When is it Sale and When is it a Licence?

All publishing and media sectors are constantly looking over their shoulders at not just the dynamically changing technology, but also the impact of digitisation on other sectors.

The music sector’s contract and reward system is once again being tested by artists who believe that they have not been correctly rewarded in the iTunes digital world. Twenty years ago, lawyers could not have imagined innovations such as the iTunes Music Store, and in certain contracts, it's now unclear which royalty rates apply. The issue is about the definition and associated reward of ‘sales’ versus ‘licences’. The norm is for digital sales to attract between 10 and 20% payment, whereas licence sales can attract higher payments up to 50%.

So the question is what is a sale and what is a licence?

Steve Jobs, once published a piece titled "Thoughts on Music," in which he principally talks about the move to DRM free (worth a read in itself). In the piece he says, ‘Since Apple does not own or control any music itself, it must license the rights to distribute music from others, primarily the 'big four' music companies; Universal, Sony BMG, Warner, and EMI.’ These words are now coming back to be used today against the music companies.

The first legal test case was brought by Eminem’s management FBT Productions who claimed that they were due not the 12% royalty revenue from digital sales paid by Universal Music, but 50%. FBT argued digital sales are not "records sold" but constitute a licensing of master recordings which entitling them to 50% of net receipts. The claim was upheld then rejected by the courts in March 2009, but now has now been overruled on appeal. The court found that the contracts were "unambiguous". The case is now opening up a stream of slimilair claims and legal actions and the FBT's case against Universal alone is worth $17-20 million in disputed royalties and could cost the label twice that over the next decade.

Thousands of artists signed their deals before iTunes. The Allman Brothers and Cheap Trick also filed a lawsuit against Sony BMG which was settled out of court. Pink Floyd's recent lawsuit against EMI also included the issue of the royalty rate of downloads and was settled behind closed doors. Now the Temptations are among a growing number of artists suing Universal Music. The Temptations class action is not just aimed at iTunes revenues but that from others including Amazon.com, Napster, Rhapsody and ringtone providers by such as AT&T, Verizon, Sprint and T-Mobile.

As we move increasingly into the digital world and from outright sale to a digital licence we have to ensure that there is a common understanding of both the associated rights and rewards. In this new world of ‘net receipts’, ‘walled digital gardens’ and often ‘honesty box’ trading, it may not be enough to assume a common understanding exists and like Universal and others, surprises can prove very expensive.

Related posts: March 2009 'Should music contracts reflect Today's Digital World'

April 2007 'Eminems music publisher sues Apple'

So How Do You Reward The Author?

At one end of the value chain we have ebook pricing, which today is in need of a sustainable model that is in the consumer interest. After all, they are the final arbitrator and the only one who actually puts real revenue into the chain. At the other end, we also find a similar need for a sustainable reward model, which is in the long term interest of the author. After all they are the ones who actually create the work and its value.

We have long stated our views on agency and its flawed position. Some have claimed that without agency, the future is bleak, prices will fall and the rewards for authors will be impacted. Whatever position you think is right, the future of agency will be addressed by the Department of Justice and EU investigations and filed class actions. Irrespective of the outcome, the question of author reward should be debated and is not just tied to any one model.

We have seen the drop in advances and the pressure on established authors to grant ebook on their back list. We have also seen the ebook self publishing model change, with the likes of Amazon, Barnes and Noble and others offering large incentives to authors to publish, both backlist and new titles with their services. The percentage of reward offered by publishers on ebooks has also gone up and down like a YoYo.

So what should an author earn on ebooks? Does an ebook have to be tied to its pbook or abook renditions? Where are the added value steps between the author and the consumer on ebooks?

Last week we also listened to a good friend, who is an published author and who told us about an aspiring author‘s manuscript that they had been given to read. They said the work was very good and a well constructed 'page turner', but that they were lost as to what to say to the writer. Five years ago they would have lined them up with an agent introduction and pushed them towards the traditional publishing route. Today, they feel that the rewards have changed dramatically and although the model still works for many, the odds on new authors making it are increasing and they believe, ‘its growing impossible for authors to make a living out of writing alone.’

