A HarperCollins analysis of its own figures confirms what the Guild has long pointed out--that when sales migrate from hardcover to digital, publishers' profits rise at the expense of author royalties. Publishers Lunch highlighted the numbers in a piece today covering HarperCollins' investor day conference.
In the sample case of a new release frontlist title, the ebook edition is 39 percent more profitable, returning an additional $2.20 in profit to the publisher over the hardcover. Authors and agents will immediately note that much of the additional profit exists because the royalty allocation once earned out is $1.58 lower on the ebook than for the hardcover. On a hardcover, the author earns 30 percent of the publisher's gross revenue, and 42.5 percent of the total margin (what the author and publisher together earn). For now, on the ebook, the author earns 25 percent.
On the AARdvark blog, agent Brian Fiore said HC's numbers confirm what publishers have been denying for years: "That their savings on printing, binding and distribution make up for the lower revenue from lower e-book prices– and that increased profitability is coming entirely off the backs of authors."
Fiore also dissected the often-heard argument that royalty rates are irrelevant to the large percentage of authors who never earn out their advances. The current ebook royalty standard, he wrote, penalizes authors who exceed expectations while leaving untouched celebrities and big name writers whose sales don't merit their big advances.
The only thing really surprising about these figures from HC is that they came directly from the publisher. More than two years ago, the Guild did the math showing the disparity and proposed an interim solution that would protect authors until a fairer industry standard could be worked out. Since then, the continued migration away from print toward ebooks has made the need for a more equitable royalty system even more urgent.