What’s a fair ebook royalty?

This is a question that’s come up quite a bit lately with author and editor friends. Are the current standard ebook royalties (25 percent of receipts) fair? And if not, what would be fair?

The argument for raising royalties to 50 percent or greater of receipts is that ebooks don’t cost publishers anything to produce: no paper, no printing, no binding, no warehousing, no shipping, no returns. Whatever investment in editing, promotion, typesetting and design that the publisher made, had to be made in order to produce the print book. Producing an e-version is a trivial additional cost. So authors should get at least half because for the publisher, ebook revenue is gravy.

That argument assumes that everything stays the same in publishing and that ebooks will continue to be a small portion of books sold. We know, however, that publishing isn’t staying the same. Sales of e-readers and ebooks have risen dramatically in just the past year. Between the Kindle and the iPad, almost everyone expects that the ebook will be embraced by more readers. The pace of adoption should increase dramatically. The open question is how to quantify that adjective “dramatically.”

And for virtually every ebook bought, a print book isn’t.

Right now, ebooks are estimated to be about 5 percent of the market. What happens to the industry when they’re 25 percent?

Anyone who has read this blog more than once knows that I’m a fierce advocate for writers, am against the Google settlement because it’s a worse deal for writers than writers can get on their own from Google, and have urged writers to stand up for their rights on pay, copyright, and other issues.

So you might be surprised to learn that I’m not convinced that writers should demand 50 percent of receipts for ebook royalties.

I agree that 25 percent of receipts is too low. Publishing guru Mike Shatzkin estimates that on hardcover books, the “standard” royalty of 15 percent works out to about 27 to 32 percent of receipts, which in turn, after expenses, splits profits about 50/50 between author and publisher.

A 50/50 split of profits is fair. But that’s not the same as a 50/50 split of receipts. One day soon, e-publishing won’t be all gravy. It will be the way we publish books. And all the costs associated with publishing books (minus the printing and other costs that printed books incur but ebooks don’t) will have to factored into ebook pricing and royalty calculations.

You can bet that publishers are already factoring the future into their calculations as they set their 25 percent of receipts royalty schedules. Nobody can accurately predict the future though, and publishers are giving themselves ample padding.

The issue we need to address is how should receipts between publisher and author be split to account for a future where ebooks are a big chunk of the books sold?  The goal should be that, after publishers’ costs are covered, authors and publishers share the profits 50/50.

The percentage of receipts authors would get with a fair (50/50 profit) royalty system is not 25 percent of receipts. But it’s not 50 percent of receipts either.

– Anita Bartholomew

The next big thing in e-readers isn’t an e-reader

Watch out Kindle, Nook and other e-readers. Blio, a software based e-reading platform is rumored to offer the best e-reading experience yet. It will run on anything that has an operating system.

And it’s free (but not available until the end of the month spring, says PW).

The FREE Blio eReader software is the new touchstone for the presentation of electronic books & magazines. Stunning, full-color pages come alive in brilliant 3D. Even image-rich books are now at your digital fingertips — because Blio preserves a book’s original layout, fonts, and graphics.

Enjoy a vast selection of cookbooks, travel guides, how-to books, schoolbooks, art books, children’s stories, and magazines. Relax, learn, work, or play! The smart display lets you insert highlights, notes, videos, and even webpages. Selected books also go hands-free with Blio’s read-aloud feature.

Flexible & accessible. Shop endless titles, right from the Blio Bookstore, with access to over one million free books and a huge library of today’s bestsellers. Then, take your library on the road by syncing to your favorite on-the-go mobile device.

– Anita Bartholomew

How Demand Studios’ exploitation of writers turned it into a billion dollar company

Wired has a fascinating article about Demand Studios, one of the word factories that regularly advertises for writers, only to exploit them. You can’t claim Demand pays writers peanuts. It’s more like peanut husks.