The ebook itself is potentially changing the relationship between the author and the others who sit between them and the consumer. Yesterday the rights were often traded on a ‘performance related’ model. If the work wasn’t shifting, the rights could revert. Yesterday, there were often separate rewards for unit sales, special ‘book club’ deals, and the royalty statement could be tied to production, inventory and sales. Today, we increasingly see ‘net receipts’ and in the digital world, ‘honesty box’ sales and receipts. We do not doubt the sales reported but it would be interesting to see who has fully audited their digital sales and established that the money paid relates to the sales achieved?

We also have the question of rights being reverted. Contracts may still tie the pbook break clause to performance, but does this extend to ebooks whose inventory is now virtual and now exists within a ‘long tail’ marketplace? Are ebook rights becoming perpetual deals? Why aren’t ebook’s rights term based and fixed and renewable on say a five year basis? This would not only remove perpetual deals for the life of the copyright but it would make sense in a marketplace which is rapidly evolving and where it is often difficult to predict next year, let alone twenty or thirty years out. Today, an author can not only be tied to an agent’s deal for life but increasingly, the publisher too. Let’s hope that they don’t ever fall out!

Permission rights will become increasingly important in the digital market, but how are these rewarded and itemised on that royalty statement, let alone calculated and recorded?

We also have the question of payment schedules. It was understandable that royalty payments on pbooks took time. But in today’s real time payment transaction world where all ebook sales should be firm, does to same ‘banking’ delays and reconciliation make sense? It is interesting that the agency model agreed the commission split upfront, but irrespective of that simplification of the division of revenue, the money flow remained slow to the author.

Marketing and promotion can be one of the greatest value added services provided by a publisher. In the physical mass market world this was relatively easy to define and could even be written into the contract, but does this still work in today’s mixed market and how will it work in tomorrow’s digital direct market? As publishers move to a more direct marketing position will the exposure and spending gap between the ‘celebrity author’ and the rest widen? Does the publisher see the author, the work, or themselves as the brand tomorrow and how is that reflected in the marketing spend?

We now have the emergence of the rental model, which as in music and other media, often has a consumer appeal. Not only can this be at title level, but also incur a subscription across collections. How will this be reconciled moving forward?

Advertising revenue driven models are now starting to take hold within other sectors but how will they be reconciled to reward authors?

There are beacons of light for authors and we applaud the Simon and Schuster new author service and believe that transparency of marketing, sales, and reward is the only way forward.

Finally, we have the question of what should the author be paid on their digital sales. Some suggest a bit more than the physical sales, some stick around the 25% mark, some go higher and then we have the self publishing levels where the majority of revenues flows to the author. These are mere numbers and meaningless unless tied to performance as it is better to earn on a lower percentage and sell volume than earn on higher percentage and sell few.

So how do you relate performance and reward in digital rights contracts moving forward?

2012 Digital Perspectives: The Author

It is easy to predict that 2012 will see us celebrating the Queen’s Diamond Jubilee, see the US presidential elections and enjoy the London Olympics, but it is not so easy to predict the winners and the losers of each and every Olympic event. When it comes to complex issues such as; the stability of the Euro, Syria, Russia, North Korean we often recognise that they are influenced by many forces that are even more difficult to predict.

In digital publishing we can obviously see trends and understand the direction in which issues are heading, but identifying individual milestones, their relevance and timelines is often impossible. The other issue is that we all may look at the same issue, but see it from a different perspective. That doesn’t mean that we are right or wrong, we just see it differently. It’s like looking into the same house through what are often different windows – it’s the same house but we all see different rooms and perspectives.

We have written a series of short articles titled, ‘2012 Digital Perspectives?’ which we shall publish this week. These will look at what we believe are the short term issues, challenges, potential game changers and outcomes across the digital publishing value chain. Today we look at the creators – The Author.

