A P Watt chairman Caradoc King has attacked the 25% royalty rate on e-books. King said he had a number of issues with the 25% rate currently understood to be offered by publishers to authors.
He said the rate "disregards the fundamental principle of publishing contracts" that an author is paid more the more books they sell. He also objected on the grounds that it treats all authors identically, whether they are a bestseller or a debut; that a publisher's outlay on the development of its publishing back catalogue is more to the benefit of publishers than individual authors, and so should not be used as a reason for the lower royalty rate; and that the rate makes no difference between frontlist and backlist titles, where publisher's initial investment in the editorial and marketing processes will have been recouped.
King said he had gone to publishing c.e.o.s with these concerns and they had responded with a variety of reasons to support the royalty rate, including that e-books are subject to VAT; that digital production is a fixed cost; that more successful authors are paid higher advances and so that goes some way to redressing the balance; that a 25% e-book royalty rate is higher than the average royalty rate authors get on physical books, and that a publisher must expend additional costs on policing piracy.
However, King added: "I don't think any publisher has offered a convincing profit and loss model to explain the 25% royalty model."
He said: "Unless publishers swiftly address the need to be more transparent and flexible about digital royalties, and compete rather than collude with each other, there may be damaging fragmentation of the publishing business, in which authors may decide to sell their own books direct from their own websites, agents may be increasingly editorial and sell only final digital files to publishers and distributors, and Amazon and Google both become publishers."
King also added confusion was arising over the lack of clear definitions of digital terms in contracts.