It’s worth reading the article to learn how this sweatshop-type operation makes such big bucks. But here, we’re only concerned with the pennies it pays to the people who made it possible for Demand to become the billion-dollar enterprise it now is. The snippet below provides a hint:

It’s the online equivalent of day laborers waiting in front of Home Depot. Writers can typically select 10 articles at a time; videographers can hoard 40.

Nearly every freelancer scrambles to load their assignment queue with titles they can produce quickly and with the least amount of effort — because pay for individual stories is so lousy, only a high-speed, high-volume approach will work. The average writer earns $15 per article for pieces that top out at a few hundred words, and the average filmmaker about $20 per clip, paid weekly via PayPal. Demand also offers revenue sharing on some articles, though it can take months to reach even $15 in such payments. Other freelancers sign up for the chance to copyedit ($2.50 an article), fact-check ($1 an article), approve the quality of a film (25 to 50 cents a video), transcribe ($1 to $2 per video), or offer up their expertise to be quoted or filmed (free). Title proofers get 8 cents a headline.

Don’t write for these — or any — exploiters. Leave these crumbs for the amateurs. I know it’s tempting, as newspapers die, and magazines fight for survival, to take whatever work is available. But writers who do so help perpetuate their own exploitation.

Write a book, instead. Either shop it to agents and publishers or invest in publishing and marketing it yourself. There are plenty of new publishing opportunities to explore, from the Espresso Book Machine which is rolling out a few new locations and may soon make the printing of a single book as cost-effective as printing in bulk, to ebooks, which already eliminate the costs of distribution, warehousing and shipping.

– Anita Bartholomew

Biggest challenge for publishers=biggest opportunity for authors?

The Frankfurt Book Fair is conducting a survey of publishers to learn what they believe will be the business models of the future.

The second question on the survey is interesting because it points to a potential shift in the balance of power in publishing from publishers to authors.

In your opinion, what are the three biggest challenges for the media industry? (Please check three answers)

Along with digitization, piracy, the economic crisis, oversupply and other issues, one of the 10 possible answers that you get to choose as among the three biggest challenges to publishers:

– Strengthened position of authors (increasing possibility for direct marketing without a publisher/bookseller)

The fact that this is one of the possible answers tells you that the market is shifting dramatically.

The fact that the following is also among the possible answers tells you we are at a crossroads.

– Concentration of distribution channels

Either authors will gain significant power in the new marketplace or big players like Google and Amazon will so overwhelm us all that we would do well to learn a new trade that will always be in demand, like plumbing.

We live in interesting times.

– Anita Bartholomew

Judge grants request for extension in Google settlement

Attorney Andrew DeVore had asked that the deadline for opting out or objecting be extended to September 7, 2009.  Although class action attorney Michael Boni asked that the extension be half as long, the judge has, apparently, ruled for the full four months:

In a surprise move, New York Judge Denny Chin today granted a four-month extension to a group of authors, led by Gail Knight Steinbeck, delaying the May 5 deadline to opt out or object to the Google Book Search settlement to early September. Although the order had not yet been made public at press time, sources confirmed for PW that Chin had granted the extension.

Google opt-out deadline still May 5th but court hears request for delay

From Publishers Weekly:

Last week, a group of authors and their representatives filed a request to delay the May 5 deadline. The motion filed April 24, by attorneys representing The Palladin Group for John Steinbeck and Thomas Myles Steinbeck, Catherine Ryan Hyde, The Philip K. Dick Testamentary Trust, Arlo Guthrie, Michael W. Perry, Eugene Linden, and James Rasenberger, asked the court for a four-month extension, with October 7 marking the new opt-out deadline, and with the hearing, now set for June 11, to follow at the court’s discretion.

Meanwhile, in response, attorney for the publishers’sub-class, Michael Boni, said the authors’ complaint was without merit and asked the court to reject it. However, Boni, said that “independent of” the authors motion, “plaintiffs and Google are amenable to a 60-day extension.”

