US indies lead the way on digital royalty shift

US indies lead the way on digital royalty shift

Publishers are becoming more flexible on e-book royalty rates, as UK agents receive offers of 30%–35% of net receipts as standard from some US publishers.

A P Watt agent Caradoc King said he was recently receiving offers of 30%–35% from some medium-sized independent publishers in the US. He said he expected the situation to shift to a similar position in the UK.

King said: "I cannot believe that within the next year that this 25% across the board rate won't be gone . . . It seems to be logical that agents offering big titles, if they are offering it multiple times, will say: 'Make me an offer for e-book royalties because we will be factoring that into our consideration of your offer.'"

Similarly, Patrick Walsh of Conville & Walsh said the agency had had "an offer come in from a medium-sized American publisher offering 30% as a matter of course on a new title". He added: "There is an upward pressure on [royalty rates]. E-book sales are just rising here so fast."

Piers Blofeld of Sheil Land said of the higher US rates: "I'm glad to see some publishers are being flexible in a changing market. I think that whenever there is really significant evidence in the US that higher rates and escalators are being fluid, arguments can be made that the UK should follow. If we all know that is happening, then I should think [change] will happen fairly swiftly."

Other agents, who declined to be named, reported UK publishers were also offering more flexible rates, particularly on backlist titles, with one recently being offered more than 25% from a top five UK publisher on backlist titles. Another top agent recently received an offer from a leading UK publisher of 25%–30%, increasing to 47.5% once the advance has been recouped, in an e-book/p.o.d.-only deal for a new title.

One impediment to a universal digital royalty rate is while e-books are subject to 20% VAT in the UK they are not in the US. Society of Authors general secretary Nicola Solomon said demand for e-book rights was increasing and could be an area where royalty models will diversify. She said: "It is clear that [digital] is an area where lots of people are interested to accumulate content, and there are a whole load of models being created with that in mind."

Meanwhile, HarperCollins c.e.o. Victoria Barnsley has called the amount authors receive for e-books a "bone of contention". Speaking on BBC Radio 4's "The World at One" on 16th August, Barnsley said: "We would argue actually that we invest a huge amount in authors . . . but it is a bone of contention. I don't think we should be paying more."