On January 31, an article released on KAI-YOU.net with the title ‘Is It True That ‘Purchasing E-Books Does Not Support Authors’? Interview With an Editor’ (hereinafter called ‘the original article’) got a lot of feedback.
Most of the comments were negative reactions. People wrote counter-articles such as the one written by video game developer Kazunari Yonemitsu, ‘Lies of “Purchasing E-Books Does Not Support Authors”‘. Editors from publishing houses were even retorting. We disagree.
In 2012 (which is called the first year of e-books) I, Ryou Takano, wrote ‘The Perfect Guide to E-Book Stores’ on ITmedia eBook USER and have been working on promoting e-books. To me, it was in some ways surprising that there was so much negative feedback to the original article, and thereby, so many positive opinions on e-books. Because in situations like this, opinions towards e-books used to be overwhelmingly negative before.
I got an email from KAI-YOU.net’s managing editor, Nao Niimi. He said, ‘The original article has few accounts, so I’ve been asking various people for their opinions.’ He also said that he wanted an opinion from me as the director of The Alliance of Independent Authors in Japan. So here I am, writing this article.
The Alliance of Independent Authors in Japan is a Nonprofit Organization whose motto is, ‘Boost independent publishing! Sometimes people misunderstand; we don’t mean to antagonize publishers. We aim in a complementary relationship with them which supplements difficult genres that publishers are reluctant to cover.
Writer: Ryou Takano
Editor: Nao Niimi
What I found most disturbing was the following paragraph:
Even though it’s true that in recent years e-books have been on the rise and paper books have been decreasing, as of now, the e-book’s market size is approximately one-eighth of the physical book’s market size.
Is ‘Purchasing E-Books Does Not Support Authors’ True? Interview With an Editor
Certainly, the figure that represents the publishing market (released by Research Institute for Publications) is not entirely incorrect. However, this figure shows the entire publishing market. The context of the original article is volumes of manga, so perhaps they should show manga figures only, since the first 2017 issue of the monthly publishing report, which the original article refers to, has the proper figures.
The market value of physical volumes of manga (represented with volumes) in 2016 was ¥194 billion, an 8% decrease from the previous year. The e-book’s market value was ¥146 billion, a 27.1% increase. In other words, if you consider only volumes of manga, e-books account for 42.9% of sales profits.
Also, the sales of physical volumes of manga and e-books combined was ¥313.8 billion in 2014, ¥325.1 billion in 2015 and it has grown to ¥340 billion in 2016; it’s actually on a rising trend.
Although figures for physical manga magazines and e-manga magazines in 2016 hadn’t been released at the time of the article, in 2015 they were ¥116.6 billion and ¥2 billion respectively (reference: 2016 Annual Report on Publishing Index). Considering the ratio of sales change from 2014 to 2015, I’m assuming a third of the manga market value will be from e-book sales in 2016.
It’s a bit unreasonable to say the e-books’ impact is not big enough to affect the landscape in this situation.
If you take a look at the regular book market, e-books hold a value of ¥25.8 billion while paper books hold ¥737 billion; E-books account for only 3.4％ of sales. However, if you compare e-books’ numbers to physical books’ numbers by genre, there’s a significant difference in each. Therefore, it’s also unreasonable to think that the regular e-book market is still tiny and cut it off.
At least with e-book manga, which have expanded their market significantly, authors and publishers must be obtaining significant benefits. It’s not a good strategy to ignore e-book sales to decide whether or not they should continue serializing a story.
By the way, it’s rather natural that e-book sales don’t count for reprinting physical books which value sales right after their release date, so I won’t mention it in this article.
However, what’s agonizing when reading figures is that physical and electronic versions both have new publications and old publications. Also, data which divides them doesn’t exist.
At least I don’t know of it, and first of all, there’s a definition problem: For how long is a new publication new? Books’ life cycles are different depending on the genre.
For physical books, it’s a fact that book stores have limited shelf space. Book stores have certain obligations toward resale price maintenance, so they can’t sell books at a discount without the publishers’ permission.
Therefore, the only solution they have is to display books strategically. Conspicuously laying books flat before the shelves is a completely different strategy from displaying books on the shelves themselves. Older books left in shelves are usually bestsellers that have a reasonable chance of selling. In other words, it can be estimated that new books will naturally have a big proportion of sales.
However, in e-book stores, they basically stay in the shelves forever. There are no returned copies, so they don’t run out of stock. (For confirmation, there are circumstances in which they stop selling for any reason, so going out of print happens to electronic books too.)
Therefore, if some books unexpectedly get big for various reasons (picked up for TV or famous people recommended them), e-books don’t let the opportunity go. Unlike physical books, electronic books aren’t under resale price maintenance, so if they want to push some books, they can also sell them at a discount.
