It's not just the music and motion picture industries that are experimenting with new business models. Take publishing, the industry where I learned the importance of copyright.

Book publishers often pay authors advances they can't earn back through royalties (like some recording artists) and bookstores return books they can't sell (like some CDs and DVDs). That means it's very difficult for the publisher to anticipate costs, and they are essentially encouraged to print more copies of a book. Not only is this wasteful in an age of print-on-demand technology, but it contributes to piracy. Bookstores don't return entire books; they rip the covers off, return them, and throw away the far bulkier portion, the book. Then enterprising store employees, Dumpster-divers, etc., sell the coverless books (if you ever see a book without a cover for sale, know the author will make no money off of your purchase).

Now The Wall Street Journal (subscription required) reports that HarperCollins plans to create a small imprint of 25 titles a year or so where the authors receive no advances but instead share in profits, and where the bookstores don't return the titles (that can be 30% to 40% of all books shipped). Robert Miller, who will head the effort, said bookstores are also unhappy with the current system because of inefficiencies in the business.

While we're talking physical books here, it's no coincidence this is coming during the digital era. Traditional bookstores and publishers are both being pinched by digital alternatives, from retailers to media products. HarperCollins is merely seeking to improve efficiencies, even if that means changing a business model that is very old indeed.

And what does this mean for authors? Well, for authors used to getting advances so large they never earn royalties beyond it, they're looking at a pay cut, if they were to go with this imprint. There are, of course, many places to be published. For many authors, it would simply mean you would be paid differently. The article doesn't say, but I suspect with this system you get pay statements more than once every six months, as is common with royalties. I could be wrong, but that might become a way to compete for the best authors; if you can't give them an advance, at least pay them monthly.

But some authors will always get advances, just like Jay-Z got a $25-million advance to join Live Nation when he still owes an album to his existing label, and just like former presidents — great marketing tools for publishers — get similar advances even though it's obvious they'll never earn them back. The advances are recruitment bonuses, and there will always be someone willing to pay top talent an enticement.

Why? Because the authors begin the process with ownership over their works. To what extent they wish to lease or sell some of those rights to a publisher will dictate what they can demand financially, the way a property rights market should work.

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This entry was posted on Friday, April 4th, 2008 at 12:30 pm by Patrick Ross and is filed under market forces, property rights. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.