Who's the Biggest Loser in E-Books?

Photo: iStockphoto

The e-book explosion is for real, and growing. What’s interesting is that most of the complaining you may have read in recent months is from the publisher side — that it will be ever harder for them to stay solvent in an e-book world. But the latest edition of the Authors Guild bulletin, reprinting a recent e-mail alert to Guild members, shows that under current royalty configurations, the real losers aren’t the publishers; it’s the authors.

This is plainly an opportunity for literary agents to exercise whatever muscle they can muster, as they have in past decades when formats changed. Here’s how the Guild (hardly a disinterested party) puts it:

Among the ills of this radical pay cut [lower prices for e-books than for hardcovers] is the distorting effect it has on publishers’ incentives: publishers generally do significantly better on e-book sales than they do on hardcover sales. Authors, on the other hand, always do worse.

How much better for the publisher and how much worse for the author? Here are examples of author’s royalties compared to publisher’s gross profit (income per copy minus expenses per copy), calculated using industry-standard contract terms:

The Help, by Kathryn Stockett

Author’s Standard Royalty:
$3.75 hardcover; $2.28 e-book.
Author’s E-Loss = -39%

Publisher’s Margin:
$4.75 hardcover; $6.32 e-book.
Publisher’s E-Gain = +33%


Hell’s Corner, by David Baldacci

Author’s Standard Royalty:
$4.20 hardcover; $2.63 e-book.
Author’s E-Loss = -37%

Publisher’s Margin:
$5.80 hardcover; $7.37 e-book.
Publisher’s E-Gain = +27%


Unbroken, by Laura Hillenbrand

Author’s Standard Royalty:
$4.05 hardcover; $3.38 e-book.
Author’s E-Loss = -17%

Publisher’s Margin:
$5.45 hardcover; $9.62 e-book.
Publisher’s E-Gain = +77%

So, everything else being equal, publishers will naturally have a strong bias toward e-book sales. It certainly does wonders for cash flow: not only does the publisher net more, but the reduced royalty means that every time an e-book purchase displaces a hardcover purchase, the odds that the author’s advance will earn out — and the publisher will have to cut a check for royalties — diminishes.

What’s tricky here in the publishing world is that an awful lot of writers do not write for the money. But I can guarantee you that the agents of the books listed above — and the authors themselves — aren’t happy knowing that they earn a little bit less money every time they sell a copy of a book that nets the publisher a little bit more money.

J. R. Tomlin

You might want to mention that "authors don't write for money" thing to Barry Eisler. He isn't the first to walk away and you can bet he won't be the last. As for that "little bit of money" it ain't such a little bit.

Allen Varney

The ebook revolution will make publishers substantial losers, but the biggest losers will be agents. This is because more and more authors are self-publishing. Bestselling author Barry Eisler just turned down a half-million dollar advance for a two-book deal with St. Martin's Press in order to self-publish. His dialogue with self-pub guru Joe Konrath comprehensively discusses the many reasons why authors now find self-publishing more attractive than legacy publishing:



But are more people buying the books now that they're available as e-books? Why would an author care about this if the increased number of purchases made up for (or surpassed) what they'd lose in terms of their share versus the publisher's?


Because that "authors don't write for money" is nothing more than hypocritical nonsense! Authors are not ascetics, and want to be paid for their work like someone else.

James Curran

But the real question is, why is the author's royality different between the e-book and the hardcover (and the paperback)? The author's contribution to each is identical, and the traits of each format that makes one more valuable/costly to the reader is purely in the publisher's realm.


It's funny how industry norms tend to outlive thier usefulness. My initial impression is that the agents aren't making the right argument. If the content (the book) is what's selling then why does thier royalty vary by delivery mechanism? In fact, I'll plead ignorance to industry numbers here, but shouldn't they argue that since ebooks have higher demand they should get higher royalties, not lower? The operational cost only makes that argument stronger.

Of course it's likely that the publishers are in a stronger position to demand terms - if they don't publish it the author gets nothing - but certainly some of the more popular authors mentioned above have more leverage.

So why are agents negotiating such bad deals?

Tom Maguire

Friends and relatives who are book dealers, book store and library employees are pretty worried as well.


The publisher benefits only if the author has a publisher. Can you say disintermediation?

Check out Amanda Hocking, a twenty-six-year-old junior college dropout from Austin, Minnesota, who couldn't get a publisher, despite trying for eight years. Last April, she self-published 9 of her rejected novels as Kindle ebooks. Between then and now, she's sold over 1 million ebooks.

Check out the Konrath/Eisler discussion.

Dave Morris

Does seem like there is an opportunity here for a new kind of venture that would offer to partner with authors and bear the cost of editing, production and marketing, then share out profits in proportion to each partner's investment. But what would that kind of JV vehicle be called, given that the word "publisher" has already been taken by an altogether less transparent type of company?

Olli Lehtola

It would seem that authors need to negotiate better deals. As I see it, the main function of publishers is to be venture capitalist who finance the printing of promising books. With ebooks, the capital needed to publish a book is basically zero compared to paper books so the need for the publishers is diminishing. Bit sad but totally expected that ebook prices are pretty much at level with paper books and publishers just pocket the cost savings. However I believe that prices will fall fairly sharply as more and more authors will either self-publish or move to publishers who embrace the ebooks with lower prices and margins and don't try to prop up the paper business.

Mike G

Barry Eisler and Joe Konrath discuss the issues around eBooks amusingly and at length here


As a photographer, I find it humorous that a post about the financial pains inflicted on the writer uses content from a micro stock photo agency.


The biggest loser in e-books?



I believe that the authors are going to win more in the long term. With paper books, the publishers are necessary especially to ensure appropriate distribution of the books, both because they have access to more distribution points than the authors and because they have capital to print and ship thousands or millions of copies. With ebooks, distribution is much easier and it is not hard to imagine that anyone would be able to sell its ebooks on Amazon (reviewing, editing, formating etc. are services that could be provided by third parties). If this is the case, the publishing industry would basically cease existing.

Wally Schmidt

Just another excuse for me to delay purchasing an e-reader device a little while longer. Writers are getting ripped off. The content is the same, no matter the format.

John B. Chilton

As others are pointing out, other things are not equal in more important ways. I'd wager authors are better off financially due to increase in the number of units sold.

Larry Marshall

It's sad that people write about things they don't understand. If you understood the eBook world you'd know that authors are telling publishers to take a hike because they can make sooo much more money selling their eBooks independently that it makes no sense for them to sign away their rights for the miserable royalties traditional publishers pay. By contrast, the big six publishers are doing everything in their power to slow consumer movement to eBooks.

Go read about bestselling author, Barry Eisler turning down a half a million $$$ St Martin's book contract to publish it independently. This is just one example where authors are feeling liberated by the eBook phenomenon, not as losers.

Cheers --- Larry


They are only showing $/book and not the # of books sold; $/book * books = $. Will people be more likely to buy a lower-priced e-book? I don't know.

Eric M. Jones

Wait just a minute...Did I fall asleep and wake up STUPID If I sell 1000 books and make $3.75 each I make...oh let me see...ah...that's...wait.... That's $3,750. If I sell 100,000,000 E-books at $2.28 each I make ah...let's see...A Bazillion dollars!

Publishing an E-Book is also a zillion times easier. What's not to like?


The examples speak for themselves but how are publishers capable of commanding this higher margin? Their costs reduce but the e-book platform makes it easier for the author to bypass the publisher's services and go directly to end consumers. I would expect this option to put a downward pressure on publisher's margins?