Twitter went aflutter this morning (and also broke, although that may not be related) over the news that Ed Victor, a UK-based agent, has opened a separate publishing house to release its clients books in digital and POD. For now, it looks like the plan is only to publisher reverted backlist titles, although Victor is allowing for the possibility of first releases at some point in the future. I’ve already expounded at length on why I think agents should not become publishers, although I think there is probably a framework in which agents could offer publishing services to their authors in a way that is both ethical and helpful. The Vincent framework is not, however, ethical or helpful, because of this:
Net receipts will be divided 50/50 after costs of production are recouped from first receipts.
/blink
Let me read that again. In this case, the agent-publisher is going to take 100% of net until the “costs” of production are recouped (and how am I supposed to know what those costs are) and then is going to skim HALF the royalties after that. Um, can you say “bad deal”? Because this looks all around like a crap arrangement that benefits the agent-publisher a hell of a lot more than the author. (Courtney Milan has a good post examining the monetary conflict-of-interest issue here.)
On Twitter, we all agreed that authors who accepted this sort of deal must be either insane or uneducated or possibly somehow felt bound by the terms of their contract to go with the flow (and by that, I don’t mean that they were necessarily legally obligated to do it, but they didn’t want the hassle of publishing their backlists themselves and taking this would keep their relationship with their agent intact).
But then I started thinking about it and…there are hardly ANY publishers, big NY houses or smaller digital houses, that are offering 50/50 splits on net royalties for digital books. With most of the major NY publishing houses, my understanding is that the author is paid 25% of net on digital book sales (and it’s unclear how the costs of production get accounted for in the “net” calculation). Obviously, that’s not 100% consistent–some authors may be getting more and some less, depending on when their contracts were signed and what their agents pushed for/got in negotiations. But by and large, 25% of net seems to be pretty typical.
Now, for a lot of those contracts, there’s also a print side, and the royalty there is lower (usually 6-8% of the cover price, IIRC) and often, there is an advance. And if you are getting a guaranteed payment upfront that ensures you will never be paid LESS THAN X for the rights to publish your book, it is arguably a better deal to take the lower royalty percentage in exchange for cold, hard, certain cash than to “do it yourself” for a much higher percentage of very uncertain and unpredictable sales. Most of the digital small presses pay better than 25% of net–they usually come in closer to 30-50%, from what I know. But still, they’re usually taking at LEAST 50% of net.
So what makes the agent-publisher deal that’s 50% of net so horrific when 50% of net from a digital publisher would be a good deal and 25% of net seems to be considered completely acceptable? Well, obviously, there’s the whole conflict of interest issue. In the agent-publisher model, it’s very possible for the agent to make a lot more money by publishing the book through his/her own house, because he’s getting a much greater percentage of the money that way (50% as opposed to 15%).
But frankly, I have to question whether 25% of net is EVER a good or acceptable deal from a publisher unless you are getting an advance. And even if you are getting an advance, it may not be a good deal if the advance is too low.
The thing is, most of the big publishing houses are either starting or have already started digital-first imprints. Harlequin has Carina Press. Avon has Avon Impulse. Random House is on the verge of announcing a digital imprint. NONE of these publishers are paying anywhere CLOSE to 50% of net and most, I suspect, will settle at 25% of net. (Carina may be at 30% of net. I can’t get a clear bead on that as they don’t seem to disclose this on their website and the rest is just chatter.)
So, if 50/50 is bad when Ed Victor does it, isn’t 25/75 or 30/70 or even 40/60 more bad? Honestly, I think the agent deal is worse because of the incentive it gives the agent to push you toward its publishing arm rather than selling you to a publisher that might pay you a nice advance that you will get more of than your agent will. BUT, in the age of 65%-75% royalties on self-published titles from B&N and Amazon, I’m not sure that authors ought to blithely accept 25% of net, especially when there’s no advance, just because it’s become the standard digital rate and they feel they have no other choice.
The reasonable author cut of royalties on a digital book put out by a publisher that is providing solid editorial, cover art, formatting, and distribution may be LESS than 50%, but it is certainly (IMO) more than 25%, especially when there is no advance (and thus, no guarantee that the author will make even $100 from his/her efforts) and no print distribution. If you disagree, tell me why. I’m all about being reasonable, and if I’m being unreasonable in this belief, I want to know about it!
