Royalties

A Hybrid Author Busts the Myths: Should You Self Publish?

18 August 2014

From The Huffington Post:

Yesterday, I gathered with a group of diverse writers for the Haverhill Public Library Authors Fair. My table was situated between Kristin Bair O’Keeffe, an author who publishes traditionally, and Connie Johnson Hambley, a self-published mystery writer.

This was the perfect place for me: I’m a hybrid author who has jumped from a traditional publisher (Random House) to indie publishing and back to a traditional house again. As I start my fourth novel to be published by New American Library/Penguin Random House, I have no contract for the next one. This means that I’m revisiting the all-important question for many writers: do I want to go solo when I publish my next book, or stay where I am?

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1. Publishers are Out to Screw Authors

MYTH. Publishing companies are businesses that compete in a global marketplace. Their job is to make money–and, in so doing, they will make money for you.

With a traditional publisher, you will get royalties from your books–typically about 25 percent of ebook sales. This is much less than the percentage of royalties you’ll get if you self publish. Rates vary, but with self publishing, you’ll reap about 65 percent of a book sale as your royalty rate.

However, with a traditional publisher, you receive an advance against royalties–anywhere from $5K to $45K for most first-time novelists, though of course there are some pie-in-the-sky whopper deals. You will also get–for free!–an editor, publicist, marketing team, designers, sales people, etc. Your team at a traditional publisher will help you whip your book into shape and get it into the hands of readers.

People who self publish don’t get advances, obviously. In addition, they must shell out money in advance to designers, editors, copy editors, publicists, advertising venues, reviewers, etc.

Bottom line: Yes, I have friends who self publish and make buckets of money. However, the only self-published authors who really make a solid profit are those who are willing to write several books a year; have deep pockets to get the whole business of branding started; and most likely write romances, mysteries, or fantasy novels in series. Most say it takes them four or five books before they start seeing a solid, reliable annual profit.

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2. You Have More Control as an Indie Author

SOMEWHAT TRUE. Everything–and I mean everything–is up to you as an indie author: writing, editing (or hiring editors), design, marketing, promotions, etc. You can decide everything from what kind of brand you want to create to how you want to promote that brand. Nobody can tell you, for instance, that you can’t write a paranormal book because your last book was a romance. You call the shots, and it’s a great feeling.

There is also a great deal of transparency. Your sales are visible nearly to the minute, and you can tell with some degree of accuracy whether certain ads or blog posts have caused upward tics in sales. If you’re with a traditional publisher, you probably won’t have any clear idea as to how many books you’ve sold until you get your royalty statement six months after your book is published, because traditional publishers have agreements with bookstores about returns–i.e., the books you “think” you’ve sold might actually be returned, so the publishers don’t want to tell you how many have gone out until they’re sure the books won’t be returned.

. . . .

As you’re polishing up that manuscript, consider these two key questions: Do you want to invest money up front and build your brand as an indie author, basically running your own business as you go? Or would you rather take more time and try the traditional route first?

For me, traditional publishing is still the place I want to be. But your situation is unique. Weigh your pro’s and con’s carefully, and don’t rush into anything. This is your book–you want it to be the best one possible.

Link to the rest at The Huffington Post and thanks to Toby for the tip.

While it’s up to each author to determine whether he/she prefers self-publishing to tradpub, PG believes every author should understand the royalty math of each option. It appears the HuffPo author doesn’t understand how the math works.

The standard tradpub deal pays the author 25% of the amount the publisher receives for ebook sales, not 25% of the retail price of ebooks. Amazon pays 70% of the retail price of ebooks if a KDP author prices between $2.99 and $9.99.

Here’s how the math works out:

Retail Sales Price $9.99
Tradpub
Publisher receives 70% $6.99
Author receives 25% of
what Publisher receives $1.75 17.50% of sales price
Less Agent’s Commission $0.26
Author’s Net Income $1.49 15% of sales price
Indie Author
Author receives 70% $6.99 471% of the amount the tradpub author receives

So, the rule of thumb is that an indie author earns almost five times as much as a traditional author from each ebook sold.

