“Despite the widespread impression that e-book people are the jet-setters of the publishing business,” we wrote a while back, “the truth is that just about every step in the creation and publication of e-books is excruciatingly boring. In fact, e-book publishing may be described as long stretches of stupefying tedium punctuated by moments of numbing monotony.”

This observation found support in Andrew Wilkins’s coverage of what sounds like the quintessentially boring event of all time, the world’s first convention on metadata.  For those who are drawing a blank, metadata is all the stuff that goes into an e-book that is not the book itself.  It includes such tedium-inducing items as the ISBN, jacket copy, cover image, publisher information, territorial rights, country codes, suggested retail prices in US and foreign currencies, BISAC code, and a host of other data.

Before you click out of this essay there is one more thing you need to know about metadata: without it the e-book industry would vanish off the face of the earth.  For unless your publisher provides it to Amazon, Barnes & Noble, Sony, Kobo Apple and other retailers, they will not carry your e-book.

“Good data isn’t just nice to have,” writes Andrew Wilkins of Publishing Perspectives, “these days, there can be serious commercial consequences if your book information isn’t correct.” Wilkins cites a Nielsen executive who notes that “those titles in Nielsen’s top-selling 85,000 with complete data records sold 70% more copies on average than those with incomplete metadata.”

Enough publishing people felt the subject vitally interesting enough to convene a conference about it at last week’s Frankfurt Book Fair. One attendee went so far as to declare “Managing data needs to be a strategic priority.” Maybe it would become one if we called it something else.  Wilkins nailed it when he lamented “Can’t we just choose another more sexy term?”

Now that we have your rapt attention, you can follow up by reading All About BISAC Codes, Mastering the Mysteries of Metadata and Looking for Tedium? E-Books Are Your Medium.

Richard Curtis

Alfred Knopf coined the classic bon mot about returns in the book business: “Gone today, here tomorrow.” Having expended some of the best years of my career railing – in vain – against the ruinous practice of returnability in the book industry (See A World Without Inventory, Part 1 and Part 2), I greeted the advent of e-books with the ecstasy of a pilgrim beholding the shrine he has sought all his life.

But after extolling the zero returnability of e-books I am slightly abashed to report that -  at one venue at least -  e-books are indeed returnable for full refund, no questions asked.

How abashed am I? 1.15330021291%  That happens to be the rate of returns viewed on the retailer record of one publisher’s  sales database over a one month period.  The retailer was Amazon Kindle.

A 1+% return rate is infinitesimal compared to that of the conventional trade book industry, where returns of 50% are not uncommon and even 75% is not unheard of. So we are definitely not complaining.  But we’re curious to know how e-book returnability works and who besides Amazon offers it.

To answer the second question first, it is not easy to ascertain the returns policy of Amazon’s rivals, but from what I have been able to ascertain, Barnes & Noble, Random House, Wiley and Simon & Schuster explicitly prohibit return of e-books. The policies of Kobo, Sony and Apple are not clear.

Amazon’s policy is stated clearly on its website:

Content you purchase from the Kindle Store is eligible for return and refund if we receive your request within 7 days of the date of purchase. Once a refund is issued, you will no longer have access to the item. To request a refund and return, click the Customer Service button in the Contact Us box in the right-hand column of this page to reach us via phone or e-mail. Please make sure to include the title of the item you wish to return in your request.

No strings seem to be attached to Amazon’s policy,  But I wondered why anyone would return an e-book.  Fantasy author Lindsay Buroker speculates that customers simply order the wrong book. “It’s very easy to buy ebooks (one-click) straight from your device,” she writes. “The Kindle also promptly asks you if it was a mistake and you want to return the ebook. My guess, based on the fact that my returns usually pop up simultaneously with corresponding new sales, is this is what happens most of the time.”

Other reasons include excessive typos, formatting issues, and the old standby: someone just didn’t like the book. The latter may not be as prevalent as you would imagine because of look-inside-the-book sampling that helps consumers judge a book before clicking the Buy button.

