Friday, February 05, 2010

Redefining "Net" under an Agency Model

If you've been following book-industry news, you know that both Macmillan and now Hachette Book Group have announced they are moving to an agency model for selling eBooks. This, of course, raises questions on how authors will be paid royalties. Today, I emailed David Young, CEO of HBG two questions:

What will Hachette’s “commission” to “agents” selling eBooks be? Macmillan’s is reportedly thirty percent. What is HBG’s?

On what figure will the royalty to authors be based? Presuming a 25% of net royalty and a $25 book, one could argue that the “net” figure is the $25, because the selling agent is compensated by HBG for selling the work. Just as publishers do not deduct royalties due the author because of commissions paid to its sales force, neither should it deduct royalties for commissions paid to other sellers.

The second point is arguably the most important, as it could render the "net" royalty that Random House and other publishers have been beating authors about the head with as moot.

Keep in mind that all publishers have sales forces, either their own or via a third-party distributor. Those sales reps work on commission. The more books they sell, the more they make. Under the Agency Model adopted by both Macmillan and HBG and almost certainly to be adopted by others soon, Amazon and other sellers of eBooks will become "agents" of the publisher, required to sell at the price set by the publisher and receiving a thirty-percent commission.

But when a publisher uses a commission sales force, they don't deduct the commission paid to sales reps and pay authors on the "net." They pay off the full retail. And I would argue that the same should be true of eBooks under the Agency Model.

As the Chinese curse says, "May you live in interesting times." These surely are interesting times.


1 comment:

admin said...

Living in Austin, Texas, I get to see first-hand how the music industry model has shifted with the advent of cheap or free music downloads. One might argue that music and books are consumed in qualitatively different ways, but even if that argument is accepted, we're still talking about an old analog form being supplanted by the new digital form. It's worth making the comparison, I think.
So, back to the point, around here, artists aren't much worrying about big labels anymore, or even becoming hit-makers. The town is now full of income-supplementers and middle-class music entrepreneurs. They make money on live shows of all kinds, including kids' birthday parties and backyard barbecues; teaching; show-ups at conventions and trade shows; whatever. They sell T-shirts, books, non-music appearances, all kinds of things. They make deals themselves to get their music product out, whether through their own web sites or others, and the physical CD product is less and less relevant -- hell, they're often giveaways.
There are writers out there now doing the much the same thing, using their product, even if sold in small quantities, as a springboard for moneymaking performance of various kinds (t-shirts, not so much).
I am agnostic as to whether this is a good or bad thing. I will write, and then pursue the avenues that seem most . . . what, I dunno, useful to get my message of universal love and harmony out?

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