Publisher's new contract would tighten clutches on authors' digital royalties

When publishers and literary agents haggle over authors' book contracts, the boilerplate is a starting point: a work-in-progress, by definition. But one publisher's plan for a new standardized contract, announced this week, suggests it's getting bolder about tightening its grip on authors' digital royalties.

Macmillan CEO John Sargent sent a letter to book agents on Monday outlining plans for a new contract, to take effect November 9, that affects all of the company's imprints, including St. Martin's Press, Henry Holt, Picador, and Farrar, Straus & Giroux. The contract sets a standard 20 percent royalty rate on net proceeds -- 5 percent lower the standard offered by other large publishing houses -- according to literary agent Richard Curtis.
This change comes six months after rival Simon & Schuster downgraded its digital royalty rate to 25 percent net. (S&S had originally floated a 15 percent figure, which was quickly shot down.) And a year ago, Random House switched from a royalty rate based on list price to one on net proceeds -- provoking one comment that "anything less than 35 percent of amounts received is an insult."

Curtis's objection to Macmillan's contract comes with a caveat -- he offers authors a 50 percent net on e-books published with his own company, E-Reads -- but it hardly undermines a point he made to The New York Times. The issue, Curtis says, is less about numerical differences in royalties between publishers, and more about "whether we should be playing on such a low ballfield at all."

With as many as 3 million e-book reader sales predicted by the end of this year, and the ever-rising trajectory of e-book sales -- now estimated as high as 5 percent of all book sales -- publishers have a vested interest in controlling the royalty rate, especially since they have such a difficult time telling Amazon (AMZN), Wal-Mart (WMT), and other retailers how to price books.

Even Macmillan's quest for contract uniformity across its imprints seems uncertain; Sargent's memo allows that each trade publisher may have its own way of conducting business, "principally in the royalty and subsidiary rights section of the new contract."

And the November 9 date apparently isn't set in stone, either; one agent reports having one agent reported receiving an e-mail that she and colleagues now have until January 4 to respond to the new terms.

Which means that agents may have a greater say on whether that 20 percent rate becomes the new standard from which future digital royalty rates deviate -- and if that deviation works more in authors' favor rather than publishers'.
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