Why Agents Should NOT Become Publishers

I stayed up in my room this morning instead of attending workshops here at RT11 to write my novella, but instead, I’m writing this blog post because as I’ve been watching the happenings at this week’s conference and overhearing conversations, I’m seeing a phenomenon that’s giving me increasing cause for concern. To wit, it seems a lot of agents are seeing the growth in self-publishing as an opportunity to find new avenues of revenue for themselves as the money from traditional publishing continues to shrink.

I said on Twitter the other day that based on the workshop line-up here, self-publishing is the new black–everyone seems to be interested in it as the latest and greatest business model for authors. That doesn’t mean I don’t see authors, both aspiring and published, continuing to court agents and editors in the traditional system, but it is to say that the world is changing at a speed I can only call remarkable. A year ago, I doubt ANYONE would have asked on a Money Matters panel about the relative merits of going with a digital-first publisher vs. self-publishing. THIS year, it was the primary question. That’s a phenomenal change in a short period of time.

It’s definitely a tricky time for agents, who make their living in the space between writers and publishers. The typical agency contract specifies that the agent gets 15% of the author’s royalties on any project the agent sells. The agent gets this percentage in consideration of the doors he/she can open at publishing houses and (most importantly in my mind) for negotiating the contract and ensuring that the author does not sign something that it’s clearly not in his/her best interest. If the project doesn’t sell, the agent gets nada.

Fast forward to today. Offers and advances from traditional print publishers are shrinking along with physical shelf space, but the digital and self-publishing world is exploding. Agents are seeing an opportunity to earn money not by trying to sell books to other publisher, but by becoming publishers (or E-stributors, as Joe Konrath called it–you can read the pertinent excerpt from his conversation with Barry Eisler on this subject at Kristin Nelson’s blog) themselves.

The idea is that, should the agent not be able to sell a book for a client (or the offers received are not sufficiently attractive), the agent could instead take on the position of the “publisher,” assisting the author in editorial, cover art, marketing, etc. And for this, the agent could then continue to receive his/her 15% of the pie.

I see HUGE problems with this.

The biggest is that it may almost never be in the agent’s financial interest to take the offer from the traditional publisher over going the “e-stributor” route. The reason for this is simple. When a publisher buys an author’s book, the advance and royalty are based on a profit and loss statement that assumes the author is earning, at most, 15% of the cover price on each copy of the book sold (the scale varies depending on format, but 15% is about right for hardcover and also about what publishers are paying on digital copies regardless of the print format). The agent in this equation is therefore getting 15% of 15%.

But if the agent takes the role of publisher, presumably he/she will “net out” the cost of digital distribution (typically 30-35% if the book is priced $2.99 to $9.99) and then skim his/her 15% of the remaining 70%. That is a HUGE change in the REAL percentage the agent is getting paid. And although 15% of an advance is a GUARANTEED amount, while there’s no guarantee on earnings from a book the agent publishes himself, 15% of 70% for a book you didn’t sell to New York is WAY better than 15% of nothing and it might even be better than 15% of a lower end advance.

Using simple, round numbers, if the advance from a traditional publisher is $10,000, the agent earns $1500. If the book is mass market paperback at $7.99, 15,725 copies¹ will have to sell before the agent receives another dime, and it will be a year or more before either the agent or author see additional payments. If instead of taking that offer, the agent publishes the book for the client and takes 15% of 70% of 2.99, the book only has to sell 3,345 copies to earn that $1,500 and the royalties will begin rolling in a few months after release. As an agent, if I really believed in my client’s book, I might be more inclined to go the e-stributor route than that traditional publishing route in that scenario because, quite honestly, I would think there was more money in it–for both of us.

So what’s the problem? The problem is first that there’s no one to negotiate the contract between the author and the agent anymore. If the agent is the publisher, who protects the author? Who ensures that 15% is really a fair percentage for the author to pay the publisher in this scenario? Who has control of the book once it’s released into the wild? Who monitors the sales and makes marketing decisions and adjustments? Should this be the author or the agent/publisher? Who holds the trump card–author or agent/publisher? Honestly, it would seem that authors in the scenario would need another agent to negotiate their contract with their agent. It’s simply ludicrous and unacceptable.

I think agents becoming publishers is a phenomenally bad idea, although some are already doing and more appear to be on the cusp of doing so. As an author, however, I wouldn’t sign with an agent who wanted to be my publisher if she didn’t sell my book to someone else, because I would never know whose best interest that agent was operating in. The author’s and the agent’s interests can only be the same if they are both working to get the best possible offer on the best terms from a third party. As soon as the agent takes on the role OF the third party, the author’s and agent’s interests no longer converge to the same degree as before. Just because the author and agent both earn more money the more books are sold does not mean the agent will work in the author’s best interest. If that were true, authors would never have needed agents to comb through their contracts with publishers, because publishers would have always been offering contracts that were in the authors’ best interests.

I have no issues whatsoever with the notion that agents should be able to recoup some income from books self-published by their authors after they fail to sell to New York (or the author chooses to turn down the offers received). But I question whether the “value” an agent offers if he isn’t handling the contract negotiation and running interference when things go wrong is really 15% of 70%. And I wouldn’t, as an author, want my agent to be handling/in control of the content of my book, its pricing, its marketing, or its distribution. We give a lot of that up when we sell books to traditional publishers. If we are going to take the riskier route of self-publishing, at least we should be able to keep that control for ourselves–along with more of the money.

In other words, I’m happy to negotiate a contract with an agent that specifies what the agent is paid in the event I self-publish something the agent has worked on. But I reject categorically the notion of having my agent be my publisher. Period.

¹I’m applying the 8% print cover price rate here and ignoring the payout for digital sales, simply because it’s almost impossible to figure out what 25% of net will be unless you know how net is being calculated. But even if that were to cut the total number of sales required to earn out in half, the earn-out point disparity is still painfully apparent.