Jeffrey Trachtenberg, writing for the Wall Street Journal (9/28/10), reports in "Authors Feel Pinch in Age of E-Books" that electronic publishing is ruining authors:
It has always been tough for literary fiction writers to get their work published by the top publishing houses. But the digital revolution that is disrupting the economic model of the book industry is having an outsize impact on the careers of literary writers.
Priced much lower than hardcovers, many e-books generate less income for publishers. And big retailers are buying fewer titles. As a result, the publishers who nurtured generations of America's top literary-fiction writers are approving fewer book deals and signing fewer new writers. Most of those getting published are receiving smaller advances.
Trachtenberg gives us what he presents as the economic realities–as usual in such articles, reality as viewed by the big publishing houses:
The new economics of the e-book make the author's quandary painfully clear: A new $28 hardcover book returns half, or $14, to the publisher, and 15 percent, or $4.20, to the author. Under many e-book deals currently, a digital book sells for $12.99, returning 70 percent, or $9.09, to the publisher and typically 25 percent of that, or $2.27, to the author.
The upshot: From an e-book sale, an author makes a little more than half what he or she makes from a hardcover sale.
Left out of this, of course, is the publisher's investment in each book–which is obviously much lower with an electronic copy that doesn't require printing, storage or shipping. According to the New York Times' calculations (FAIR Blog, 3/2/10)–which are based on a $26 hardcover rather than $28–the net profit on each hardcover copy is $4.05; the net profit on a $12.99 e-book, if you use the Journal's royalty figure, is $5.54–or $1.49 more profit than with hardcover publishing.
Suppose royalty rates were increased so that publishers made the same profit on an e-book as on a hardcover book. That would give the author $3.77 per e-book sold, as opposed to (by the Times' reckoning) $3.90 for a hardcover sale. As the law of supply and demand will tell you that it's possible to sell a lot more copies at $12.99 than at $26 or $28, it's clear that authors could maintain or increase their standard of living in a digital world–if publishers weren't intent on grabbing a bigger slice of the pie.
Update: See also James Ledbetter's take on this in Slate (9/28/10), "The Journal Asks Us to Weep for Literary Novelists."
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