Major Publishers and the No-Advance Digital Model: Thanks, but No Thanks

It can’t have escaped too many authors’ notice that most of the major publishers are opening digital-first/only romance lines. Harlequin was first out of the gate with Carina Press, but now we have Avon jumping into the game with Avon Impulse and Random House with Loveswept. I’m sure the other major houses can’t be far behind. There’s a lot to be said for the digital first/only publishing model in this age of shrinking shelf space and expanding digital book sales. Why shell out for a print run when orders for print books are declining and you may even take a bath on the book if one of the big boxes (Walmart or Target) decides not to stock it? Better to test the waters in digital first and, if the book does really well, cross the author over into print when you’re more certain of the return on investment. And romance readers have clearly been the early adopters on this front. Digital books and romance readers are a match made in heaven because we like to read a lot of books and we want them yesterday.

But there’s a catch, and it’s a big one, in my opinion. With the exception of Carina, it appears that these new digital lines being created by the major publishers are picking up books and authors for these new lines with no advances and a royalty rate of 25% of net. (The royalty rate sometimes steps up to as much as 50% of net after a certain number of sales, but these sales numbers are usually in the 10,000+ range.)

Now, 25% of net is pretty standard when you sign with a major publishing house, but usually, you’re getting that lower rate in exchange for print exposure AND an advance. The publisher is making a significant upfront investment and taking the lion’s share of the risk in traditional print deals, both because they’re giving the author a guaranteed minimum royalty payment in the form of the advance and investing in the print run and print distribution, not to mention the possibility of returns. From a business perspective, it’s reasonable for an author to take relatively low royalties in exchange for a guarantee that, even if the book tanks, he/she will never receive less in payment than the advance.

When digital publishing first started catching on, one of the things that made the no-advance model work was that, although there was no advance, the royalty rate was much higher. The publisher was taking much less risk by giving no advance, but there was no cost to the author to produce the book and the potential earnings if the book did well were much greater. Even so, back in the day, there was a LOT of skepticism about the no-advance digital model. RWA and many authors looked askance, viewing it as a too-risky proposition because there was absolutely no guarantee that the author would ever earn any money at all. For quite a while, RWA refused to “recognize” digital publishers like Samhain and Ellora’s Cave because there was so much uncertainty associated with earnings.

That uncertainty in digital publishing hasn’t gone away. There’s still no guarantee that a digital book will sell enough copies to earn the author a decent amount of money, even at the higher royalty rates offered by small digital presses. Which is why I’m baffled by the insistence of the major houses on maintaining that 25% of net on royalty rate for these digital-first lines. (Again, I’m not including Carina in this rant, as their rates have always been more on a par with the other digital presses, and from what I understand, they recently raised those rates.)

Let’s see if I have this straight, shall we? You are not going to pay me an advance for my book, so you are not going to guarantee me a minimum payment. In addition, you won’t be investing in a print run or physical distribution for my book, thereby significantly cutting your production costs. But, because you are (Insert Big 6 Publisher Name Here), I should be happy to accept the exact same royalty rate for my books as authors who are getting both of the benefits? Hmmmm, forgive me if I’m not impressed.

And here’s the real kicker–the way I see it, within five years, most romance will be published as digital first. If print is available, it will probably be POD. And this will be true of books put out by the Big 6 publishers. Unless a book is “big enough” to be stocked in Walmart/Target, it’s not going to HAVE a print run. That’s just the reality of what’s happening to the book market. With Borders gone, B&N committed to the Nook+Nookbooks as its primary source of revenue growth, and more and more people getting ereaders/tablets/smart phones, print is fast becoming an inefficient and not even particularly desirable method of delivering book content. If I want a print book now, I have to go to a store and buy it or buy it from an online retailer and have it shipped. If I want a digital book now, I can have it. NOW. (Well, unless it’s only available for pre-order, but details, details.)

So, what I foresee is that publishers will start pushing their current midlist authors into these digital lines in addition to attempting to acquire new authors for these lines. It remains to be seen whether they’ll be successful at keeping authors on, though, if they offer such poor royalty rates and no advance.

All I can say is that, if I were a Big 6 publishing house and I planned to launch a digital line, I’d be thinking about offering either a royalty rate to match the digital small presses or a modest advance. But I wouldn’t count on my big name to convince authors to take it on the chin when they have other options.