Or, to flip things around, if a tradpub author sells four times as many ebooks as an indie author does, the indie author still makes more money.

Kindle Unlimited’s Two-Tier System Makes Some Authors Second-Class Citizens

22 July 2014

From Digital Book World:

On Friday, Amazon rolled out it’s Kindle Unlimited feature, where for a fixed fee of $9.99 a month readers can read as many books as they want from a certain subset of the ebooks sold by Amazon. It also includes a limited number of audio books from Audible.com. Here is how the numbers break down:

– 2,769,500+ ebooks in Amazon
– 645,790 books in Kindle Unlimited (about 23%)
– 2,157 audio books (about 0.3% of the Kindle Unlimited Books
– 2,773 books in KU are free (even if the reader isn’t subscribed to Kindle Unlimited)

How a title gets into Kindle Unlimited

Before I discuss the two-tier system. Let me explain how an author’s book gets into Kindle Unlimited.

– Kindle Direct Publishing titles enrolled in Select: this is by far the largest group of ebooks in Kindle Unlimited and is mainly self-published titles, although I suspect there are a fair number of small-presses that use KDP to list their books with Amazon. For those that don’t know, Select titles have added features such as the ability to be sold for free for five days out of 90, ability to do time-bound sales, can be borrowed from the Kindle Owners’ Lending Library, and now they are available to those who are subscribed to Kindle Unlimited. While that’s a lot of advantages, it comes with a big down-side. You must be EXCLUSIVE to Amazon. You can’t sell those titles anywhere else. Not your own site, not Barnes and Noble or the iBooks store.

. . . .

How a publisher/author is compensated

– For books enrolled in KDP & Select: Amazon has a pool of funds which is established at the start of each month. This is the same fund that has been used for “borrows” for people who are enrolled in Prime (they get 1 borrow a month). The fund does not take into account the size of the book or it’s price. Instead it takes the total amount of the pool divided by the number of borrows to calculate a unit price. This unit price is then multiplied by the number of times an author’s books are borrowed. Historically, the per unit price has been about $2 (sometimes a bit more, other times a bit less). The “downloads” from KU will be treated like a “borrow” once the reader gets past the first 10% of the book.

– For publishers/authors who opt-in to KU: they are paid the same price that they would receive if the reader had bought the book outright. Again, this amount is only credited once the reader has passed the 10% mark.

– For titles added without consent: Publishers are paid as if a regular sale were made without any minimum reading requirement.

. . . .

Historically, Amazon has been good about treating self-published authors and traditionally published authors equally. There are some exceptions (for instance traditionally published titles can be pre-ordered, and most self-published authors cannot get this feature. Again there have been exceptions made for best-selling self-published authors), but for the most part both self- and traditionally published authors have enjoyed equal treatment. They share similar exposure on best-seller lists and top-rated lists, and Amazon’s “cut” from sales have been the same for both groups (30% under the agency model). In fact, when the agency model went into affect, Amazon raised self-publisher’s royalty from 35% to 70% to match what traditional publishers were getting. But now with the roll-out of Kindle Unlimited, we see two very different treatments:

Self-published authors MUST be exclusive to Amazon (except for a handful of best-selling authors) and can’t sell their books on other sites. Traditionally published books have no such exclusivity requirement and can be sold wherever the publisher wishes.

Self-published authors are paid from a pool set by Amazon each month. They have no idea how much they will be paid per book. Traditionally published books get paid exactly as they would if a sale were made. They know exactly what the unit price will be for each book and are not relying on the Amazon’s whim as far as what their unit price will be.

Link to the rest at Digital Book World

July 2014 Author Earnings Report

17 July 2014

From Author Earnings:

It has been nearly half a year since we first pulled data for nearly every ranked ebook on Amazon.com’s thousands of category bestseller lists. This is our third quarterly report, and every data set tells us something new. With enough reports, we should be able to spot emerging trends in the world of digital publishing in order to help authors make the best decisions with their manuscripts.