The article goes on to quote New York Law School professor James Grimmelman saying that an extension is unlikely to be granted while the attorney presenting the request for the delay, Andrew DeVore, said that such a delay was necessary. DeVore pointed out that the Google settlement is “not a typical class action settlement,” because it’s not primarily about compensation for past injury but about future rights.

I’d point out that while the Google settlement is, indeed, not typical for class actions, it took its lead from an earlier class action that grabbed future rights from all affected writers for periodicals, essentially overriding copyright law by granting the Defendants future rights in all the works affected. In that class action, too, writers were “represented” by class action attorney Michael Boni, supported by the Authors Guild.

To haul out an old cliche, with friends like Boni and the AG, writers really, really don’t need any enemies.

– Anita Bartholomew

Where to get a better deal than the Google Settlement? From Google.

Several writers I know have responded privately to my posts about the Authors Guild’s settlement with Google saying that they will stay in because they believe that the future of the book is electronic. And they want their books to be part of that future.

They’ve been misled into believing that those are their only choices: take the deal or have your work erased from cyberspace.

Wrong.

You can make a better deal. Google has one that’s ready-made for you, outside the settlement.

First, opt out of the settlement. Then, if you want to make your book accessible via Google, on the web, join the Google Books Partner Program.

Your books will appear where they would have appeared if you opted in to the settlement. But this way, you keep all your rights. And you can even add a “buy this book” button to the display page of your book if you offer the book for sale at your own site.

Remember: Google wants to scan your books. Just because the class action attorneys gave Google all sorts of extra rights (taken from you), doesn’t mean you have to roll over and play dead. Turn down the bad deal. Take the better one offered by the Google Books Partner Program.

“The Google Books Partner Program is a free marketing program that enables publishers and authors to promote their books online, through Google Book Search. By submitting a digital or physical copy of your book to be displayed online, you’ll make it discoverable to Google users from around the world.”

And yes, you can earn income from this –  Google shares the majority of its ad revenue with you –  and it’s probably more than you would get through the settlement. That’s because, in the Partner Program,  you deal directly with Google,  instead of with the Books Registry being set up to administer payments from future revenues via the settlement.

Use this form to sign up. You’ll need to mail a copy of your book for scanning but you can cancel your account at any time.

Here are some of the benefits of the Google Books Partner Program vs the Google Books Settlement:

1. You send your book to Google and request that Google scan and display the book but, unlike opting in to the settlement, you can withdraw from your relationship with Google at any time.
2. You get the majority of the revenue from ads appearing on the same page as your book. Contrast that with the settlement where, although you get 63% of the profit, that may be less than you believe. Some experts, including literary agent Lynn Chu, speculate that as much as half the revenues will be used for administrative costs of the registry before you see your share.
3. You can include a “buy this book” link as long as it links back to your site, not that of a third party, for purchase. So,  if a preview hooks a reader’s interest, you get to sell the physical copies of your book.
4. In the Google Books Partner Program, you don’t give up any of the rights, written into copyright law, that you now have.
5. Unlike the settlement, you are not locked in for the life of the copyright.
6. If something goes sour with Google, you aren’t forced into binding arbitration. You retain all your rights to sue in court.

– Anita Bartholomew

The Register of Copyrights weighs in on Google settlement

Marybeth Peters, Register of Copyrights (the person at the United States Library Of Congress in charge of the system that maintains records of who owns which copyright), has many things to say about the Google settlement. She was the first speaker at the conference Columbia Law School held in March on the settlement. The video of the conference is online.

As I was able to pause the video in order to transcribe parts of her speech, I learned (and will share) a great deal about her views that I haven’t seen reported elsewhere.

