E-Readers, Ebooks, and Publishing's Bottom Line: The Opportunities and Challenges Presented by the Explosion of the E-Reader Market

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Changing Relationships With Authors

As Miller points out, there are the two components of author compensation for book publishers: advances and royalties. Advances can range from $1,000 for a first-time author up into the millions, such as for recent memoirs from Sarah Palin and Hillary Clinton. Royalties are paid off of actual book sales against the advance, usually on an escalating scale-for example, 15% for the first 20,000 copies sold in hardcover and 20% thereafter. Oftentimes, there are different percentages for different formats, giving authors varying incentive to support sales efforts along different channels such as hardcover, paperback, or digital.

HarperStudio is experimenting with a restructuring of how it compensates authors for their work. "We have a structure that gives authors a smaller advance but a 50/50 revenue share regardless of the platform on which it's sold," says Miller. That gives authors just as much incentive to push the digital book as the printed copy. "But we're an exception in the industry."

The e-reader onslaught could lead to a significant shake-up in how authors are selected and compensated. "We publish books based on their likelihood to sell in hardcover," Forrester analyst James McQuivey says. "If I were Sony or Random House, I'd create a digital minor league-an imprint for first-time authors, where readers can download a book for $4.99 and provide [the] author [with] feedback." Harlequin has done just this with its digital-only publishing house, Carina Press. The imprint plans to launch in summer 2010 and will release new titles on a weekly basis.

Miller wonders whether McQuivey's approach underestimates the cost of creating even an electronic book. "You don't get two bites of the apple," he says. "If you're going to promote a digital version of the book, you won't get a second chance to do that when it goes physical."

How Publishers Can Leverage Digital Formats

One of the complaints about periodical publishers' digital presence to date has been a lack of imagination-a stubborn loyalty to the format of the printed version. But that mindset is rapidly changing.

Mark Brokering, director of content strategy and acquisition at Safari Books Online, which sells an online subscription database of books, videos, and articles for professionals, says, "When you think of how The New York Times treats its print paper versus its online product, they're not just digitizing the paper anymore. They're creating a dynamic new product," one that integrates video, interactive charts, animation, and user comments and, as such, creates value that a customer will pay for. Brokering continues, "At some point, it's conceivable that the print newspaper could become a byproduct of [its] digital presence."

In December 2009, Google, The New York Times, and The Washington Post announced the Living Stories project, an experiment in presenting news in a manner specifically designed for the online environment. The idea is that complete coverage of an ongoing story is gathered together and prioritized on one URL to enable quick navigation between news articles, opinion pieces, and features, and users can navigate by themes, participants, or multimedia type.

McQuivey says, "Digitization gives publishers a chance to think of a book as more than what's between two covers. Together with the author they can create a digital experience-including video interviews, blog posts, [and] personalized messages from the author." He's excited about how tools such as Twitter and Facebook can help an author make personal connections and build demand for the product along the way.

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