As before, we are dividing the ebooks up by publication path while looking at the following four measures: the number of ranked titles, the number of unit sales, gross earnings, and authors’ earnings. Our primary focus at AuthorEarnings.com is the writer, so we pay special attention to the last of these measures.

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Of note here is that all of our graphs show remarkable consistency across data sets taken over the course of half a calendar year. And with our latest data set, we estimate that self-published authors now account for 31% of total daily ebook sales regardless of genre. This makes indie authors, as a cohort, the largest publisher of ebooks on Amazon.com in terms of market share.

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Gross sales are where it begins to get interesting. Now we are factoring price into the equation. We know self-published ebooks cost less than ebooks from the Big 5, but how much less? Being able to see the combined effect of price and sales rank in a single graph for 120,000 ebooks is very powerful. A lot of small discrepancies begin to average out with such a massive sample size. And while indies have seen positive movement across all three quarters, it’s too soon to tell if this is a global or a seasonal trend. It could be that indies promote their books year-round while major publishers pull out all the stops around the Holidays. This time next year, we should be able to answer this question.

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In February, we were able to announce that self-published authors are earning nearly as much as Big 5 authors combined when it comes to ebook sales on the Kindle Store. In the two quarters since, the earnings for Big 5 authors has shrunk while that for indies has grown. We can now say that self-published authors earn more in royalties than Big 5 authors, combined.

. . . .

It bears putting a number here and stressing what we are seeing: Self-published authors are now earning nearly 40% of all ebook royalties on the Kindle store. The days of looking at self-publishing as a last option are long gone. A lot has changed in six months.

. . . .

It wasn’t surprising to see that most Big 5 books employ DRM, but we were shocked to see that it is practically 100% of them. Indies, on the other hand, locked down roughly 50% of their titles. Since there isn’t any variation in the Big 5 books, we are forced to look at the self-published titles for any effect on sales, and indeed there is one. The 50% of non-DRM ebooks account for 64% of total unit sales.

Indie titles without DRM sell twice as many copies each, on average, as those with DRM.

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We believe this is one of the most important graphs we have ever published. At a glance, we can see how each publishing path performs in the top genre categories, and we can also see how these genres compare to one another in both total revenue and market share by publishing path. This last distinction is crucial, because the old-time advice to “never self-publish” has now faded to the advice that “self-publishing only works in certain genres.”

The truth is that, regardless of which publishing path an author chooses, some genres of trade ebooks sell vastly better than others, period. Other genres languish. For Big 5 authors, Mystery, Thriller, & Suspense is by far the most lucrative genre. But you don’t hear many people assert that traditional publishing is only good for people writing sleuths. Another common refrain is that nonfiction and literary fiction are uncrackable genres for indies. But in non-fiction, self-published authors are earning 26% to the Big 5′s 35%.

It turns out that Big 5 publishers have nearly as small a portion of Romance earnings (18%) and Science Fiction & Fantasy earnings (29%) as indies have of Literary Fiction earnings (13%) and Nonfiction earnings (26%), respectively.

Self publishing isn’t just viable for Romance and Sci-Fi/Fantasy. While indie authors are absolutely dominating traditionally-published authors in those particular genres, indies have also taken significant market share inall genres, including Mystery/Thriller/Suspense and Non-fiction. The market for literary fiction is anemic for indie authors simply because it is an anemic segment of publishing overall.

In fact, Literary Fiction makes up only 2% of Amazon ebook unit sales and 3% of Amazon ebook dollar sales. More startling is the fact that 20% of that 3% belongs to a single aggressively-promoted title, The Goldfinch.

Link to the rest at Author Earnings.

The Tenured vs. Debut Author Report

17 July 2014

UPDATE: Oops. Posted this late last night and was off the grid this morning. Latest report up above.