And of course, some people may download the book, read it before the seven day deadline expires, and return it.  The low returns rate suggests either that only a tiny percentage of Amazon customers are moochers, or more of them would be if they could only read faster.

However negligible Kindle returns may be, accepting them is good policy and another example of Amazon’s customer-friendly approach to retailing.

Richard Curtis

The news that independent bookstores are starting to charge admission to author events has stirred up a lot of controversy, but there are some collateral issues that no one seems to have given a lot of thought to.

For instance, should a store charge more for an appearance by Charlaine Harris or Lee Child than it does for Joe or Jane Shmoe? How much more?  Is a Janet Evanovich event worth more than a Jody Picault or an Ann Patchett?  How much more?

The New York Times article by Julie Bosman and Matt Richtel explains the reasons for making attendees pay to hear an author speak in a book store. “Too many people regularly come to events having already bought a book online or planning to do so later,” the reporters explain. “Consumers now see the bookstore merely as another library — a place to browse, do informal research and pick up staff recommendations. ‘They type titles into their iPhones and go home,’” says one store manager. Another one says “We don’t like to have events where people can’t come for free, but we also can’t host big free events that cost us a lot money and everyone is buying books everywhere else.”

How does this in-store admission deal work? One California bookstores makes customers buy a gift card that admits them to the author appearance.  They can apply the card towards the purchase of the author’s book.

If you are outraged that stores are starting to charge admission for activities that up to now have been as free as the air, you’re probably unaware of how much those activities cost. A typical one for a reasonably well known author breaks even for the store and loses money for the publisher, according to The economics of bookstore events, an eye-opening analysis published a few years ago by Penguin’s Colleen Lindsay. So making customers pay is by no means off the wall.

Ostensibly, an appearance by a megastar like Harris or Evanovich is worth far more than one by an anonymous struggling newbie. But because those two authors guarantee a profitable event that will sell lots and lots of copies, doesn’t it stand to reason that an admission charge is unnecessary?

Does that mean the store should charge for Mr. or Ms. Unknown Author?  That doesn’t make sense either. Why would anybody pay to see someone they’ve never heard of?

In short, charging admission to author appearances, famous or otherwise, is a lousy idea.  But it’s a lousy idea whose time has come. Bookstores have seized on admission as a potential source of income and nothing is going to roll the practice back.  So look look for it to come to a bookstore near you.

Join the debate.  Read Come Meet the Author, but Open Your Wallet

Richard Curtis

Harlequin has announced an increase in royalty rates, bringing the company’s royalties in line with with those paid by Big Six and other legacy publishing houses.

The company issued its announcement in two parts. One was for series titles, raising the rate to 15% of net, the other for single titles, raising it to 25% of net.

Even better news is that the changes are retroactive.

Here’s the key text from the single title announcement.

Effective January 1, 2012, single title authors who are actively writing for Harlequin will receive a digital royalty rate of 25% of net digital receipts for each digital unit sold in the English language, United States and Canada, frontlist and single title backlist.

Given that these are more favorable terms than those in your existing contract(s), this notification will be considered the amendment to those contract(s).

The full text of both announcements may be seen here.

Richard Curtis

#1 Letter to Series Authors Actively Writing For Harlequin

Digital Royalty Rates Changes

Dear Author,

The landscape of digital publishing continues to evolve at a fast pace and Harlequin is at the forefront of this evolution. In 2007 Harlequin was the first publisher to simultaneously publish print and digital editions of our entire frontlist. Since then we have also digitized and brought to market our backlist and now have a current catalogue of over 11,000 ebooks! The Harlequin brand has always offered an advantage other publishers don’t have and this is especially true for ebooks. Our digital marketing efforts focus on building the Harlequin brand to drive the sales of your books through newsletter programs, advertising, search engine marketing, social media properties, the Harlequin website and leading ebook retailers. All this means better search and discoverability by online shoppers and an endorsement of the quality of the read, which is critical in the midst of the online clutter.

