Trends in earnings

My six monthly royalty statement shows e-sales again increased but still only at best 10% of real book sales (by best I mean the titles with the highest % of e-sales). Also UK market is down but international rights well up especially the Indian market.

The royalties on the e-book sales should be higher than the royalties on print books.

Interesting you should say that because they are either the same or lower. I negotiated 12.5% and 15% on most titles but the publisher is paying 10% flat on e-books. I am getting back to them on a number of points and will add this to my list. What would a usual % for e-book be and what can I say in my case for a higher percentage for e-books?

Smashwords:

"Smashwords
pays the author, or the author's designated publisher, 85% of the net
sales proceeds from the work. Estimated proceeds are clearly disclosed
during the publish process in a pie chart, and are calculated as
follows: (Sales price minus transaction fee) multiplied by .85 =
proceeds to author/publisher. The royalty rate for affiliate sales is
70.5% net.
For most retail distribution partners, Smashwords pays the
author/publisher 85% of the net proceeds to Smashwords, which works out
to 42% or more of the suggested list price you set for your book. These
rates vary by retailer. Apple is 60% of retail price."

Mobipocket:

"Publisher shall set the Digital List Price for each Digital Book. The
Wholesale Price is 35 % OF THE DIGITAL LIST PRICE"

Thanks Shelagh

The e-retailers from whom I have received royalties are described on the statement as:

Ebook, myilibrary, ebrary, OCLC, IG, overdrive, dawson, EK, ellibs, gale, proquest.

Do you recognise any of these? And would their wholesale price be similar to the ones you describe?

By the way foreign rights really have gone up (maybe because of the week £). Rights for French, Arabic, Russian and Indian were sold for one title in the 6 month period. In all I guess as many as 20 lots of rights were sold for the period (normally I would expect two or three). Except for French rights which sell for thousands all the others are in the hundreds and I get 50% of the rights earned. So you obviously don’t get rich from rights.

LOL! No, you don't get rich from rights!

The list you've provided has a number of library outlets. Presumably, your publishers can decide how much they are willing to pay their authors for ebook sales to libraries.

On the last royalty statement for my text there were several entries labeled "rights," with two columns, one for the publisher take, one for my take. Publisher take: $96. My take: $4.

I have no idea what those "rights" are (page copies for coursepacks?) but they could have kept their stinking $4, I got pissed just reading it.

I didn’t expect to get rich so that’s OK. My 50% sound great compared with your cut LC. I would ask them what it is.

Shelagh, I should have said foreign rights but you don’t get rich from rights is true too because the vast majority don’t get rich from being a published author period.

The big problem with foreign rights is that from my experience you hardly ever see any further royalties. I are supposed to get the advance and then royalties but in practice I rarely get more that the first payment (a few hundred pounds for the rights to publish your book in a huge market like Indonesia/china/India). This may be due to the book not selling of course but I know some of the books are selling because I get emails from readers from those markets. I get emails from readers from India for example but I have never received anything other than the initial advance for foreign rights there. No one bothers/can pay to police it.

Mike, no one buys texts in those countries, they're all pirated. Even at the universities, and the professors are complicit in it. I've known exchange students from those countries who told me as much. No one there takes a class with a legal book (and some are outraged that they're expected to buy them here).

I agree pirated books are a big problem in many markets. But they buy the rights for the territory so they must want to sell the book. Pirated books must be as big a problem for the holder of the rights as the author in these territories.

I know what you mean by the outrage. Intellectual rights are seen as wrong these days. Someone recently wrote to me complaining that while my book has lots of good advice they could get the content for free on the net so why should they buy it? I replied; try that line of argument next time you are in a supermarket, tell the cashier ‘I don’t want to pay for these goods because I can steal them and would not have to pay for them then’. It’s incredible they don’t pay for my work but still expect me to reply to their emails!

The problem is that everyone has their hand on the cash before the poor author (I get about a $US a book on UK sales and I guess a cent or two for sales in the rest of the world). Then add the problem of theft through copying etc and the lot of the average author is a distressing one. If only self publishing was the answer and maybe it will be one day but it don’t think it is yet.

Now you’ve got me started.

How would self-publishing be the answer? The book would still be downloaded once and copied a million times.

The people who say they can get the info on the net for free don't realize that they don't know what they don't know - that is, they don't know what content to LOOK for on the subject until they see someone else's TOC. Where, of course, all the relevant content is laid out, organized, and then explained/illustrated in the text.

I get the same thing with my nonfic. A lot of Amazon comments say, "You can get this content for free." Sure, if you want to hunt it all out on your own, first, and sort through it for the relevant stuff.

Self-publishing works best for non-fiction. True self-publishing means doing it all yourself with a short print run and then selling the book at venues (lecture tours etc.). POD self-publishing could lead to being ripped off -- but since the authors themselves can hardly give their books away, no one would want to steal the work and have the bother of trying to sell it.