From Author Earnings:

In our most recent earnings report, one chart jumped out at us and begged for deeper analysis: It was a look at daily author earnings according to publication date, and it revealed the heavy reliance Big 5 publishers have on the sale of their backlist titles. The same chart showed, less surprisingly, that self-published authors are making the vast majority of their earnings on recently published works. In a single chart we were witness to the economic effects of new participants entering an industry in which they were formerly uncompetitive. The same chart made it apparent that the effects self-publishing will have on the trade book industry have only just begun.

Because of this chart, we began looking more deeply at authors from two different camps: those who debuted prior to the explosion of self-publishing and those who debuted after. Authors getting their start today will of course be joining the latter camp. And we believe those authors will want to know the following:

• Big-5 publishers are massively reliant on their most established authors to the tune of 63% of their e-book revenue.

• Roughly 46% of traditional publishing’s fiction dollars are coming from e-books.

• Very few authors who debut with major publishers make enough money to earn a living—and modern advances don’t cover the difference.

• In absolute numbers, more self-published authors are earning a living wage today than Big-5 authors.

• When comparing debut authors who have equal time on the market, the difference between self-published and Big-5 authors is even greater.

In this report, we will also reveal how e-book earnings represent roughly 64% of a traditionally published fiction author’s income, and therefore why authors should focus less on statistics geared toward publisher earnings and trade bookstore sales and consider their own incomes instead. Finally, we will tackle the difficult question of just how many authors are earning a living wage today. The results are sobering. I’ll spoil it for you and say that there aren’t many. But there are reasons to celebrate. Read on to see why.

. . . .

[We started] wondering how much of traditionally-published author revenue was coming from new releases by long-tenured authors, and how much of it was coming from debut authors. This is a crucial question for a new artist hoping to break into an entertainment sector. What we were hoping to discover is how many seats are left on the traditionally published bus. So we divided authors and books into “New” and “Old” using January 1, 2010 as a cutoff date, and checked.

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This final chart reveals a startling insight: If the Big 5 hadn’t signed a new author since 2009, and simply released new works from their long-established authors, they would still be making 63% of the e-book revenue that they are making today. Ownership of backlist and long-tenured authors is quite clearly big publishing’s most powerful commodity. This goes a long way toward explaining ever more restrictive reversion and non-compete clauses in publishing contracts. It also lends credence to rumors that some top-name authors are already receiving ebook royalties higher than 25% of net. Publishers rely heavily on these established authors and may be willing to violate their own most favored nation clauses in an attempt to retain them.

. . . .

This time, when comparing only the earnings of “New” authors who debuted after 2010, we see that below a tiny handful of mega-selling Big-5 debuts (like Veronica Roth), far more “New” indie authors are making a good living from their Kindle e-books than their “New” Big-5 peers. This is a logarithmic scale, which means a little separation signifies quite a difference in outcomes.

Some might argue that this comparison does not reveal the entire picture, because best-selling traditionally-published authors have a healthier complement of print sales than their indie counterparts. However, non-ebook revenue for traditional-published authors makes up a smaller percentage of their author earnings than you might think, and this is especially true for authors of fiction. To see this requires a digression, one that may be just as important for the aspiring author as our larger analysis in this report.

. . . .

While only 32% of the publishing industry’s gross revenue currently comes from e-books, nearly 64% of the average traditionally-published fiction author’s earnings is coming from their e-books. Earnings for the average genre-fiction author will skew even further toward their e-book sales. Perhaps an e-book-based comparison between publishing types is not so unfair a comparison after all. Especially when considering that the gain of 8% – 15% royalties on print sales means taking a massive cut in e-book royalties—from 70% of gross to 25% of net.

. . . .

[This data] neatly captures so much of what is going on in the e-book market today, mainly that there are far more indie debut authors from 2010, 2011, 2012, and 2013 who are now holding spots on the Amazon bestseller charts than Big-5 debut authors. Even more striking, the number of today’s bestsellers from these “New” indie debut authors increases steeply year-over-year, while the number of today’s bestsellers from “New” Big-5 debut authors stays flat. The number of today’s bestsellers from small to medium publisher debut authors is also growing year over year, although not at the same explosive rate with which indie debuts are grabbing and holding slots on the charts.

