Random House Slashes E-Book Royalties

Here’s some important news on e-book royalties from the Authors Guild…and some essential advice to authors on how to deal with this issue in their book contracts.

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Random House recently advised literary agents that it will reduce the e-book royalties it will pay, starting with contracts signed this month. Since November 2000, Random House had essentially based its royalty rates on the notion — correct, in our view — that selling e-books has financially more in common with the act of licensing than with selling a traditional book. Once an e-book is created, the cost of producing an additional copy is practically nothing, just as a publisher incurs no production costs when it licenses the paperback reprint rights to a book, only the costs of negotiating and administering the license. Until now, Random House has split the net revenue from the sale of e-books with authors 50-50, just as it typically splits reprint-licensing revenues with authors. Random House’s e-book royalty rate had been the best among major trade publishers.

Unfortunately, Random House is abandoning this sensible approach. Random says it will honor its promise to pay 50 percent of net receipts on e-book sales for works under contract by May 31. For contracts signed on or after June 1, the publisher intends to pay 25 percent of list price until the author’s advance has earned out. (In its letter to agents, Random says that 25 percent of list is equivalent to 50 percent of net receipts, implying that its standard e-book discount is 50 percent.) Once the advance on a work is earned, royalties are sharply cut, to 15 percent of list price. For high-discount sales — those sold at discounts of 65 percent or greater — Random intends to cut its royalty rate further by applying its new royalty rates to net receipts rather than list price. That is, for high-discount sales, it will pay 25 percent of net receipts on titles with an unearned advance and 15 percent of net on titles with an earned advance.

What it means:

E-books aren’t dead; these royalty rates will matter. Random House clearly anticipates that e-books will be an important source of income and has decided that the author-relations value of its e-book royalty rates declared in 2000 is outweighed by the costs it now anticipates those royalty rates would incur. (Recent figures confirm that e-book sales are growing rapidly, though from a quite small base.) Those with negotiating clout should do what they can to secure more favorable terms, whether they are negotiating with Random House or any other publisher.

Negotiate the premium or high-discount sales clause carefully. When a sale falls into a contractually defined high-discount category, the result is always a drastically reduced royalty (in the case of Random House, this lops 65 to 70 percent off of royalty earnings). Protect yourself by inserting language specifying that sales will be deemed to be high discount only if they are made outside of normal trade channels. Since most e-book sales are made online, where Amazon.com dominates, it’s conceivable that Amazon may successfully demand high discounts as the cost of reaching its customers. If these sales are deemed “high discount,” then the author would shoulder nearly all of the burden of the reduced revenues to the publisher.

Random House has confirmed to us that they will make this change — specifying that only sales outside of normal trade channels may be deemed special sales — to their contract, but you have to ask for it.

Negotiate a higher royalty rate for direct sales by the publisher. Random House may be anticipating that its own e-bookstores will generate significant revenue. It’s certainly possible. By giving the e-book buyer an incentive to register with Random House (“Any e-book we sell for $1!”), Random could capture the e-mail addresses and other information it needs to market specific e-books directly to those who are likely to buy them. Under the old royalty scheme, Random would have to pay royalties of 50 percent of net receipts for these sales, which might be made at very low discounts. If Random sold the e-book directly at a 20 percent discount, for example, the author would earn 40 percent of list price. (This is fair, since Random would also be doing quite well by the sale.) Under the new scheme, Random would pay the author as little as 15 percent of the list price.

Authors with negotiating leverage should consider seeking a net-revenue based royalty for any direct e-book sales by a publisher or any of its affiliates, including its book clubs.

Important: While this advisory addresses the Random House e-book royalty situation specifically, we think the lessons apply to e-books generally. Authors should be paying close attention to e-book royalty rates when negotiating contracts.

Signings

My latest DIAGNOSIS MURDER novel, “The Shooting Script,” is coming out on August 3, so I am starting to line up signings and speaking engagements. Here’s the schedule so far, with more in the works…

Saturday, Aug. 7, 2:30 pm Mysteries to Die For, Thousand Oaks, CA
Wednesday, Aug 25, Rossmoor Auditorium, Walnut Creek CA (more info to come)
August 27-29, 2004 East of Eden Conference, Salinas, CA Keynote Speaker, Panel Participant
Saturday, Sept. 18, 10-4 pm Men of Mystery, Irvine, CA
Sunday, Oct. 3, 2 pm Sisters In Crime, South Pasadena Public Library
Oct. 7-10, Bouchercon 2004 Toronto

Best Laugh of the Day

From Sarah Weinman’s wonderful blog, where she does a wrap-up of mystery news across the web…

Dean Koontz, the horror-meister who has never publicly answered for the mysterious reappearance of his hair, answers questions at ABCNews.com.

