In recent issues we have given a good deal of coverage to the emerging ebook market. We have argued - with publishers and in the trade press - that royalties need to be looked at afresh. A range of costs will be eliminated (e.g. printing, warehousing, transport and returns), so we believe that royalties should be substantially higher than on traditional books.
The ways in which the book market will develop are still far from clear, but some general trends are emerging, e.g. that publishers of ebooks are aiming to sell in all formats (to avoid the problems encountered in the early days of video where some producers chose Betamax over VHS); and to sell ebooks more cheaply than the equivalent print editions. In recent months, various developments have been announced, including the following:
Barnes and Noble
In the USA, the bookseller Barnes & Noble is launching Barnes & Noble Digital, a publishing imprint which will publish new, old and out of print titles in electronic form, and a (presumably exclusive) seven year licence. As we understand it, Barnes & Noble Digital is offering authors a 35 percent royalty on the retail price of ebooks sold through its ebookstore on the barnesandnoble.com website and affiliated sites. Authors will receive 50 percent net revenue on titles that are sold in electronic form through third party online retailers. (The net revenue from ebook sales will be lower than for traditional sales if, as is often the case with ebooks, they are sold at a lower cover price.)
Random House
Random House announced last November that it would share net revenues from the books 50:50 with authors, "thereby becoming the first major book publisher to do so". The new policy applies to Random House both in the USA and the UK. Previously it had been offering royalties of 15 percent of the retail price. The new rates will apply "to all titles in the group's recently-announced ebook publishing programme of some 100+ books drawn from the Random House UK and Transworld lists".
We welcome the initiative taken by Random House, and asked Simon Master (Group Deputy Chairman of Random House) to clarify what was meant by "net revenue". He replied that authors would receive a "a full 50 percent of our revenues from the relevant ebook distributor with no deductions for conversion costs, overheads or whatever..." Thus on an ebook retailing at £10 (£8.51 plus VAT), sold to an ebook distributor at a 50 percent discount, Random House would receive £4.24 (£5 less VAT), which would be split 50:50 with the author, giving him/her £2.12. (Barnes & Noble Digital would pay the same when selling through a third party retailer, but would pay £2.98, being 35 percent of £8.51, when selling direct.)
Is 50:50 a substantial improvement, a fair split? There isn't the direct analogy in traditional publishing, but perhaps the closest might be with a book club deal - an additional way of selling the book via an outlet that that is expected to reach a different market and which will give generic advertising. On book club sales, our advice is that it might be worth pressing for an increasing scale, e.g. 60 percent of the publishers' receipts up to £5,000 and 70 percent thereafter. It's worth noting that the Random House Minimum Terms Agreement split on book club deals is 60:40 in the author's favour.
Taylor and Francis (which includes Routledge)
T&F has written to its authors, offering them the same royalties on the books as on the paperback edition (T&F royalties are almost invariably based on net receipts). The group claims to be following the print publishing model: T&F therefore pay the costs of digitisation. In short, T&F's net receipts appear to be calculated in much the same way as Random House's net revenue. We challenged T&F to explain the huge difference between their royalty and Random House's 50 percent.
Jeremy North, the Business Development Director at T&F, replied that the company was digitising its entire backlist (which will be expensive) as well as all new titles, rather than cherry-picking a selection of top titles only. And the company argues that it offers more because its ebooks will be "fully functional digital books, capable of word searches and other on-screen interrogation and manipulation". T&F will be rekeying, tagging, and proof-reading afresh.
Unlike the view of trade publishers, T&F anticipate that the book's sales may become a substantial part of its business, substituting for conventional book sales, in which case "staff and other operating overheads" will have to be covered by ebook sales. But it seems likely that those overheads will be less, and the work of "publishing" considerably less, so while these arguments may justify some difference in royalties, surely not as much as the difference between a paperback royalty and 50 per cent.
Oxford University Press
OUP has also been in touch with its authors, seeking their permission to publish/licence specific electronic editions of their works, notably with Questia Media and NetLibrary.
Questia is "planning to offer an Internet - based service aimed initially at the American college market. Students will pay a subscription to the service, which allows them to search the entire [Questia] collection by word, phrase or concept". The collection is described as being more than 50,000 scholarly books and journals. OUP says "users cannot download whole texts in one, but can view and print one page at a time. Questia pays 15 percent of user subscription income into a royalty pool which will then be divided according to usage. OUP proposes to pay authors 50 percent of the resulting revenue from Questia. The non-exclusive licence period is two years.
Is 15 percent of Questia's subscription income a fair proportion to go into the royalty pool? No doubt Questia will be incurring costs by re-keying and adding search mechanisms, but whether this contribution justifies retaining 85 per cent is a point for debate. OUP presumably thinks so.
As to the 50:50 split between OUP and the author, in the world of academic publishing dividing sub-licensed rights 50:50 is far from unusual. However, traditional rights licensing only happens when the original work is being kept actively in print, and involves the publisher in finding and negotiating exclusive one-off deals with a licensee for an individual title each time. Here, OUP is offering a bulk stable of titles, on uniform non-exclusive terms. In addition, Questia's range has already expanded well beyond just the US college market (it is available to all), and the OUP titles for which agreement is currently being sought include mainstream biographies.
Whether OUP's minimal contribution to this deal justifies retaining 50 percent of the (paltry) income from Questia we leave you to decide. While individual authors will not be able to alter the terms the OUP has agreed with Questia, some writers might prefer not to agree to this deal (or ones like it) at all.
OUP is also contacting its writers about an arrangement with NetLibrary (see below) from which OUP proposes to pay authors 10 percent of OUP's net receipts from NetLibrary. The letters about Questia and NetLibrary say that OUP is receiving a number of similar requests for each book licensing so "in order to avoid inconveniencing you each time", the author is invited to a "allow us to act on your behalf on the same terms as for this deal." We welcome the fact that OUP is actively consulting its authors about such proposals, but advise that if in doubt, writers do not at this stage give blanket agreement for the future.
NetLibrary
A large number of academic publishers, including OUP, CUP, Blackwell and Wiley, have arrangements with NetLibrary - a US-based venture which digitises texts and sells the resulting ebooks for single-user use in libraries and universities. OUP and Blackwell are offering authors "a conventional royalty" based on the publisher's receipts from NetLibrary.
David Wynn, Rights Director of OUP's Academic Division, explained "we sell an electronic version of a book to a library, through a library supplier such as NetLibrary, very much as we sell a print version. It has thus been OUP policy to pay authors the same royalty on both print and electronic sales. We view Questia, in which is an online database, as secondary publishing and thus we have proposed to authors that the royalty income should be divided 50:50 as is common with subsidiary income in academic books." The Society's view is that in practice the arrangements with Questia and NetLibrary do not differ greatly as far as the reader is concerned. Furthermore, in both cases the costs are being carried by the licensee rather than OUP, so we consider the arrangement with NetLibrary to be licensing and would therefore expect the author to receive a minimum of 50 percent of the income. And one final thought: if single pages can be downloaded or printed off, perhaps the closest print-based analogy would be photocopying - and authors and publishers agreed years ago that money from the photocopying of books would be divided 50:50.
Click for An Ultra Short Run (print-on-demand, plus links) and Encyclopaedia File/Encarta.