing agrees with me (and Macmillan) about the importance of name-gathering, which brings us to the second conversation this week.

We got a call from Open Road Integrated Media asking us to come down to their shop and learn a bit about what they’re doing. Open Road is an ebook publishing company founded by former Harper CEO Jane Friedman which has been an annoyance to the big publishers. Jane has been in the business for more than four decades in high positions at major houses (at Random House before Harper). She knows the agents and she knows how the game of signing up content works.

So she moved against the establishment by offering a standard deal of a 50% share of ebook revenues, when the major publishers are holding the line at 25%. (Open Road’s deal includes the ability to recoup one-half the digitization cost before paying what we usually call royalties but which they call “profit share”. ORIM says that comes to less than $500 per title. Open Road pays no advances.) She used her understanding of the ambiguities in legacy publishing contracts to sign up backlists from both living authors and estates, including Willam Styron, Lawrence Block, Carl Hiaasen, Alice Walker, and others.

Those have been the headlines about Open Road and that was pretty much the extent of my knowledge of their proposition. Without any other knowledge of their economics — their ability to raise money, their burn rate, their sales — I was skeptical about the sustainability of their model, if it rested primarily on paying 50% for what others were paying 25% for and gathering high-quality backlist of titles not nailed down already for ebooks, which is a limited resource.

It turns out they have a lot more going for them than that. But they don’t gather names.

Open Road’s head marketer is Rachel Chou, who worked with Jane Friedman at Harper. Jane and Rachel, and former Scholastic CEO Barbara Marcus, who is an advisor to Open Road on children’s and YA acquisitions, made the point that Open Road is a marketing company. That’s what they do. And their bullpen with about a dozen people in cubicles working away is just about exclusively devoted to marketing. Except that, in their eyes, marketing and sales and author relations are all the same thing to them, and they see a workflow built around that perception as a key differentiator.

In fact, they see the consolidation of functions in their shop as a significant competitive advantage. In the ebook world, marketing and sales are so closely related that it is hard to see how to parse them. That’s partly because the promotions by ebook retailers could be the single most important marketing component (a point made emphatically by Diversion Books’ Scott Waxman at our eBooks for Everyone Else shows in New York and San Francisco), but it is also because all marketing efforts at Open Road are aimed at driving sales to the ebook retailers. (Their widgets all have buy buttons for the full range of retailer choices.)

But that’s not where the competitive advantage of their structure comes into play.

Rachel spelled that out. One of the major retailers came to them in the past few weeks with a big sales opportunity. They could place 15 Open Road titles in a major promotion that would sell a lot of books. One catch: they needed the titles cleared for the promotion within 24 hours.

Another catch that is characteristic of the ebook world: this was a price promotion that required clearing the participation of each book with its agent. That’s 15 agents. Rachel and her team of marketers, who have the agents of the Open Road ebooks on their own speed-dials, got the job done and got all 15 books into the promotion.

Moving that fast would be a non-starter in any significant publishing house. Whether the opportunity came in through sales or marketing, neither team would own the agent relationships. I believe in most houses it would be necessary to have the agent calls made by the editor who had signed the book. Certainly, the editor would have to be consulted before anybody from marketing or sales could make such a call. And that round of communication, which would include explaining the promotion opportunity to each of the affected editors, would never be attempted within a 24-hour window. Realistically, 24 days would be a challenge.

Open Road is organized differently than legacy publishers because there is so much they don’t have to do! There is very little in the way of a production department (there is a person who creates their covers and Pablo Defendini, who was a key player building Macmillan’s tor.com, is their “interactive producer”.) There is no sales department. There is no inventory management. Everybody works in a room that is dominated by a wall with a 2-month marketing calendar, listing all the events and anniversaries they might promote around. They have 75% or 80% of their company dedicated to marketing, which everybody — including all the big publishers who have expressed an opinion to me — agrees is the prime responsibility of the book publisher in the digital era.

But, even within that, Open Road is organized for efficiency and speed based on the realities of the value chain for ebooks. Their marketers are assigned books which “fit together”, so they are consistently going back to the same blogs and websites for promotion. They can develop relationships. They’re not really a “vertical” publisher (by genre or by topic) but they do have multiple titles from the same author, which helps.

To be fair, the other major publishers are reorganizing themselves constantly into more marketing-focused and less bureaucratic organizations. Just this past week, Simon & Schuster announced organizational changes which effectively shift resources from physical store sales to online marketing (which is admittedly an oversimplification.) The big companies all have great leadership and they’re well aware that they have to change. And I know for sure there are plenty of initiatives I haven’t heard about because the houses feel there’s competitive advantage to keeping them quiet. In fact, Rachel Chou told me about newsletters that are published readers at HarperCollins were getting open rates when she was there a couple of years ago that were even higher than Fritz’s tor.com numbers in October!

