The State of E-Books: Compensation Shortfalls

Royalties, digital rights management, sales-versus-lending, paid reviews — there is apparently no end to the number of ways one can cut the e-book pie these days.

The National Writers Union released a report in June that focuses on some key issues when it comes to how authors are paid for the e-books they write.

The report reveals that a significant number of the published writers who answered the survey are still in the dark — even after their works have been released electronically — about what e-books mean to their publishing contracts, especially when it comes to royalties.

Royalties and Reality

The National Writer’s Union survey represents a small data set — some 240 members with published books, about half them having issued books in electronic form. According to Paul MacArthur, vice president of external organizing for the NWU, it is reasonable to assume that the responding authors fall across the spectrum of accomplishments. Some may be relative newcomers, and some may have extensive CVs.

The NWU’s numbers show that these authors are not always the primary deciders, or even very well informed, about the e-book publishing part of their book deals.

• 80% of the polled authors said their publishers authorized the release of their manuscript as an e-book.
• 66% said that their publisher never informed them about their books appearing in electronic form.

Making a book available electronically is usually a good thing for the writer. But fair compensation is also important. Consider these survey responses:

• Some 17% of the authors in the survey said their e-book royalties percentage was the same as their print-book rate.
• The most commonly cited royalty amount was 25%.

If you take into consideration this recent blog entry by Michael Kozlowski, the e-book royalty rate of 25% has been the norm for years, far less than the split that publishers typically make with writers on hardcopy profits. That is, 25% author royalties for e-books leaves a lot more profit in publishers’ hands.

For example, based on Kozlowski’s research, when HarperCollins sells a book for $27.99, the royalty rate is closer to 50%. The e-book rate is not only lower (it’s 30% in HarperCollins case), but on e-books the publisher doesn’t pay manufacturing costs or the costs of distribution, freight, and returns. Profits are higher but the payout to the author is roughly half that of print.

A better alternative, according to the NWU, would be to treat e-books as licenses rather than as objects that are sold to a consumer. Meaning, when a reader buys a book for their e-reader, they’re buying a license to read that material on their device. Such licenses are usually covered under author’s subsidiary rights. Subsidiary rights for authors are often given a 50% royalty rate.

That’s important, because as the struggle surrounding e-book pricing continues to grab industry headlines, letting publishers out of the box of “did you really just double e-book royalties?”  becomes part of the bargaining equation.

The Black Box

But none of the preceding ideas solve one other crucial and underlying problem that the NWU’s report points out.

• One-third of the respondents said they actually don’t know their e-book royalty percentage.
• Of those who did know, 25% of the authors didn’t know how that number was arrived at.

The industry can address whether e-books are objects or licenses when it comes to royalties, and in so doing take big step toward fairer pay, but when it comes to authors and their e-books, only the writer can close the education gap. If nothing else comes of the Union’s new study, the call to get smarter about what’s in the publishing contract comes through loud and clear.

Not answering that call means leaving money on the digital table with every e-book sale.

Image courtesy of goXunuReviews/flickr