Speaking of Koontz… when I wrote my novel MY GUN HAS BULLETS, a spoof of network television, one of the fake TV series that figured prominently in the book was FRANKENCOP.. the best parts of a dozen dead cops put together to make one incredible crimefighter.

It was a joke. Silly me, I should have tried to sell it.

Koontz has teamed up with Martin Scorcese to do a cop show for USA Network. The cop is Frankenstein.

Steven Bochco apparently is smarter than me. In his novel, DEATH BY HOLLYWOOD, there’s a fake TV series about a blind cop called (what else?) BLIND JUSTICE that figures prominently in the plot. He must have really liked the idea… because BLIND JUSTICE just made it on ABC’s new fall schedule.

Some Things Never Change

I’m in the midst of writing my fourth DIAGNOSIS MURDER novel, which is based, of course, on the TV series that starred Dick Van Dyke as Dr. Mark Sloan. There were a lot of creative choices made on the show, for the convenience of production, that I’ve carried over into the books (like Mark Sloan and his adult son Steve living together in the same house). I’ve wondered just how much I should begin deviating from the show to accomodate the broader opportunities of a novel.

I’m not fooling myself… most people who are buying my DM book are doing it because they loved the show and want to repeat the experience…not because they are looking for a clever whodunit. The books will always be seen as TV tie-ins, no matter how well-reviewed they might be in their own right. But how much can I tinker with the characters, format and situations without alienating that core audience? And how much should I in order to keep the series fresh and engaging for the readers?

I don’t have answer… but my gut tells me to take the NERO WOLFE approach. Over the decades that Rex Stout wrote the books, virtually nothing changed in the lives of the characters… except, every now and then, he’d shock you with an unexpected situation (Wolfe has left the country!) or revelation (Wolfe has a daughter! A trusted operative is a killer!). But things would always return to the status quo… Wolfe and Archie back in the brownstone, solving crimes.

Maybe I should have Steve move out of Mark’s house… and then move right back in.

Is This How To Sell Books?

A week or so ago, I posted a note here saying how glad I was that my broken right arm, the one with the titanium elbow, was finally out of a cast and I could more-or-less resume most of my normal activities. Naturally, somebody saw this post as the perfect opportunity to plug his upcoming book.

I am pleased to announce the signing and acceptance of a contract for the publication and upcoming release of “Dreams-The Gateway.” Follow the research professor who dares to venture into a world of dreams. New technology truly becomes a nightmare for those who transverse into “Dreams-The Gateway.” A novel by Louis Poessel.

Curious, I checked out Louis Poessel’s site to see how his book was related to broken arms, casts, titanium elbows, physical therapy or me. There I found a picture of a middle-aged man with a white beard sitting in front of an American flag like Wally George. A few clicks later, I discovered that Louis decided to pursue writing after retiring from a “lengthy career in the agricultural seed industry.”

His unique blend of science fiction combined with snippets from his personal experiences take the reader into a world of fantasy, yet possible scenario. Possessing a broad background in the agric-business industry he often uses it as the backdrop for his vivid imagination.

I also learned his first novel is:

A vivid account of a research professor that has broken the bonds of reality and entered the world of dreams. Follow the professor from his safe and protected college research laboratory to a secret government base where new technology truly becomes a nightmare…

I’m assuming the new technology isn’t titanium elbows. Still, I’m sure everyone interested in my arm will want to buy the book.

Where’s the Outrage?

On her blog, Sara Weinman unearthed an incredible column by Otto Penzler, founder of the Mysterious Press and proprietor of the Mysterious Bookshop. I don’t know how I missed this article when it first ran in April. I don’t know why every author of cozies and hardboiled mysteries alike isn’t incensed by his article.

The column is incredible because Penzler is something of a leader in the mystery field, both as a prominent NY bookseller, as well as a respected editor and publisher of mysteries. He’s treated as mystery royalty.
He shouldn’t be anymore, because as he reveals in his column, he’s one thing above all else:

A prick.

In his column, he trashes… and I mean trashes, “cozy” mysteries.

The books stacked in front of me are the finalists for the Agatha award, given at the annual Malice Domestic conference. This event honors books written in the mode of Agatha Christie, loosely defined as those that contain no explicit sex, excessive gore, or gratuitous violence. Unstated, but clearly of equal importance, is that they must contain not a scintilla of style, originality, or depth. They must have the texture and nuance of an infomercial, lacking only its philosophical power.

My fiancée, as kind and generous as she is beautiful, defended them briefly by comparing them to television sitcoms, to be read as pure escapism. “They’re throw-away books,” she says. I agree. We just disagree about timing, as I think they should be thrown away before they are read.