Open Road’s team would point to other distinctions between them and other publishers. (They not only claim to be different from the legacy print publishers, they don’t recognize any of the other ebook publishers as true competitors either.) They do extensive video interviews with every author (or a descendant in the case of a deceased author) which creates a rich library of video content. It’s a point of pride with ORIM that these are not fodder for video trailers, but give them real editorial material that can be made into solid programming, often combining video from several authors thematically into “mashups”. They distribute that video aggressively and claim they’ve now reached the point where they’re a recognized B2B brand by some digital media and bloggers who come to the Open Road website, unbidden, to pick up video. Of course, all the video is tagged so the Open Road marketers can track its placement, downloads, and any clickthroughs that result to the retailers.

And that leads us to metrics. Open Road is relentless about data and analytics. They make the point that they can test different covers or tag lines on Facebook or in other media and have answers within hours about what works best. The Open Road team believes that the big houses don’t give their marketers the kind of tools ORIM has to measure the impact of campaigns and that their competitors’ corporate structures don’t enable fast changes in the pitch or the artwork based on data.

These may not be sustainable advantages. Tools can be provided. Workflows can be changed to permit faster responses when that’s necessary. The established houses can raise their royalty rates. How fast things will change in the big houses is an open question (and the answer is different for every house), but it is undeniable that the decision-making structures that worked for print books readily accepted time lags that are a real handicap in the evolving ebook world.

Jane Friedman and her team claim that there is a marketing plan for every book for every quarter! (They admit there’s some ganging there; a bunch of different books might be part of the same Mother’s Day effort.) Whether that is scaleable and replicable when they are ten times their current size (approximately 1400 titles) is another question. But it is certainly a point of differentiation today.

Open Road doesn’t sell direct, only through intermediaries. And they eschew name and email address capture of end users, preferring to rely on the combination of the viral distribution of content and their always-developing relationships with bloggers and websites.

Both Macmillan and Open Road are doing things that no big trade house could have imagined five years ago. Macmillan is applying scale; Open Road is applying the speed and flexibility enabled by a smaller organization. But both of them are employing what I’d call “investment marketing”: doing things on behalf of their books that build their capabilities to do more on behalf of subsequent books. I think that’s the key for publishers who want to give authors and agents convincing reasons to publish with them in the future.

We’ll do a panel on “investment marketing” at Digital Book World in January. Of course, Open Road and Macmillan will be on it. So will F+W Media, a vertical publisher (investment marketing is much more natural for vertial publishers) and we expect to add one more Big Six house which is doing interesting things in this regard.

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Apologies in advance for a much-longer-than-usual post.

It is not like the publishers haven’t seen the ebook royalty fight coming. On a panel he and I were on together in March of 2009, John Sargent, the Chairman and CEO of Macmillan, identified ebook margins as the critical issue for publishers going forward. Even though ebook sales at that point were financially insignificant and the growth surge that we’ve seen in the past 15 months wasn’t yet evident, Sargent expressed the belief that ebooks would be the future and that publishers had to be diligent to preserve their margins in the digital environment.

There are three moving parts to the publishers’ margin equation for ebooks.

The one that I think Sargent was thinking most of at that time is ebook pricing. If “misguided” publishers or market forces drive down prices a great deal, that could threaten publishers as sales migrate to digital.

The second one, which was then and remains today a focus of publishers, is the potential consolidation of sales channels so that power moves from a multitude of publishers to a small number of, or perhaps a single dominant, point of contact with the customer. Until the Nook came along from B&N last winter and the iPad from Apple in the spring, Amazon and Kindle looked dangerously close to being able to dictate both pricing and margin in the ebook supply chain.

And third, of course, is the amount of the consumer spend that is taken by the authors: the royalty.

The ebook pricing and channel consolidation issues have been front and center for the past year, ever since Dominique Raccah of Sourcebooks put “windowing”, which had been tried before for ebooks, in the spotlight as her solution to the perceived damage deeply discounted ebooks could do to print book sales, particularly of the hardcover edition. After she announced that she was holding back the ebook for Bran Hambric, similar announcements came from other publishing houses. At that time, only a year ago, Amazon was the dominant ebook vendor with Kindle sales amounting to 80% or more of the ebook sales for narrative trade books.

But the introduction of Barnes & Noble’s Nook device began to eat into Amazon’s hegemony last winter as 700 B&N stores started pushing a Kindle-type experience on their millions of customers. Then, in April, Apple introduced the iPad and changed the game two ways.

