How does agency pricing affect author royalties? Sharp-eyed blogger Brian DeFiore spotted a clue in a slide from HarperCollins’s latest investors’ meeting pointing out that, under agency pricing and the now-standard 25% e-book royalty, publishers are making considerably more and authors considerably less for each agency-priced e-book sale than for each hardcover sale.
$27.99 hardcover generates $5.67 profit to publisher and $4.20 royalty to author
$14.99 agency priced e-book generates $7.87 profit to publisher and $2.62 royalty to author.
So, in other words, at these average price points, every time a hardcover sale is replaced by an e-book sale, the publisher makes $2.20 more per copy and the author makes $1.58 less. If the author made the same $4.20 royalty on the e-book sale as he/she would have on a hardcover, the publisher would STILL be making an improved profit of $6.28.
Even if most books don’t earn out of their advances, DeFiore points out, this means that it’s effectively punishing the most successful authors—the ones whose works do earn out—as well as making it that much harder for the less successful ones to earn out and make more money.
Nick Harkaway points out in FutureBook that, in comparison to these rates, self-publishing is starting to look better every day, especially to authors who’ve already had a few books traditionally-published and earned a following who will gladly buy their self-published titles. If even a few authors jump ship successfully, how many more will follow?
He also expresses puzzlement that all the innovation he would have expected to see in the e-book market by now is nowhere to be found:
I would have expected to see publisher-branded ereading software by now, direct sales and reading clubs, bundled digital and physical copies with deals on audiobooks, loyalty schemes, communities, discovery engines, price experiments, more DRM-free books, a faster transition of manuscripts to books and a partial end to the seasonal nature of the trade, with at least some books coming to market when they’re ready. These things just don’t seem to be on the menu, and yet the profits are decent, and you can’t entire explain that with tentpole books like 50 Shades (tentpole movies are not helping Hollywood, either, and haven’t done for years).
He wonders if the publishing industry is managing to stay afloat without having to innovate simply by leeching more and more money away from the authors, and if so, how much longer this state of affairs can last.
That last bit does read kind of like that song “(It’s the Eighties So Where’s Our) Rocket Packs,” except that unlike with rocket packs there aren’t any technological hurdles preventing publishers from developing any of the things Harkaway is surprised we haven’t seen yet—just publisher inertia. I’m maybe not quite as surprised as Harkaway that these things haven’t materialized yet, though, in light of publishers’ spectacular failure to do anything with e-books for the ten years prior to the Kindle, and their frantic attempts to stop Amazon from doing too much with them after that. So far the only innovation in e-book space has come from the e-book stores, especially Amazon. From publishers, we got every possible attempt to apply the brakes, up to and including colluding to form an illegal anti-trust.
Publishers are doing everything they possibly can to hang onto their paper-book buggy whips, up to and including possibly cannibalizing their authors’ e-royalties to stay afloat while they cling to a dying paper market. They need to figure out how to “burn the boats” and get to where they can start making money out of e-books before paper books have entirely faded away into objet d’art territory. If they don’t…well, even Harkaway admits it’s hyperbole to predict some kind of “armageddon” for traditional publishers. But it only takes one armageddon to bring everything to a crashing halt.
I will admit, I do harp on the publishers’ failure to capitalize on e-books every chance I get. And maybe in their shoes I wouldn’t be able to do any better. But just seems so asinine that they’ve had every chance to innovate, and they responded to these opportunities by colluding to force Amazon to raise its prices instead.
Looking at that track record, I get indignant when I think about the marvelous innovations we could have seen in the e-book market by now—the ones Harkaway called out above, for example—that we haven’t gotten because the publishers either couldn’t be bothered with or felt downright threatened by the new technology. It’s like the futurists’ flying cars only worse, because as I said above, there is no technological obstacle to doing these things—just institutional inertia.
Come on, guys, get with the program…while you’re still around to do so. Otherwise, you’ll die out like the dinosaurs you are, and a new breed of mammals will inherit the Earth. If the big traditional publishers do collapse, the smaller publishers will still be around, and I’m sure it won’t take long for some of them to step into the vacated niches. And maybe they’ll be a bit more prone to innovation.