Carina pays 30% of cover if sold via its website & 15% off cover if sold via 3rd party vendors. It was posted on AW, and the royalty % as far as I know is not negotiable.
I don’t like it when agents do this not because the terms they offer are necessary better or worse than publishers or Amazon KDP. It’s because agents are supposed to look out for their clients’ best interest, and Ed Victor’s deal does not show that he’s going to be capable of performing fiduciary duty.
I totally agree re: the fiduciary duty.
I think 30% of cover is a decent royalty rate; 15% of cover actually works out to about the same as 25% of net from what my agent tells me, though. In other words, it’s 25% of net by another name and most sales are likely to come through third parties, so…
The conflict of interest in the agent scheme is obviously a greater concern than the royalty rate and the fact that it gives the agent an incentive to screw the author.
That said, I’m not sure that publishers are providing enough “value-added” in most cases to support me giving up 75% of my royalties unless I’m getting an advance. It’s not just about what I can get from Amazon/B&N, but about what I’m getting for what I give up and whether it’s worth such a huge percentage of my earnings for the life of the contract.
I agree, and I’m looking very closely at what publishers are offering to writers beyond editing, cover and distribution. Regardless of what people may assume, Amazon and Nook seem to be the most dominant e-tailers at this point, and both are accessible by authors on their own.
Before ebooks became so dominant, publishers offered a lot of value, esp. in the form of physical book production. (Because it ain’t cheap to print thousands of copies…) But now…it’s something else.
15% of cover is below 25% net, provided that your publisher is doing agency pricing. Or so my math tells me.
I absolutely would not agree to 25% of net with no print distribution and no advance. I wouldn’t agree to it today because I am positive that those terms will not persist.
I would be even more loathe to consider it for a contract that came with reversion clauses that would never kick in.
And for Ed Victor–In addition to the stated terms, I still want to know who owns the files? Can his authors go and put them up on their own if he leaves the business? How long do they have to publish with him? Is he taking 50% in perpetuity or is it for a limited time?
25% of net is 17.5% of the cover price if the only cost your publisher is netting out is the 3rd party’s cut. But there may be other costs being netted we don’t know about, which might easily account for another 2.5%.
At any rate, 25% of net and 15% of cover are very, very close. My agent says it is common for her to see either one or the other in the boilerplates she gets from NY pubs and that, based on royalty statements, they wind up being very close to the same in terms of payout.
@Courtney:
Yes, 25% of net is a non-starter for me without an advance and print distribution (and yes, both). The Carina splits would also be a non-starter, despite the better rate on books sold through their website. I think for digital only and no advance, the royalty rate has to be a minimum of 35% of net for me to even consider it.
I’ll also never sign a contract that won’t revert. I am so glad my Kensington contract clearly specifies a minimum print run or it reverts. I didn’t even examine that closely at the time I signed, so phew!
And yes, I wonder all of those things about the Ed Victor deal, too. To me, it sounds like this is not “really” the author self-publishing, but set up as an actual publishing house, which implies to me that Victor owns the files and all access to them. Not pretty.
Two major differences between Ed Victor and a publishing company, though:
1. Ed Victor has no experience making covers or hiring proofreaders, no process in place for vetting files for quality, and no experience marketing or data to know what is and isn’t effective.
2. Legitimate publishing companies may pay less, but they do not charge the expenses to the author.
So I can definitely see someone saying “yes” to 25% but no to this kind of a 50/50 split.
@Courtney:
Agreed on your points as to why 50/50 from Victor might be less acceptable than 25/75 from a reputable publisher.
That said, if a reputable publisher offered 50% of net after recouping costs and I knew upfront EXACTLY what those costs would be, I might prefer that to a 25/75 deal. I know that sounds like heresy (you’d let a publisher charge you for production? quelle horreur), but since I have a good sense of what production actually costs and would have to pay those amounts to self-publish but also spend the time and effort to find subcontractors and so on, that 50% deal might seem pretty reasonable to take the work off my plate. All other things being sensible of course (i.e., reversion clauses and so on).