First of all, their tablet computing device, which can serve as a larger-than-a-cellphone screen for an ebook reader, started adding tens of thousands of new device-equipped potential book customers every day!

But along with the device competition, the iPad and its iBooks platform added a new business model called Agency. And, under Agency, the pricing of ebooks at retail theoretically becomes standardized across the web, not subject to discounting by individual retailers. This visibly upset Amazon, which appeared to pick a fight with Macmillan over the terms. It looked to those of us with no inside knowledge of their conversations to be an attempt to bully publishers to give up the Agency idea. In retrospect, this was perhaps a bad fight to have picked. Amazon’s threat was to stop selling the print editions of titles from those publishers who sold ebooks on Agency terms. Since five of the top six publishers were moving in that direction, and none of them blinked, Amazon had to, in their own words, “capitulate.” (On the other hand, we are not aware of any other publisher, beyond the Big Five, to whom they also capitulated, so the final score on this fight isn’t in yet.)

So it would seem that the big publishers have solidified two of the major components of their ebook margin. With their help, consolidation in the ebook channel has been reversed and they’ve taken critical steps to control prices to the consumer, while ebook sales have continued to rise at an accelerating pace.

But there remains this tricky question of royalties.

Agency pricing compounded the 25% problem from the authors’ and agents’ point of view because the base price for Agency books is 25% to 40% lower than it is for the old model, wholesale, so the authors’ share is commensurately reduced. Most agents liked the principle of getting uniform pricing, likely to create a healthier ebook marketplace, but were understandably miffed that their per-copy take could be reduced without any agreement required on their part. The publishers would no doubt point out that their take per ebook unit was going down as well. And Random House, still selling at wholesale, is no doubt making the point that their 25% amounts to substantially more per unit than the other guys’ 25%.

There had already been signs for a while that a lot of legacy backlist wasn’t being enticed by the royalty offers of its current publisher. Jane Friedman, formerly the CEO of HarperCollins and an important player on the New York publishing scene for four decades with a lot of very solid relationships, started a new publishing company called Open Road. Among her propositions was to secure ebook rights to some very well established backlist titles by offering a royalty of 50% of receipts while many of the big publishers were apparently holding the line at 25%. The early headline “get” for Open Road were novels by William Styron.

Then in December, S&S bestselling author Stephen Covey announced that he was putting some of his backlist into ebooks for a deal calling for more than 50% of receipts through Rosetta Books, which had litigated inconclusively with Random House about these matters a few years ago. Through Rosetta, Covey’s books were going to be exclusively offered for a time through Kindle. At the time that announcement was made, Nook hadn’t taken hold and iPad hadn’t come out and Kindle was the dominant platform in the market. A time-limited exclusive with them at that moment didn’t seem crazy.

Last week, the plot really thickened.

In retrospect, one could say that there were two preliminaries to the big news about the intentions of the agent Andrew Wylie.

On Tuesday Teleread carried the story that Knopf was pushing ahead to digitize more backlist. There appears never to have been a formal announcement of this, and it seemed a bit curious on a couple of counts. One is that Random House, of which Knopf is a part, has already digitized backlist for years. What could they have missed in their prior efforts? The other is that it always seemed that Random House’s digital efforts were corporate, not imprint-specific. Why would there be news about Knopf on its own?

Then my good friend Evan Schnittman published a post on his Black Plastic Glasses blog called “Pass the Gestalt, Please.” Evan’s point was simple and forcefully made. Ebooks don’t exist in a vacuum; they can’t be evaluated with stand-alone economics. Publishers acquire intellectual property and they monetize it every way they can. They make more from some formats and channels than they do from other formats and channels. But what matters in the end is how much total money they produce, for themselves and for their authors.

I have a problem jumping from the math Schnittman lays out to the characterization that agents are being unreasonable when they ask for a higher percentage of ebook receipts than they get of hardcover receipts. Schnittman argues that margin is irrelevant because the parties aren’t negotiating a profit-sharing deal. I’d say the receipts comparison that he draws is irrelevant. Hardcover receipts are offset by printing costs, handling costs, and spending for excess inventory that receipts on ebooks are not.

Schnittman’s post, which was debated as soon as it hit, turned out to be prologue to the events which then dominated conversation for the rest of the week.

By all public appearances, big publishers were being very stubborn about their 25% ebook royalty, even on very important backlist and more or less daring authors to do something about it.