There’s nothing wrong with disliking cozies… but then he personally, and quite viciously, attacks the authors nominated for the Agatha Award, some of whom are the sweetest, kindest people you’d ever want to meet (and several of whom… okay, most of whom, are friends of mine). They have also helped line his pockets for decades… making the pilgrimage to his store and signing hundreds and hundreds of books for him to sell. I won’t repeat the individual attacks, but he summarizes his feelings this way:

You know the scariest thing about this little shelf of books? They are the cream of the Malice Domestic crop. That’s crop — with an “o.”

The criticism, as pointed as it is, isn’t the problem. The authors and their work are fair game. But coming from Penzler, an editor, publisher and bookseller in the mystery field, it’s an act of raging hostility, utter stupidity, and naked hypocrisy(not to mention revealing that Penzler has the social skills of a rabid weasel). For a man who has profited off authors for years… whether they write hardboiled mysteries or cozies… to write an article like this is an act of pure malice. I hope the “mystery community” as a whole boycotts this jerk and his store… and makes him as welcome as Legionnaires Disease at the mystery conventions he likes to grace with his presense.

Another View on the Book Fest

My brother Tod offers his take on the LA Times Bookfest in this weeks Las Vegas Mercury. He also talks about the experience of being quasi-interviewed by Byron Allen.

I’m sitting in a chair talking to Byron Allen and I think, man, if this were 1979, this would be one of the biggest thrills of my life. I’d be peppering Byron with questions about Sarah Purcell and the rest of the “Real People” cast and digging for info about his stunning turn on “Battle of the Network Stars” alongside Greg Evigan and Fred Willard. Instead, it is 2004 and I’ve spent the past two days walking among the broiling multitudes at the L.A. Times Festival of Books, the largest literary gathering in the universe (400 authors and upwards of 140,000 people attend over two days) and though Byron Allen is preparing to interview me for a new show called “The Writer’s Hotlist,” the biggest thing burrowing in my mind is that I think, though I’m not positive, that I can smell my own groin.

Edgar Winners

And the Winners Are…
BEST NOVEL

Resurrection Men by Ian Rankin (Little, Brown)

BEST FIRST NOVEL BY AN AMERICAN AUTHOR

Death of a Nationalist by Rebecca Pawel (Soho Press)

BEST PAPERBACK ORIGINAL

Find Me Again by Sylvia Maultash Warsh (Dundurn Group)

BEST CRITICAL/BIOGRAPHICAL

Beautiful Shadow: A Life of Patricia Highsmith by Andrew Wilson (Bloomsbury)

BEST FACT CRIME

The Devil in the White City by Erik Larson (Random House – Crown Books)

BEST SHORT STORY

“The Maids” – Blood on Their Hands by G. Miki Hayden (Berkley Prime Crime)

BEST YOUNG ADULT

Acceleration by Graham McNamee (Wendy Lamb Books/Random House Childrens)

BEST JUVENILE

Bernie Magruder & the Bats in the Belfry by Phyllis Reynolds Naylor (Simon & Schuster/Atheneum)

BEST TELEVISION EPISODE TELEPLAY

The Practice – “Goodbye”, Teleplay by Peter Blake & David E. Kelley

BEST MOTION PICTURE SCREENPLAY

Dirty Pretty Things by Steve Knight (BBC, Celador Productions, Jonescompany)

Block on Signings

Sarah Weinman clued me in to this terrific article by Lawrence Block on signing and touring…

The whole signed-books issue got accelerated with the 1992 publication of John Dunning’s Booked to Die, which noted that books simply signed by the author had more collector value than those inscribed to a specific reader. Almost immediately, I noticed an upsurge of buyers who murmured “Signature only, please.” It’s much quicker just signing one’s name, and not having to write “To Cathy, I’ll never forget that heavenly night in Sioux Falls.” And was that Cathy with a C or Kathy with a K, and does it end in Y or I?

“Thank you, John Dunning,” many of us said under our breath when another signature-only appeared. But there was a downside. If more folks were content with a simple signature, they were also intent on getting their entire collection signed.

Larry is being a bit disingenuous… as much as he questions the value of signed books and the desire readers have to get their books signed, he’s certainly taking advantage of the market more deftly and agressively than any author I know. Not only does he tour extensively to support his books (as he should), he also runs a small business through his website and his newsletter — and literally out of the trunk of his car — selling signed copies of his backlist and other editions. It’s rare to find an UNSIGNED Block book. So while he may question the whole signed-book-mania, he’s certainly profiting from it and, no doubt, hoping the craze doesn’t wane. Who can blame him? I admire his writing and his salesmanship. But given the way he’s embraced the signed book market, I found the tone of his entertaining piece a bit puzzling…