UPDATE: I neglected to include the link to The Bookseller whose original reporting I quote below. The link is now included!
As if the signs were not clear enough that the world of trade publishing is changed forever, Ed Victor comes along and proves it pretty definitely. It’s not the scale, which is modest, more it is the fact that this kind of operation is but one of many sure to crop up over the next few years. They makes sense, they will no doubt bring in more money for agents and authors and they are fine ideas.
From an author’s perspective I wonder on the 50/50 split of proceeds though. For one, the new operation will be by far best business at an agency in terms of margin (after all, once the digitization costs are repaid the money coming in will be almost entirely profit). What’s more, Victor makes clear no extra staff will be recruited and agencies don’t have the overheads a publisher does. Given that and given the likely emergence of a 50/50 split with publishers, why would an author settle for 50/50 with their agent?
In any case, fascinating move:
The agency is not taking on any new staff, but will work with digital production company Acorn to create and distribute the content in the correct format. The agency has also retained J K Rowling’s joint publicist Mark Hutchinson to market the titles through social media sites.
The titles will all be available on online booksellers including Amazon.co.uk and the iBookstore, with Victor confirming he intends to adopt the agency model. He said: “I think it will all be on the agency model, we’ll give up 30%, then we will give up another percentage to Acorn”. The POD side will be through Gardners, with print carried out by Antony Rowe.
He said net receipts will be divided on a 50/50 basis between author and agency, once production costs have been recouped out of the first receipts. This is in contrast to the 25% royalty rate understood to be offered by most major publishers.
Victor described the lines separating different roles within the industry as being “blurred”, and, looking ahead, comparing publishers and agents’ ability to compete in a changing industry, he said: “I’m certainly lighter on my feet and maybe that’s the answer for the future.”
Eoin Purcell's Blog 
Hi Eoin,
Interesting development, if not entirely unexpected.
I think this is a terrible deal for writers though.
The headline split is bad enough (50/50), but once you break it down, it gets worse, as the author is getting 50% of net receipts.
First off, they will be adopting the agency model, so that’s 30% gone to the retailer (Amazon, Apple etc.)
Second, for some bizarre reason they are going to give a percentage to Acorn rather than a flat fee per book. This makes no sense, and further cuts into the writer’s take. They don’t mention what that percentage is, but let’s say for the sake of argument it’s 10%. Leaving the author and Ed Victor to split 60% of list price.
Third, on top of all that, “production costs” are covered first before the writer sees any money. Are these production costs not what Acorn is getting a split for? Very strange.
This leaves the writer with a grand total of 30% of list price of royalties earned AFTER “production costs” are paid off.
Ed Victor is getting 30% after he has paid everyone. What is he doing for that big a slice? He’s not hiring additional staff. What value is he adding? Putting his name to the project? Will he be promoting the work, or is that down to the author? If he is promoting it, is this another “production cost” that the author will have to fork out before they see any royalties?
No deal.
It’s only marginally better than going with a trade publisher, and at least with them, you have someone with a powerful print distribution network, and serious marketing muscle (if they choose to use it). Also, they pay all the production costs and don’t deduct it from your royalties. Plus you get an advance.
If you can’t get a trade publishing deal or don’t want to, I can’t see what the attraction of this kind of deal would be.
Dave
last line should have said:
If you can’t get a trade publishing deal or don’t want to, I can’t see what the attraction of this kind of deal would be ahead of self-publishing where you get 70% of list price.
An interesting move that is, as we all expect, a sign of the coming changes in the industry. Mr Victor seems to be aiming at the potential of the ‘back list’ opportunities, though right now he has only a very small number of titles ready to push out. However we have no idea whether he has plans in the works to change this significantly. He may simply be launching a new business unit to position himself to take advantage of the opportunities coming his way in 2012 and beyond.
The question of whether this is a good deal for authors is far more complicated than David makes it out to be. The 70% he refers to with Amazon is where the author has to fund ALL marketing and promotion and copy editing and editing and cover design costs etc. Not every author fancies this. David also omits, in his calculations, the percentage due to Hutchinson for marketing and promotion. Perhaps these are the ‘production costs’ Victor is referring to ?
So from the start the simple comparison is a nonsense.
The issue of ‘value’ for an author needs to be looked at by each individual author. Do they want to sit back and forego royalties to pay others to do all of this work ? How much actual marketing effort WILL be done for their title ? Are they a first time author ? do they already have a reader base ? Have they tried self publishing ? If they have a back list, how successful were the titles originally ?
On the issue of royalties being based on ‘Net’, the only ‘issue’ for an author is that if they accept this basis, they need to ask themselves how they are going to control the expenditure incurred by Victor before the Net figure is reached ? This will need to be strictly documented and controlled, otherwise any percentage of nothing is nothing.
What is clear from this new venture, and others like it, is that both new-style publishers and authors need to really wake up to the new world of publishing, contracts, royalties and marketing cost implications. In the past authors have, it appears to me, been far far too lazy in signing contracts that they barely read and take from their writers association guidelines. They have surrendered their careers blindly and lazily. Many publishers have behaved with equal laziness in exploiting this author behaviour, and they have also been astonishingly incompetent and naive in how they structure their cost/margin/profit business models as a result.
