So, last week there were two big announcements in publishing. The first, of course, was the Google Book Search settlement, which received a huge amount of attention (a trend continuing to this week — it’s that big!). The second was an(other) announcement from Random House that they’re messing around with ebook and digital content royalties.
Let’s put this another way: the week that Google effectively sets the royalty to content owners at 60-something percent (there’s a bit of math involved, so, for today, I’m rounding), Random House decides that 25% of net amounts received by the publisher should be the going rate. Yep, that is a small disconnect you’re seeing there. Google, in conjunction with industry players, set the standard on the minimum e-royalty that other publishers will have to meet to remain competitive in the space.
Remember, the Google deal is quite author-centric, creating scenarios where authors, via the ASCAP/BMI-type structure, can be paid directly.
While Random House cites market conditions (those ephemeral things we know are out there but cannot necessarily see, touch, or quantify) and tries to hide behind the “in line with our competition” fig leaf, the truth of the matter is that “the competition” is not a handful of New York publishing entities. A few months back, I noted that author Terry Goodkind had followed the money and cut a deal with Rosetta Books, highlighting this quote:
When asked why Goodkind opted to be published in e-book by an independent, in Rosetta, Goodkind’s agent, Russell Galen, said Rosetta “offered us much better terms.” [Arthur] Klebanoff [CEO of RosettaBooks], who negotiated the Goodkind deal with Galen, added that he thinks the size of a publisher is also less important in e-book publishing. “Obviously Random House has a compelling argument when it comes to what it can do [in publishing] a phsycial book,” he told PW. “But in e-book [publishing] the people selling the books are Kindle, Sony Reader and various other e-tailers. So, whether the title is fed by Rosetta or Random House makes no difference.”
So a mere two months and change later, Random House counters this blow with….lower royalties? The problem, of course, that accepting this lesser amount doesn’t come with substantial incentives for authors — otherwise known as the “why?” question. Russell Galen notes that when it comes to e-book publishing, the distributor of the book makes no difference. Customers only care about fulfillment. They’re not peering down the food chain to see whose corporate banner is being flown.
It is incumbent upon publishers to understand the nature of competition. Most authors, yes, will take what they’re offered and be thankful that someone wants to publish them (this is a weird perversion of the business, but never mind that right now). It will be the authors with smart, forward-looking agents who withhold rights because there are better deals down the road. These will be the authors who understand that they need to define distribution terms to allow for maximum flexibility.
Publishing is in transition, and will likely be so for a long time. We’re in the wild experimentation phase of a new business model. Not everything will stick, not everything will work. Random House is not only on the same playing field as other publishers, but it’s also going up against new competitors: Google, Amazon, Barnes & Noble, a slew of independent epublishers, and even yet-to-be-discovered ventures that can change the game again.
Heck, Microsoft might get back in the game.
Count me among those who believe that setting royalty rates based on list prices is folly. Particularly in today’s world, where deep discounts are the norm. I appreciate the history of this convention, but find it archaic. I can hear a lot of authors screaming from here, but they know, deep down inside, that I’m right. It makes no sense to pay out royalties based on a number that has no true bearing on the actual financial transactions taking place.
In justifying this rate reduction, Random House cites the usual suspects and admits the truth:
3) The electronic formats are not as inexpensive to produce and publish as many believe [...] We have made substantial investments, and we will continue to invest, in related digital infrastructure, such as the creation and maintenance of a digital archive, and in the development of the market for electronic formats…
Or, if you will, they’re asking that authors help subsidize overhead. Which would be neat, if oh, that wasn’t what the publisher should be doing with the amounts it already retains. RH goes on to say:
4) The new ebook rate continues to compare favorably to the rates we pay for other formats in which books are made available.
Yeah, well, those rates aren’t so hot either. For my money, anything less than 35% of amounts received is an insult (and I’m setting the rate lower than I honestly believe is fair, but, yeah, I do have a certain level of wimpiness when comes to the infrastructure argument). Publishers don’t “own” books, they license rights to a particular book. Publishing entities that get this will survive and succeed (and there will be quite a few).
Publishing entities that don’t will go softly into the good night.