Tuesday, July 22, 2008

More On E-Book Royalty Rates

Just a quick post to complete what I started over the weekend with my post about Simon & Schuster's latest move.

If you read my post on Saturday, you'll have seen that Simon & Schuster is apparently sending a letter to its writers, seeking to modify their contracts to establish the standard royalty for e-books at 15% of "the catalog retail price."

This is actually huge because you have a New York publisher moving its royalty rate for e-books from the industry standard paperback royalty of 7.5% of the list price to the high end of the industry standard for adult fiction hardcover books of 10% to 15%--without any provision for discounting the book.

Do I think S&S is doing this out of the goodness of their hearts?

Hell, no.

I've been saying for over a year that New York was going to have to get used to the idea that they could not expect to offer authors the same royalty rates for e-books as they did for physical books.

First of all, their level of expense in producing and releasing an e-book is nowhere near the level of expense of producing, warehousing and shipping a physical book. Second, e-publishers have been offering royalty rates of 33% to 50% since e-books first appeared.

A couple of weeks ago, I spoke in St. Louis to the RWA there. I made the comment that New York was going to have to raise its rates for e-book royalties. One of the published authors in the audience was very aggressive in arguing against this. Although her reasoning seemed muddled ("New York still has huge expenses"), I simply reiterated this was my opinion.

Her comment reminded me of my recent discussion with an employee who was demanding a 42% raise. When I asked what the logic was for making this request, I was told that she "simply can't live on the $32,000 she is presently making."

Both women (the St. Louis dissenter and the disaffected employee) were forgetting two things: (1) Businesses generally (not always) pay according to the value received, not according to the expenses the provider of services (employee) is encountering and (2) Prevailing market rates have an enormous impact on prices and salaries.

Now, less than a month after my St. Louis visit, here comes S&S offering to double its e-book rights. That says a couple of things to me. First, that their authors are complaining about the e-book royalty rates being offered. And, second, that S&S is probably looking for another advantage and using this raise in rates to secure it.

I'd LOVE to see a copy of the letter S&S is sending its authors. The fact that the Authors Guild warns writers that this modification to their contracts may "grant the publisher rights that you've otherwise retained" causes me to suspect there is something else going on here.

Also the Authors Guild says this modification "may affect your ability to obtain a reversion of rights."

THAT sounds like the newest variation of a familiar song. The Internet offers a virtual bookshelf where books need never go out of print in the traditional sense in which we think of "out of print." I'd wager that S&S is arguing that this higher royalty rate and the virtual bookshelf should allow them to retain the right to the work in question indefinitely.

I'd be VERY cautious about signing that clause without a revenue-based threshold (i.e. an annual level of sales they must make) to justify my leaving my work with that publisher.

Stay tuned. I'm sure this is not the end of the discussion.

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