By Allison Brennan
Publishing is in a flux for many reasons, the rise in e-books only one–but perhaps the primary reason.
I’m going to separate e-books into four categories for the sake of argument:
1) Traditionally published books that also have e-books as one of many available formats (i.e. my books are primarily mass market, but they are also available electronically, in audio, and large print);
2) E-books published by an e-publisher and primarily available only electronically, though there may be a POD version available or trade or mass market version on sale usually more than three months after the electronic release;
3) Self-published e-books that have never been to market and are published by the author directly to electronic format and available for one or more e-readers;
4) Out-of-print (OOP) books that had been traditionally published, but where the author has retained or regained their rights and has chosen to release the book electronically themselves, and the book is now available only in electronic format and one or more e-readers.
OOP books are seeing a return because authors are finding a great opportunity to publishing these books for their readership. These books all went through a traditional editing process, and while some have to be updated, most of the authors don’t need to do anything with the story itself. All the work is in making the physical formatting conform to technology. (Or, for some of the older books, re-tying the entire manuscript. Did you know that in the past, most books were written entirely on a typewriter?)
And self-published books electronically are the same as self-published books in print–the author incurs all the costs, and gets all the profit.
The November issue of RWA’s Romance Writers Report had a very interesting and eye-opening article on the cost of e-books by Sourcebooks CEO Dominique Raccah. The reason it caught my eye was because for so long there’s been this myth that e-books should be much cheaper than they are priced because they are much cheaper to produce. Raccah debunks the myth, and everyone interested in this subject should read the entire article. I’m summarizing some points here.
First, she points out that between traditional, self, and e-publishing, that 2009 heralded a record in books published (to be surpassed this year for sure) – one million. That’s 1,000,000 books.
A million. Books. In one year. Nearly five times the number published in 2008.
One of the big implications of this, according to Raccah, is that it devalues content. There is too much and too little time.
I completely agree.
With all the noise, it’s why my comments here last April still hold water: the bestsellers will continue to do well, but most of us—both traditionally published and self-published– will be fighting for sales. We’ll be spending more on advertising, more time online social networking, more time positioning our books . . . and less time writing.
What I think is important for writers and readers to understand that there is a cost to create e-books.
Raccah says, “If publishers and authors want the ebook available broadly – everywhere readers might buy their ebooks, rather than just one e-tailer – the publisher has to manage every one of those customers individually.
That also means that we have to manage their technical requirements individually. With printed books, we ship the same product to different retailers. Barnes & Noble, Borders, Walmart, Target – everyone receives the same book. That’s not the case with ebooks.
Ebook retailers use different file formats. Despite attempts at standardization, the reality is that if you want ebooks available in as many retailers as possible, you will be creating a minimum of three different file types based off that one original file. The technically savvy among you who’ve worked with InDesign might say, “easy! I select ‘Export for Digital Editions’ from the pulldown menu. Done!” And welcome to the world of broken files, widows, orphans, and stray Cyrillic symbols.”
To be honest, I hadn’t considered the formatting problems with e-books. I’d assume that one “good” electronic file was fine—but according to Raccah, there are a minimum of ten e-tailers and devices to prepare separate files for, and each of those files must be manually checked for quality control.
“Just as “spell check” won’t produce a cleanly written text (in lieu of writers, editors and proofreaders) automation and technology are aids but not an all-encompassing solution for ebook production (at least not at this time). You still need human beings to check it all.”
With the rise of e-books, publishers must bring on technically trained staff to handle the new workflow, plus keep up with the constantly changing technology and new e-readers.
One problem area Raccah cited was in metadata—all the information related to each specific book including title, author, ISBN, cover, etc. Each e-tailer has different requirements in how they receive that data, meaning it’s not an automated process to get your e-book up in all available e-markets.
All this is before the book ever goes to market. Editing, copyediting, proofreading, production, cover design is all part of the print process, and while e-covers are generally different formats, it’s only designed once. But even taking out the cost of printing, paper, and shipping, publishers are incurring additional costs on the technology end for each and every book. And that doesn’t even begin to speak to marketing.