. . . .

After years and years of querying and jumping through gatekeeper hoops, it appears that even the less-than-1% who are lucky enough to land an agent and a Big-5 publishing contract can’t manage to quit their day jobs. (This is an observation in the data that matches what we have seen anecdotally in the publishing and bookselling trenches).

By contrast, we see over 700 Indie-published authors who debuted in 2010, 2011, 2012, and 2013 who are today earning more than $25,000/year from their Kindle e-books alone. For these authors, e-book sales on other platforms and POD print sales will add another 20%-30% on average to this total. It’s easy to see that, for the past 4 years, and even taking lost print sales into consideration, far more Indie authors than Big-5 authors are earning a living wage from their writing.

Link to the rest at Author Earnings

Traditional publishing is ‘no longer fair or sustainable’, says Society of Authors

11 July 2014

From The Guardian:

After figures released this week showed professional authors’ median annual incomes have collapsed to to £11,000, The Society of Authors’ chief executive has claimed that traditional publishers’ terms “are no longer fair or sustainable”.

. . . .

Nicola Solomon, who heads the 9,000-member strong Society of Authors, said that publishers, retailers and agents are all now taking a larger slice of the profit when a book is sold, and that while “authors’ earnings are going down generally, those of publishers are increasing”.

“Authors need fair remuneration if they are to keep writing and producing quality work,” she said. “Publisher profits are holding up and, broadly, so are total book sales if you include ebooks but authors are receiving less per book and less overall due mainly to the fact that they are only paid a small percentage of publishers’ net receipts on ebooks and because large advances have gone except for a handful of celebrity authors.”

On top of that, said Solomon, “publishers are doing less for what they get. There are still important things they do – a traditional publisher can edit, copy edit, design, market, promote, make your book better, deal with foreign sales. With ebooks, though, publishers’ costs are less, so authors should get a better share. They do not have to produce, distribute or warehouse physical copies. Even on traditional books, publishers’ production costs have gone down but authors have not benefited from these costs savings. And, increasingly authors are being asked to do a lot of marketing and promotion themselves.”

. . . .

Self-publishing, meanwhile, is becoming an increasingly attractive option for writers, according to the survey, which found that just over 25% of writers had published something themselves. Writers were investing a mean of £2,470 in publishing their own work, with the median investment at £500, and typically recouping their investment plus 40%. Eighty-six per cent of those who had self-published said they would do so again.

Mark Edwards is an author who topped Amazon’s charts with the self-published thrillers he co-wrote with Louise Voss before landing a deal with HarperCollins. Unhappy with his deal, he then returned to self-publishing, and released The Magpies, which he says sold 160,000 copies before Amazon Publishing acquired rights.

“I spent 15 years trying to get a deal before self-publishing. When I finally got a deal it was a disappointment so I returned to self-publishing, which rescued my writing career. Lots of writers are seeing other writers having success via self-publishing and deciding to try it themselves. I would encourage any mid-list author to try it. A lot of writers who’ve got back the rights to their novels are now self-publishing them and having a lot of fun in the process,” he told the Guardian.

It offers, he said, “freedom and control”, and higher royalties. “As the writer, you will always be the person who cares most about your work, and if you can channel that passion and energy and know what you’re doing, this can be more effective than having a team of people who have 10 other books coming out that week.”

Link to the rest at The Guardian and thanks to Russell for the tip.

Authors’ incomes collapse to ‘abject’ levels

9 July 2014

From The Guardian:

Will Self’s lament for the death of the novel earlier this summer has been cast into stark relief by “shocking” new statistics which show that the number of authors able to make a living from their writing has plummeted dramatically over the last eight years, and that the average professional author is now making well below the salary required to achieve the minimum acceptable living standard in the UK.

