E-book royalty debate reignited

E-book royalty debate reignited

Author Nick Harkaway has called for authors to be offered a greater share of royalties from e-book sales, after HarperCollins parent News Corp published an investor presentation that showed the publisher could potentially make greater profits from the sale of e-books when compared to print books.

The presentation was made at the beginning of June as part of the series of strategy meetings ahead of a divestment of the publishing businesses from the rest of News Corp, and reported on Publishers Marketplace. In the presentations News Corp plays up the positive side of the transition to digital stating: "Historically, as e-books replaced print books, revenues declined slightly on a title by title basis. However, profitability increases significantly."

The company gave as an example the profitability of a typical hardback priced at $27.99 and an e-book costing $14.99. In this scenario the e-book's contribution to profit was $7.87, compared with the print book's contribution of $5.67. However, News Corp put no manufacturing costs against the costs of the e-book, compared with a $1.92 cost associated with the production of the print book. There was also no allowance for increased taxes on e-books: in the UK e-books attract a VAT surcharge of 20%, whereas print books do not.

Writing on the Association of Authors Representatives blog, agent Brian DeFiore said that the chart illustrated "very clearly something that agents have been arguing for several years now, and that publishers have been saying just isn’t true: that their savings on printing, binding and distribution make up for the lower revenue from lower e-book prices". DeFiore claimed that this increased profitability was coming "entirely off the backs of authors".

Writing on FutureBook
, Harkaway stated that the "red lines drawn by publishers—we MUST have e-book rights, you WILL accept 25%—start to look both shaky" and warned that "disenchanted creators [might] demand a better slice of the action or find other ways of doing their thing". He wrote: "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."

The News Corp analysis was also the subject of a separate blog on the Writer Unboxed website, written by Porter Anderson. In the comments on that blog DeFiore admitted that his analysis was a "simplistic look at a complex issue”, with News Corp using this example to "put the best scenario for profitability forward" as part of its investor conference. DeFiore added: "We need to see the entire picture of a book’s publication effort—in all formats—to judge value."

News Corp added that it planned to accelerate "digital strategy to benefit from higher operating profit margins", while looking to "lower manufacturing costs [to help] offset decline in print books".