On Wednesday morning, the plans of the Wylie office were dropped like a bomb, apparently by Amazon. (I am told by a source I trust that Amazon revealed the news and that Andrew Wylie himself was, and is, away on vacation. The Times, as you can see, didn’t report it that way.) It was announced that Wylie that had formed a new publishing company called Odyssey to handle some significant backlist  and — in an apparent middle finger to the entire publishing community — were putting the books into Amazon for a 2-year exclusive. Left unrevealed were what Wylie was paying the authors, what splits Amazon offered Wylie’s authors, and whether any money changed hands between Amazon and the new Odyssey entity. The announcement of Odyssey followed a long period where Wylie had complained publicly about publishers’ reluctance to pay what he (and many other agents) thought were reasonable ebook royalties for legacy backlist.

Response was quick. John Sargent, tongue deeply in cheek, welcomed Wylie to the community of publishers and suggested he should perhaps be paying AAP dues. Random House announced they would not be buying any books from the Wylie agency until this issue was resolved. And many people observed that signing an exclusive deal with Amazon when they’re losing market share quickly and are likely to lose more soon was questionable, not to mention whether there was a conflict of interest for an agent publishing his own clients’ books.

Without knowing what incentives Wylie got for his authors from Amazon in return for the exclusive, it is hard to be sure that it is a mistake (although it seems likely, given the current growth pattern of the ebook suppy chain.) But the conflict of interest for an agent charged with looking for the best possible deal for an author and then self-publishing, in the face of potential litigation, is transparent. And even if Random House is the only house that openly boycotts the agency, there’s an impact on all Wylie clients in return for a theoretical advantage for the ones being he will publish through Odyssey. One must imagine there are more than a few current authors with that office who are scratching their heads about what this might mean for them.

From my perspective, there’s plenty of justification on all sides of this argument. Although I didn’t like his math, Evan Schnittman is entirely correct to say that a publisher making a deal for a copyright plans to exploit it through all channels. In words I’ve heard often from John Schline of Penguin, “you don’t do a P&L on a format; you do a P&L on a title.” They’re right that the author negotiating a deal with them accepts a basket of compensation schemes for different channels in return for an advance. Logical fallacies can creep in when you take one element of it in isolation and say it “isn’t fair” (although, in practice, that’s exactly how contracts are negotiated.)

But the controllers of old copyrights — the Styron estate and Stephen Covey, among others, and apparently several other estates and authors represented by Andrew Wylie — are also right to believe that the ebook rights weren’t contemplated in the contracts for the books in question and that a publisher starting today to publish those books electronically will have a tiny cost base and relatively astronomical margins.

Certainly not all publishers are being stubborn about the 25% number in all negotiations. And agents usually feel they can’t talk about concessions they get publishers to make. One made it very clear to me that s/he was getting concessions from publishers on ebook royalty terms in the form of escalators, but would never say so out loud for fear of angering the customers of s/he’d wangled those concessions from.

(On the other hand, things might be changing fast. In a story I saw just as I was finishing this post, the Financial Times wonders if the Wylie plans don’t signal the conclusion of publishing as we have known it. In that story, superagent Amanda (Binky) Urban is quoted saying her ICM office is getting significant royalty concessions from major publishers, including Random House. Perhaps the Wylie story has changed the dynamic so that now publishers want all the agents to know they’re ready to be reasonable. I’m not aware of an agent having been quoted to that effect before, and it would seem highly unlikely that Urban said what she said without having consulted any house she would name in advance. All of that would anticipate the suggestion I’m making below.)

All public statements are, by definition, posturing.

But the arguments publishers have made publicly to this point have elided the fact that their negotiating position is not the same for these books as they are for a new book. When a new proposal is put in front of them for purchase today, whether they are offering $10,000, $100,000 or $1 million for the rights, they’re in a position to say “if you want my check, it comes attached to these royalty terms.” But they didn’t stipulate those terms when they published books 40 or 30 or 20 years ago, or even 10 years ago. At a minimum, they require agreement from the author on a royalty rate to publish the ebook today; they may need agreement from the author to publish the ebook at all.

Why would the publishers expect an author whose book has earned out long ago, who has no requirement to allow the publisher to publish the ebook and (at the very least) a case to make that they’re free to sell ebook rights elsewhere, to accept the same terms that are offered to authors not in that position?

Publishers may have trapped themselves by not articulating that distinction. Their public position seems to be that they can’t make a competitive deal on this backlist because it would create precedents for the new titles they’re negotiating for today. But it doesn’t have to. There’s a very simple, clear policy they could declare that would make this whole issue go away. Maybe there are one or two already acting this way, but it would be nice if even one publisher would just say this:

“Our policy for all new titles we sign up in the context of all our other standard terms is that we pay 25% royalty on ebooks. But for those books on our backlist which a) have earned out their advance and b) have ambiguity in their original contracts making it unclear what the royalty rate for an ebook should be, we will negotiate a higher royalty in recognition that a contractual element is being negotiated after the value of the copyright has been demonstrated in the marketplace and the risk profile has changed.”