Harlequin has been closely monitoring developments in digital publishing, including author compensation. As you know, until now Harlequin’s position has been that digital royalty rates as a percentage of cover price is a more transparent way to pay authors than as a percentage of net receipts: authors know exactly how many copies they sold at what price and their compensation is not affected by unspecified costs. Over the past several months we have worked to ensure a smooth transition from the current percentage of cover price calculation to a net receipts calculation while maintaining the same transparency. As such, Harlequin will be amending digital royalty rates.

Effective January 1, 2012, series authors who are actively writing for Harlequin will receive a digital royalty rate of 15% of net digital receipts for each digital unit sold in the English language, United States and Canada, frontlist and backlist. This will include books in Harlequin’s digital backlist program, Harlequin Treasury.

Given that these are more favorable terms than those in your existing contract(s), this notification will be considered the amendment to those contract(s). If you wish to maintain the existing terms of the contract(s), please let us know by Friday, July 15th, 2011.

**************************

#2 Letter to Single Title Authors Actively Writing For Harlequin

Digital Royalty Rates Changes

Dear Author,

The landscape of digital publishing continues to evolve at a fast pace and Harlequin is at the forefront of this evolution. In 2007 Harlequin was the first publisher to simultaneously publish print and digital editions of our entire frontlist. Since then we have also digitized and brought to market our backlist and now have a current catalogue of over 11,000 ebooks! Harlequin invests heavily in digital marketing efforts to promote our authors and their books, with activities ranging from newsletter programs, advertising, search engine marketing, social media properties, website development and distribution through leading ebook retailers.

Harlequin has been closely monitoring developments in digital publishing, including author compensation. As you know, until now Harlequin’s position has been that digital royalty rates as a percentage of cover price is a more transparent way to pay authors than as a percentage of net receipts: authors know exactly how many copies they sold at what price and their compensation is not affected by unspecified costs. Over the past several months we have worked to ensure a smooth transition from the current percentage of cover price calculation to a net receipts calculation while maintaining the same transparency. As such, Harlequin will be amending digital royalty rates.

Effective January 1, 2012, single title authors who are actively writing for Harlequin will receive a digital royalty rate of 25% of net digital receipts for each digital unit sold in the English language, United States and Canada, frontlist and single title backlist.

Given that these are more favorable terms than those in your existing contract(s), this notification will be considered the amendment to those contract(s). If you wish to maintain the existing terms of the contract(s), please let us know by Friday, July 15th 2011.

Responding to input both from readers and authors, E-Reads has cut list prices for a wide range of selected e-book titles.  Many novels previously priced at $9.99 have been slashed as low as $2.99.  All nonfiction, previously priced at $12.99, will now list at $9.99 or lower.

“After surveying readers and authors and studying creative pricing strategies developed by independent authors, we felt that a drop in price per unit would be balanced by a rise in volume,” said E-Reads CEO Richard Curtis. “The move seems to have worked, as our volume has already risen 10% in the month since the changes took hold. We will continue reviewing and adjusting prices as the market demands.”

E-Reads, founded in 2000, is a leading independent reprinter of previously published books. Its e-books are sold worldwide in the English language at the Kindle, Nook, Sony, Apple, Diesel, Kobo and other retail and library websites, and trade paperbacks at Amazon and Barnes & Noble.

It started as Book-of-the-Month Club. After merging with a number of rivals it became Bookspan, then Booksonline, with a club to suit every reading taste from war to crafts to spirituality to mysteries to African American to gay and lesbian and even, yes, to literature. But time, technology and demographics have taken their toll, and now the clubs have all but succumbed as Bertelsmann, the publishing colossus that owned most of them, announced it was closing the division that operated them.

Almost 85 years ago a marketing genius created the brilliant – some say diabolical – principle on which the Book of the Month Club was founded. It was called the negative option. By signing up, subscribers would receive (and be required to pay for) a book every month unless he or she actively requested that no book be sent. The founders counted on sloth, one of the seven deadly sins, to insure that subscribers would neglect to inform the club that they didn’t want a book this month (or any other month). Only very recently was the negative option abandoned as clubs sought to reinvent themselves.

