I have excerpted from the letter in Publisher's Lunch.


"And now on to royalties. Three or four weeks ago, we began discussions with the Author's Guild on their concerns about our new royalty terms. We indicated then that we would be flexible and that we were prepared to move to a higher rate for digital books. In ongoing discussions with our major agents at the beginning of this week, we began informing them of our new terms. The change to an agency model will bring about yet another round of discussion on royalties, and we look forward to solving this next step in the puzzle with you.

A word about Amazon. This has been a very difficult time. Many of you are wondering what has taken so long for Amazon and Macmillan to reach a conclusion. I want to assure you that Amazon has been working very, very hard and always in good faith to find a way forward with us. Though we do not always agree, I remain full of admiration and respect for them. Both of us look forward to being back in business as usual.

And a salute to the bricks and mortar retailers who sell your books in their stores and on their related websites. Their support for you, and us, has been remarkable over the last week. From large chains to small independents, they committed to working harder than ever to help your books find your readers.

Lastly, my deepest thanks to you, our authors and illustrators. Macmillan and Amazon as corporations had our differences that needed to be resolved. You are the ones whose books lost their buy buttons. And yet you have continued to be terrifically supportive of us and of what we are trying to accomplish. It is a great joy to be your publisher.

I cannot tell you when we will resume business as usual with Amazon, and needless to say I can promise nothing on the buy buttons. You can tell by the tone of this letter though that I feel the time is getting near to hand."

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I just got this from my editor. Jesus. Could you be any more inspecific, John?

My understanding is that Macmillan's cutting its standard royalty from 25% to 20%, but toying with the agents' push to increase ebook royalties to 50%, or thereabouts. This has got the big agencies in an uproar as you can imagine--though I believe in this case Macmillan's following precedent established by other big publishers (I could be totally wrong about that, of course). I'd be willing to trade a 5% cut in HC royalties for a 100% increase in ebook royalties, naturally, although I don't have a lot of faith that we'll get there, or that if we did it would last very long. But certainly it doesn't seem fair to pay the "standard" rate when the publisher's per-copy overhead is so low.
Okay, I had it totally wrong. In fact Macmillan's most likely moving from the 20% royalty on ebooks they'd tried to set in December (up a lot from what they were paying, which was the same royalty we got for hardcovers) to the 25% number everybody else is currently paying. That's good--but it's not as good as the 50% the big agencies are pushing for. HC royalties are unaffected, evidently. As soon as I post this it will change, naturally.
Is anyone wondering about the 45% that make up the difference between the 25% reluctantly passed to the author and the 70% Amazon pays to publishers and authors alike? In what manner does a publisher earn 45 % of an e-book?
Well, the Association of Authors' Representatives have been asking the same question. Apparently the big agencies are pushing for a 50% royalty on ebooks, which sounds pretty damned good to me. 20% seems like a fair cut for the publisher, IMO. Of course, no one knows if this is really going to happen; we'll see.
I just got a royalties report. Seems like Penguin only pay 15%. I frankly do not see where their expenses are.

I don't like AAR. What they did on the Google deal was appalling -- and how come this organization can make deals for me?

Agents need to wake up to the electronic publishing phenomenon and rewrite contracts.
AAR didn't make a deal with Google, IJ. You're thinking Authors Guild and the Association of American Publishers.
Umm, quite right. No idea where my mind was. AAR are the agents.
The key thing I picked up from Jon's comments is that Macmillan, no matter what they do, won't stray too from from the "precedent" other publishers have set. I find it curious that when they're looking for ways not to pay authors more they can adhere to precedent, yet just the thought of telling booksellers they want a change in return policies would be "collusion." If one big house went first, couldn't the rest then follow their precedent?

Is it just me who thinks like this? I mean, if I'm full of crap, say so.
Yeah Dana, I picked up on that too. But that horse has been beaten to death in here. Nobody's going to change their minds.

Airlines use such collusional precedents all the time setting prices of tickets and baggage charges. Oil companies 'collude' all the time setting gasoline prices. But, like I said, beating a dead horse is beating a dead horse. . . .
You're full of crap, Dana. Heh. U.S. federal trade law has, since the days of Teddy Roosevelt, expressly forbidden manufacturers from getting together to fix the price at which they sell their products to retailers. It's collusion, or price fixing, and it's illegal (I know this because I used to work in the wholesale music industry, believe it or not). That said, in our current environment of deregulation and cowboy economics, it seems to happen all the time: see the petroleum industry, etc. How manufacturers deal with suppliers and labor is another issue, and doesn't fall under the same set of regulations. Basically, when you're dealing with a group as disorganized, decentralized and distracted as authors (anybody else get a headache when they try to read a royalty statement?), anything goes. That's why we have agents, and that's why agents have their own professional association, etc. Basically, the rules are different when it comes to dealing with labor/suppliers than they are in dealing with retailers. It's about trying to prevent vertical monopolies. There's very little in labor law that protects people like us, who are basically independent contractors.
Isn't it time for new laws? Amazon's cost to sell a $10 (for sake of math) book is $4.50. A brick and mortar store cost to sell a book is $8.00. Amazon will sell the same book on their site for $7.50. Amazon is in the practice of putting all competion out of business.

When they pay $14 for an ebook they sell for $9.99, I get concerned. (Yes, that is what they are doing and you can find supporting evidence on the web with ease (links can be found on the Write Report http://writereport.blogspot.com/)).

Price fixing may be the only way to save B&M and the millions of jobs that are associated with B&M businesses from the low cost internet giants who employ so few (7,800 US Amazon workforce, 20,100 worldwide. The job losses they have created to date are 50 times their employee base.)
Yes, let's have price fixing in publishing! And while we're at it, some extortion to buck up the insurance industry. :)


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