One short-print run or POD book could be bought, scanned, and uploaded to a bit torrent site to be downloaded free like everything else.

Yes it could. So could any other book. There are companies that will rip apart an out-of-print book, scan it and produce as many copies as you want. It's not the copying of books that is the problem; it's how do you sell the things once you've gone to the bother of printing them?

Shelagh, the book pirates don't sell them, that's the point. They upload them for anyone to take for free, for the fun of it. Or to have something to exchange, a requirement to access some bit torrent sites.

Third world students don't buy texts, they print up their own copies from such sites.

Yes, I can see that being a problem for textbook authors. For self-published, fiction writers, it isn't such a problem.

How timely -this just appeared on the TAA listserve.

<< The most important issue before textbook authors is e-royalty rates as that is
the future for all textbooks.

The first question is what percent of the cost of producing a textbook book is
for printing? We need to find the answer to this question because this number
is the percentage that should be split 50:50 between the author and publisher.
This is not a hard number to find out. Publishers know it. Please, somebody
must know....


--- On Wed, 9/23/09, xxx wrote:

Subject: Re: [TAATextbookAuthoring] e-textbooks-royalty negotiations


I am interested in this study too, and think it was done, but not sure. If
TAA has the data, could you point us interested folks to it?


=====

>
> I sent the article from the Chronicle of Higher Education because I
> believe that ebook royalty rates should be at the top of author
> concerns. I currently get 15% royalty rate--same as for print. I do not think this is
> enough, given decreased costs of production to publishers. In years
> past xxx and I have sent out queries to the List asking authors to reveal royalty rates--
> confidentially, anonymously, if desired--so that as a group TAA could
> get some sense of a current average. From there, we could try to determine a fair rate.
> From there we could perhaps seek advice from TAA on how we might
> move publishers to offer it. >>

Thank LC for posting the TAA info. I’m def going to push for more than 10% of ebook royalties.

You earlier asked how self publishing might help. I had in mind that if the earnings from traditionally published books continue to be eroded a point might be reached where self publishing is a better option in terms of earnings. Although by then writing will have been reduced to a hobby for all but the lucky very few authors.

Heh, another one just posted:


<< I've been working for over 30 years on means of making conventional textbooks more reader friendly. The possibilities with electronic books are considerably greater. The ebook could be more valuable than traditional ones. In fact, the Imbedded Aids to readers that I envision would allow for premium pricing since the text would, in effect become a teaching machine. Publishers are suffering from "industry blindness." Help me find a publisher who isn't brain dead and willing to invest a bit in fresh ideas and a few programmers and I'll happily describe these scaffolding "apps" so that they might not only appear in textbooks but could be licensed to corporations and the military, two other big publishers. >>

This just in from the listserve, from a noted author and publisher.

<< To my knowledge there is no set or standard percentage for the cost of
producing and manufacturing a print textbook. Publishers begin with
the projected revenue from sales to establish a book's budget. They
then distribute that budget however they need to to get the kind of
book that will generate the projected revenue or better. Projected
revenue depends on pricing and the size, segmentation, and
distribution of the market and its accessibility in relation to
competitors' market shares. Publishers generally aim for a profit
margin of 12% or better, with the book breaking even in its first year
of sales. Their drop-dead margin typically is 7.5%, after which they
may no longer be able to afford to be in business or to publish.

In other words, the amount of money to be invested in production and
manufacturing is market driven. Consider a 624-page 4-color book
expected to sell 100,000 copies at $76 per unit. The publisher must
sell it to intermediaries (wholesalers, distributors, and retailers)
at 50% discount or more (usually more). At $38 per unit, then, minus
a margin of, say, 15%, the book would have $3,230,000 left for all
costs associated it, including royalties and advances, editorial
services, photos and art, permissions, paper and printing, marketing
and promotion, warehouse and freight, administration and sales, and a
portion of all other overhead (utilities, salaries, insurances).

In distributing a book's budget among these costs, individual
publishers may wish to spend more on some things and less on others.
They also use specific economies of scale they have established and
economical or low-bid vendors known to them. Their solutions, in other
words, tend to be unique rather than standardized. Four-color books
typically are printed offshore using offset printing technologies.
Paper for a book is usually bought along with paper for other books
for a lower per unit cost. On the other hand, a one-color book with a
smaller market or lower projection of sales may be printed on demand
on a Docutech or other sheet-fed press. Simply put, books, like
individuals, have budgets and cannot live above their means.

There are rules of thumb for individuals with budgets, e.g., the old
saw that you should not spend more than a third of your gross income
on your housing costs. If there are similar rules of thumb for
publishers' manufacturing costs, I, too, would love to hear them.