The first point she made, and the one she returned to many times, is that she’s troubled by the use of class action lawsuits to grab future rights because they are, in essence, legislation via litigation:

“I do believe that class actions generally look backward and settle infringements that have been in the past. And typically, when you go forward, it’s typically the prerogative of Congress, the legislative branch, to decide what the rules should be. And when they do that, they think of things like, ‘Are we meeting our treaty obligations?’ ‘What about the public interest?’ And everybody has an opportunity to be heard.

“And the question is, when you have a private agreement where there are private solutions that are in the nature of legislative action, resulting in something that would be a legislative action, is that a good thing?”

But does this settlement (and the earlier one, granting licenses by default to the defendants in the case now before the Supreme Court, Reed Elsevier v. Muchnick, No. 08-103) really change copyright law? Yes, by creating exceptions to the law that encompass almost all of the literary works that would be subject to it.

And the way such settlements change the law is particularly troubling. The infringers, i.e., the wrongdoers, the ones who should be paying steep penalties to deter them from future wrongdoing, always come out the winners.

Peters paraphrased the analysis of the Google settlement by Brewster Kahle, the creator of the online Wayback Machine:  it creates new copyright laws and a new payment system, all to benefit a single monopoly, for access to the collective books of mankind.

Her own concerns about the agreement appear to mirror Kahle’s.

“One thing I do know is that the legislative process is what the Constitution had in mind with regard to copyright policy. There is a balance between encouraging creativity and rewarding authors. And it gave that power to the Congress. And the Congress does act, sometimes slowly, sometimes well, sometimes, not so well. But that’s the Constitutional balance.”

Peters also complained that there are many unanswered questions and the possibility of unintended consequences. (Several other speakers at the Columbia Law School conference, all experts on copyright, said they were confused about what the settlement really said).

What was clear is that the vast future license for Google troubles the person in charge of copyrights for the U.S.

It should trouble us all.

The above is part 4 of a series of blog posts on the settlement reached between Google, the Authors Guild and the Association of American Publishers to settle a copyright infringement case related to Google’s unauthorized scanning of books.

– Anita Bartholomew

Google settlement, part 3: Authors Guild’s false information

My friend Pat McNees runs a website with good information for writers and editors. She recently posted links to various opinions about the Google settlement. I have one quibble with her section on this topic: she implies that you can trust the word of Paul Aiken, executive director of the Authors Guild.

“If you were alarmed by Lynn Chu’s piece in the Wall Street Journal (Google’s Book Settlement Is a Ripoff for Authors: ‘Why allow a single publisher to throw out a functioning copyright system?’ ) be sure to read this letter to the editor from Paul Aiken, executive director of the Authors Guild: The Google Book Deal Will Help, Not Hurt, Authors, which points out essential errors in Chu’s piece.”

Most authors, editors, and agents I know, like Pat, are willing to trust Aiken’s word. If they had studied the settlement with skeptics’ eyes, and consulted with attorneys, they more likely would trust Chu.

First, let’s deal with Aiken’s whopper:

“Ms. Chu likes the marketplace of in-print books that authors and publishers depend on. So do we: The settlement leaves it alone. Authors and publishers of in-print books will be able to participate in the settlement’s programs, but only with rightsholders’ express permission.”

I can’t imagine why Aiken would make such a patently false statement about a central issue. It’s too long to be a typo. What on earth was he thinking?

“Express permission” means “explicitly stated permission.” Any author reading Aiken’s words is likely to accept those words at face value and assume that, without his or her explicitly stated permission, he or she will not be subject to the provisions of the settlement.

Wrong.

Here’s how you get to “participate in the settlement’s programs.” Do nothing. Bam! You’re in. That’s not “express permission.” That’s license by default.

But it’s worse than that because, although the Google settlement gives authors some control over display and other incidentals, if you do nothing, and allow yourself to be lulled by Aiken’s reassurances, you’ve also agreed, by default, to mandatory arbitration (a huge issue that Chu brought up in her op ed but that Aiken never addressed).

