randomhouse Publisher often love to draw a connection between money and the quality of a book—and you can bet that includes e-books. I agree. Editing, design, promo and the rest aren’t free, no matter what the medium.

But how about the money-quality connection in the case of writers? Random House, it would appear, is taking at least a small step backwards. And writers and society at large will be the losers. Yes, manuscripts abound. But the smaller the rewards for writers, the less incentive they will have to do their very best. Even literary writers like the late Kurt Vonnegut—follow the just-given link—aren’t impervious to the allures of cash.

So what’s Random House been up to? From E-Reads, via the TOC blog:

A recent Random House contract states that on all copies of a work sold as an electronic book, the royalty will be 25% of the US suggested retail price until the book’s advance has earned out, and 15% of the list price thereafter. Under the current (pre-change) royalty structure, on a book retailing for, say, $10.00, the e-book royalty would be $2.50 per download at 25%, then $1.50 per download when the royalty rate shifts to 15%.

By contrast, the new royalty of 25% of the net receipts [after distributors’ cuts] comes to something like $1.25 per sale on a $10.00 book (25% of 50%). So, Random House’s change is definitely a reduction of e-book income for authors.

Just $1.25 for the most important person, the author? So much for the efficiencies of E, huh? Among Random House’s justifications: “…The new rates are very much in line with the e-book and digital audio rates being offered today by our major competitors…”

Detail, from E-Reads: “By way of comparison, and as a matter of full disclosure, E-Reads pays a royalty of 50% of net receipts for e-book sales, and has done so since its founding in 2000. On a $10.00 book, that means a royalty of $2.50. At no point is the royalty rate ever reduced.”

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  1. Random House and the other large publishers better start treating their authors better if they want to remain competitive in a world where ebooks are the norm. Right now most authors need the publishers more than most publishers need any particular author (certain exceptions like Stephen King excepted). This need is based simply on the ability of the big publishers to get their books into national and world wide distribution.

    The net however, has provided an alternate means of distributing books. More and more authors are going to realize that ebooks and print on demand technology means that getting picked up by a big publishing house is not quite as necessary as it use to be. Already some authors already self publish at least some of their work on line and I think in the future that trend will continue to grow.

    Who knows, in 10 years, publishers might have to work very hard to convince authors that there is a reason to use them as opposed to just self-publishing on Amazon and other sites.

  2. I agree that in the future a publisher will need to convince authors of their place in the publishing process. However what does need to be acknowledged is that publishers (and no, I don’t work for one) carry a huge amount of costs and risks.

    Also, without the investment in editing that they offer as part of their services then the quality of the published product – online, ebook or printed – would be substantially less!

    However, that said in the publishing pie it would be interesting to visually demonstrate exactly who gets each piece and how big it is!

  3. At BooksForABuck.com, I pay royalties on net receipts rather than on list price. If I sell directly through the BooksForABuck.com website, list price and net receipts are identical (except during the introductory month during which I offer new eBooks for only $1.00).

    So, I don’t think the method Random House uses to calculate is wrong. However, they might want to consider whether the royalty rate based on net receipts shouldn’t be adjusted upward.

    Being an author (or a small publisher) is a lousy way to get rich. Still, we’ve all got to eat and a reasonable royalty rate seems little enough to ask.

    Rob Preece
    Publisher, http://www.BooksForABuck.com

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