The New Standard Royalty Rate?

Last Tuesday, Rosetta Books announced a new higher e-book royalty rate, one which they called the “highest industry standard e-book royalty rate":

Publishers Weekly reported that the new royalty terms give Rosetta authors 50% of net receipts on the first 2,500 copies of the e-books sold, followed by 60% of receipts for subsequent copies.

Most print publishers are now offering a 25% e-book royalty while many e-book publishers offer a 50% royalty rate. PW speculated that Rosetta's offer of another 10% after an author sells 2,500 copies "could make a huge difference" for big-selling authors.

The rate reminded me of another PW article back on August 30. I dug around and found it.

The story came out about three days after Andrew Wylie and Random House reached a settlement on those 13 backlist titles in dispute when Wylie announced the launch of his Odyssey Editions.

[Behind the resolution] of the Random House/Wylie dispute ... is the quiet deal making publishers have been conducting with agents for months to develop a standard digital royalty rate for backlist titles where the ownership of digital rights is unclear.

A source confirmed that the biggest of the “big six,” Random House, has adopted an e-book royalty that tops out at 40% for all titles covered by contracts signed before 1994. Sources said that Random is offering a starting royalty of 25% on these titles—which is the de facto standard in the industry on frontlist books—that then rises to 40%.

That RH 40% rate only applies to backlist titles and only kicks in after a "specified number of sales."

Of course, putting Rosetta in the same post as Random House brings to mind the lawsuit RH brought against the fledging e-book publisher almost ten years ago. Rosetta launched in February, 2001, offering backlist titles from William Styron (The Confessions of Nat Turner and Sophie’s Choice); from Kurt Vonnegut (Slaughterhouse Five and Breakfast of Champions); and Robert B. Parker (Promised Land).

The day following Rosetta's opening, Random House filed a lawsuit accusing Rosetta of copyright infringement. Random House pointed to their contracts which, in Styron's case, gave them the right to “print, publish and sell the work in book form.”

Judge Sidney H. Stein, U.S. District Judge found that:

... the most reasonable interpretation of the grant in the contracts at issue to “print, publish and sell the work in book form” does not include the right to publish the work as an ebook ... Manifestly, paragraph #1 of each contract – entitled either “grant of rights” or “exclusive publication right” – conveys certain rights from the author to the publisher ... In that paragraph, separate grant language is used to convey the rights to publish book club editions, reprint editions, abridged forms, and editions in Braille. This language would not be necessary if the phrase “in book form” encompassed all types of books.

Arthur Klebanoff is both the CEO of Rosetta Books and an agent for Scott Meredith Literary agency. Presumably, wearing two hats helps him to understand that what it takes to snag a best-selling author either for his agency or his publishing house.

As publishing continues to shift from p-books to e-books, it's inevitable that royalty rates will climb. Take a look at Joe Konrath's post from last week here where he describes a "meeting" between an author and an acquisitions editors. Although written in Joe's humorous style, it highlights the very real disconnect between print publishers and reality.