Sonia Land tells it like it is. Publishers cannot hope to avoid 50% net for ebooks in the medium term, at the very least on back-list titles:
Publishers can so simply redress this threat: their main concern therefore must be to secure book rights and this they can easily do by offering a fair rate to authors for their e-book rights. If any publisher offers an author 50% of net proceeds from the sale of an e-book, an agent will be hard pushed not to go with them even if the author can get 70% from the online retailers. And I will be happy to go with a publisher because I believe they can still publish a book better than anyone else.
But does this mean that a publisher will lose out financially? I really don’t understand why the financial guys in the publishing world don’t do their sums properly. No matter how a publisher tries to gloss over the figures, there are huge profit margins in the sale of each e-book. There are no paper, print, production costs; no distribution costs in a time of ever increasing fuel prices; no need for inventory control and yes, let us not forget the bane of all publishing companies – return of books! And one last big plus: every sale is a cash sale!
via Publishers should improve their royalty rates | FutureBook.
Eoin Purcell's Blog 
Eoin, while I agree there are no printing and storage costs (and it’s a firm sale model!), it’s not true to say there are no production costs. Maverick House is doing simultaneous editions of its books and formatting an ebook takes just as much time as typesetting a paperbook. While we have these skills inhouse, time is expensive. Other publishers don’t have the same skills inhouse, so they are spending yet more money on a book before they recoup any of their investment.
Publishers are trying to develop a sustainable business money in the electronic area so it simply doesn’t make sense to give away 50% of the ‘profits’ (and they aren’t profits until the publisher has recouped their initial cost.)
Your argument for backlist books holds more sway, but it still doesn’t take into consideration the investment publishers need to make to create ebooks.
I think there is terrible misnomer about ebooks and publisher’s lack of costs; I do believe, however, there can be room for movement after a certain period of time or a certain threshold has been reached. Relationships between authors and publishers need not be fractious, and good communication and an understanding of the challenges on both sides is the key to this.
Jean,
I’m not unsympathetic to a publishers plight. Indeed I’m very conscious that the costs are not as sweet as painted by Sonia. For most publishers there are ways to prevent the costs sprialling TOO much, especially if they adopt sensible and basic methods of creating ebooks both for backlist and front list titles.
The point at its most basic level however is that authors, agents and readers don’t care. That sounds flippant, and perhaps it is a little. But the reality is that the business is shifting and with that shift, power is shifting away from publishers, towards tech giants in the first instance, and through them to authors and agents in the second. That change in the balance is manifest in the demand for a higher ebook royalty. My reading of the situation is that regardless of the profitability of such a concession, publishers who wish to publish ebooks will over the medium – long term be forced to move to 50% net receipts or beyond.
On a quick aside, I think Sonia’s case (although there is some terminological inexactitude) is not for 50% of profits but rather for 50% of net receipts which seems reasonable to me in the long-medium term.
Eoin
We have endured this nonsense from the big Publishers for a couple of years now regarding the costs of producing eBooks. The Production Costs are exactly the same as for paper books. However there is no distributor margin to pay, no retail margin to pay, no printing or transport or warehousing costs.
Everyone and his dog knows this and it’s tiresome for some publishers to bang on about it. Sonia is totally correct in her post.
The whole superstructure of publishing is being transformed and the thinking of publishers needs to undergo the same change.
What matters is that writers now have real, workable, successful and profitable alternatives that provide much higher earnings for them.
Where I diverge from Sonia is that I think any orthodox Publisher who applies flat rate percentage royalties to each writer is incompetent !!
Every writer, and each title, is a distinct and unique income stream and should be treated as such. Each writer has a different track record of sales and success. Each writer has different selling potential. Each writer will involve different levels of marketing effort. Each writer will contribute different amounts to their own marketing. Each writer will be offered or demand different advances.
All of these factors feed into a risk profile that needs to be calculated individually, and that risk profile needs to be used to calculate the appropriate royalty rate. An orthodox publisher who does not do this is not going to achieve it’s potential.