In October 2008 Random House circulated a letter among literary agents announcing a shift in e-book royalties from one based on list price to one based on actual net moneys received. Five months later, Simon & Schuster has followed Random’s example. “Beginning March 1, 2009,” writes Judith Curr, Executive Vice President and Publishers of S&S’s Atria Books division, in a Dear Agent letter, “all Simon & Schuster contracts worldwide will offer a royalty of 25% of net receipts for all sales of all electronic editions including eBooks and audio book downloads.”
Although publishers’ royalties are presumably negotiable, the boilerplate on one recent (pre-March 1 2009) Simon & Schuster contract called for a 15% list price royalty. That means that on an e-book retailing at $10.00, the author would be entitled to $1.50. Switching to a 25% royalty on net receipts, the author will now receive $1.25. How is that number calculated? Most e-book retailers take a discount of approximately 50% of an e-book’s list price. If S&S collects $5.00 from the retailer, the author will get 25% of that, or $1.25. a reduction of twenty-five cents per sale from the previous arrangement.
One significant aspect of S&S’s policy statement is a clarification of the way the company arrives at list prices for e-books. Curr’s letter states that “we have, with limited exceptions, adjusted the suggested retail price for our eBooks to mirror the price of the most recently published edition of the book (hardcover or paperback), rather than the discounted prices we had been using.”
Translated, that means that if S&S issues a book in hardcover, the e-book price will be commensurately high; when S&S then releases a cheaper paperback edition, the e-book price will proportionately drop. The rationale (if that is the right word for it) for this approach is spelled out in a recent posting, Penetrating the Mysteries of E-Book Pricing. Kind of.
It’s hard to say if 25% net e-book royalty will become “standard” throughout the publishing industry but with majors like Random and S&S leading the way, that would seem to be the direction things are headed. (By way of comparison, and as a matter of full disclosure, E-Reads pays a royalty of 50% of net receipts for e-book sales, and has done so since its founding in 2000. On a $10.00 book, that means a royalty of $2.50. At no point is the royalty rate ever reduced.)
– Richard Curtis
The problem is that S&S ebook pricing isn't commensurate with the lowest print version available. Almost all S&S digital copies of comparable mass markets are being retailed at a 50% uptick. I'm very frustrated with this pricing and I think it reflects an attempt by S&S to take a higher cut of the book pie but placate authors by telling them that the net price won't be reduced because they are going to jack up the ebook prices.
HarperCollins has the same rate and it’s a “take it or leave” clause.
I guess I can not agree with this article. When I try to count it 25% of net receipt is better than that.
Here’s the math.
1. Assume the retail price of the e-book is $10.00.
2. In the old royalty model, the publisher paid a royalty of 15% of the list price, or $1.50.
3. In the new model, the publisher pays the author 25% of the net. What is the net? It’s the retail price minus the retailer’s discount. The discount is about 50%. That means that the publisher is actually receiving $5.00.
4. 25% of that $5.00 net is the royalty that the publisher pays the author. That comes to $1.25, compared to $1.50 paid before the publisher changed its policy. The author loses 25 cents for each e-book sale.
Hope that’s clear.
RC
I think this article was excellent. I do not see any math problem (ref: "morgan ebook"), but I think the math is pretty straightforward.
Also, I agree with Jane and think that the reduction of Ebook royalties is nothing but an attempt by S&S to make more money at the autors' expense (if that is what Jane says).
Nevertheless, it is great that E-Reads pays 50% of net receipts. What a difference, compared to Random House or Simon & Schuster!
Bo, Editor
EbookBrothers.com