A bestselling author, Barry Eisler, decided he’d have more upside potential as a self-publisher than with a traditional publisher that offered him a $500,000 advance. The traditional publisher pays a 25 percent net ebook royalty. By publishing his books himself, Eisler could earn a 70 percent ebook royalty.
If enough top authors follow Eisler’s example, the publishing business, as we know it, will cease to exist. That’s not to say that all bestselling writers will go off on their own. But if Eisler isn’t an anomaly, he’s the first domino.
Publishers probably can keep most of their top authors in the fold, and survive the digital revolution, by splitting profits on ebooks with authors evenly (which is roughly how profits are split on a hardcover, after factoring in all the publisher’s costs). But it’s unclear how many publishers will see the light in time and be willing to do that. It seems more likely, at this point, that most publishers will refuse to give authors enough of a share in ebook profits until it’s too late, and most of the top names have discovered that they, too, will do better on their own. For the sake of the entire business, please hope that I’m dead wrong.
As Eisler explains in a long discussion, posted at JA Konrath’s blog:
Barry: All signs that publishers are aware of the potential for digital disintermediation, but that they don’t understand what it really means.
Joe: Because they still believe they’re essential to the process.
Barry: I would phrase it a little differently. They recognize they’re becoming non-essential, and are trying to keep themselves essential–but are going about it in the wrong way.
Joe: You and I and our peers are essential. We’re the writers. We provide the content that is printed and distributed.
For hundreds of years, writers couldn’t reach readers without publishers. We needed them.
Now, suddenly, we don’t. But publishers don’t seem to be taking this Very Important Fact into account.
Barry: Well, again, I think they’re taking it into account, but they’re drawing the wrong conclusions. The wrong conclusion is: I’m in the paper business, paper keeps me essential, therefore I must do all I can to retard the transition from paper to digital. The right conclusion would be: digital offers huge cost, time-to-market, and other advantages over paper. How can I leverage those advantages to make my business even stronger?
Joe: We figured out that the 25% royalty on ebooks they offer is actually 14.9% to the writer after everyone gets their cut. 14.9% on a price the publisher sets.
Barry: Gracious of you to say “we.” You’re the first one to point out that a 25% royalty on the net revenue produced by an ebook equals 17.5% of the retail price after Amazon takes its 30% cut, and 14.9% after the agent takes 15% of the 17.5%.
Joe: Yeah, that 25% figure you see in contracts is really misleading. Amazing, when you consider that there’s virtually no cost to creating ebooks–no cost for paper, no shipping charges, no warehousing. No cut for Ingram or Baker & Taylor. Yet they’re keeping 52.5% of the list price and offering only 17.5% to the author. It’s not fair and it’s not sustainable.
Barry: I think what’s happening is that publishers know paper is dying while digital is exploding, and they’re trying to use the lock they’ve always had on paper to milk more out of digital. In other words, tie an author into a deal that offers traditional paper royalties, which are shrinking, while giving the publisher a huge slice of digital royalties, which are growing. The problem, from the publisher’s perspective, is that their paper lock is broken now.
Joe: I feel all writers need to be made aware that there is finally an option. Not just an option, but an actual preferable alternative to signing away your rights.
Barry: It’s inevitable that more writers will be realizing this is true. It’s being demonstrated by more and more self-published authors: you, Amanda Hocking, Scott Nicholson, Michael J. Sullivan, HP Mallory, Victorine Lieske, BV Larson, Terri Reid, LJ Sellers, John Locke, Blake Crouch, Lee Goldberg, Aaron Patterson, Jon F. Merz, Selena Kitt, hopefully me…
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