2011 often demonstrated that Authors were starting to ‘do digital for themselves’.

Many authors continue to be tied to relatively new digitally inclusive contracts, but many of those who had retained their digital rights or reverted their back list rights, started to realise that it is easy to do it themselves and potentially earn more as a result. Some choose Amazon, Pubit or Smashwords whilst others took a more conventional route with the likes of Open Road. Some separated their back and front list and realised that they do not need the ‘digital serfdom’ of perpetual licences with fixed royalties and where the vast majority of earnings go elsewhere. The challenge authors and their agents now face, is how to avoid those digital handcuffs. It like taking on a business lease, you want break clauses, rent reviews and a fixed term deal and not life plus 70 years in a marketplace that is still in its infancy and unpredictable.

We envisage that more published authors will ensure old physical rights are reverted and that their digital rights are treated separately to the physical ones. Many may still choose to be tied to their print publisher and many will treat their digital rights separately, but all will be doing so with increasing digital market awareness.

We believe that at least one trade publisher will wake up and see the benefit of offering a significantly better digital royalty deal on back list and potential digital orphans in line with the likes of Open Road. We envisage that this will be tied to a fresh approach to proactively promote back lists and not just place them on virtual shelves. As publishers become more aware of the need to be seen as a trusted business partner, we seen ‘Author care’ becoming the ‘flavour of the month’ and offering greater transparency of information to authors and maybe even speedier digital royalty payments.

Promotion and marketing authors within a growing social direct marketing network will remain a significant challenge. This isn’t just about engaging with current fans but finding new ones and growing the base. It is also about publishing collaborations to create genre groupings which cross publishing houses and channels.

The key driver for change is digital awareness and we see increased media coverage on digital author options being a major catalyst.

We are not only in a digital age but also and importantly we are now entering a golden age for writing. Accommodating this creative explosion of new as well as old material is the real challenge. Managing authors expectations and ensuring that they are fairly rewarded and recognised is now the goal for all.

Don't Forget The Digital Back End

We have long recognised the issue of the lack of effective and consistent digital sales reporting. Its as if the standards bodies and consultants that work for the industry are too focused on building and selling the car but forgot about the after sales servicing. As an industry we spend a great deal of effort deal with the issues at the front end of the sale process, but like the infamous publishing physical returns issue, we often fail to follow through and deal with the back end. It is a golden rule of any supply chain that the chain is only as strong as its weakest link and that any all cost or inefficiency within the chain, is a cost and inefficiency to all and not just those impacted.

We have previously advocated that the standards bodies make strides to at least standardise digital sales reporting. However, in doing so we believe that they should also look not just to fix today’s problem, but build a mechanism that will enable us all to do things smarter and cost efficient tomorrow.

Reconciling digital sales is not straight forward and this was well put across by Helen Kogan, MD of Kogan Page in her reported comments in the Bookseller from the UK PA conference’s "Changing Face of Export Sales" panel. Kogan was reported stating that, ‘One of my biggest bugbears is about the nightmare of digital reporting, it should be a simplistic supply chain but instead we are dealing with multiple reports, multiple spreadsheets. Reporting is a real issue and distributors have a part to play in this. They could support us.’

Some would suggest that the market is consolidating around a few aggregators and therefore it’s a manageable issue. Others would suggest that the lack of reporting standards today and the inconsistency of reporting schedules effects not just sales reporting but also royalty transparency of reporting and payments. Whether we have a few super digital distributors in the future, or as more likely, hundreds of smaller ones as well, the problem remains transparency, timing and standards. Dealing with it today will be easier that trying to deal with it tomorrow.

In today’s ‘switched on’ world where there is literally only one digital file, which is then digitally ‘pick packed and dispatched’ in real time for each order, it would surely make sense to have real time sales reporting to its rights owner and maybe even its author. If addressed from a strategic and architectural perspective we may also address some of the ‘honesty box’ and audit issues which are not going to go away.

