E-publish and be damned – emerging trends of the digital book economy

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Analysis by Alex Klaushofer.

Those trying to follow the changing fortunes of book publishing in the digital revolution have had a tough time of it trying to discern the direction things are taking. But, finally, in the last quarter of this year, a few trends are beginning to emerge.

First fact: the long-predicted shift from physical to digital publishing is gathering pace: according to a survey by FutureBook, independent publishers are predicting that digital sales could account for 15% of sales by the year’s end.

The shift heightens the rather fraught issue of digital royalties which has been dividing authors and publishers since e-books appeared on the scene. Authors, arguing that the removal of printing costs should free up more of the book’s revenues to come back to the creator, have been seeking a cut of 50%, while publishers – maintaining that a fifty-fifty split fails to take into account the true costs of publishing – have tended to offer a maximum of 25%, a rate which has become increasingly standard across the industry.

However, it seems that the gap between the two positions is beginning to narrow, with the Society of Authors reporting that royalties paid out on e-books are increasingly 30-35%, a rise attributed to its general secretary Nichola Solomon to effective lobbying. Meanwhile, there are signs of a similar upwards movement in the US: The Bookseller in August reported that e-royalties were increasingly moving to 30-35%.

The differing perspectives of authors and publishers reflect the widespread ignorance about the new economics of e-publishing. In a clear-eyed breakdown of the costs in June this year, Tom Tivnan points out that the lack of transparency about the financial model underpinning e-books is contributing to the suspicion that publishers may be raking it in. Noting that publishing an e-book involves conversion to digital files and digital warehousing, as well as the usual labour-intensive costs of editing and marketing, he proposes a compromise royalty of 40%.

Part of the reason for publishers’ caginess about costs of e-books may be that, with the market price yet to settle at an agreed point, they don’t yet have a clear idea of the revenues they can generate. Other uncertainties include how far the new format affects what people are most likely to buy to read on-screen. There is some suggestion that popular genres are particularly suited to the medium: the US thriller writer John Locke claims to have made over £375,000 from online publishing this year, for example.

The limitations and opportunities of on-screen reading are also leading publishers to experiment with length, commissioning work written specifically for e-consumption. The idea that people can only absorb bite-sited chunks of information via phone or computer has been beating a retreat in journalism for some time, with longform articles finding a ready audience. Now the publishing world is following suit, with initiatives such as Brain Shots, a series of short monographs aimed at the ‘time-poor’ reader published by Random House,
and Collca, a publisher producing e-books for phone apps that can inform the reader on a given subject in an hour.

It’s easy to see how the lack of transparency about the financial benefits of the e-book, combined with the difficulties besetting traditional publishing and the openess of the digital world is fuelling the newly-respectable trend of self-publishing. Some authors are wondering whether signing up with a traditional publishing house is worth all the bother, with a few established writers such as Stephen Leather taking the indie route online while maintaining a deal with publishers for the physical versions of their books. This kind of pragmatic approach gives authors the possibility of earning royalties of up 70% on Amazon while putting pressure on the publishing world to prove it is genuinely adding value.

And, with the Christmas exchange of e-readers giving a further boost to electronic reading, these trends look certain to accelerate in 2012.

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