This article makes a couple of interesting points.
First, mainstream publishers are screwing authors on e-book royalties:
“Look at Harper’s own numbers,” DeFiore wrote. “$27.99 hardcover generates $5.67 profit to publisher and $4.20 royalty to author. $14.99 agency priced e-book generates $7.87 profit to publisher and $2.62 royalty to author.”
Looks fishy, doesn’t it? And the same basic math holds throughout the industry, including at Hachette.
The 15% royalty on hardcovers has always been justified by the costs of manufacturing, storing, and shipping the physical object. Those costs disappear with an e-book. But apparently the publishers are not passing much of that savings to the author. And Amazon knows this.
By leaving royalty rates where they are, publishers have left their nice digital margins hanging out there for everyone to see. And when Amazon sees someone else’s healthy profits, it’s like a dog smelling a steak. As Jeff Bezos has said, “Your margin is my opportunity.”
The other point the author makes is that reduced profits for publishers means a brain drain as fewer people decide to write books:
If publishers make less money on every book, they are going to pay people less to write and edit them, and talented people will decide to do something else with their time. Consider that it takes at least five years, and usually more, to write a definitive presidential biography. If an advance of $100,000 exceeds the budget that an Amazon-dominated world will allow, then the only author who can write such a biography must be either independently wealthy or subsidized by a full-time job, probably teaching at a university.
Do you buy this argument? I suppose it could be true for mainstream non-fiction. It certainly seems untrue for fiction — or, at least, it would be balanced off by an influx of talented writers who are simply bypassing the barriers put up by mainstream publishers. If I earned more from my writing I could quit my day job and write more, but that’s fundamentally a function of success in the marketplace, not advances from a publisher.