Well done Helen for stating the case.

Bifurcation

Last week we had two viewpoints expressed in Digital Book World which raised much debate and further amplified the gulf of dialogue and thinking within the industry today over the issue of self publishing especially in the digital world.

First we had the original article ‘Leaked: Hachette Document Explains Why Publishers Are Relevant’ , which again raises the question as to the role of the publisher in tomorrow’s changing value chain. The premise of the proposition was based on, ‘Self-publishing is a misnomer’ and it went on to lay out the value added services that publishers can offer authors. When we look at these in pure digital terms there are a number of questions:

‘Curator’ we are not sure that this is the right term but irrespective is the curator for the author or the consumer?

‘Venture capitalist’ some would suggest that this actually describes the publisher role. As many who have dealt with VCs know, the VC onus is often purely on the money and return, more than the venture and interestingly most VCs have an exit strategy from the outset.

‘Sales and Distribution Specialist ‘ we agree this is very important in the physical world where grabbing shelf space and promotion has to be ‘in the face’ . However, does it carry the same weight in a digital world? The digital world does not just compete with the other new titles and some back list, but has to compete with everybook ever published. There is an opportunity, but it is more about marketing and brand awareness than sales and distribution. It could be questioned what digital sales expertise one needs when the sales are to a small number of aggregators who actually drive the sales and who by their virtual shelves carry everything anyway.

’Brand Builder and Copyright Watchdog’ this is real value and one that becomes of even greater importance the more digital we become. Brand building is critical in today’s viral world, but as often proved, this can be unpredictable in today’s Facebook and YouTube world. Copyright protection is however difficult and the publisher should have the mechanism to monitor, raise take down notices and litigate where needed. However, we must remember that a watchdog is not just about copyright and we live in a digital ‘honesty box’ trade, where it is rumoured that ‘no audit’ clauses exist today, so assuming a huge amount of trust.

We then read the response from self publishing author JA Konrath, ‘Advice to Publishers’ .

In his response Konrath lists six points:

‘Offer much better royalties to authors.’ This should be a given but there is often much debate about the digital norm and the fact that royalties are based on net sales which can be very loose. If agents do not tie contracts to term times, authors may find they are digitally tied to perpetual contracts, with little incentive and where both agents and publishers live off a sizable proportion of earnings for life plus 70 years. In this digital real time age, why digital royalties aren’t paid out monthly or even at the end of each day and totally transparently? The recent Simon and Schuster move on transparency is a step in the right direction but to some is only a one step.

‘Release titles faster. It can take 18 months after a book is turned in to be published. I can do it myself in a week.’ This is a legacy issue and often tied to physical lead times that are required by many large bricks and motor chains. In a digital world this doesn’t apply but the implications on the development process within publishers are significant and with reducing advances the pressure to reduce lead times and be smarter is clear for all to see.

‘Use up-to-date accounting methods that are trackable by the author, and pay royalties monthly.’ We have covered this above and must remember, when someone decides to do this and promote it heavily, it may become a game changer for all.

‘ Lower e-book prices.’ We see Konrath’s point and how some have moved volume by low price pointing. It is a case that when there is only one mouth to feed then a larger amount of a lower price is acceptable, but when there is a corporate to feed, there is often a cost point that must be first cleared to have any chance of break even.

‘ Stop futilely fighting piracy.’ This is not so much about self publishing as about publishing risk. We will soon reach a point when DRM (Digital Rights Management) becomes less of a risk and more of an inhibitor. It happened in music with MP3 and it will happen with books, it is just a case of timing.

‘Start marketing effectively. Ads and catalogue copy aren’t enough. Neither is your imprint’s Twitter feed.’ We understand Konrath’s point, but we all face the same problem and there are no digital marketing silver bullets. If there were, we would all be adopting them and … Publishers do offer scope and skills, but many have not developed these and rely heavily on external resources to show them the way. This is a core skill set for tomorrow’s publisher and one where they can offer in house value add.

