As I explained in my first two blog posts in this series, the advances in technology, coupled with a change in buying habits, has impacted publishers in any number of ways (some good, some not so good.) During this flood tide of change (and partially as a result of it), the distribution-payment schedule for traditional trade sales has evolved into a seriously flawed model. Review those posts here and here.
By way of recall: a book with a $30.00 retail price nets each publisher (give or take a quarter or so), $9.75. That means publishers must pay everything--authors, printers, storage, taxes, shipping, design, formatting, editing, utilities, wages, insurance, office supplies, travel (I could keep going) out of the $9.75. "That's Impossible!" one person announced to me recently. He is not far from wrong.
This impacts authors in many ways, but the main result has been a significant change in the structure of royalty payments. The impact on authors can be positive and negative, depending upon the publisher the author selects, and the author himself.
Traditionally, authors were paid a royalty based upon the retail price of the book. If the book was $30.00, and the royalty was 10%, the author received $3.00 for each book sold, whether the publisher received the full price or something less than full retail. Recall that before the advent of the Internet, Amazon, eBay, etc., a large percentage of books were sold at full price. But buying habits have changed, and so few books are sold for full retail unless there is a value-added incentive (early shipment, signed copies, first or publisher edition as opposed to a cheaper book club printing, and so forth).
With some publishers, especially those who handle their own distribution (and so do not have to fork over 35%-50% in distribution fees), authors are still paid a royalty based upon the retail price. However, many (most?) of these publishers pay little or no attention to individual authors and titles, do not plan a book tour (even the large houses plan few tours), arrange media for only a select handful of dozens or even hundreds of titles, and then rapidly remainder their remaining inventory after the initial push into the book trade is over (just 90-180 days). Authors who have spent years working on a book suddenly find they cannot get a meaningful response from their publisher, little or no marketing support, and their labor of love is quickly thrown into the remainder bin at Walmart or online and sold for $3.99. Being paid off the full retail suddenly means very little when a very large percentage of the print run is remaindered.
The flawed distribution and payment model, coupled with the influences of the Internet, make it virtually impossible for small- and medium-sized houses to pay authors off the full retail. Some still do, of course, and we have on occasion depending upon the title and how and where we believe we can sell it. But for many authors--especially niche writers--this traditional arrangement is no longer as viable as it once was.
So what does this mean for authors? It means that, in most cases, they will be paid less for trade sales because there simply is not enough of a margin to allow otherwise. It has nothing to do with a publisher wanting a larger slice of the pie. Rather, it is about being able to continue publishing books. Understanding this, and then altering behavior and viewpoint accordingly, will be the subject of my next post, followed by the effect on end users: buyers.