GENREALITY

With the rise of less expensive ebook readers and the growing interest in using mobile devices such as handhelds and cell phones to read digital content, the question of how an author should best handle their digital rights is becoming more complex.  Recent changes in how publishers are compensating us for this content has also made it more important for us to understand just what is being offered and by whom.

Back in October 2008, Random House sent out a letter to industry agents informing them of a change in policy regarding ebook royalty rates on all future contracts.  Previously, RH had paid 25% of the suggested retail price of the title.  The new policy was that they would be paying 25% of the amount received for all titles.

What, exactly, did this mean for writers?  Under the old policy, if a book retailed for $10.00, the author earned a royalty of $2.50 on every book sold, regardless of any discounting the publisher might do on the title.  Under the new policy, the writer would only receive 25% of what the publisher took in instead.  So if the book retailed for $10.00, but the publisher had to discount that 50% for the distributor, the author would only receive 25% of the 50% the publisher made, or somewhere in the neighborhood of $1.25.

That was a significant drop, any way you look at it.

Shortly thereafter, Simon & Schuster followed suit, adopting the same policy as Random House.  Thankfully, the vast majority of other publishers continued to offer what was at the time the standard 25% of list price royalty rate.

Now we have another bump in the road.  MacMillan, parent of such companies as St. Martin’s, Farrar Straus and Giroux, Henry Holt, Picador, and Tor among others, announced earlier this month that they would be making changes in their ebook royalty rates as well.

Here’s a direct quote from CEO John Sargent’s cover letter:

“It won’t surprise you that we have looked at the growth of development of digital delivery of the content from our books.  A number of the new contract’s provisions, specifically in the grant of rights and royalty sections of the contract, reflect our response to those developments.  Our starting premise is that digital rights in the content we publish in print book formats must be included in the basic grant of rights that we receive from authors.  In addition, as the methods for dissemination of content rapidly change and the distinctions between sales and licenses blur, we have determined that a single royalty rate, based on the amount received by the Publisher, should apply to all exploitation of the content of the book in digital form.”

That standard royalty rate Sargent is talking about?  Turns out it’s 20% of monies received.

Back to our example.  If that $10.00 book is published by one of MacMillan’s companies, that $2.50 royalty is now reduced to $1.00.

MacMillan is not the only one who is making moves like this on the changing digital landscape.  Recently Harlequin Enterprises announced the formation of a digital only publishing arm, Carina Press.  One of the big advantages that is being touted for working with Carina is their higher royalty rates.  In fact, their FAQ puts it this way:

The Carina Press contract does not include an advance or DRM, and authors are compensated with a higher royalty.

What’s that higher royalty rate, you ask?  30%.  Digging a little deeper uncovers that it is 30% of cover price, rather than net.

That’s good, right?  Much better than MacMillan or S&S?

Sure it is.  Until you discover that Carina insists on taking ALL RIGHTS, including print rights, despite the fact that they are a DIGITAL ONLY publishing house.  What are they going to do with those other rights?  Nothing, at the moment.  Will they do something in the future?  Who knows.  But I can tell you this – every author who accepts that deal is shooting themselves in the foot by giving away potentially lucrative rights for nothing in return.

Like the MacMillan changes above, that sucks.

So what’s my point with all this doom and gloom?  Simply this.  The market continues to change and authors need to be aware of how small changes in contract terms and language can have significant impact on their bottom line.  We’re going to see more changes in the near future, I’m sure, and it behooves us to start paying attention now, rather than later.

***Added by admin: Nadia Lee adds another interesting fact about Carina Press and their royalty structure in the comments. Be sure to read them. ***

Tweet This Post

Related posts:

1. And I Had Such High Hopes…
2. Foreign Rights (otherwise known as selling your novel more than once!)
3. Must Have Contract Clauses