Last week a good friend was offered a digital deal on some six titles that are still in print, but where the digital right is not encompassed within the contract. The agent had taken some months to negotiate an offer 25% net and suggested it was a good deal. Our advice was to define a fix term time, understand the reversal clauses on digital, agree the loan and rental deals up front, and the control and pricing policy on agency. The agent gulped and understandably is yet to respond.

Are You Selling Your eBooks Via An Honesty Box?

Imagine you have 100 ebooks and each has to be handed over to not one reselle,r but potentially many. Each reseller stores the files on their system and effectively sells copies of the file to their customers and can also sell them through other resellers to their clients. The files sold may be complete download sales and could if I have granted these could be sold as separate chapters. Some could be sold online as direct rentals, or under subscription. Some may be loaned by ‘libraries’. Revenue could be subject to an agency model on a ‘fixed price’ , or net sales as per a wholesaler terms. Whatever, the model, whatever the channel, whatever the price you only effectively learn what has been sold long after the event.

Now ask your CFO if they are happy giving the company assets to all resellers and then waiting, for them to tell you what they have sold and to pay you what some call as being ‘on consignment’ in a print world and via an ‘honesty box’ in the digital world. The difference is that in the print world you can count the units out the door and the stock in hand. In a digital world you merely hand over one copy of which many copies are made and sold, hopefully many times.

We are not questioning the integrity of any reseller service, we are merely pointing out that the digital ebook world is built on a lots of trust and not a lot of counter balances. Some aggregators do provide some statistics of sales online, others you wait for the sales report to tell you the facts after the event. In all cases money sits in cash flows waiting for yesterday’s financial processing to grind into action.

Now spare a thought for the author who is one link up the chain and has to wait until his royalty statement is produced to find out what sold and the royalties earned. It often can’t be done any sooner as it has ‘to be processed and consolidated with the old print royalty system’. We would suggest that authors may be a bit more digitally responsive with transparency and speedier in not instant reward. Some would suggest that they first have to earn out any advance on front list but on back list, we shouldn’t have the same block and maybe we should be thinking how and why rather than why not?

Digital is different but we spend far too much time dreaming up the sizzle and worrying about the formats and standards and selling and often very little focusing on how we could collect cash faster and more transparently. The next thing we will have is a new audit service to pour over the figures to validate that they are accurate or not and of course incur yet more cost to offset. The obvious candidates for this would be the likes of Nielson and Bowker.

We are living in a world of instant cash transactions, where a credit transaction made anywhere in the world can be see by all, where information is real time. We subject the ebooks to DRM authentication which automatically can validate licences in flight and the likes of Adobe can authenticate every encrypted licence of an ebook using their DRM solution in real time, yet we can’t appear to see sales and collect cash on payment. It somewhat ironic that it could be argued that Adobe today has better sales data on the transactions they licence, than the publishers! There should be no digital returns and what disputes may occur, can always be dealt with retrospectively. So why has the standards and processes not been delivered to provide live and transparent reporting of sales transactions in a standard manner. We bet its coming but not soon and probably at the same speed that the returns issue did in print.

Perhaps we have been so obsessed with readers, platforms, formats, aggregators, pricing and DRM we have forgotten to close the loop? Perhaps we shouldn’t be thinking about ‘messages’ as much as instant processes.

Are eBooks Different?

Unlike the music, game and video sectors, the majority of books today don’t exist in a digital form, they exist on paper. The consumer choice is not one of changing or upgrading a device, or moving from tape to CD to MP3, or going from DRM protected music to DRM free music. In other media sectors, the headphones may change, the screen may be now mobile, the games console may become wireless but the basic experience remains the same all that has changed is the delivery. Books are different. Unless we are talking about a pair of glasses, the vast majority of consumers and book readers don’t own a reading device today, they have to buy it. Also today when we buy a book we own it and can, give it to a friend, write all over it, destroy it and even resell it to someone else. The biggest change consumers face is the realising that when they buy a digital book they will not own as yesterday and that may be tethered to specific technology or platform that has not got a lifetime guarantee. These two changes are significant and hold the keys to many of the issues we are all grappling with.

