With big publishers jumping into the fray, it has become increasingly difficult for new authors to make the choice between self-publishing their book as an ebook or signing on with a publisher and letting them handle all the things, including electronic rights.
There are numerous reasons for an author to hang on to as many rights as possible, but nowhere is this more important than digital rights. Why? Because ebooks are selling like hotcakes, and even though publishers charge less money per ebook, authors end up with a significantly smaller piece of the pie.
How does this work?
Publishers spend very little on ebooks. There are no printing costs, no warehouse fees, and no returns. As a result, ebooks cost less. But the reduction in retail cost is not commensurate with the reduction in production costs, which means profits are higher for ebooks.
Because ebooks retail for less, the result is lower royalties for authors. Traditionally, authors make 25% on ebooks, which seems like a lot compared to 10% on hard covers, but the disparity in production costs more than evens the playing field.
According to Brian DeFiore - who serves on the Board of Directors of the Association of Authors Representatives as Chair of the AAR Digital Rights Committee - this is how the deck is stacked in favor of the publisher.
"Every time a hardcover sale is replaced by an e-book sale, the publisher makes $2.20 more per copy and the author makes $1.58 less. If the author made the same $4.20 royalty on the e-book sale as he/she would have on a hardcover, the publisher would STILL be making an improved profit of $6.28."
In short, publishers are increasing profits on the backs of authors.
Are we angry? No, we are just disappointed.
For more details on this inequitable, yet somehow completely predictable, sleight-of-hand read Brian DeFiore's post here.