Also with e-books there is something called Long Tail: if stores keep selling things for a long time, those things keep making money.
The Alliance of Independent Authors in Japan had issued an e-magazine called Monthly Gunsu from January 2014 (currently suspended). The first issue, the longest-selling issue, had its number of sales in the first two months matched and surpassed in the following twenty. Other numbers and Gunsu Bunko, a label which started in November 2015, show similar trends too.
Consequently, you can predict that older publications might account for a large part of e-book sales compared to physical book sales. It seems that ‘Long Tail’ generally follows The Pareto Principle (roughly 80% of the effects come from 20% of the causes), so perhaps the sales ratio of heavily-pushed new publications and older publications that tend to just be in shelves is about 80:20…?
Now, let’s get back to the original article. Is it really true that ‘Purchasing E-Books Does Not Support Authors?’ Is it really true that ‘they just use revenue from physical copies to judge if a work itself is a success or failure,’ and ‘e-book sales don’t contribute to continuing publication at all, but are even detrimental?’
As I wrote in the title, I don’t think so at all because e-books essentially have super high margins. The copying cost is extremely small, so once a publication goes over the break-even point, it starts making surprising amounts of money.
There will be people involved who thought ‘No way,’ but that’s probably because they think only in the short term. Well, when the market was small, a lot of products must have taken a long time to go over the break-even point. However, as markets expand, the period of time to go over the break-even point has gradually contracted and profitable products must have been increasing.
Let’s go into it a little more in depth. With physical publications, royalties to authors are generally about 10%. (Hereinafter without ‘about’) In many cases, royalties are paid based on copies printed. Publishers take the risk of returned copies by over-printing. Advertising expenses are basically paid by them as well. Therefore historically, a lot of people accepted that the author’s royalty rate is 10%. By the way, there are physical publication publishers that adopt the royalties on actual sales and have lower royalty rates, so this is just a common opinion.
On the other hand with e-books, royalties are on actual sales. As far as I know, they all adopt a revenue share based on the amount paid by e-book stores. E-book stores pay server fees and internet fees that are equivalent to printing costs, so e-book stores claim a relatively high percentage of profits compared to physical stores (generally 22% of list price). The rate is different depending on e-book stores. For example, it was announced that on Amazon’s Kindle Unlimited, which started last year, half of the revenue goes to publishers.
Although there’s not much information on revenue share rates between publishers and authors, it seems that one major publisher sets it to 25%. It seems to be a much better condition compared to paper royalties rate of 10%, but you need to be careful because it’s based on the amount paid by e-book stores to publishers.
E-book stores share 50% of the revenue with publishers and publishers share 25% of what they get with authors, so when computed from the sales price at e-book stores, it’s 50％×25％＝12.5％. When compared to paper royalties rate of 10%, it’s actually only a 2.5% difference.
Publishers naturally absorb expenses like the manuscript fee, editing fee, design fee, and other costs around making e-books, but since there aren’t returned copies in electronic form, they don’t have a stock risk. Therefore, perhaps e-books, which have higher margins, essentially should set higher revenue share rates.
In addition, this applies to both physical and electronic copies. If publishers are overwhelmingly short-handed and authors have to promote themselves, then advertising expenses should be given back to authors. As is written in the original article, if they count on authors’ direct marketing, they are supposed to pay them compensation.
Therefore, if authors can’t agree on an e-book contract with publishers, there are ways like negotiating to get a higher share rate or asking another publisher motivated to promote e-books.
However, I hear that these kinds of negotiations are hard unless they are by already popular authors. Maybe in the future, there might be agents who cover these complex negotiations in Japan.
Also, if authors have to promote themselves, they might as well self-publish. For example, Kindle Direct Publishing offers normally 35%, and if it’s exclusive, 70%. Rakuten Kobo Writing Life offers 70% if the price is over ¥299, and 45% if it’s less than ¥299. BW Indie Authors Center, in which authors can deliver works on BOOK☆WALKER, offers 50%.
There are cases in which publishers canceled publications but the authors didn’t want to finish the series halfway, so they canceled their contracts and kept publishing on their own.
Surprisingly, this article also has a similar conclusion to the original article: Maybe we should review contracts between paper media’s publication rights and e-books’ publication rights.
Thanks to the development of digitalization and networking, anyone can be published now. The existential value of publishers and editors is questioned. Rather than continuing as you have by bearing with people who keep telling you they can’t do things for you, isn’t it healthier to find new partners or challenge yourself in new ways?
If you’re interested in The Alliance of Independent Authors in Japan, which supports independent publication, please visit the official page.