They sought in vain. As populations shifted to cities from the rural demographics that fed book clubs, as book shops and chain superstores popped up in suburban malls, as deeply discounted hardcovers and cheap paperbacks and ultimately e-books took their hacks at the flesh of these beached whales, book clubs lost their audience, their profitability, and, at last, their reason for being.

The wickedness of the negative option aside, book clubs brought literacy, joy and culture to millions of households, and their passing should be noted with bared head.

For more about book clubs, click here.

Richard Curtis

Psst. Amazon. Your fly is open. And your algorithm is showing.

Earlier this month, a UC Berkeley colleague brought to biologist Michael Eisen’s attention an astounding anomaly: a book entitled The Making of a Fly by Peter Lawrence was offered for sale on Amazon for almost two million dollars – $1,730,045.91  to be precise. Plus $3.99 shipping.

“At first I thought it was a joke – a graduate student with too much time on his hands. But there were TWO new copies for sale, each offered for well over a million dollars. And the two sellers seemed not only legit, but fairly big time (over 8,000 and 125,000 ratings in the last year respectively). The prices looked random – suggesting they were set by a computer. But how did they get so out of whack?”

Actually they got even out-of-wackier, soaring up up up until they reached $23,698,655.93!

His investigation into this phenomenon set Eisen on a path that led to some extremely significant discoveries about computer-driven pricing algorithms employed by Amazon and its retailers. Eisen writes: “I learned that Amazon retailers are increasingly using algorithmic pricing (something Amazon itself does on a large scale), with a number of companies offering pricing algorithms/services to retailers. Both [competing retailers] were clearly using automatic pricing – employing algorithms that didn’t have a built-in sanity check on the prices they produced. But the two retailers were clearly employing different strategies.”

If you love a good mystery story, follow Eisen’s footsteps as he tracks down the solution to the case of Amazon’s $23,698,655.93 book about flies.

Richard Curtis

Authors – time to lawyer up?

The United States Supreme Court has refused to hear an appeal of a lower court’s ruling that digital music royalties should be treated as a license.  Given the similarities between music and book contracts, the implications for authors are significant. Below is our original article on the subject published in October 2010.

Don’t just stand there. Look at the royalty language in your book contract.

RC

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Is there a reason why publishers are not wailing, gnashing their teeth and rending their garments over the Eminem decision?

Maybe they haven’t heard about it. Maybe they don’t understand it. Maybe they don’t think it applies to them. Maybe they just don’t want to think about it at all.

They really must think about it and so must you. The case heard by the Ninth Circuit Court of Appeals was ostensibly about music but you can bet it won’t be long before it’s about e-books, and it could throw the publishing industry’s royalty structure into chaos.

Ethan Smith of the Wall Street Journal explains the issues (the italics are ours): “Under most recording contracts, artists are entitled to 50% of revenue from licensed uses of their music. That usually means soundtracks for movies, TV shows and ads. Sales, on the other hand generate royalties for the artist at a much lower rate—generally in the low teens, and rarely more than 20%.”

For “recording contracts” read “publishing contracts”. Under current book industry standards publishers pay authors a 25% royalty for e-book sales. Their contracts also call for a 50% share of e-book licenses made with third parties. But publishers do not consider e-book revenue to be license revenue. If they did they’d have to pay authors 50% of what they receive rather than half of that amount.