According to a survey of almost 2,500 working writers – the first comprehensive study of author earnings in the UK since 2005 – the median income of the professional author in 2013 was just £11,000, a drop of 29% since 2005 when the figure was £12,330 (£15,450 if adjusted for inflation), and well below the £16,850 figure the Joseph Rowntree Foundation says is needed to achieve a minimum standard of living. The typical median income of all writers was even less: £4,000 in 2013, compared to £5,012 in real terms in 2005, and £8,810 in 2000.

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Commissioned by the Authors’ Licensing and Collecting Society and carried out by Queen Mary, University of London, the survey also found that in 2013, just 11.5% of professional authors – those who dedicate the majority of their time to writing – earned their incomes solely from writing. This compares with 2005, when 40% of professional authors said that they did so.

. . . .

“My direct income from sales is abject – literally abject. There’s been an absolutely radical decline in my income over recent years,” said Peet. “I do live by writing, but that’s because I have got a backlist of educational books which keeps on selling, and I have a pension, and I have to go on the road. Because I’ve a certain reputation, I can ask for a £25,000 advance, but then you spend a year writing the book, and £25,000 is a loan against sales and you can easily spend five years earning out. So that’s £25,000 for six years.”

Link to the rest at The Guardian and thanks to Suzanne for the tip.

The Future of Competition in Publishing: Be Very Afraid

6 July 2014

From author Andrew Updegrove:

If you were to count up all of the earnest articles, blog entries, and even Colbert Report routines that have been dedicated to the Amazon vs. Hatchette dispute, well, you wouldn’t have an accurate number, because more would have been written while you were counting. Curiously enough, almost 100% of them miss the point of greatest concern to authors. The real issue isn’t whether the on-line retailer or the publishers win the current battle, but whether there will be any real competition in the marketplace in the future regardless of who wins. Right now, it’s very hard for me to see how there can be. Here’s why.

Authors today have only one real and one theoretical way to get their books in front of potential buyers. The real one (because it’s available to anyone) is to self-publish, and the theoretical one (because first-time authors have at best a one in a thousand shot at success) is to somehow secure a contract with a traditional publisher of any size.

Despite those odds, the existence of traditional publishers still matters, however. That’s because no matter how inept and unable to adapt they may have shown themselves to be in the face of Amazon, they still act as a brake on how much Amazon can cut prices.

. . . .

If Hatchette and the other big publishers are successful in holding off Amazon, then it’s pretty safe to assume that not much will change with the way they do business. But if Amazon wins, the traditional publishers will be under severe financial pressure. Given the fact that they have steadfastly refused to innovate or change thus far, it seems more likely to assume that they will react by dramatically cutting overhead than by exercising creativity.

And they’re certainly not going to react by raising royalties for authors, so the already increasing movement of published authors to self-publishing can only accelerate.

. . . .

Should authors care which outcome occurs? The answer depends on whether you’re looking at the near or the long term.

The short term answer looks like this: The short term answer looks like this: if the publishers win, then Amazon will have an incentive to continue to innovate, making it easier and more profitable for authors to sell directly to Amazon. This will maintain incentives for more published authors to move to self-publishing.

On the other hand, if Amazon wins, publishers will be under further price pressure, and will presumably provide fewer, and not more, services to authors. As more and more authors shift to Amazon, and as more and more publishers go out of business or downsize or become even more selective in who they take on, Amazon’s control of the terms under which authors are paid will dramatically increase.

So in the short term, the answer is yes – it matters. But how about in the long term?

That, I submit, is a different story. The reason is that no matter who wins, the degree of competition in the marketplace is going to continue to decrease. The only question is how quickly the traditional publishers continue to lose authors, because it appears increasingly true that they simply aren’t offering a superior alternative to self-publishing.

. . . .

So where does that leave authors?

In trouble, and if you want to see what trouble looks like, take a look at the music industry, where indie musicians make pennies when their songs are played tens of thousands of times on the streaming services that are now dramatically cutting into download sales as well as CD sales.

