Friday, June 17, 2011

Down and Dirty Ethics of Digital Publishing

OK, full disclosure: yesterday's post wasn't *just* a general knowledge "Hey, you should know this, just because!!" post.

Reading that post and understanding what's outlined there is vital for understanding *this* post. So...I'll wait. :)

Now that we're all on the same page:

I'm sure you've heard of the new companies popping up as independent digital publishers. Some are actually integrated into agencies.

Independent ePublishers typically have 50-50 royalty splits and handle new covers, conversions, etc. Most (now at least) do this front-end work for no money down, without an advance. I think this is pretty fair, although there is certainly room for improvement (but that's another post).

Today I discuss the latter--agencies getting into the ebook business. Many people have an immediate negative reaction:
agencies shouldn't be publishers. It's an inherent conflict of interest (how can someone negotiate against herself in your best interest?). But if agencies aren't allowed to epublish on their authors' behalf, then how can they, for instance, put an out-of-print backlist online, which is in their client's best interest?

Are they forced to go with one of the indie ePublishers, even if, for whatever reason, they don't think it's best?

The issue is more complicated than just "Agencies should never publish." And to get to the bottom of that, you have to get at the financials: who's getting paid for what.

In a traditional publishing deal, the author pays both sides: the publisher takes a revenue split on sales (your royalty rate is the other portion of this split) and the agent takes a standard 15% commission on the gross (total amount before taxes) of all monies received.

The publisher gets paid for publishing the book, the agent gets paid for working on the book, getting it sold, and monitoring the publication and sales forever.

So let's say the backlist is small, and it's better to leave out the ePublisher, do the conversion through a freelancer, and get a 70% royalty for the author (in their best interest!) by publishing directly with Amazon, etc. The agency handles everything. Of course, they should still get their 15% commission. They got the book sold in the first place, and they're facilitating the ebook.

But I've heard of agencies, here and abroad, taking a 50% instead of 15% cut in the name of all the "extra work" they're doing on the ebook. To someone who doesn't know the steps (unlike you who does know the steps), that probably sounds reasonable. Who the heck knows how HTML works, anyway?! It's probably some sort of voodoo.

Those agencies seem to be saying "pay us 35% for publishing this ebook, and, of course, we're still entitled to our 15% for working on and getting the book sold in the first place." So a cut for a "Publisher" function and one for an "Agency" function. This is where we cross the ethical line, in my opinion.

There's no publisher involved.

"But," you might say, "don't they deserve some more dough for the extra work they're doing that a publisher normally would?"

Well, back to yesterday's post: There are 6 steps (roughly) to getting an ebook online. 3 of those are probably going to be done by a freelancer (the conversion). Your agency, unless they've made some big personnel changes recently, is probably going to contract this work out. After all, they've had a full-time gig being agents for some time now; more than likely they don't have time to integrate ebook coding themselves.

So, you should be paying the freelancer, not the agency, for the conversion. A simple referral to a freelancer doesn't justify a 35% cut of sales (forever).

Step 4, the upload, takes vigilance and attention to detail, but it's a one-time deal. And it takes about 30 minutes. I've heard of and support agencies charging a (small) flat fee to perform this service, but a 200%+ higher commission rate?...not so much.

Step 5 is a step that agencies already do for all of your books. Monitor sales and royalties. So that definitely doesn't justify 35% more money--or any more money.

The final step, marketing, is and always will be a split labor. I do foresee agencies charging to do marketing for their authors. We are, after all, really good sales people. But marketing services should not affect commission rates, which are tied to sale of books only. (Marketing helps sales of books, but it is not sales of books)

So 50% of the process is done by someone else, 16.67% is one-time "extra work" for the agency, 16.67% is what they've always done, and 16.67% may not be done at all by the agency, and isn't related to sales, which are what we typically commission. I'll leave you to make the final decision, but that doesn't sound like it adds up to a 50% cut for the agency.

Agencies stand to make money on the sales of books. There are opportunities for agencies to provide new services to their clients in the marketing arena: setting up and managing a social media presence, for instance. And for those, they should certainly be paid.

But the publication of clients' books online should not be considered a new revenue stream for agencies. Royalties, sales, are an agency's revenue stream. It's not that agencies shouldn't facilitate the publication of clients' books online, it's that they shouldn't be paid as publishers.

A client's book going into ebook format is the same, for an agency, as having the book come out in mass market (as far as commission). Someone gets it into the new format and the agent monitors the publication and sales, and continues to take 15% for services rendered.

And, dash it all, we still have to figure out the marketing.

5 comments:

  1. Thank you so much for this very intelligent breakdown of the problem. 50% sounded high to me, but I couldn't figure out why. This is important stuff. You're doing a great job of helping us keep up with the ever-shifting publishing landscape.

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  2. I've been waiting for an agent to discuss this online. My immediate thought is that this highlights that publishers aren't paying high enough royalties on ebooks.

    I personally like the idea of having an agent whether we publish independently straight to ebook or go with a publisher: An extra pair of eyes, an experienced professional who sees merit in your work, guidance with marketing.

    If an agency out sources the editing, conversion, & cover design then the author pays for those services. It would be fair for the agency to charge a one off handling fee, not % on sales. Full disclosure on pricing.

    If the author can't pay for those services I guess there's the option of recouping that cost from sales: the author doesn't get paid until the agency has recouped those costs. This would mean the agency would be carrying some risk, but I imagine if you've signed a client you believe in their work. I've looked into those costs and I think that risk is minimal. There'd be added incentive for creative marketing.

    I also think agents would be able to take on more clients. If you have a project that you can't sell to a publisher, but you like, you have the option to go straight to ebook.

    If I was a businessman I'd expect agents commission to rise. There'll be more phone calls to make, more office work.

    Thanks for the great post. Talk soon :)

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  3. Thanks for the feedback, guys. It's a complicated issue. Ethics have to stay at the forefront, though!!

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  4. Thank you. This is the first post I've come across that discusses this issue. Very interesting, and a great heads up.

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  5. Thank you for this post. This is one of the first posts about this from an agent's perspective, and I whole-heartedly agree with what you've said.

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