I’m happy to take my lower royalties in the traditional market and not have to incur the technological costs of e-book production, in addition to editing costs, cover design, and everything else a publisher does. But if someone else wants to do it, great. I just want everyone to look hard at the costs and not get all dreamy-eyed because they can made 37.5%-70% royalties.
Now, even saying all this, I’m not happy with lower royalties across the board. What I mean is, there are extensive costs the publisher incurs to produce e-books across all e-tailers, just like they incur costs to get books in physical bookstores and mass merchandisers. The first books sold cost the most to the publisher. (For example, a publisher would always prefer to sell 100,000 copies of one book than 10,000 copies each of 10 books.)
It’s standard in the industry to have escalator clauses in publishing contracts. In mass market, the “standard” clause is 8% of cover price up to 150,000 copies sold, then 10% of cover price. In hardcover, the “standard” clause is 10% royalties of cover price for the first 5,000 copies sold, 12.5% for the next 5,000 copies, and 15% for copies over 10,000.
Traditional publishers make their money selling volume—they’d go under real quick if every book they published only sold 10,000 copies. The cost of printing, e-printing, editing, copyediting, cover design, marketing, sales, accounting—and more—for each book would be impossible. That’s why they 1) love backlist and 2) need to sell their frontlist in volume.
Right now, there really isn’t a standard royalty rate for e-books through the traditional publishers. Most houses (Harlequin is the big exception with 6% cover price e-royalties) pay 25% of net. That very roughly works out to be about 15% of cover price.
E-published authors point to the fact that their publishers pay 35-50% royalties. Most e-published authors who go through an e-publisher, like Samhain, don’t incur any editing or publishing costs—nothing more than what a traditionally published author is expected to do (i.e. have a website.) Self-published Amazon authors point to the 70% royalty rate they get for books over $2.99 (this doesn’t include costs the author incurs to sell through Amazon, or the rules of the 70% royalty rate which I tried to understand but couldn’t—if anyone has facts to share, please do.)
Lou Aronica—author, publisher, and incoming President of Novelists, Inc, a professional writers organization—gave me permission to share his numbers for e-books costs and royalties. In light of the Sourcebooks data above—the cost of producing e-books—I think Lou’s numbers make a whole lot of sense.
He extrapolated the cost of ebooks based on firm costs—for example, it costs a “flat” rate to prepare files, metadata, etc for each and every book a publisher offers. He used a $7.99 priced book for the numbers—I can’t remember why, but it made sense at the time he wrote it. (I’ll send him a note and see if he’ll come here and elaborate.)
His conclusions:
25% net royalty: If the publisher sells 2,000 copies, the publisher loses money. The author will still make royalties on each unit sold.
25% net royalty: If the publisher sells 4,500 copies, the publisher makes money, and in fact makes nearly the same dollar amount as the author.
Now, after 4,500 copies, if the author is still making 25% net royalty, the publisher continues to see their numbers go up exponentially because the costs incurred (other than marketing and incorporating new technologies) are fixed whether the publisher sells one copy or 100,000 copies.
Lou’s argument is that, like other publishing models, e-books should be paid on a sliding royalty scale. That after XXXX units are sold, authors get a higher royalty. Based on his numbers, that first threshold is 4,500 copies.
Copies between 4,500 and 10,000 should be paid 37.5% net royalty. (He factors in increased marketing costs for books that sell more copies, and I’m sure he has data that supports this.) But once the e-book sells over 10,000 copies marketing costs don’t increase at the same rate, and thus the author should be getting 50% net for all units sold after the initial 10,000, and that when he extrapolated the data at different sales points (10,000, 50,000, 100,000, etc) his numbers held.
