E-books and IP and contracts

November 23, 2010

As noted yesterday, I've been thinking a lot about Intellectual Property and e-books and contracts. I'm fairly certain everybody in the writing and publishing community is well aware of the growth of e-books and what seems to be happening to the publishing industry in general as things shift. Some folks, like Joe Konrath, feel that paper publishing is a dinosaur soon to be hit by the doomsday comet of e-publishing. Maybe. Others--primarily those within the publishing industry, I've noted--say publishing will remain and e-books will only be about 50% of the market. Maybe.

(And I will note with some irony that in USA Today a few months back the CEO of Harcourt--or maybe it was HarperCollins--wrote an editorial on why traditional publishing was going to remain strong and although I thought in general it was well-reasoned, at one point he said that all books at his firm are reviewed by at least 10 editors and that writers like that. Although in my experience a relationship with a good strong editor who's on the same wavelength as you is a very, very good thing, I have yet to talk to a writer anywhere who thinks getting notes from 10 people is a positive aspect of their life. And if you really wonder about that, talk to a scriptwriter whose life is made up of getting editorial notes from everybody and their second-cousin. I thought his comment was probably a stronger reason for why writers might embrace e-self-publishing).

Anyway.

If you self-publish your own work on the Kindle DTP platform, and you price it over, I believe, $1.99, the writer gets a 70% royalty. I don't know off the top of my head what it is for Smashwords or Nook's self-publishing program, etc.

I do know that traditionally, with paper books, your royalty ranges from about 6% to about 15% depending on which particular format you're discussing--mass market, trade paperback, hardcover. It also depends on how many books you sell--there are often elevator clauses, where if you sell a specific number of books the royalty rate goes up--and I imagine that if you're a bestselling author, you can lean on your publisher for a better royalty rate.

Nonetheless, it's not hard to see that there is a big difference between a 6% royalty rate and a 70% royalty rate (in fact, for the mathematically challenged, the difference is 64%). Let's just give a for-instance: on a $10 book, with an e-book the writer gets $7. If it's a paper book, the writer gets 60 cents.

E-book royalty rates have often been a bouncing ball. Some publishers fold it into the regular royalty rate, so let's say, as my wife says, for "shit-and-giggles," call the royalty rate for both as being 10%.

[And for you non-authors out there who are astonished that of the $25.95 you paid for a hardcover novel, only $2.595 of it goes to the author, well, keep in mind the author's agent gets 15% and Uncle Obama and his many minions get maybe 24% and depending on what state you live in, your governor probably gets another 4% or so. I have long thought that if you want to make money in publishing, you should go work for UPS, but e-books are even screwing with that thought. If it sometimes feels as if you're being groped, you're either taking a plane somewhere or you're a writer and a lot of people have their hands in your pockets.]

So what is a good royalty rate for e-books?

The Authors Guild feels it should be 50%. Of course, that is partly because they are referring to e-book royalty rates as a subsidiary right and once upon a time (like most fairy tales), e-books were considered subsidiary rights (along with film rights and dramatic rights and, once upon a time, even mass market paperback rights. Think of this, boys and girls: In about 1972 Stephen King received $2,500 for the hardcover rights to "Carrie." Then they sold the paperback rights to New American Library for $400,000. But there was a 50/50 split, so King got $200,000 and Doubleday got $200,000--and all Doubleday did, really, was act as an agent. Imagine if your agent asked for a 50% fee!).

Many publishers these days are pushing for a 25% royalty or lower on e-book sales. It also used to be that if your publisher let your book go out of print, they would release the rights to you, as well as the e-book rights, because, from your publisher's perspective, there wasn't any money to be made. I was lucky enough to get the e-book rights back from Midnight Ink for THE DEVIL'S PITCHFORK and THE SERPENT'S KISS when they let them go out of print, and thank God for it, because they're generating income every month. I seriously doubt publishers are going to relinquish e-book rights to anyone any more.

Also, e-book rights were sort of a moot negotiating point for a long time. Nobody was buying them, so if your agent wanted to push for a little better royalty on your hardcovers or a better split on your film rights, your agent might say, "Okay, tell you what, you get 50% or 60% of the e-rights. It's going to be the next big thing." Well, now it is. And as Joe Konrath wrote a while back, it's possible that e-rights are no longer a subsidiary right. In fact, it's possible that paper publishing might become the subsidiary right.

Thoughts? This is a big, complex, changing subject, so it's hard to even discuss it without it wanting to turn into a book.