Wringing of hands, gnashing of teeth

I just wrapped up my first panel at this year’s Orycon in Portland, Oregon, which was titled Twitter Novels, Kindle, eBooks, Podscast and the Market. I was one of three panelists; the other panelists were Dianna Rodger and Michael Briggs (husband of Patricia Briggs, the author GoH).

I brought my Sony eReader and my iPhone for “show and tell,” so to speak, and we launched into a surprisingly heated discussion. There were a good number of published authors in the audience, and many of them were venting about how the NY publishers are giving them a raw deal on eBook royalties. Many of them seemed quite angry, in fact. I suppose I didn’t help matters by saying that VT does not believe in charging the same price for print and eBook formats, because print requires the additional expense of printing, and eBooks don’t. Therefore, eBooks should cost less than print books.

One very passionate author immediately launched into a salvo about how the editor, the artist and the author deserve to be paid for their work, and it shouldn’t matter what the format is. And while I definitely agree that all the people who work on a title deserve to be paid for their efforts, I was merely pointing out the public perception of value.

Consumers are not as dumb as corporations would like to believe they are. They understand that printing a book involves expenses related to paper, ink, binding, glue, cut and trim, packing, storage, transporation, etc. But they know that an eBook does not require these expenditures, and consumers don’t think it’s fair that they should have to pay the same $24.99 for a new eBook title that they do for the hardcover version.

But authors should be paid for their work, no doubt about it. More than anything, though, I believe the problems with the current publishing model (i.e., “traditional” publishing, a.k.a. NY publishers) has as much to do with authors as it does the NY publishers.

The traditional publishing model requires publishers to pay out a large advance to an author (several thousand dollars at least) and assume all of the costs involved in creating, printing, and distributing a book. Most of the marketing responsibilities fall on the author’s shoulders, and in many cases, the author does not make very much (if any) by way of additional royalties because no royalities are paid out unless/until the book generates enough sales to not only cover all the initial expenses (such as ISBNs, editing services, typesetting services, cover artwork services, review copies/ARCs, advertising, etc.) but exceeds the “returns reserve” they have established.

Under this model, the NY publishers are happy if they can sell half of the initial books printed  after returns because then they will cover all their expenses and maybe even make a little money. And the author got their big advance, so at least they got paid for their efforts, even if they don’t do any marketing at all.

As for eBooks, well, when the NY publishers don’t look at it as siphoning away their print profits, they look at it as “gravy,” — extra, unexpected income. They give their authors 20% or less of net eBook revenues, and that has the authors hopping mad. If eBooks are “the future,” and they get less revenue for eBook sales than print sales, and the eBooks cost less, well… I think you see what they’re so upset about.

The way I see it is that publishers need to change their models so that they don’t go into a new book with the expectation that they will destroy 50% of the copies due to returns (which they’ve paid to print), and authors need to be open to lower advances with higher back end royalties. The whole model is totally broken… and that’s why I believe that independent presses like VT have a unique opportunity in publishing right now.

In the first place, most of us use POD (print on demand) technology to avoid the entire accounting screwiness with inventory taxes. We don’t print books until they are ordered, and consequently, less than 10% of our books are returned. We don’t have inventories, so we don’t have to worry about inventory taxes.  Our model has less waste and less initial risk. Because it doesn’t cost us a small fortune to print a new title, we can afford to publish new authors and take a chance on them.

However, while we don’t expend a lot of cash to get a new title out, we do expend a lot of sweat equity. Not just us, but our editors, our cover artists, and the print and eBook layout designers all do our work upfront. We do not pay advances to anyone (even ourselves). So instead of getting a $2,000-$5,000 advance for a book with 6%-10% royalties per copy after all the expenses are recouped, our authors make at least 50% of net royalties for every print and eBook copy sold… which encourages (and rewards) the author for his/her marketing and promotion efforts.

In other words, if a book is selling on Amazon.com for $10, and Amazon takes 40% (or $4) of the cover price, and it cost 20% (or $2) of the cover price to print a POD copy, the author would make a minimum of $2 per copy (50% of net revenues). But, for the eBook, the author actually makes more because there is no “cost to print” on a eBook. Amazon is still going to take 40% of the cover price for their cut, but that means that the other 60% is available as net revenues.

However, keep in mind that we also charge more for print books than for eBooks. The cost to print a book is based on the number of pages. The more pages, the higher the cost (for example, $9.95 for 160 pages, or $12.95 for 220 pages). But for eBooks, we base the price on the number of words (for example, a 40,000 word eBook would retail for $4.95, and a 120,000 word eBook would cost $6.95).

In doing this, we demonstrate good faith with consumers because we know that they understand that paper and ink costs money, and by providing a reasonable gauge for determing the eBook price (word count), the consumer is not feeling like they’re being taken. The different prices charged for both print and eBook is justifiable, and authors are fairly compensated by word count (longer books/eBooks command higher retail pricing).

The most interesting comment I heard came after the panel, when a woman stepped up to talk to me privately. She agreed with my comments that part of the “piracy” problem with eBooks is caused by the fact that there are so many titles that aren’t available for purchase. Many authors are so worried about piracy of their backlist titles that they won’t put them out as eBooks. So an unscrupulous person takes advantage of the desire to have an Anne McCaffrey title as an eBook by pulling a paperback copy of the book apart so they can scan it, do an OCR conversion and then post it illegally for download.

If the books were available as active eBooks, ready to purchase at a justifiable price (i.e., the word-count model), people would buy the titles legally — just as they do for music and movies. And I suspect that authors would be more willing to do this if they could make a greater percentage of the proceeds (i.e., not 20%… especially if they’re not getting a separate eBook advance).

As with software, music and movies, it won’t eliminate all the piracy… but realistically speaking, the people who choose to download a free copy of something instead of buying a legitimate copy were never going to be your customer anyway. By giving your customers the option to buy your book in multiple formats (print, eBook, audio book, etc.) you will maximize your revenue potential and give the customer what they want. Now that’s good marketing practice!

Tomorrow’s panel is also about print vs. eBooks, so I suspect there will be lots more to discuss.

Sheri

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