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Digital Shockwave: How Millions of Dollars and the Survival of the Publishing Industry are at Stake

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Yesterday afternoon I participated in a Blog Talk Radio interview with authors J.A. Konrath and Boyd Morrison on ebooks, traditional vs. self-publishing and the future of the digital landscape. All three of us have had experiences publishing in the digital-only realm: Konrath has made a name for himself by contracting with Amazon Encore for the 7th book in his Jack Daniels mystery series, as well as raking in an expected six figure income from ebook sales of many previously unpublished manuscripts. Morrison, after unsuccessfully trying to sell his technothriller The Ark, published three novels on the Kindle. The books sold approximately 7,500 copies in less than 3 months, and were all subsequently acquired by Simon & Schuster, which recently published The Ark in hardcover, selling rights in 18 territories. Last year I published an ebook exclusive novella, The Hunters, that served as a bridge between my two traditionally-published novels The Fury and The Darkness. The Hunters hit #1 on the Kindle bestseller list, and by conservative estimates has been downloaded around 40,000 times.

Now these are small, personal anecdotes, mere drops in the ocean. However, as David Mitchell said in Cloud Atlas: 'What is any ocean but a multitude of drops?" I found the timing of our discussion interesting given the news Thursday morning that literary agent Andrew Wylie has started his own self-publishing firm: Odyssey Editions. Wylie represents a murderer's row of esteemed authors and their estates, including Ralph Ellison, Hunter S. Thompson, Saul Bellow and Salman Rushdie. These authors, and many others, signed their publishing contracts long before digital rights were even a speck on the horizon. Because of this, Wylie and other agents have fought a public battle claiming that digital rights were a wholly separate entity, and could be sold or distributed independently of any previous publishing arrangements. Random House has planted its feet, releasing a statement disputing Wylie's legal right to publish the books. It harkens back to the battle between MacMillan and Hachette with Amazon over the newly adopted 'Agency Model' of ebook distribution. It is no surprise that Random House, Hachette MacMillan and other publishers are resisting these inroads: millions of dollars and possibly the future of the industry are at stake.

Let's go back just a few weeks ago. At the ThrillerFest conference, Gina Centrello, President and Publisher of The Random House Publishing Group, said that she believes ebook sales will represent up to 50% of the market within just five years. Five years. Five years ago the Kindle did not even exist. Last year represented 3%. According to Centrello, this year it will make up 10%. And with price-slashing on the Kindle and Nook, the introduction of the iPad, plus the inevitable sub-$100 e-readers that will almost surely be hitting stores by Christmas, Centrello's figures may be accurate.

So what does this mean? Well, for publishers it could be nothing short of catastrophic. Every publishing house depends on backlist sales for a tremendous amount of their income. Frontlist titles might flesh companies out, but backlist books are often the spine. Publishers depend on revenue from books that have been in print for years and sometimes decades, that have long ago earned out and sell four, five or six figures annually. These books are essentially 'found money', as little to nothing needs to be spent on marketing, editing and other overhead costs. Without backlist titles, a great deal of a house's income would be dependent on costlier and riskier frontlist titles (read Anna David's Daily Beast column on the risks of celebrity publishing).

Now, what if this begins a domino effect? What if many backlist titles, responsible for a tremendous annual income stream, are suddenly available in cheaper ebook editions? And the revenue for those editions completely bypasses the publishers and goes straight to the pockets of the authors, agents, Amazon, Apple and Barnes & Noble? There are millions and millions of dollars at stake, which is why Random House so publicly claimed ownership over the digital rights to a large stable of backlist titles where digital ownership is somewhat murky. If digital rights to these older titles are yanked away, or if more established authors decide to publish their digital books independently, it could carve out a substantial piece of publishing revenue. The outcome of the Random House/Wylie/Odyssey battle could be a harbinger of what's to come. If it is decided that pre-digital era contracts do not grant digital rights, expect numerous authors and estates to explore alternate options to maximize their digital revenue. Additionally, this could create dilemmas for literary agents who want to maximize their authors earnings, but are already dealing with publishers' cutting back imprints and reducing money spent on marketing. Taking away an integral piece of the publisher's pie could force additional layoffs, additional cutbacks.

Not only will the digital rights fight effect older titles, but likely newer acquisitions as well. A war has been brewing for some time between publishers and agents over royalty rates for ebooks, exacerbated by Amazon's up to 70% royalty rate for books published through the Kindle store. Authors who publish their ebooks through traditional publishers can expect to receive, at most, about 25% of net receipts. That's a lot of money left on the table -- especially if you're an author like James Patterson, Charlaine Harris, Stieg Larsson or Stephenie Meyer, who have all sold over half a million ebooks, with sales expected to grow exponentially. Will there come a time in the near future when a mega-author simply refuses to grant his/her publisher ebook rights, preferring a higher royalty rate by publishing with an outfit like Wylie's Odyssey or Jane Friedman's Open Road Integrated Media?

If the print revenue that publishers reap through backlist sales -- or can expect via digital editions from recentl or future publications -- is drastically reduced or lost in whole, it could bring forth a seismic shift in the way the industry does business, and will drastically affect the bottom line of every publisher. My hope is that digital progress will encourage younger, more tech-savvy and perhaps reluctant readers to give books a shot. I still believe the biggest issue facing the industry is the simple lack of readers: too many adults read too little, not enough children grow a love of books from an early age. But these are larger picture concerns, ones without tangible solutions. The battle over digital rights will only grow over the next few years as authors, agents and publishers realize just how much is at stake.

JASON PINTER is the bestselling author of five thriller novels (the most recent of which are The Fury and The Darkness), which have been nominated for numerous awards and optioned to be a major motion picture. His first novel for young readers, Zeke Bartholomew: Superspy!, will be released in the summer of 2011. Visit him at http//:www.jasonpinter.com.

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