Why Don't Agents Want to Play? Amazon Flies Agents to Seattle to Find Out

[Kali Yuga]

So in the contracts, isn't a sale a sale -- or to be specific, isn't an ebook sale treated the same as a hardcover, since the wholesale price is the same -- regardless of whether it's paper or electronic? I mean, I can't imagine that the authors are giving the publishers the ability to collect all the revenues from an ebook sale.

Nor should this necessarily change the advance, if they treat all types of sales equally.

[Elfwreck]

Originally Posted by Kali Yuga

Nor should this necessarily change the advance, if they treat all types of sales equally.

If the publisher expects to make substantial money on ebook sales, it's reasonable for the author to request/demand more of an advance against expected royalties. Publishers that don't offer that additional money, will find authors reserving their ebook rights (currently difficult to do), or going to other publishers who do offer those higher advances.

[Kali Yuga]

Originally Posted by Elfwreck

If the publisher expects to make substantial money on ebook sales, it's reasonable for the author to request/demand more of an advance against expected royalties....

And if publishers expect ebooks to replace paper sales, rather than increase overall sales numbers?

What if they expect net book sales (in units sold) to remain the same, while revenues drop due to retailer pressures to reduce the wholesale prices, and readers spend their saved money on other things? Should the authors receive a smaller advance in expectation of this outcome?

And while I can't blame authors for wanting to reserve rights, that is one factor that slows the advancement of ebooks. For example, an author may not want to grant international ebook rights to a US publisher, but this is exactly what slows down international distribution of the ebook version.

I can see how the royalty rate might be up for grabs, but I really don't see how this should specifically impact advances, especially if international rights are still treated separately.

[MaggieScratch]

Originally Posted by Kali Yuga

So in the contracts, isn't a sale a sale -- or to be specific, isn't an ebook sale treated the same as a hardcover, since the wholesale price is the same -- regardless of whether it's paper or electronic? I mean, I can't imagine that the authors are giving the publishers the ability to collect all the revenues from an ebook sale.

Two things.

1. Electronic rights are separate from hardback rights, which are separate from paperback rights, which are separate from foreign-language rights. You get the picture.

2. If the publishers are demanding the electronic rights as part of the initial deal, it is probable that the publishers are not offering the best royalty rates for electronic. Now that ebooks are becoming more prevalent and lucrative, the agents are not able to negotiate for the best rates since the rights were given, for whatever rate, in the initial deal.

But no, I don't think anyone is giving them away for free. Kristin Nelson, an agent, has written about it at her blog. She said some publishers are pushing for rates like 25% of net (this would be as part of the initial deal). Print royalties are usually paid on cover price, no matter what rate the book sells for*. It's a lower rate (8-15%, usually on a sliding scale depending on copies sold), but the cover price is set. Net (the profit after costs) can be much lower. 100% of 0 = 0.

*The royalty rate can further vary depending on the discount given on wholesale. But it's always a percentage of the cover price.

Originally Posted by Kali Yuga

I can see how the royalty rate might be up for grabs, but I really don't see how this should specifically impact advances, especially if international rights are still treated separately.

Advances are generally based on the number of books they think will sell. So if the publishers think an ebook will sell lots of copies (since ebooks are becoming more popular), the advance should be accordingly larger. That being said, I'd rather have a higher royalty rate than a larger advance. You have the opportunity to make more money in the long run. Of course, if your book tanks, you're screwed. But E is forever*, and the Long Tail can do much, given enough time.

*Another issue that e raises: when is an ebook out of print? Because an author can renegotiate a new contract if the book goes out of print...

[Kali Yuga]

Originally Posted by MaggieScratch

She said some publishers are pushing for rates like 25% of net (this would be as part of the initial deal). Print royalties are usually paid on cover price, no matter what rate the book sells for*. It's a lower rate (8-15%, usually on a sliding scale depending on copies sold), but the cover price is set. Net (the profit after costs) can be much lower. 100% of 0 = 0.

I'm afraid you're losing me here....

I was under the assumption that royalty rates are roughly 10% for hardcover, 7.5% for trade, and usually change after x number of copies have sold. So I'm not sure what "25% of net" refers to in this context, or what the typical ebook royalty rates are.

I assume the royalty is based on the wholesale price. E.g. Ballantine wholesales 1 copy of Book X for $10, and the author gets say 10% of that price, regardless of whether Amazon charges $5 or $15 for it.

Originally Posted by MaggieScratch

Advances are generally based on the number of books they think will sell.....

Yep, which still kind of brings me back to my original query. Namely, why would advances be the hold-up, unless the publisher is trying to, for example, include international ebook distribution rights? I can see how authors would be slow to line up behind ebooks if their royalty rates are inferior, but that is not what the author of the article is saying -- he is specifically saying that authors are balking at ebooks because the advances are not increasing.

Originally Posted by MaggieScratch

Another issue that e raises: when is an ebook out of print? Because an author can renegotiate a new contract if the book goes out of print...

Probably never.... I'd think a smart publisher would try to hold the ebook rights for the life of the copyright. A smart author might not allow that, though.

