[Daithi]

I took a look at the numbers, comparing the retailer model with the new agent model that Macmillan Publishing is championing. It really screws the authors.

Under the "Retailer Model"
$28.00 typical list price of a new hardcover
$14.00 publishers net (Macmillan has stated that Amazon pays them 50% of list)
$2.80 authors royalty (Macmillan has stated it pays authors 20% of net)

Under the "Agent Model"
$14.99 list price
$10.49 publisher net (Macmillan gets 70% and Amazon gets 30%)
$2.10 authors royalty (Macmillan still pays authors 20% of net)

Clearly the publisher is making less money under this new model. The author is making less money under this new model. The only one making more money is Amazon, and the customer is getting hit with a 50% increase in price.

Looking at the figures I really wonder if other publishers will adopt the agent model. Additionally, Macmillan under pays its authors, and the other big publishers pay their authors 25% of net. That means that these authors would take an even bigger hit if their publishers adopted the agent model (25% of $10.49 is a lot less then 25% of $14.00). Most (or at least a lot) of the independent publishers pay their authors based on list price, typically about 10%. This model REALLY hurts those authors -- 10% of $28 is $2.80 and 10% of $14.99 is $1.50.

Amazingly the Association of Authors’ Representatives (AAR) has came out in support of Macmillian. Although I think this has more to do with seeing a publisher stand up to Amazon, and little to do with how it will affect their authors' bottomline. The Authors Guild has also came out in support of Macmillan, although they too didn't note that authors will make less under the agent model.

I think Amazon is making a huge mistake for which they are starting to pay for now. The publishing industry knows the money they are making on ebooks right now is an illusion. They are making money because Amazon is willing to take a loss on ebook sales. The publishers know that this model is unsubstainable and no business likes uncertainty. The publishers need some assurances from Amazon that in the future the publisher's and author's profits won't take a big hit as more and more people adopt ebooks.

Amazon needs to provide the publishers with a model that works for all involved -- including consumers. I don't know what that model ultimately will be, but it will probably start with getting a handle on the true cost of an ebook, which is roughly the cost of a hardcover minus the cost of printing, distribution, warehousing, and retailer returns. I suspect that initially an ebook should probably cost more than $9.99 but less than $14.99. As time goes by, the cost of the ebook would go down just as it becomes economically feasible to release a hardcover in a mass paperback format.