Kate Pullinger is one of the most creative, forward thinking authors I know, and she has my utmost respect for the positive way in which she is embracing the digital possibilities of the web, mobile technology and digital publishing in general. So it was with great interest that I read her piece on digital royalties in the g2 supplement of The Guardian the other week. Now, I can empathise with the impulse to ensure that publishers don't take an unnecessary large slice of the digital pie, if the economics work favourably and there are real cost savings to be made in a digital world.
But, but, but - let's do a reality check. In the UK consumer fiction / non-fiction space at least, digital revenues *today* are a tiny (no, virtually non-existent, let's face it) proportion of overall revenues. So we're operating in an economy still hugely dominated by print. Publishers still therefore bear all the traditional costs of print (advances, editorial, production, sales and marketing costs, promo, paper, print production costs, warehousing and distribution, plus sizeable cuts to the wholesalers and retailers in the distribution chain). In fact margins have been squeezed further and further over the years for trade publishers as the high street has consolidated and supermarket sales of books have driven a bestseller culture that relies on heavy discounting. A book which actually earns out its advance is not the most common of creatures. In today's publishing economy then, digital is an additional set of costs (conversion to multiple formats to support different types of 'e-reading'; digital file hosting (virtual 'warehousing'); content and metadata tracking and management; digital security and protection, I could go on...). These costs are 100% investment costs against an uncertain revenue stream which is likely to be little more than an interesting 'sideshow' for quite some time, even when the channels for distribution of this content begin to open up.
In fact, even if digital at some point in the future became the dominant revenue stream, which most would agree is a pretty long way distant in the consumer market, which of the costs listed above for print will really 'go away'? Actually, hardly any of them. In this scenario, print production costs don't exist, and there is no physical warehousing or shipping, but none of the content development, editorial and creation costs disappear, nor do sales and marketing costs or overheads. Traditional print production staff dont go, but simply re-skill or are replaced by digital programme managers to manage the conversion process, suppliers and workflow. Infrastructure investment and maintenance is required, constant updates to technology and systems must be made to keep up with the relentless changes and improvements in technology. And the channels to market (be it traditional retailers' eBook stores, new digital-only etailers, mobile platforms or networks or other third party channels not as yet devised or imagined) will all take their cut in the digital world just as they have in the print one.
Perhaps authors believe that the distribution chain between author and reader can be more or less cut out in the digital world; that authors could simply publish to the web and find their own audience. Why involve all the middle men, and, more to the point, why give away chunks of potential revenue to them? The big problem with this proposition is that the Internet is already less of an information super highway, more of an information pile-up. It's full of white noise. For an established, big name author to connect with their audience directly may not be a huge challenge, but for a literary title by a new author who has yet to seal their reputation to get noticed above the millions of other books (self-published and published traditionally) this would be far harder. Publishers play a role in developing new writing and new authors, in nurturing their careers, in marketing and promoting their work, in selling to, negotiating with and managing all the channels to market that exist and still will exist in the digital environment.
In order to continue to finance this support system publishers will still need to make a bit of margin, yes. Noone disagrees that authors should receive a fair royalty. I don't think we can truly know what that is until we understand the market dynamics of print versus digital once digital truly becomes established. At Pan Macmillan we have resolved this by asking authors to agree to a digital royalty in the immediate term that will enable us to produce and sell their books in digital formats, to engage actively with this nascent market, but with the safety net of a 'review period' after which we can all determine how the market is shaping up, what the economics of doing business digitally really are. I think that is the best solution as we enter such unchartered waters.