Some believe that digital is just an extension of the physical and as such just another rendition. Arguing that as they own the right to publish the books, this should be on any platform, but authors and agents are instead saying that digital rights, if not specifically covered under a contract, remain with the author. It is reasonable to argue that the digital rights traded to the consumer aren’t the same as the physical traded rights and if not, then the rights acquired and developed must also be different. If this is correct then its perfectly logical for authors and agents to treat them separately and not dance to the publishers tune. There may be are secondary rights acquired to develop or enhance a digital work and these need to be contractually thought through moving forward. However, where the text from the physical book is merely poured into the digital jacket the point that should be considered is the traded rights not whether it is just another rendition. It is read differently and the usage rights and restrictions traded are different and these should be the points that determine whether it is the same or different. .

The issues of digital pricing rages on, with one side saying that the price must be comparable with the physical and the other shouting cheap or no deal. The questions should not be about what the publisher’s believe is fair, but what the consumer expects or is prepared to pay. Also low pricing can stimulate growth and high volume and low margin is often better than low sales and high margin. We should remember that consumers aren’t stupid. The music industry got initial CD pricing woefully wrong and despite the alarm bells keep coming up with the lame excuses for artificial high pricing. The result was that consumers voted with their clicks and created Napster, Kazza and a whole new independent channel. We hear similar explanations about the cost of digital on publishers today and it makes one wonder if some should be working for the Ministry of Disinformation. The message is clear - be careful what you wish for.

One of the major reasons that the economies of digital aren’t always appreciated by the public is that they don’t understand that in the digital age many publishers still live, work and develop content and the marketing collateral in the Dark Ages and simple convert it, post production as an afterthought. Yes distribution and printing may only constitute some 10 to 15% if the cost but that isn’t where the greatest cost saving is offered by digital! The one thing that is clear is that Digital Publishing should be publishing and not an adjunct and afterthought. While publishers still maintain their pre and post production worlds they will fail to grasp the true benefits of digitisation on their business and continue to play ‘pin the tail on the digital donkey’ whilst they are blindfolded in the market.

Amazon Part 3: 70% Royalty

There are many issues in the Amazon announcement that, starting in June, it will offer 70% royalties on book sales after delivery costs, which are claimed to be less than 6 cents per book. Obviously authors may settle for a lot less from a publisher and hope that they generate significantly more sales and exposure and doing so more gross revenues.

Those who opt in for the new 70% pricing must meet a specific set of criteria as defined by Amazon:

• The author or publisher-supplied list price must be between $2.99 and $9.99
• This list price must be at least 20 percent below the lowest physical list price for the physical book
• The title is made available for sale in all geographies for which the author or publisher has rights
• The title will be included in a broad set of features in the Kindle Store, such as text-to-speech. This list of features will grow over time as Amazon continues to add more functionality to Kindle and the Kindle Store.
• Under this royalty option, books must be offered at or below price parity with competition, including physical book prices. Amazon will provide tools to automate that process, and the 70 percent royalty will be calculated off the sales price.

So is the game plan to secure more rights, content, authors or to align itself better for the looming Apple wars?

Next Amazon Part 4: Give it Away

The Three Rs: Authoring in a Digitral Age. No. 3 Rights

This is the first part of the presentation given to the Swanwick Writers Summer School, 11th August,2009. It is based on The Three ‘Rs’: Authoring in the Digital Age.

The third R is shared between rights and reward.

It brings me back to that Litopia discussion and the issue of how authors get rewarded in this digital age. Let’s try and park the physical book world to one side and look purely at digital rights and reward.

Today author advances are disappearing or shrinking. Digital rights are effectively being talked of as a single subsidiary right but we must recognise that these are different from the rights we are familiar with today but can also affect them.

