Revolutionary Times For Publishers, Writers and Readers

The publishing world is a vortex of change. There has been a steady flow of news reports, court filings by the Department of Justice, judicial decisions followed by settlements, merger announcements, controversial contract terms for new digital imprints and much more besides. We find publishers, brick and mortar bookstores, and distributors all trying to adjust their business models to respond to revolutionary changes in the production and distribution of literary material. All these changes have immense consequences for authors. It appears that the Kindle reader introduced in 2007 was as upsetting to the marketplace as the change from manuscript books to print books in the 15th century. Before Kindle, readers bought print on paper books; now paper and ebook sales are close to equal in fiction genres and gradually approaching equality in non-fiction.

When paper was King, there were two publishing models: traditional for the general reading public and vanity for the family. Splitting production and delivery has triggered a variety of new models. Just as movable type replaced the quill, electronic production is impinging on the market for print books. Traditional publishers pay a premium up front in the form of an advance against royalties for the right to publish and distribute an author’s work. Vanity publishing is essentially an arrangement in which authors pay for printing and other services. There are two models for ebooks: self-publishing for a fee is a vanity like model in which authors keep a significant portion of proceeds; or licensing to an epublisher such as Open Road or RosettaBooks for a royalty (but no advance) based on a percentage of net proceeds.

Traditional publishers have expanded their business models over the past few years. They are already publishing ebooks under the advance and royalties formula and they are also searching for new relationships with authors. We can see this with the  recent introduction by Random House of the Hydra, Alibi, Loveswept and Flirt digital imprints. When Random House announced contract terms for these imprints there was an uproar. Science fiction and other authors and literary agents were horrified. This brouhaha was reported by Victoria Strauss in her Writer Beware Blog of March 7, 2013. She later reported on March 12 that “Based on strong criticism from writers’ groups, authors, and agents, Random House has decided to make major changes in its digital contract.” The Hydra Model is essentially a collaborative or partnership relationship in which the author agrees to license a literary work to a publisher for a share in the net proceeds from ebook sales. In the Hydra contract initially proposed there was no advance. After the response from authors and agents Random House posted a “Special Message” on March 12. The Hydra initiative has now been subdivided: there is a profit sharing model and a traditional advance and royalties model.

Two further points about changes in the publishing industry. First, in the Business Day section of Friday March 8, 2013, the New York Times reported that attempts are under way to create a marketplace for secondhand digital books. This is an extraordinary development. We all know about the market for print books; they are owned by the purchaser who can resell them. The “first sale” doctrine has been reaffirmed in the past week by the U.S. Supreme Court in Kirtsaeng v. John Wiley & Sons, Inc. At the present time electronic books are not owned because downloading is a license rather than a purchase in the traditional sense. Amazon and Apple have created algorithms for setting up an exchange for digital material. Amazon in fact received a patent for its algorithm in January of this year.

The second point concerns the domain name extension dot book. I’m quoting from a PW report of March 11: “In a filing with ICANN … the Association of American Publishers came out against a bid by Amazon to buy the .book domain name for its exclusive use, saying such an application would be counter to public interest.” To permit a company like Amazon to own a registrar for the dot book domain name would be equivalent to Citibank or Bank of America becoming the registrar for dot bank.

All this is playing out along with disputes between Barnes & Noble and Simon & Schuster about paying for shelf space (Report in the New York Times) and Amazon’s announced purchase of the social site Goodreads (from the same source). None of this suggests the demise of print publishing, but it disproportionately impacts authors whose works are less and less available in physical formats.

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