Kurt R.A. Giambastiani

A blog post has been going around lately, in which Hugh Howey (bestselling author and book industry watcher) attempts to debunk some myths about publishing. Specifically, he addresses the standard tropes that the fast growth of the e-book market is  (a) materially damaging publishers, and (b) decimating the independent bookstore market.

His post (which is a good read) pulls together simple graphics from sources such as The New Republic, Bloomberg, and Harper Collins’ own PowerPoint slides, and lays it out clearly.

• Publishers are making more money from e-book sales than from hardcover sales.
• Independent bookstores are thriving in this post-Recession economy.

As evidence of the first item, Howey shows how the profit margins publishers enjoy from e-book sales is nearly twice the margin provided from hardcovers. Publishers’ profits are not on the MSRP of a book of course, but on the wholesale cost of the book. So, in the graphic I’ve linked to on the right, keep in mind that the 41% and 75% profit figures are based on the publisher’s share of the MSRP (which are $13.72 and $10.49, respectively).

To support his second assertion, Howey cites bookstore membership figures that show the number of independent bookstores rising 20% since 2009, and sales figures that show an 8% annual increase for indie bookstores, in each of the last three years. Unlike some of the comments on Howey’s post, I do not dispute these figures. The bookstore industry suffered through massive contractions, first as indie bookstores failed to survive their battle with Big Box Bookstores (like Borders and Chapters and B&N) and then, later, as those same Big Box Bookstores either collapsed themselves or lost serious market share as they competed with Amazon. However, while a 20% increase in the number of indie bookstores since 2009 is a good sign, the hard figures show that 20% to be about 560 new bookstores, which doesn’t come close to filling the gap left during the contractions (indie bookstores lost 1000 members between 2000 and 2007).

But as I said in the title, this milkstool has three legs, not two, and while publishers are making e-hay while the sun shines, and while indie bookstores are enjoying a resurgence due to their niche marketing capabilities, what about the third leg, the authors?

Take a closer look at the Harper Collins slide Howey cites as evidence for increases in publishers’ profit margins on e-books. Note the “Royalty” line items. In the Hardcover column, the author royalty is listed as $4.20 (or 30% of the $13.72 revenue for each unit). In the E-book column, author royalty is $2.62, or only $25% of the $10.49 revenue.

So, while bookstores are re-opening across America, and as publishers are enjoying near double increases in their profit margins, authors don’t even get the same percentage royalty rate. Now, different royalty rates on different media is common–royalty percentages on mass market paperbacks are lower than the rate for hardcovers–but that’s because the publisher’s share of the MSRP is lower on MMPs and the profit margin is much thinner. Here, the publishers’ share of hardcover vs ebook MSRP has increased dramatically, from 49% to 70%, but the authors’ royalty rates have decreased by 5%.

In short, two legs of the milkstool are enjoying bigger profits and successes, while the third leg–the authors–is stuck in the cow poop.

Why don’t publishers offer their authors a larger share of the bigger profit pie? Because they don’t have to. So, while Hachette and Amazon duke it out, each claiming that they’re working to “protect authors,” let’s take a step back and look at the bigger picture. No one is protecting authors. We’re a dime a dozen at best, and unable to unite in any meaningful, effective fashion. If we make it into the Bigs, we need to be wary, savvy, and as realistic as possible. We’re the third leg of the milkstool, but it seems to be the short leg.

k