Hi Howard,
You made some good points there, however I would like to defend my “nonsense” comparison.
First off, the piece doesn’t mention if Hutchinson is getting a percentage or a flat fee and whether that is coming from the “production costs” or not, or whether it is coming from Ed Victor’s share or not, so I left it out.
Self-publishers have to pay all the costs you mentioned, true. I thought that was obvious, so I didn’t mention it. But for the purposes of this comparison, the article states that the author’s cut will be net of production costs.
If Hutchinson is, as you suggest, given a percentage rather than a flat fee for these production costs, then that’s not such a great deal either.
While the self-publisher has to pay for these things, they do so on a flat-fee basis, rather than giving a percentage of the royalties for the lifetime of the copyright. Once those sunk costs are covered, everything after that is profit.
I accept that not every author will want to go down the self-publishing road, I was only using it as comparison (along with trade publishing) to evaluate whether this deal will appeal to writers or not.
And I certainly agree that each author will have to decide for themselves on the basis of their own circumstances – I hope I didn’t appear to suggest that self-publishing is best for all. It’s not.
I agree with the rest of your points.
There is no real motive here for Ed Victor to control costs as they are all passed on. It reminds me of the cost-plus contracts during Iraq “rebuilding”, and we know what happened there.
And you are 100% correct that too many authors sign their contracts without reading them. I think some would be surprised with what they might find.
There is one final issue that no-one has mentioned so far: conflict of interest.
If agents become publishers, their interests won’t always be 100% aligned with the writer. I expect this to be a huge issue in the future, and could cause a split in the agent community.
Dave
Fair points David. The comparison remains … let’s say, a ‘complex’ one.
A factor I didn’t mention, and one that also needs to be noted as significant when looking at the comparison between Amazon’s 70% and a publishers 25% or 50%, is RISK.
The self published author invests (hopefully) in editing, formatting, cover art and marketing themselves to whatever level they chose. If they don’t sell, they absorb those costs into their lives.
The commercial publisher may invest several thousand euros in these endeavours, or more. They are taking this risk without knowing if a single copy will sell.
Great points from both of you.
I’d focus on the 50/50 split more then anything else here on the deal side.
Even take Howard’s points on board re: Marketing (but with no new staff where’s that coming from?) these are backlist titles, well and truly edited so production aside there’s little to be done to them that’s worth an ongoing 50% of Net receipts.
If Victor was offering a deal like this to new authors, I’d advise turning it down out of hand, there’s no proof he can break new writers on digital. Indeed there’s no proof any agent or, for that matter, any major publisher can do that yet. The first one create a genuine digital hit with no backlist and then take those lessons and do it again will have something to offer new writers in a digital only deal
Eoin
Very good point.
There are several self-publishers who have managed genuine digital hits without any history in print. Some have done everything themselves like Amanda Hocking, and some like John Locke paid a flat fee ($1000) to have everything done for him.
Similarly, several new, independent e-pubbers in the US are building up a history of creating genuine digital hits for several different authors.
And, obviously, lots of trade publishers have too.
The best agent in the world might know nothing about the nuts and bolts of producing an e-book from scratch and getting it into the hands of lots and lots of readers. It’s a different skill-set.
Why would an author go with them other than to a small press, a trade house, or self-publish?
The only reason I could possibly think of is the desire to have the Ed Victor “brand” attached to the book. But what does that mean to the average reader? Have they even heard of him?
Dave
It beats me 🙂 …. but I guess personal contacts and perhaps a network of agent contacts might grow his business over time.
David,
My point re: building up new authors in the digital space is JUST that. It is primarily independent authors or small houses dedicated to key niches.
Howard,
That’s the only angle I can think of too. I wonder how relevant those forces will be to success in the digital market ten years from now?
Eoin
Sorry Eoin – I was agreeing with you – maybe it didn’t sound that way!
Scott Waxman has had Diversion Books going for a almost a year now in the US, and he is about as plugged in as an agent can be. No hits from previously unpublished writers that I could find.
But the conflict of interest issue is one that will be huge. It’s already causing rows. In the UK, since Sonia Land went solo with Catherine Cooksons backlist, there have been calls from Piers Blofeld and others to change the code of practice of UK agents to allow them to become publishers (it currently forbids publishers as members). Others like Simon Trewin have warned against it.
In the US, you have Scott Waxman and Richard Curtis on one side, morphing into publishers, and powerhouse agencies like Trident who are dead against it, and seem to want to position themselves as authors’ advocates in this brave new world, saying, “It is a mistake for agents to become publishers. There are substantial conflict of interests involved.”
Source: http://www.thebookseller.com/news/agents-mull-change-aaa-code-practice.html
All true,
Which brings me to my ‘chaos theory of publishing’ thinking again!
Eoin
To be fair, there’s one thing that Ed Victor says that does make sense.
When asked what he will bring to the show, he said that maybe he will be lighter on his feet.
That is very true. Some publishers are still deciding on the process for putting their backlists. Not in the game at all.
But in this sense at least, self-publishers will win, they can be more nimble than anyone.
Speed vs Power – it’s The Rumble in The Jungle all over again. This one will probably go to the last round too.