The new economics of the e-book make the author's quandary painfully clear: A new $28 hardcover book returns half, or $14, to the publisher, and 15%, or $4.20, to the author. Under many e-book deals currently, a digital book sells for $12.99, returning 70%, or $9.09, to the publisher and typically 25% of that, or $2.27, to the author.
The upshot: From an e-book sale, an author makes a little more than half what he or she makes from a hardcover sale.
Okay, what's wrong with this? Answer: the assumption that hardcover sales and ebook sales are zero-sum.
Authors (and publishers) always prefer hardcover sales, because they get a bigger cut from each. But the reason popular books usually wind up being reprinted as paperbacks is because most people will only buy their favorite authors or a really hyped book in hardcover. The number of paperbacks sold usually far exceeds the number of hardcovers. And notice that the author's royalty for ebooks is higher than for hardcovers (whereas the paperback royalty rate is usually lower).
So, ebooks are only bad for authors if they cannibalize hardcover sales, and do not increase overall sales. Since ebooks are still relatively new, there aren't a lot of long-term numbers to argue this one way or the other, but I think that the ease of buying an ebook is only likely to increase total sales.
E-books sales are exploding. Currently, e-books account for an estimated 8% of total book revenue, up from 3% to 5% a year ago. Mike Shatzkin, a publishing consultant, estimates e-books could be 20% to 25% of total unit sales by the end of 2012. "Eventually, digital books will overtake physical books," Mr. Greco predicts.
Another thing to note (which the article doesn't): with ebooks, there need never again be any such thing as "out of print." Even now, authors with long out-of-print titles whose rights have reverted to them are beginning to realize that there exist epublishers such as ereader.com and Fictionwise who can take those old books and reissue them digitally. Nobody is going to be making big money off of electronic sales of their older titles, but for an author with a substantial backlist, that's another revenue stream from books that are currently earning them nothing.
More doomsaying from the article:
The lower revenue from e-books comes amidst a decline in book sales that was already under way. The seemingly endless entertainment choices created by the Web have eaten into the time people spend reading books. The weak economy also is contributing to the slide.
It is certainly true that people are reading (and buying) books less. I can only offer an anecdotal counterargument, however: since acquiring an ereader, I have read (and purchased) far more books than I did before. Including, ironically enough, paper versions, since by reading and reviewing more frequently, I've been hanging out at more book and writing forums and blogs and getting more recommendations for books to read, including some that aren't yet available as ebooks (boo! hiss!). And my impression is that this is true for most people with ereaders. There's something about click-and-download that makes an ebook purchase easier to get over the should-I-buy-this-or-not? obstacle than actually taking a physical book off the shelf and walking to the counter with it to hand over your credit card. Yes, digitally speaking, you're doing exactly the same thing, but Amazon knows what they're doing. (And I don't even have a Kindle; if I were book browsing with 3G wireless and one-click purchasing, my to-be-read shelf would be even bigger!)
So far, ebooks are seen as a secondary market that doesn't require the same attention or marketing as hardcovers. This is changing and will change more, and when ebooks are pushed more aggressively on the web, ebooks will come to be seen more as a driving force in a book's success.
Another example of Not Getting It:
John Pipkin's 2009's debut novel, "Woodsburner," won several literary prizes, including the 2009 Center for Fiction First Novel Prize. Despite the acclaim and print sales of more than 10,000, "Woodsburner" has only sold 359 digital copies.
Mr. Pipkin says the business model of e-books worries him. "I embrace anything that makes it possible for people to read what I've written, especially if it's somebody who might not have read the physical book," Mr. Pipkin says. "But the sales price of e-books is lower than the price of physical books, so writers stand to earn less. It's a concern moving forward, especially as e-books make up a larger percentage of sales."
Mr. Pipkin then goes on to whine about how hard it is for him to support his family on a writer's income:
"Unless you're a best-selling author, I don't see how it's possible for an author to get together enough income to pay for health insurance, retirement and other things," he says.
Umm, newsflash, Mr. Pipin: this has always been true. Advice for would-be writers from time immemorial has always been: "Don't quit your day job." The WSJ article seems to back up Pipin's concerns by referencing several authors "only a few years back" who received six- and seven-figure advances for their debut novels, as if this is remotely typical. The number of writers who can make a full-time living off their writing has always been small, the percentage of fiction writers who can make a living off of writing novels even smaller. Only the big names are full-time novelists; only the biggest of big names actually make more than a decent middle-class income. (Also, the majority of big name authors did not get big advances for their first few books. Stephen King, who received a $400,000 advance for Carrie -- that was for the paperback rights, btw -- is very much atypical.)
And none of this has anything to do with ebooks. Does Mr. Pipin imagine that all 359 of those ebook sales of his book would have been hardcover sales if the ebook had not been available? He contradicts himself by worrying what ebooks will do to book sales. Anything that makes it possible for people to read what he's written, especially if they wouldn't otherwise, represents an additional sale that otherwise wouldn't have happened.
SF author Cory Doctorow (who is also quoted in the WSJ article) has an even more radical take on this, since he advocates the abolishment of copyright and argues that every author should make their works available for free online, as he has done. He makes this case in a series of essays in his book Content. Now, I am not actually convinced that his model will work for every author, but reading his arguments will certainly get you thinking about our current assumptions about intellectual property and the viability of charging for content in a new way.
As e-book sales accelerate, their impact on physical book sales will grow. Publishers worry that $12.99 digital books that typically go on sale the same date as physical books will cut into their hardcover sales and their $14.99 paperback sales down the line, a key revenue producer for literary titles.
No doubt this is true. I increasingly prefer to buy books electronically and will certainly choose the digital version over the hardcover *. But looking at the model above, the author makes $4.20 off of a hardcover sale, vs. $2.27 off of a digital sale. So how much better does the electronic version have to sell than the hardcover for the author to make more money? I'll do the eighth grade algebra for you: at just over 1.85 × hardcover sales, electronic sales net more money for the author. If electronic royalties rise to closer to 50% (as some are suggesting), ebooks becomes even more lucrative for the author. (Keep in mind also that paperback print runs are usually much greater than the hardcover printing, and increasingly, genre books don't get hardcover editions at all.)
This discounts the economic impact on publishers, and how the entire industry will shudder and rearrange itself with the continued closing of brick-and-mortar stores, but my point is that the WSJ's conclusion that the increasing popularity of ebooks spells doom for authors is, at the very least, premature.
* Though I did buy Brandon Sanderson's The Way of Kings in hardcover, because maps and pictures don't display well in my tiny ereader. But I'm gonna give that big-ass doorstopper away as soon as I finish reading it. Incidentally, what I actually paid off the $28 cover price after getting my Borders Club discount was $16.87. So if $14 went back to the publisher, and $4.20 of that back to Brandon Sanderson himself, then the bookstore only cleared $2.87. No wonder Borders is struggling? But without the club discount, I would have bought the digital version and just squinted at the tiny maps, rather than paying 28 bucks.