To summarize and compare author royalties
Hardcover
First 5,000 copies sold 10% cover
On the next 5,000 sold 12.5% cover
Over 10,000 copies sold 15% cover
Mass Market
First 150,000 copies sold 8% cover
Over 150,000 copies sold 10% cover
Electronic Books: semi-standard
all copies: 25% net
Electronic Books: what should be standard
Up to 4,500 copies sold 25% net
4500-10,000 copies sold 37.5% net
Over 10,000 copies sold 50% net
I am very supportive of the publishing industry as a whole, because I think they are the gatekeepers. I don’t want to be my own publisher and incur the costs of editing, design, copyediting, technology, and everything else. I’m happy to let them do it, and they should make money off their risk. That’s my choice. But I firmly believe that authors need to fight for escalator clauses for their electronic sales like we have for our print sales.
I honestly don’t care how people read my books–whether listening, in print, or electronic. I love that readers have options, because that means (I hope) that more people will read more books. I, personally, prefer to read in print, but that doesn’t mean I’d never buy an e-book (and I have bought e-books, and own an iPad.) All these changes are scary and exciting at the same time.
My e-book sales have always been a small percentage of my total sales, while I’ve heard that my hardcover thriller friends have been seeing a substantial increase in their e-book sales—20 to 50% total sales being electronic. This may be a factor of being released in mass market—the price point for a paperback ($7.99) is better—especially in this economy—than the price point for a hardcover ($25.) I also think that e-book sales for mass market authors will grow, but most of us who have always been traditionally published in mass market (opposed to authors who started in e-publishing), we’re still seeing single-digit percentages.
This may have something to do with the discount on the electronic book for mass market is less (about 15-20% less) than hardcovers (50% or more.) I don’t know what the right price point is, but for the most part, publishers and e-tailers are losing money on the $9.99 threshold—as the Raccah article and this article written by industry veteran Bridget Kinsella shows.
“Sargent says publishers are figuring out how to manage that evolution wisely. “The way I see it,” he says, “our job is to do two things: make sure we make that transition well, and we also must protect the value of the intellectual property as we go through the transition.” Once that’s done, he adds, publishing must “make sure, in the end, that the consumer pays a price that is fair and isn’t artificially made cheaper.”
It is truly an exciting and changing time, but anything we do–as authors, publishers, or retailers–we need to decide only with facts and information, and not on fear and the unknown.
Now, to completely change the topic, my publisher is releasing an exclusive electronic novella on January 24th that’s part of my new Lucy Kincaid series. Both Steve Berry and Dean Koontz have published e-novellas prior to the release of their next big book. I was thrilled to be asked to write a short story (well, not-so-short—Love is Murder clocked in at 25,000 words) to be released electronically between Love Me To Death (12.28.10) and Kiss Me, Kill Me (2.22.11) which are both mass market originals.
After a tough breakup with her boyfriend, Lucy Kincaid needs a different kind of break. So she heads west to join her brother, an ex-cop, for a long weekend of skiing in the mountains. At a picturesque lodge tucked high in the Sierra Nevadas, Lucy finds just what she’s looking for: a peaceful retreat undisturbed by internet, television, and cell phone distractions. She also finds an unexpected group of newlyweds seeking their own idyllic getaway.
But finding one of her fellow guests dead wasn’t in the brochure. And neither was the overnight snowstorm that leaves the lodge cut off from the outside world. When Lucy’s brother suspects the honeymooner’s death was foul play, he’s mysteriously stricken ill. Now, to keep them alive, it’s up to aspiring FBI agent Lucy Kincaid to figure out which of the lovebirds trapped in the lodge is really a bird of prey.
So because I’m very excited about this e-book, and the entire Lucy Kincaid series, and because I believe in giving away books whenever I can, THREE randomly chosen commenters can pick any book in my backlist.
I could ask any number of questions–I probably went too long in this commentary!–but I think I’ll just say let me know what you think about this whole thing, and if you have anything to share, please do! If not? Then enjoy this new picture of my daughter’s kitten Nemo as he “helps” me write:
Drinking those ML’s every week became a ritual for us. We’d do our shopping, then swing by the snack bar and pick up a couple and head on over to the next shopping center, sucking on our straws as we drove.
Then a few days later I was tooling around Fry’s when I came across a unit on sale. 
