The Thorny Issue of eBook Royalties

Sharon BlackieBy Sharon Blackie BA (Hons), MA, PhD, Director, Two Ravens Press Ltd

In a recent blog, the Society of Authors has been railing against publishers again, and calling for higher e-book royalty rates than the 15-25% that currently prevails in the market:

…it is unconscionable that publishers should be attempting to strong­arm authors into accepting fixed royalty rates on e-books for the entire duration of copyright—and setting them, what is more, at a miserly 15% to 25% of their receipts. That may still be fair enough back in the Cretaceous world of dead tree publishing, but it is hard to see what it is about the selling of an e-book that entitles the publisher to cream off such an exorbitant share of the revenue.

I should say that, as a published author, I am a member of the Society of Authors, and I think they do many fine things. However, this whole e-book royalty question is NOT as simple an issue as it appears, and I find myself wishing that they would do a little more research before they simply assume that all publishers are out to fleece all authors for every last penny that they can.

I’ve read a number of statements from the SOA recently (including in the recent issue of their magazine, The Author) on this issue and they are often filled with misconceptions about the practicalities of running a publishing business when it comes to independent publishers, who publish rather a lot of their members. For example, one piece stated outright that there were no big distribution/wholesaler costs for e-books as there are for print books, because there is no need for warehousing/storage:

In suggesting these royalties we have taken into account that:

(a) publishers need to cover their overheads and make a profit; but

(b) the direct costs of originating, producing and keeping an ebook ‘in print’ are low (e.g. no printing costs); and

(c) the cost of making an ebook available through a third party distributor such as Amazon is minimal. Publishers’ warehousing and distribution costs are eliminated, as are losses from dealing with returns and unsold stock.

WRONG! – Absolutely, utterly, 100% wrong.

The distribution and warehousing charges for e-books are absolutely as high as they are for print books. For example, the biggest book warehouser in the country, Gardners, who distribute our e-books, charge exactly the same as they do for print books – an average whopping 50% of retail price. Why? Because they argue that there are still large costs associated with the production and maintenance of e-books: they’re just different ones. They relate to building, managing and keeping secure e-warehouses, among other things.

Two Ravens PressAt Two Ravens Press we price our e-books as low as we possibly can, but the ultimate price of an e-book is driven by a desire to ensure that the author will get as much royalty from the sale of an e-book as from the sale of a print book – to the extent that that is feasible in the marketplace. With 25% royalties, we can usually achieve this. In fact, for e-book sales through our website, we can usually do better.

According to the SOA, we must therefore be making vast amounts of money!

Well, the truth is that on the average e-book, after we’ve taken off file conversion costs and everything else, we don’t make any more than we do on the sale of an average print book. And we still have to produce, market, cover our overheads etc etc – just as we do with print books. It is true that if your anticipated e-book sales for a given title are in the thousands and thousands for a bestselling title, you might be making a very large amount of money indeed for a relatively small amount of work. But in order to make back the conversion costs alone of an average TRP e-book, we’d have to sell over 100 copies. That’s without taking into account time, overheads and the vague desire that one of these days we might make a profit.

Right now, I think our bestselling e-book has shifted around 6 copies.

The moral of the tale? Well, there are many, but I’m not going to go into them all here. At a minimum, please don’t tar all publishers with the same brush. Independent publishers with low volumes simply cannot operate, let alone make a living, on the kinds of royalties and terms that the SOA is beginning to insist on for all its members, regardless of who the publisher is.

At TRP our publishing contracts are among some of the most generous around – certainly compared with other small indie publishers. But they’re right at the limit of what we can do and still operate. And whereas our authors always make money from their books, we often don’t.

[This article was originally published on the Two Ravens Press blog and has been reprinted here with the permission of Ms. Blackie.]

Sharon Blackie was originally trained as a neuroscientist, and has worked in a variety of corporate consultancy roles, practiced as a therapist, and is now a publisher, having established Two Ravens Press in November 2006.

3 thoughts on “The Thorny Issue of eBook Royalties

  1. Morgan Ives

    It sounds to me as if Gardners book warehousing is ripping off the publishers, then, and publishers are passing that onto the authors. I’m a computer geek as well as a writer, so I can tell you it shouldn’t cost that much to build a secure “e-warehouse.” My company recently implemented a secure server for the federal government. It cost several thousand dollars, true, but once it was in, all they would pay is a couple hundred dollars per month maintenance fee and electricity. It could store up to eight terrabytes (2 with quadruple redundancy).

    Independent publishers like Two Ravens Press need to do a little homework and implement their own e-publishing storage, if that’s really where 50% of revenue is going. It isn’t hard to do. If you are worried, simply set up a computer and don’t connect it to a network. You can transfer files to the network as needed using a USB drive. We also do that in the federal government, and it works just fine.

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  3. Mark Seabrook

    Most of the major eBook aggregators are charging around 50% for housing and distributing eBooks.

    I do not agree with the comment of saying that publishing should therefore simply setup their own secure eBook repositories. As this is just not as simple or practical as it sounds.

    Technical ease:
    You require fairly in depth technical knowledge to put an eBook hosting and distribution system in place which is in line with industry standards (i.e. ePub files using Adobe Content Server). ACS4 is complex software which requires Java knowledge to setup and run,

    Cost benefit:
    If you do overcome the technical issues the next issue is cost. ACS4 costs around $10,000 once off and there are also annual licenses. For a small to medium publisher this probably does not make sense.

    Reach / Integration:
    The biggest issue however is that online retailers (Waterstones, Borders, etc) do not want to integrate their websites into multiple publishers eBook content stores. They want to deal with one aggregator who holds multiple publishers eBooks. Same as physical world – Publishers do not all have their own physical warehouses for good reason.

    Sure you could sell off your own website and bypass the online book retailers, but you need to be realist about your ability to generate sales off your own website. Perhaps for niche publishers this is easier, but for general trade publishers I suspect most of your audience will visit the Waterstones, Gardners, etc websites looking for eBooks.

    Being both a publisher and a distributor and having done a fair bit of research into the area of eBook warehousing and distribution I can say that it is not an easy or inexpensive process. You need to be a medium to large publisher to even consider this, and that still does not solve the ‘reach / integration’ issue.

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