What happens to the rights reversal in a digital age where print on demand and an ebook can mean a book is never out of print? Why should a work be effectively tethered to a publisher in perpetuity?

Always make sure that you can revert your rights and when the conditions for reversal are reached get them back. You can with little effort, sell as many digital individual copies of an out of print work as a publisher and enjoy more return.

Guess what the price of an ebook is today?

I can’t tell you the answer only that some publishers tie it to the current renditions RRP, others to the hardback, and others to whatever. The price has to include tax which changes from state to state, country to country and even within the EU is not standardised. The consumer is however now seeing Amazon, Barnes and Noble, Borders US, Indigo in Canada and others trying to create a $9.99 price point.

Remember that iTunes moment everyone talks about? They did it by creating a .99 cent price point. I would predict that ebook prices can only go one way and it isn’t up.
Many are using the ebook as the promotional lost leader to capture the physical sale. Others are saying that they will not release the ebook until after the hardback has had its day so avoiding the cannibalising of hardback sales.

James Patterson today has a best selling US ebook ‘The Angel Experiment’. It isn’t new it came out 4 years ago. The reason it is a best seller today is that its been given away to promote his new series. Mega authors such as Patterson may be able to give their books away, big publishers may think it a smart marketing move, but what impact could it have on authors and publishers who don’t enjoy the same economic freedom?

It’s often like the wild west out there today.

But remember the contract you sign today will not deliver royalties for some time and can you predict what the market will look like in 2 years or 3 years?

Should there be a separate digital rights contract which is not based on the physical rendition but on a fixed term licence?

With physical sales came returns and so royalties took time to be paid. However with digital sales there are no returns so why does the author have to wait? Why not transfer the money when it hits the till or at least not long after?

Should digital royalties’ be based on a % of RRP, which is often meaningless in the digital rendition?

Should digital royalties be based on a % of net receipts, which if the current trends continue could be a % of little or nothing?

Should digital royalties be fixed amount? Publishing may be a gambling business but who will gamble on predicting that today?

Should you negotiate different rates based on the different channels as Google, Amazon, Apple are all different in their models? Just like yesterday’s territorial rights they can all be done separately.

Then there is the Google Book Settlement in the US. My thoughts on this debacle are well documented but what I would say it has raised it the whole issue on copyright. I find it amazing that an industry that is all about copyright and rights failed to create a rights registry to control them and waited for a handout from Google to even start the process.


I see a fantastic opportunity for writing talent in the digital world. Tomorrow you may not have the same dependency on some relationships that you believe pivotal today.

I believe that publishing is about joining those dots between the author and the reader.

I believe in the right for authors to revert their rights and not be tethered to a publisher unless they want to be.

I believe that digital rights should be term based and reflect the different channels.

I strongly believe authors should see a greater slice of the digital pie.

I also believe that there will always be publishers and retailers, but they may not be the same number, or that they will provide the same services they do today.
The one thing that is certain is that tomorrow will be different and you are in the best position to benefit.

You are no longer in that theatre performing to an audience hidden in the dark. You can switch on the lights and embrace the digital age.
Enjoy the journey!

Sharing Digital Revenues

Digital books are not just about ebooks podcasts, online, they are merely the delivery formats. It’s about how we acquire, develop, market, promote and sell rights. We have long argued that ‘digital publishing is publishing’ and the need to look not just at the end format but at all aspects of the life-cycle from the author to the reader. Today we see many grappling with some these wider aspects of digital publishing and an environment, which for many sectors, will have to support both physical and digital side by side for as far as we can envisage.

Last week The Bookseller reported on the issue of royalty rates on ebooks and the apparent impasse that Random have with many in the over their claimed lower rates.

The question is not whether the rate should be ‘x’ or ‘y’, but what is the appropriate model to be adopted today for digital rights and how is it likely to change over time. There are a number of points we should also acknowledge:

First, a royalty deal struck today may not pay out for maybe two years yet in that time the digital market may have shifted significantly. The digital market is not stable and out of the control of any one party. Best intension and what appears a good or fair deal today is vulnerable to outside forces.