[MaggieScratch]

Originally Posted by Kali Yuga

I was under the assumption that royalty rates are roughly 10% for hardcover, 7.5% for trade, and usually change after x number of copies have sold.

Close enough for government work.

I assume the royalty is based on the wholesale price. E.g. Ballantine wholesales 1 copy of Book X for $10, and the author gets say 10% of that price, regardless of whether Amazon charges $5 or $15 for it.

No, most royalty rates are based on the cover price. Say the cover price is $20 (nice round number) and the royalty rate is 10% (also nice round number). The author's royalty for one copy is $2. The wholesale amount, that is, the discount price at which the publisher sells the book to the distributor or retailer, doesn't matter. HOWEVER, the royalty rate might change based on the discount. Amazon and other big chain stories, Costco, Wal-Mart, etc. get larger discounts as they buy in large volume.

So I'm not sure what "25% of net" refers to in this context, or what the typical ebook royalty rates are.

Actually that would be what you referred to above--the percentage is taken from the publisher's profit after the discount to the wholesaler/distributor/whatever is taken out. And the definition of "net" could also include the publisher's sunk costs, such as editorial, marketing, overhead, etc. (but that would be especially nasty).

Even a very high royalty rate such as 25% of net might end up being less than 10% of the cover price, especially if the pricing paradigm for ebooks changes. Say $9.99 becomes the normal "cover" price for ebooks, which the publisher provides at a 50% discount (all very round numbers). The author ends up making 25% of $4.98, or about $1.25 per book. If Amazon demands a 55 or 60% discount because they are a large-volume retailer, the author gets even less.

These rules are not hard and fast, by the way, and neither are the royalty rates. There are exceptions for certain publishers, certain genres, etc. I'm generalizing a lot.

Yep, which still kind of brings me back to my original query. Namely, why would advances be the hold-up, unless the publisher is trying to, for example, include international ebook distribution rights? I can see how authors would be slow to line up behind ebooks if their royalty rates are inferior, but that is not what the author of the article is saying -- he is specifically saying that authors are balking at ebooks because the advances are not increasing.

I don't really get that either. I'm making an assumption that he means most deals (advance + royalties) are based on the amount of books the publisher thinks will sell, and really they're only talking about hardcover. If paperback rights are included in the deal--which is almost always the case at this point in time--the advance is usually increased to accommodate that part of the deal. Because until recently ebooks have generated such a small amount of revenue, they weren't really included in the equation, and I think he is saying that if they were, presumably the advance should be larger, because the potential for making some real coin is there now.

And once the deal is done, if ebooks suddenly explode the way digital music did, they can't go back and say, "We can haz ebook rights now?" because oh well, you signed the crappy deal back when ebooks didn't make a difference.

I could be wrong, but I *think* that's what he is saying.

Probably never.... I'd think a smart publisher would try to hold the ebook rights for the life of the copyright. A smart author might not allow that, though.

Yep.

[igorsk]

Originally Posted by MaggieScratch

*Another issue that e raises: when is an ebook out of print? Because an author can renegotiate a new contract if the book goes out of print...

I hear Baen sets a minimum number of copies the ebook must sell in a [some time period] to be considered "in print".

[Daithi]

Originally Posted by MaggieScratch

I'm making an assumption that he means most deals (advance + royalties) are based on the amount of books the publisher thinks will sell, and really they're only talking about hardcover. If paperback rights are included in the deal--which is almost always the case at this point in time--the advance is usually increased to accommodate that part of the deal. Because until recently ebooks have generated such a small amount of revenue, they weren't really included in the equation, and I think he is saying that if they were, presumably the advance should be larger, because the potential for making some real coin is there now.

MaggieScratch you are rapidly becoming one of my favorite posters. The above was my interpretation as well, but you said it far better and clearer than I ever could have.

[MaggieScratch]

Originally Posted by igorsk

I hear Baen sets a minimum number of copies the ebook must sell in a [some time period] to be considered "in print".

Now see, this is reasonable and logical. Unfortunately, we're talking about PUBLISHING here. Reasonable and logical do not apply.

I kid, but the Byzantine nature of publishing (from my observation) is Byzantine for a reason: it works. It doesn't seem like it should, there are other ways of doing business that seem like they would work better, but the current system, as twisted and weird as it is, works. Everybody makes money--the publisher, the author, the agent, the wholesaler/distributor, the retailer. They all might want more money, but they are getting something out of it.

I think that's the problem with suggesting new paradigms. However logical and reasonable they might seem, if you mess with the current delicate balance, the whole thing might come apart. It seems logical to say, "Bookstores shouldn't be able to return books for credit! No other retailer can do that!" But if they couldn't do that, the bookstores would go out of business. (What would make sense would be to not allow the big chains to abuse this privilege.) It seems to make sense to say, "Pay authors less advance money and higher royalties on the backend," but if that happened, many authors would not be able to write as their primary job--and if they had to do something else for a day job, they wouldn't be able to write. (I'm struggling with that balance now myself.) There also is a school of thought that the publishers will push a book harder if they have a big advance involved.

There is no doubt that the publishing system needs to adapt, but it's going to happen very, very slowly. Unfortunately it's getting to the point that there is pressure being applied from the outside. The trick will be to make the change without wrecking that delicate balance.