In the case in question, Eminem’s producers F.B.T. Productions brought a lawsuit against Aftermath Records claiming that what Aftermath defined as sales were really license revenues and Aftermath therefore owed them the difference between the low royalty they were being paid and the much higher share of license money. The three judge panel of the San Francisco Federal court agreed:

Pursuant to its agreements with Apple and other third parties…, Aftermath did not “sell” anything to the download distributors. The download distributors did not obtain title to the digital files. The ownership of those files remained with Aftermath, Aftermath reserved the right to regain possession of the files at any time, and Aftermath obtained recurring benefits in the form of payments based on the volume of downloads . . . Under our case law interpreting and applying the Copyright Act, too, it is well settled that where a copyright owner transfers a copy of copyrighted material, retains title, limits the uses to which the material may be put, and is compensated periodically based on the transferee’s exploitation of the material, the transaction is a license.

For a cogent analysis of the case and its implications for the book industry, read Copyright Alert: 9th Circuit Holds Digital Downloads are Licenses Not Sales by copyright authority Lloyd J. Jassin, to whom we’re indebted for bringing the case to our attention.

It will not surprise us to find a flurry of amendment letters from publishers in the next few months saying “Wherever we refer to ‘royalty’ we mean ‘license’ but we’re still going to pay you 25% of what we receive.”

Richard Curtis

About once a year I read an article so significant that by the time I finish underlining, highlighting, circling and starring it, there is scarcely anything left to excerpt.  Such is the case with Tim Spalding’s The downward spiral of ownership and value published on the thingology blog of the website LibraryThing. Spalding is founder of the website.

He was prompted to write his piece in response to a posting about ownership in the age of e-books. “I’m sure that there are other possibilities,” his correspondent wrote, “but with the amelioration of ownership and comparable media prices, digital books will come down from their current position and this, in turn, will create new business models and new pricing models. Could publishers resist the downward pressure of ebook pricing by coming up with a business model which would result in increased sense of ownership and thus value to the consumer?”

Spalding is hard pressed to answer in the affirmative.  “The loss of ownership creates a downward spiral in value,” he writes, “and erodes the very notion of paying for books at all.

“We used to own our books,” he writes. “With most ebooks we own them in name, but effectively we lease them….The slide toward more and more attenuated concepts of ownership continues.” The spirit of open access infusing the Internet is eroding the tradition of book ownership, and new, access-based models will eventually achieve dominance.

“The process,” Spalding writes, “is gradual” because psychology and culture always lag behind technology. But a “tethered, metered and monitored product” is inevitable as “each step away from ownership makes the next step more acceptable. Once you realize your Kindle book is not fully yours, you’ll accept it being mostly not yours. Google Ebooks are a further step away from ownership.

“By itself, such changes might be culturally and economically neutral. Ownership of paper books wasn’t so much a consumer preference as a side effect of their physical nature, and law followed and solemnized that state of affairs. Maybe the faucet model will produce more readers, more reading, more good books, more paid authors, etc. Or maybe it will produce less. Who knows?

“The role of piracy. I think we know. And the trends are negative, for both readers and authors. Unfortunately, digitization and the faucet model tends to encourage a third option–piracy. Digitization makes it possible, but the faucet model encourages it. This happens in two ways.

“First, people who love autonomy and personal freedom rebel against metered and monitored access to reading. They don’t want inconvenient DRM, monstrous and opaque licenses, transfer limitations, constant access requirements or icky, opaque monitoring. These people will turn to piracy to avoid it. (Or at least that’s what they’ll say they’re doing.)

“Second, the more ownership is devalued, the less people care about the rights of the seller. When someone sells you something they made, or through a small number of simple intermediaries, it’s easy to see what’s wrong about cheating them. When authors’ work is reduced to a limitless soup, available through shiny digital spigots at cheap, but limited, rates, it’s hard to see where problem with piracy really lies, and easier to rationalize cheating authors.

As devalued ownership feeds piracy, rising piracy in turn devalues ownership. Anyone with an internet connection can rapidly assemble a ‘library’ of books it would have once taken years to build–so why bother building one?”

Well, I’m afraid I’ve come close to crossing the Fair Use boundary.  So do read the rest of this cogent article: The downward spiral of ownership and value. And if you’re still skeptical, read David Carnoy’s masterful article The Rise of the 99-Cent Kindle e-book.

Richard Curtis