Life is very complicated here. Every deal is different. There are costs and risks for authors and publishers trying to set up these separate ebook deals while a print backlist remains with a legacy publisher. The publisher might sue (although that opens up, for them, the danger that they’d lose, and the consequences of that could be dire.) At the very least, the author annoys the guys with the big checkbooks who are still the custodians of their print sales.

Although it is certainly possible that some authors or estates would want a publisher as talented as Jane Friedman remarketing their backlist, I still believe that if Open Road and others are offering 50%, publishers would find many authors receptive to avoiding the conflict if the publishers were offering 40%. But even if they had to pay 50% to some authors, the publishers would be doing themselves a favor by stating the position articulated above.

Each publisher has to do its own math about how many books of theirs would be affected and what openly paying 60-to-100 percent higher royalties on those books would cost them. Undoubtedly, it would also require them to make concessions to authors they’d roped in for the 25% royalty; certainly many of those have re-openers or most favored nation clauses of some kind in their contracts. That’s the downside. But there is a lot of upside. For one thing, Open Road and Rosetta and Wylie’s new imprint would be seriously weakened; except for Open Road, which has strong cachet with Jane Friedman at the helm, they might just disappear. For another, lots of great titles that could be selling robustly as ebooks if only they were available as ebooks would be producing revenue for the publishers (as well as the authors.) Significant legal costs and liabilities would evaporate. And they’d gain enormously in trust and goodwill with the agents, who are spending far too much time trying to figure out how to go around publishers for the best backlist they control, rather than how to work with them. The conversations I have had make me believe that most agents do not believe that most big publishers are willing to deal on the basis I’m outlining here, (although a lot of them will be calling the publishers tomorrow after they read Binky Urban’s quotes.)

Aside from the reduced per-copy royalties agents and authors are seeing from the Agency pricing, they are also afraid that robust ebook sales at the hardcover price are postponing the issuance of trade paperback editions, on which the 25% Agency royalty does exceed the normal 7% of retail paid on print. That makes them feel like they’re losing again.

It is a paradox that traditional contracts have legacy publishers — the ones who write the large advance checks — paying higher per-copy print royalties than many little publishers pay on hardcovers, even with the various high-discount clawbacks that have been built in over the years. The ebook-first publishers who do print will almost certainly pay lower print royalties than print-first publishers have, if they do hardcovers at all. Publishers will need a foundation of good will, but over time should be able to negotiate lower hardcover royalties in return for higher ebook royalties on new contracts. And that will make sense, because, ultimately, print sales are more expensive for publishers to deliver than ebook sales.

Even if the publishers pushing back manage to win this round with Wylie, and they well might, I don’t think the 25% royalty can hold for very long. As more and more of the business shifts to ebooks, companies without the legacy costs that big publishers have will find it easy to pay higher royalties than that and agents will keep doing the math about how many sales they can afford to lose and still end up ahead in dollars with a higher ebook royalty. As Amazon should have learned in their fight with Macmillan in January, it isn’t smart business to draw a line in the sand marking a position you ultimately can’t defend. I hope every big publisher in town will take that lesson on board, or, even better, that Urban’s remarks tell us that they already have.

In a dialogue with a couple of smart people in my “kitchen cabinet” between writing this piece and posting it, I was asked whether I thought the ebook should have a royalty “greater than the hardcover or less than the paperback.” My response was:

I don’t have an ideology about this. Applying logic alone, I would think a Harlequin or O’Reilly ebook author should get a lower percentage than a Big Six ebook author because the Harlequin and O’Reilly brands add to the online ebook sales power in ways the Big Six publisher brand does not. The same author and the same book wouldn’t sell as well if it were under another imprint. Fully applied, that approach would mean that every deal would be different, which is utterly impractical. I don’t like to advocate things that are impractical.

Publishers should try to make standard the lowest royalty that they can apply in the marketplace without making enemies of their trading partners. It just isn’t realistic to offer a brand name with a choice of where to go 25% in this day and age. It’s just bullheaded. My sense is that any house that offered a standard 25% to earnout and 35% thereafter would be fine for now, except with the biggest authors with whom they’ll have to negotiate escalators (or change the basis on which the not-intended-to-be-earned-out advance is calculated.) But all solutions here are temporary. The line won’t hold. When ebook sales get to 50% of the total (2014-15), even 50% is not going to cut it.

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