As to the point of this inquiry, I agree that authors should be able
to get a better split on ebooks because of the reduced cost of
production and distribution. However, I think it's the difference in
margin that should be split, if possible, giving both author and
publisher higher profits, rather than the cost of manufacture per se.
Savings in the cost of manufacture count for little if the publisher
is forced to sell at a price too far below that needed to achieve a
profit. E.g., a publisher in a 100,000-volume market requiring a 624-
page 4-color textbook, but forced to sell at $10 per ebook unit, would
soon lack sustainability. Because of pricing issues, in other words,
publishers in the first place are unlikely to earn proportionally more
by publishing ebooks. Nevertheless, if the publisher earned, say, a
million dollars more on the ebook than on the print version on the
same volumes of sales, I would think those earnings could be split
50-50 with authors, enriching them both.

I look forward to hearing others' intelligence on this question. >>

<< Publishers have some other considerations. Electronic texts are being designed
so as not to support resale to subsequent users. The "deal" for students is a
much lower cost text in exchange for their inability to recover part of their
cost by reselling the text. This effectively cuts out the used textbook seller.

The three year sales cycle for a paper text, I have been given to understand,
is: for every 100 units sold the first year, 30 new copies are sold in the
second year and 5 new copies in the third year. The decline is due to such
factors as faculty reselling complimentary copies (for which authors earn no
royalties, now illegal in several states), and students reselling their copies
(each resale earns no income for the publisher and no royalties for the
author).

With electronic texts, a faculty member can download an examination copy to a
given computer, but cannot upload that copy to any other computer (and thus
not sell it). Similarly, a student can download a given copy to a given
computer, but cannot transfer that copy to another computer (and thus not
resell it). Further, the electronic copy can be programmed so as not to be
accessible after a certain date, effectively creating a timed lease of the
copy to the student.

Given the three year scenario of first copy sales described above, an
electronic text can be continuously sold only in first sales throughout its
content life. Thus, for every 100 units sold in the first year, 100 units will
be sold in the second year and 100 units in the third year (assuming even
demand). So for every 135 units expected to sell in paper form, 300 units will
be expected to be sold in electronic form, with a 222% increase in sales over
the same three-year period. New editions or versions of editions can be
brought out as content changes due to advances in the underlying research.

Depending on the distribution costs, the list price of texts can be brought
much closer to the net sale price: publishers could be their own distributors
(rather than, say, campus bookstores or Amazon-like distributors). Further, a
textbook edition might be extended beyond three years, thus spreading
production costs over more units.

Finally, some of these new electronic platforms permit individual instructors
to modify the text for their own classes' use, eliminating material that is
not to be required and adding the instructor's own material (perhaps in the
form of video clips, study aids, self-test material), and students can
interact with the textual material in collaborative ways that further enhance
engagement.

So I think that we should not limit our thinking to such formulae as ordinary
cost of production and distribution of a paper text minus paper and printing
and binding costs. Even at, say, 15% of net, where the net cost of a copy has
dropped due to the elimination of printing, binding, and warehousing,
publishers and authors stand to gain by the increase in volumes of first sales
for a given issue if the contracts we have with publishers reflect these new
(hoped-for) realities.

I am eager to hear what others think about these considerations. >>

Stopping resales of print books is a waste of trees. The amount of paper wasted in education is staggering.

Both my textbooks (the existing and upcoming) have worksheets in the back, perforated for easy tear-out. This was done specifically to cut down on resale. Instead of having a separate workbook, they tear up the text.

I save the college a bunch of money by not having to run copies of these worksheets for the students anymore (many of the text's worksheets are basically the ones I had already written/drawn up).

Originally I thought this would even make the materials cheaper for the students; instead of buying a separate text and workbook, as they used to buy, they'd just buy one that had both. Didn't work out that way, though, as Cengage raised the price within two years to more than what the separate text and workbook we used to use cost. Oh well.

Thanks again LC. I suspect future electronic platforms will help maintain royalties and publishers profits.

Regarding the post discussing publishers costs I will use some of these points when I make my case for a better percentage. One problem will be the price war that the publishers seem bent on having over e-books. This will mean that they will go the same way as all other book sales in that author’s royalties will be squeezed and publishers profits will remain low.

For years my publisher has offered more than 50% discount on the majority of sales (amazon 55% I believe). High discounted books earn royalties on receipts not cover price. So, on the vast majority of sales I received 10% at worse or 15% at best on 45% of the cover price. My books retail between £8.99 -£14.99 (depending on the title). This means they have to sell a lot of books for me to earn a modest living.

The publisher pays the distributor 10% of cover price. Print costs are low as they typically print 3,000 at a time no colour (except for cover) but they have a large workforce. Their public accounts show modest profits.

Mike, do you get some royalties on cover price? None of my three contracts give me this. I get a percentage of net receipts, and it's not even clear what "net" is.