E-book royalties have been fixed at around 25% for a few years now. The unanimous position of publishers has been that that was what was affordable.
I've generally left this topic alone because a) it was well-covered elsewhere and b) I was prepared to accept pro-tem that the digital transition was expensive, that it had arrived rather suddenly (if you allow a definition of "suddenly" which embraces "a lot of people were telling you about it and you chose not to believe them"), and that no one would actually be daft enough to try to deceive the golden goose about the availability of grain.
Because sooner or later—especially in an environment where grain sources are becoming less centralised and where the flow of grain is scrutinised rather intensely—the goose was going to find out and might get a bit pissy. Geese are almost as sensitive about grain as they are about unanticipated Gaulish invaders.
So what did I know? As it transpires, not much. Brian DeFiore smartly spotted a rather telling bit of information in HarperCollins' "Investor Day" presentation (thanks to Porter Anderson for the link).
There are lot of different ways of expressing the numbers in the various articles discussed here, but the burden of the whole thing is neatly expressed by DeFiore:
$27.99 hardcover generates $5.67 profit to publisher and $4.20 royalty to author
$14.99 agency priced e-book generates $7.87 profit to publisher and $2.62 royalty to author.
So, in other words, at these average price points, every time a hardcover sale is replaced by an e-book sale, the publisher makes $2.20 more per copy and the author makes $1.58 less. If the author made the same $4.20 royalty on the e-book sale as he/she would have on a hardcover, the publisher would STILL be making an improved profit of $6.28.
Let's assume for a moment that this holds roughly true across the industry. Absent some really powerful, clear, and unhedged explanations, authors are going to be miserable and furious. The question is how they will respond. In general, we're not a very organised or proactive bunch, especially in the UK, but there are limits to that indulgence (or you could call it apathy, if you want).
Publishers, meanwhile, have put themselves in an interesting position. E-book sales are rising against paperbacks, and many authors are becoming—encouraged by their editors—their own best advocates in the online setting. On the one hand, such authors may be less willing to carry this weight if they're not being properly remunerated for digital sales. On the other, those who are most effective in this arena may feel less and less interested in being published by a major house.The red lines drawn by publishers—we MUST have e-book rights, you WILL accept 25%—start to look both shaky (as they are crossed by writers coming into a publishing deal from a self-publishing success) and demonstrably unfair.
This is not a good game to be playing when self-publishing has never looked so plausible or so profitable. It only requires a few successful transitions to put a very large hole in the traditional publishing bucket and see writers come pouring out, and appearing to be unfair in dealings with authors guarantees a few will try to become those successes.
I've been wrestling with a sense of confusion for a little while now. It all seemed to be going so well for the traditional trade, and yet so many of the things I think are important in the digital transition remain completely untouched. I would have expected to see publisher-branded e-reading software by now, direct sales and reading clubs, bundled digital and physical copies with deals on audiobooks, loyalty schemes, communities, discovery engines, price experiments, more DRM-free books, a faster transition of manuscripts to books and a partial end to the seasonal nature of the trade, with at least some books coming to market when they're ready.
These things just don't seem to be on the menu, and yet the profits are decent, and you can't entire;y explain that with tentpole books like Fifty Shades (tentpole movies are not helping Hollywood, either, and haven't done for years). I might just be wrong about what's important—maybe you can just get away with commercial skeuomorphism in the book world, and replicate the paper experience to suit your pre-existing models, perception and infrastructure, and have readers put up with it—but I couldn't help but ask if this was a walking ghost phase, like the moment of apparent physical recovery seen in the victims of acute radiation poisoning. A short while later, the body starts to collapse and everything goes downhill from there.
If the industry is achieving this happy stasis through a perpetual blood transfusion from its authors, that would explain a lot, but it would also leave open the possibility of a sudden collapse as disenchanted creators demand a better slice of the action or find other ways of doing their thing. That sounds a bit over the top, perhaps. Armageddon scenarios make great reading and can usually be ignored—no one's ever actually seen one come true. But that's the point about armageddons: no one sees two of them. As Iain Banks put it, you encounter them in much the same way a sentence encounters a full stop.
It is now time for that 25% to shift, and shift properly. Taking a bite out of authors is neither a long-term answer nor an acceptable one.