Secondly, digital pricing is all over the floor, a true dog’s dinner! Some want to align ebook pricing to the physical, others use them a promotional leaders, others such as Amazon are trying to create a price point independent of RRP. In a world where the net receipts are vulnerable, many will opt for royalties based on them, but for the author a percentage of net can mean a percentage of little.

Thirdly, the new retail entrants are often trading on fixed ‘value share’ terms, so a percentage share on royalty makes sense, but in these cases the percentage should often rise not fall.

What is clear is that we have a timeline issue which means what we know, or can predict today, is almost certain to change tomorrow. This surely demands, that digital rights should be at least revisited on an agreed schedule and not fall into a perpetual licence contract. Should a term time right on digital align to a term time right on physical or even visa versa? In a world of Print and digital on demand some would suggest that rights don’t revert, but given that precise shift surely its time to ensure that licences are term based and not dependant on inventory movements and ‘reprint under consideration’.

We see no real alternative to individual digital licences based on channels and revenues. The alternative could be digital falling into the special sales route where the deal may be more important than the royalty earned by the author. The physical world has different channels and it is fair to envisage the digital one will be no different. However, the channels and revenue models will be different and aligning these to the physical may be at best, unwise.

Finally, we would like to throw in what some may regard as totally inappropriate. In a digital world where stock is effectively on consignment and every sale is a real cash generating sale why not pay the author their royalty in real time? Some will argue that advances etc need to be covered before royalty trip in but should that apply to digital and is it so sacrosanct?

Dear Author

The news today from Richard Curtis’s eReads blog, ‘S&S Follows Random in Reduction of E-Book Royalties’, may have raised some eyebrows. We wondered how the news may be broken to agents and authors. The letter below is purely fictious and is not representative of any letter that may have, or may be sent.

Dear Author…

We are all excited about the potential opportunities that digitisation offers the book trade and although sales today are relatively small, we are convinced that through our astute business negotiation we are building digital business models and distribution channels, that will ensure that we get our due return on our huge investments.

As you know we are investing huge sums of money in our digital programs and when we finally get round to digitising the total publishing process this will make us more productive and lower our cost base. We will also be able to digitally promote your works so benefiting all.

We realise that you enjoy bookshop library visits and signings, so we are pleased that these will continue for the physical books. Obviously, many small independents will not be able to sell digital copies and ebooks can hardly be signed, so we are therefore focusing on all the big aggregators, Amazon and of course the new breed of booksellers, Google, Sony etc. These will obvious sell lots of stock, albeit at maximum discount.

You may be aware that some major publishers have just announced, (Simon & Schuster and Random House), that they are unilaterally switching to a 25% royalty on net receipts on digital and audio download sales. This obviously is a greater % for you and everyone benefits. Some would suggest, today's list price has to be inflated to accommodate the increase in discounts being demand by many resellers, but in our case it clearly is not so. We also believe that the digital recommended price should reflect the current edition. This would align the recommended price to that of the hardcover when that is out and the paperback when that comes out. We realise that the consumer may be a bit confused as to why the price of for the same title, in the same digital format, with the exactly the same content, is the same, but they will get to understand its down to marketing and selling it at premium and then discounting it later. We are convinced the big resellers will understand. You may wonder what happens in Europe with VAT and how the recently announced potential drop in tax due on digital copies will affect the price. Many of us today merely deduct the tax of the list and stand this, so any reduction will benefit both of us as we will keep the price the same.

We were sorry that we upset you when we tried to take away the right reversal clause in your contract, but we have help shape and support the historic Google settlement that among other things sorts the problem out and also mops up all those poor lost orphan works. We realise that you may be also wondering about the Google settlement and how it will effect you and why Google is paying a different rate on sales and how they derive the price of your old books that are no longer in print. Don’t worry we will as ever, support your best interests and reflect this in your royalty statement.

Yours…..