Monday, October 22, 2012

The Slippery Slope of E-Originals, Part 1 and 2_October 14, 2012 | Richard Curtis

The Slippery Slope of E-Originals, Part 1 and 2, |

In the last year a number of major publishers have begun offering authors contracts for “e-originals” – books released originally – and exclusively – in e-book format. Though this is a logical step in the evolution of traditional publishing houses from tangible to virtual formats, the deflationary nature of its business model poses a serious threat to author earning power. Less obvious but ultimately more dangerous is the implosive effect the shift may have on the publishing companies themselves and the people who work for them.

What’s Wrong with Paperback Originals?

The first and obvious question is, what’s wrong with paperbacks books, that publishers are abandoning them in favor of digital originals? The fact is that in the past fifteen or twenty years, mass market paperback books have transformed from a breeding ground for fresh talent to an exclusive club for bestselling authors.

The reasons for this metamorphosis are complex (you can read about them in The Rise and Fall of the Mass Market Paperback: Part 1, Part 2), but in essence the ruthless math of an industry based on the returnability of books has made it almost impossible for fresh talent to develop over time in the nursery of original paperbacks. Though many promising genre authors, especially romance writers, continue to be introduced in mass market paperback, the sales thresholds they must achieve in order to make a profit for their publishers have risen to almost unattainable heights.

Cue e-book originals.

At first blush, e-originals appear to be the perfect way for publishers to pull authors out of this death spiral, for many of the costs of manufacturing and distribution are lower or negligible. You would think that the savings would be passed along to authors in the form of higher advances and royalties. So far, that has proven far from true. Why?

At the present time, the so-called “standard” e-book royalty paid by the Big Six legacy publishers – Random House, Hachette, HarperCollins, Simon & Schuster, Penguin and Macmillan – is 25% of net receipts.

Though many independent e-book publishers (including, full disclosure, my own firm E-Reads) pay 50% or higher, the Big Six justify the 25% royalty on the strength of the high cost of manufacturing the print books that serve as the launch pad for their e-book reprints. If it costs X thousand dollars for a publisher to produce and publish a hardcover book, publishers reason, a portion of those costs should be allocated to the production of the e-book.

Though many authors deny that assumption, let’s grant it for the sake of argument. It is, however, much harder to grant it in the case of original e-books. Though the cost of producing e-books is higher than most lay people may think (see Are Publishers Making a Killing on E-Books?, Part 1 and Part 2), it is considerably lower than the cost of producing print books.

Publishers, however, don’t see it that way. They contend that they are not yet selling e-books in sufficient quantities to merit advances commensurate with those paid for paperback originals. Advances for e-originals are therefore dropping by half or more of those paid for print originals, and in some instances publishers are offering no advances at all. To compound the injury, they remain adamant about the 25% net royalty.

Do the Math

It might help to do the math. If a publisher charges $3.99 for an e-original and collects on the average of 60% of the list price from the retailer, that comes to $2.40. 25% of that sum, $.60, goes to the author. In order to make $5000, a reasonable minimum for three to six months’ work, that book would have to sell over 8,000 e-book units. Most publishers would deny that that is a realistic projection. They are therefore offering a good deal less than $5000 advances, and in some cases are offering no advances at all.

From this, as comedian Jackie Mason might say, you cannot make a living. Or, to put it another way, the economics of e-originals published by big houses are so marginal that many authors might now be tempted to jump to on the independent bandwagon, where 50%, 60% and 70% royalties beckon to the self-published.

What is the solution? Obviously, if Big Six publishers want to retain quality authors they may have no choice but to raise their royalty rates and pay decent advances.

In the second installment of this post we’ll look at the unintended consequences facing Big Six publishers who are switching to e-originals

Richard Curtis
Richard Curtis

About Richard Curtis

Richard Curtis is a leading New York literary agent (www.curtisagency.com) who foresaw the Digital Book Revolution and launched an e-book publishing company early in 2000. E-Reads (www.ereads.com) is one of the foremost independent e-book publishers in the industry, specializing in reprints of genre fiction by leading authors in their fields. Curtis is also a well-known authors advocate, author of numerous works of fiction and nonfiction including several books about the publishing industry, and prolific blogger – see his hundreds of other blog posts here. 



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