The iPad may sometimes seem like a boondoggle for authors (Yet another must-have device? Now I need an app for my memoir?), but it has been a bona-fide boon for e-book vendors. Caught in the middle are agents and traditional publishers, trying to carve out new territory for themselves and their clients. In April 2010, Sarah Baker explained the finer points of the chaotic electronic book market, informing authors of the state of e-rights, royalties, piracy, and pricing in this competitive (and lucrative) landscape. Let’s trace the zigs and zags of the e-book industry in the year since.
How large is the e-book market?
According to a press release from the Association of American Publishers, e-book net sales leapt 115.8 percent between January 2010 and January 2011, comprising approximately 9 percent of the consumer book market. American readers spent $263 million on e-books in the first eight months of 2010 alone, and in October 2010, Amazon released a statement boasting that during the previous three months, it had sold 143 Kindle books for every 100 hardcover ones.
Who buys e-books?
In January 2011, Digital Book World—a forum for the digital publishing industry—posted a slideshow detailing the results of a customer survey on e-reading. Results indicated that typical e-book consumers are employed 30- to 44-year-olds in cities and suburbs, followed by 45- to 54-year-olds and then 18- to 29-year-olds. The survey also revealed that sharing the literary love is good marketing strategy: nearly 40 percent of respondents reported purchasing an e-book after receiving a free sample chapter, and almost 30 percent reported buying an e-book after receiving a free one from the same author.
What should I be aware of in my contract?
According to an article by the Author’s Guild, publishers typically request broad grants of electronic rights in their contracts. However, because digital copies of a book can easily be sold long after physical printing has ended, the time limit on e-rights retention by publishers may remain open-ended. “Typically, rights revert to the author when [a book] goes out of print, but everything changed with print-on-demand and e-books,” said Paul Aiken, executive director of the Author’s Guild. Aiken advises authors to modify the out-of-print reversion of rights clauses in their contracts to stipulate that if digital book sales don’t hit a certain number in a 12-month period, e-rights revert to the author.
Literary agent Ted Weinstein says that contract modifications like these are the goal of many literary agents fighting to establish new industry standards. But Weinstein cautions authors to let experienced agents take the lead in contract negotiations. “Authors can work themselves into a neurotic frenzy, but I say worry only about the stuff that is in your realm,” Weinstein said. And, he adds, get a good agent. (Start with the Association of Author’s Representatives.)
What royalties should I expect?
E-book royalties for authors have coalesced at 25 percent of the publisher’s receipts. This a higher royalty than is standard for hardcovers (12 to 15 percent) or paperbacks (7.5 percent); however, the sale price of e-books tends to be much lower than that of bound books, so in absolute terms an author is likely to earn less in royalties on e-books—unless the digital format allows for the sale of many more volumes.
In an online article, the Author’s Guild argues that publishers will reap far greater profits on e-books, and that this could distort publishers’ incentives and ultimately hurt authors. The Guild did the math on authors’ royalties and publishers’ gross profits for several popular hardcover titles using industry-standard contract terms (15 percent royalty for hardcover sales and 25 percent for e-book sales). For example, Kathryn Stockett, author of The Help, earns $3.75 in hardcover royalties, while her publisher earns $4.75 in profit. However, Stockett earns $2.28 in e-book royalties, while her publisher nets $6.32—a 39 percent loss per book for the author and a 33 percent e-gain for the house.
Some writers, including Terrill Lee Lankford, author of Blonde Lightning, have balked at the 75/25 royalty split. Lankford, in a blog for Publisher’s Weekly, aired his decision to walk away from a publishing contract altogether in protest. Yet, Lankford and the Guild are hopeful that as authors demand better rates, and digital sales begin to overtake print sales, the playing field will level. The current royalty rate “runs against a long-standing tradition of essentially splitting net proceeds from book sales,” Aiken said. When big-name authors—and even authors who are not at the top of the food chain—say, “‘my market is now 50 percent digital and I’m not going to be a junior partner,’” publishers will take notice. Once one publisher begins to sign known authors at a higher rate, Aiken added, other publishers will have to follow suit or risk losing business.
How are e-books priced?
On March 1, the New York Times reported that Random House became the last of the six largest U.S. publishers to switch to the “agency model” for the pricing of e-books, in order to sell its 17,000 e-titles through Apple’s iBookstore. Under this model, publishers set the list price for their e-books and online booksellers return 70 percent of this amount to the publishers for each sale, taking a 30 percent commission per book. Under the “wholesale model,” preferred by Amazon, publishers sell e-books to Amazon at about half the list price and Amazon sets the Kindle price.
The move from “wholesale” to “agency” pricing has finally broken the mega-retailer’s hold on the largest share of the e-book market: Amazon can no longer artificially lower the price of e-books in order to attract more online business. “You need competition not just among authors and publishers, but also on the distribution end,” Aiken said. “Without the agency model you’re in a winner-take-all situation, and the winner is Amazon.”
Predictably, the “agency model” has led to an overall increase in e-book prices from the “standard” 2009 Amazon listing of $9.99, spurring some e-reader owners to leave hostile comments and one-star ratings on vendors’ websites. According to a New York Times article, under new publisher agreements with Apple and Amazon, the prices for newly released e-books will rise to between $12.99 and $14.99 in the coming months. Aiken says that we are likely to see additional price fluctuation because publishers must now measure how incremental increases or decreases in price affect their volume of digital sales.
Do books ever go straight to e-book?
Some trade publishers have been experimenting with releasing titles straight to e-book—typically timely digital releases followed shortly by print editions. But in a tight publishing market, the Author’s Guild reports that midlist and maverick authors are being wooed by the prospect of self-publishing. Agent Weinstein asks: What are publishers really doing for authors when anyone can publish an e-book through Amazon in minutes and receive 70 percent of the proceeds?
The answer, of course, is that publishing houses offer advances, edit manuscripts, and market the finished product. Yet niche outlets, including Self-Publishing Boot Camp, provide opportunities for those capable of aggressive self-promotion. The rag-to-riches story of young-adult fantasy author Amanda Hocking, who sold more than 400,000 e-books in January 2011, is a testament to the power of social networking and the equalizing potential of the digital-book format.
What is the state of e-book piracy?
E-book piracy has been slow to take hold, but a study by Attributor—an online content-monitoring firm—indicates that authors and publishers may yet face the challenges recording artists and record labels did with the introduction of the iPod. “All the same mechanisms that have made music and movies stealable online are there for e-books now,” Aiken said. “It can hit overnight and decimate an industry.” In January 2010, the Attributor blog claimed that e-book piracy costs the publishing industry nearly $3 billion annually, or roughly 10 percent of U.S. book sales.
E-book files are small, and several thousand titles can be easily packaged into a single torrent requiring less than 4GB of memory. Author and C-Net blogger David Carnoy realized in February 2011 that the digital version of his novel Knife Music was being pirated in just such a package. Carnoy believes that a rise in the popularity of the Kindle e-reader and the spectacular success of the iPad have “supercharged” e-book piracy. Still, the variety of e-book file formats and the relative novelty of the technology mean that piracy has not yet had the same devastating effect on the publishing industry as it has on other sectors.
Check back with us next year for a report on the swordfights over that subject.