What authors really need is more competition in the marketplace, and it’s difficult to see where that will come from if Amazon ultimately succeeds in gaining effective control of prices.

Link to the rest at Andrew Updegrove: Tales of Adversego

I Think It’s Time for Indies to Join Publishers in Their Fight Against Amazon

26 June 2014

From The Digital Reader:

Over the past two months Amazon has been supporting their very public and very rough book contract negotiations with a subtle media campaign which has kept indies on the sideline. By saying little and letting the publishers leak details, Amazon has avoided giving indies a reason to join sides with the major publishers that Amazon is fighting.

That was a smart move, but yesterday everything changed. Amazon released a statement which inadvertently confirmed that indie authors and publishers have a horse in this race.

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In short, Amazon has confirmed the rumors that the Bonnier negotiations include a fight over ebook payments.

. . . .

Indie authors might not care whether Amazon is extracting increased and specific co-op service fees from Hachette (they might actually want to pay for the services – if they boost sales), but now that Amazon is pushing major publishers to accept a smaller cut of ebook sales it is time to be concerned.

Tell me, if Amazon manages to force the major publishers to accept a smaller cut of ebook sales, how long do you think Amazon will continue to offer the 70% option in KDP?

. . . .

I think Amazon is using the high royalty rate to keep the publishing industry fragmented. By offering better terms, Amazon keeps power from concentrating into fewer hands. But if Amazon manages to force publishers to accept a lower rate, it won’t need to offer such a high rate via KDP any more.

Link to the rest at The Digital Reader and thanks to Meryl for the tip.

Cordelia’s Promise and High-Discount Clauses

6 June 2014

From attorney C.E. Petit:

Most of the grousing about authors’ earnings concerns the base rates imposed upon them by commercial publishers. The authors gripe about “25% of net” for e-books, and rightly so. They gripe a little less loudly about 8%/12.5%/15% on hardcover trade fiction as a base royalty rate. They gripe loudly about advances, if seldom with numeric disclosures attached. What they neglect, however, is the high-discount clause: In almost all commercial publishing contracts, the author’s per-copy compensation is cut in half for copies sold at a high discount (but not “remaindered”, for which the author receives nothing). Consider, for example, an author at top escalator (that is, 15% per copy) for a hardcover novel — not a bestseller, but a steady-selling work of general fiction happily ensconced on the midlist for half a decade now that long ago earned back its advance — currently retailing at $25.95.3 For the royalty period ending on December 31, 2012, the royalty statement showed that there were 1,227 US sales of that edition. (Plus sales of other editions, but let’s concentrate on this line item for a moment.) Calculator in hand, the author figures that she should have been credited with 1,227 * $25.95 * 15% = $4,776.10 in royalties. That’s not what the royalty statement says, though; instead, it accounts for those sales like this:

227 ISBNxxxxx $883.59
1000 ISBNxxxxx $1946.25
1227 ISBNxxxxx TOTAL: $2829.84

for an on-its-face and in-your-face detriment to the author of $1,946.26. This particular author is no shrinking violet, so she (there’s no agent on this book any more, as the agency went into bankruptcy and everything got returned) called the royalty department in New York. After five calls, she finally reached someone who knew: That second line was a single bulk order from Amazon… at a discount of 0.5% over the trigger for the high-discount clause.

That was bad enough, and sent the author shrieking for assistance. At which point the following math comes into play that demonstrates the real problem here:

Discount Gross
Receipts
Author
Compensation
Publisher’s
Net
Receipts
45% $14.27 $3.89 $10.38
50.5% $12.85 $1.95 $10.90

That’s right: The publisher’s per-copy net is five percent higher if it accepts a five-percent-lower gross from Amazon.

. . . .

My point is that the trigger levels for the high discount clauses in most publishing contracts were set without claimed knowledge that there was — or, more to the point, might be during the foreseeable life of the contract — a distribution system different from the publisher-distributor-bookstore-with-discounts-and-returns default of the time.
. . . .

