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Random House to give e-authors 50% of revenues

© Richard Loeffler

Random House announced this week that it will be increasing authors royalties from an average of 15% to 50%! for e-authors. It has been long cited that e-books are more profitable to publishers because they eliminate the costs of printing, warehousing, distribution and returns. Random House, Bertelsmann's gigantic book publishing subsidiary, has now put an end to the dispute over determining an equitable split of the revenue from e-book sales, announcing that it will share net revenues from e-books 50/50 with authors. Any decision by Random House on this issue is likely to set the industry standard for years to come. The decision brings Random House in line with many upstart Web publishers, who are attempting to lure authors away from their more established counterparts. Agents say other publishing companies will have to follow Random House's move to stay competitive. Authors typically receive 15% of a hardcover book's list price, but have argued that they should receive a higher percentage for e-book sales. Not every publisher is going to be pleased with Random House's decision. Publishers say they need incentives, like the extra revenue from e-book sales, to take on the economic risk needed to make the e-book business work. Jonathan Tasini, president of the National Writers Association, called the new policy, "a step in the right direction." He also noted that he wanted to see "the fine print. How will this be enforced." He was also curious whether "other publishers will follow suit." Random House will be able to do this, I assume, by disintermediating the retailer and the distributor with its electronic books. It is already selling its classics line through non-traditional book web-sites who will take less of a percentage of gross to sell the item. Random House traditionally gives the wholesaler of a book a 50% discount. Now they are passing on those savings to the author. However if the electronic edition is the same price as the print edition, then it isn't going to cost Random House a dime. In fact, because of the lower production costs mentioned earlier (re: shipping, printing, etc.) Random House will still be making the same profit on the e-book as it does on the p-book. All Random House is really doing is cutting out the middle man and giving that share to the author. It's a fair deal but not as altruistic as Random House would like everyone to believe.

A Canadian electronic publisher, Tumbleweed Press has introduced a new kind of electronic book for children. It is a new high-energy multimedia eBook format for children. Ten free titles are already available, including four that come with the free downloadable TumbleReader application. Future titles will be sold through on-line bookstores and niche e-commerce sites. For more information go to their site.