This editorial, by Authorlink.com Editor in Chief Doris Booth, originally appeared on the Authorlink site in October 2010.
Many authors who received their royalty checks from major publishers this summer received an unwelcome shock. In a number of cases–especially among back-list authors– royalty incomes have been slashed in half as the result of the so-called new “agency model” which lets major publishers set the retail price of their books.
The new scheme was touted to authors and their agents as one that would earn them just about as much royalty at 25% of the publishers net income (agency model) as they did under the old retail model—generally 8- to12% of a book’s retail price. The new royalty rate almost sounded like a pay raise. But it hasn’t turned out that way for some.
True, the difference between 12% of the gross or 25% of the net on average amounts to a few cents per copy. Not a big deal unless the author is selling millions of copies. Where the real pain lies for the beleaguered writer is in publishers’ new retail pricing structures.
Under the old pricing system, publishers “sold” their titles to booksellers such as Amazon at a discount of 45-55% , and the reseller set any sale price it desired. But early this year, Amazon scared the bejeezus out of publishers when it started buying publishers’ e-books for its Kindle reading device for about $13 and then selling them at a loss for $9.99. Publishers feared that Amazon and other e-book retailers would drive the price point down to around $9.99 for just about every title—including high-dollar bestsellers. So publishers devised the new “agency model” that allows them to set their own retail prices and pay resellers like Amazon and Apple a flat commission of about 30% on the sale.
The squabble over who gets to set the price escalated when Amazon pulled an across-the-board “black out” on titles from publishers who didn’t agree with their heavy discounts, prohibiting the sale of their books in a venue that commands about 80% of the e-book market.
Panic set in.