[I]n our author’s situation, the publisher clearly already knew. At the time that contract was negotiated and signed, that publisher was already making deals on terms not disclosed to the public with “big box” vendors like Wal-Mart/Sam’s Club and Costco. Later audits have disclosed that those terms, for large orders, also fell into high-discount territory. In short, that publisher knew before negotiating that contract that the implied rarity of the high-discount-clause term was deceptive, and reflected a probable change in future market conditions and structure. The author (and now-deceased agent), however, did not have that information, and was in fact deceived. Bluntly, this is not an instance of mutual mistake allowing voidability; it is an instance — a pattern and practice — of deceptive conduct by one party to a series of relatively-but-not-entirely-standardized contracts.

Link to the rest at Scrivener’s Error

PG says that, in today’s publishing world, high-discount clauses have evolved into screw-the-author clauses and should be avoided completely. PG has seen contracts under which the author can expect virtually all sales of his/her books to qualify for high-discount/low-royalty treatment.

PG is not the only person to witness tradpub authors go wild with delight when they discover their books in Costco. As C.E. points out, many of those authors will be lucky if their Costco royalties fund a Costco hotdog and drink combo.

We’ve observed the beginnings of class-action suits by groups of authors against publishers based upon the deceptive business practices enabled by vague clauses hidden in standard form publishing contracts. PG suggests the high-discount discount scam is another area class-action lawyers may wish to consider.

All that nurturing authors receive from their publishers can come at a very high price.

Bringing Down the Hachette

31 May 2014

From Slate:

Amazon is digging in for a lengthy fight with one of the Big Five publishers, Hachette, and flexing its extraordinary market muscle while the two companies negotiate a new contract. It’s understocking Hachette books so as to create shipping delays, cutting discounts, suggesting alternative titles to buyers, and even refusing to take pre-orders, foreclosing a major sales opportunity. 

. . . .

Neither side is officially discussing exactly what it is they are fighting about. But all indications and industry chatter suggest that Amazon and Hachette are revisiting the pricing and revenue split for e-books—the same contentious issue that prompted the 2012 price-fixing suit against the Big Five publishers, from which Amazon emerged more powerful than ever.

The publishing industry is cheering for Hachette to hold the line and has denounced Amazon’s anti-Hachette tactics almost unanimously.

. . . .

But the publishing world that is speaking as one against Amazon is really made up of two principal factions: publishers and authors. Their interests are not identical, and authors should consider the possibility that the publishers have contributed to the difficult situation they now face. Literature could end up suffering for it.

The crux of the issue is that in recent years, e-books have been more profitable for publishers than print books, despite the substantially lower price tag. But they’re less profitable for authors of new releases. This is not a well-known fact, but one group to have noticed is literary agents, who are in the business of ensuring that authors (and they themselves) get their fair slice of the pie.

So when HarperCollins, another Big Five publisher, boasted about its digital profits in a presentation to investors last year, literary agent Brian DeFiore seized on Harper’s own PowerPoint slide to point out that authors of new releases get the short end of the deal. On the blog of the leading agents’ trade association, DeFiore published a post headlined “e-books and profitability—What we’ve always said and publishers have always denied.” He noted that Harper’s chart neatly demonstrated that for a given title, the e-book is more profitable than the hardcover edition precisely because the author makes less money on it.

“Look at Harper’s own numbers,” DeFiore wrote. “$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.”

. . . .

By leaving royalty rates where they are, publishers have left their nice digital margins hanging out there for everyone to see. And when Amazon sees someone else’s healthy profits, it’s like a dog smelling a steak. As Jeff Bezos has said, “Your margin is my opportunity.”

What I suspect is happening right now is that Amazon is telling Hachette that they want some of that margin. If Hachette had spread some of those digital profits to authors in the first place, it would not be vulnerable to this tactic. What’s more, if Hachette had been the first to raise author pay, it no doubt would have snagged some marquee writers.

Link to the rest at Slate and thanks to Randall for the tip.

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