Here’s the gist of what you need to know about arbitration: mega corporations love it because they almost always win in any dispute:

“The fine print associated with service agreements from credit card, wireless phone, Internet access, and other service contracts is increasingly likely to include a clause that removes contract disputes from the legal system, subjecting them instead to binding arbitration. Superficially, arbitration sounds like a great way to settle disagreements while avoiding the fees and animosity associated with legal action; arbitrators ostensibly offer an impartial decision quickly and painlessly. But a report issued by the consumer watchdog group Public Citizen portrays the process as heavily slanted towards business, and a Kafkaesque nightmare for individuals.” [emphasis mine – Anita Bartholomew]

Google Settlement: is it a bum deal? Part 2

A number of writers I know believe that the Google settlement is the best way to get their old books back into circulation. Their thinking is that, once the book is on the web as part of Google Books, the vast library of texts that Google will make available in various ways, new readers may find these old books. And the authors may realize new profits.

Let’s analyze the above and figure out whether it makes as much sense as some writers believe.

Q: Is having your book scanned by Google the only way to get it out on the web and available?

A: No. If you still have a word processing file of your manuscript you can publish your book yourself on smashwords with just a few keystrokes, in an electronic format, and offer it for sale. You’d get 85 percent of the profits from smashwords versus the 63 percent that Google is offering. And if you got a better deal elsewhere, you could take it. Contrast that with Google’s book scanning venture which requires you to enter into a binding 100+ page contract (the Google settlement) that nobody has yet thoroughly analyzed on your behalf.

Q: What’s wrong with opting into the settlement (signing the “contract”)?

A: I don’t believe that anyone has adequately parsed what’s in the settlement agreement or what its ramifications may be for the long-term. I don’t typically sign contracts without knowing whether the terms are favorable to me. Do you?

Q: But wouldn’t my book get more attention if it were part of the Google library of scanned books?

A: Not necessarily. Google, the search engine, finds material on the web for searchers based on keyword searches and ranks the material it finds based on various other criteria. As your original manuscript, if uploaded, would include all the same key words that your scanned Google Books version would, your own book wouldn’t necessarily be at a disadvantage.

Q: But I know nothing about publishing on the web. Why not just leave it to Google?

A: Again, see smashwords. You don’t need to know how to publish. All the instructions are there, plain and simple. Even so, you might decide that Google is your best option. But it’s important for this to be an informed choice. You need to weigh the costs against the benefits of agreeing to a 100+ page contract (the settlement), which is what you’d be doing in order to participate.

Q: Do I have to decide right now whether to participate?

A: Unfortunately, yes. You only have until May 5, 2009 to decide to opt out. If you don’t, you’re in. The decision is made for you. But you can opt out now – and you may be able to opt in later, according to page 33 of the settlement notice:

“If you opt out of the Settlement, you will not be eligible for a Cash Payment or to participate in any of the revenue models under the Settlement. You will, however, have the right to bring your own lawsuit. In addition, even if you opt out of the Settlement, you may still be able to contact the Registry or Google at a later date to attempt to negotiate a separate deal for inclusion of your Books in any of the Settlement Agreement programs.”

That “Cash Payment” you won’t be eligible for is all of 60 bucks. (To help you judge whether you believe this is an adequate payment, see my earlier post for what the minimum statutory penalty is for willful infringement). And you only get the 60 bucks if Google has already scanned your book. If not, you get nothing. Zip. Is that a sufficient incentive for you to opt in?

Q: Can I opt in now and opt out later?

A: Nope. You may be able to change some of the terms of how your book will be displayed or other incidentals but you will have agreed, by default, to the terms of a 100+ page settlement.

Again, do you know what those terms are? Has anyone analyzed them on your behalf and given you all the pros and cons? And have the pros been so strongly in your favor that the cons seem inconsequential?

If you haven’t done that analysis, and you’re gung ho to go ahead anyway, I’d like some of what you’ve been smoking.

– Anita Bartholomew