Authors Guild Presses Members to Negotiate Ebook Royalties

Posted on June 18, 2004

The Authors Guild has urged its members to focus on ebook royalties during contract negotiations. The Guild said that Random House's new ebook royalty rates signal that the largest trade book publisher believes that ebook sales will be increasingly significant in the industry. Ebook sales have continued to show huge growth each year. The AAP reported that ebook sales grew 45% in 2003, but the number of ebook sales still remains a small percentage of overall book sales.

Random House had paid royalties of 50% of its revenues for ebook sales -- the best ebook royalty among major publishers. For book contracts signed after May 31st, Random intends to reduce that rate to, effectively, 30% of receipts for ebooks sold at standard discounts to retailers and 15% of receipts for high-discount sales. Royalties for works that haven't earned their advances will be higher.

"Ebook royalty rates will matter -- we want to make sure authors and their representatives are paying close attention, " said Guild president Nick Taylor. "Sales have been modest, certainly not what industry optimists had hoped for in the 1990s, but they're growing quickly, and the reading devices are rapidly improving."

Since ebooks sell primarily online, the Guild said that authors should take precautions to deal with Amazon.com's dominance in online bookselling and the possibility that publishers will sell large numbers of ebooks directly to readers.

"Amazon may be able to command steep discounts as the price of reaching its customers," said Mr. Taylor. "Authors have to take care that they don't wind up paying for that." The Guild stated that discounts of 65% often trigger "high-discount" clauses which may shift most of the burden of the added discount to the author by drastically reducing royalties. The Guild said authors can avoid this by limiting such sales to those outside of ordinary trade channels.

Publishers may also be able to sell in considerable volume directly to readers by giving incentives for ebook buyers to register with the publisher. The publisher could then target offers for specific titles to readers who are likely to buy. The Guild urged authors to negotiate a separate royalty rate for such sales.