Post-Wylie Comments & Thoughts

More voices are being heard from since the explosive announcement on Thursday that Andrew Wylie had signed an exclusive two-year deal with Amazon to release twenty e-books from the backlist of authors his agency represents.

Random House responded to that announcement with one of their own:

The Wylie Agency’s decision to sell e-books exclusively to Amazon for titles which are subject to active Random House agreements undermines our longstanding commitments to and investments in our authors, and it establishes this agency as our direct competitor ... Therefore, regrettably, Random House on a worldwide basis will not be entering into any new English-language business agreements with the Wylie Agency until this situation is resolved.

You can understand Random House's frustration. They hold the print rights to some of the twenty books for which Wylie is now separately contracting the e-book rights.

The irony of this is that it was only seven months ago when Random House tried to grab e-book rights to their backlist. I dug up the December 11 letter from RH CEO Markus Dohle, which included this excerpt:

The vast majority of our backlist contracts grant us the exclusive right to publish books in electronic formats, as well as more traditional physical formats ... Our older agreements often give the exclusive right to publish "in book form" or "in any and all editions" ... Accordingly, Random House considers contracts that grant the exclusive right to publish "in book format" or "in any and all editions" to include the exclusive right to publish in electronic book publishing formats.

Naturally agents and authors challenged this self-serving view of a format that had not even been invented at the time many contracts were signed.

The Financial Times reported yesterday:

An unexpected consequence of Mr Wylie’s actions seems to have been to induce other companies to reach deals quicker to avoid a prolonged war over rights and risk missing out on e-book sales.

“We feel much more comfortable in giving our valuable backlist to publishers at very good royalty rates, which we are now winning,” said Amanda [Binky] Urban, the literary agent at International Creative Management (ICM) ... Since the iPad’s debut, Ms Urban said her agency had secured e-book royalty rates of between 40 to 50 per cent from some of the big six major publishers, including Random House.

Read the entire Financial Times article here.

Today The Bookseller reported here on comments made by HarperCollins UK CEO Victoria Barnsley with respect to the three books on Wylie's list of twenty, which are print published by HC:

"HC will vigorously protect its rights and our authors' interests by ensuring their work gets to the broadest possible audience. The only winners in this are Amazon."

I'll be honest. I think a 25% e-book royalty is too low, but I also think that if a book is currently being published in both print and e-book versions, a 50% royalty may be too high at this point in time.

Please note I said AT THIS POINT IN TIME.

Publishing is being reinvented ... but it isn't there yet. On July 16, the Association of American Publishers (AAP) reported that e-books have captured 8.5% of the total trade market year-to-date. This is remarkable when you consider in 2009, that figure was only 3.31% of total trade sales, up dramatically from 2008's 1.19% for the entire year.

But as exciting as that 8.5% figure is, the number means that print (and audio) books still have more than 90% of the trade market.

Print books will continue to be available for the foreseeable future. What is still in question is whether the Big Six will wake up and start preparing for the future:

1. Stop their policy of protectionism for their print books. Ditch the delay "window" that holds the e-book from release to give the print books more time to rack up sales.



2. Stop their belly achin' about how it costs as much to produce an e-book as it does a print book and begin a serious review of costs.
   
   The inimitable Mike Shatzkin did a post on his blog yesterday afternoon here in which he talked about the problem of setting a royalty rate in this new publishing environment. He made his own recommendation to the Big Six:
   
   
3. "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."

Mike brings his common sense to the problem. He recommends a variant of a common practice these days in publishing contracts for rising star authors: build in an escalator so that the more books they sell, the higher their print royalties climb. For example, the first 100K books have a royalty of 7% while the second 100K books have a royalty of 8% and the third 100K have a royalty of 9%.

In the case of e-book royalties, he suggests setting one royalty rate for pre-payout [before the advance is paid back by royalties from sales] and another royalty rate for post-payout.

Do read Mike's post. It's well worth it.

The point here is that publishers need to develop a new playbook for operating in futureworld. They need to quit trying to maintain the status quo and move forward. They need to start trying to get closer to their end-users: their readers.

Remember Marketing 101: Give the customer what s/he wants.