With the rise of less expensive ebook readers and the growing interest in using mobile devices such as handhelds and cell phones to read digital content, the question of how an author should best handle their digital rights is becoming more complex.  Recent changes in how publishers are compensating us for this content has also made it more important for us to understand just what is being offered and by whom.

Back in October 2008, Random House sent out a letter to industry agents informing them of a change in policy regarding ebook royalty rates on all future contracts.  Previously, RH had paid 25% of the suggested retail price of the title.  The new policy was that they would be paying 25% of the amount received for all titles.

What, exactly, did this mean for writers?  Under the old policy, if a book retailed for $10.00, the author earned a royalty of $2.50 on every book sold, regardless of any discounting the publisher might do on the title.  Under the new policy, the writer would only receive 25% of what the publisher took in instead.  So if the book retailed for $10.00, but the publisher had to discount that 50% for the distributor, the author would only receive 25% of the 50% the publisher made, or somewhere in the neighborhood of $1.25.

That was a significant drop, any way you look at it.

Shortly thereafter, Simon & Schuster followed suit, adopting the same policy as Random House.  Thankfully, the vast majority of other publishers continued to offer what was at the time the standard 25% of list price royalty rate.

Now we have another bump in the road.  MacMillan, parent of such companies as St. Martin’s, Farrar Straus and Giroux, Henry Holt, Picador, and Tor among others, announced this week that they would be making changes in their ebook royalty rates as well.

Here’s a direct quote from CEO John Sargent’s cover letter:

“It won’t surprise you that we have looked at the growth of development of digital delivery of the content from our books.  A number of the new contract’s provisions, specifically in the grant of rights and royalty sections of the contract, reflect our response to those developments.  Our starting premise is that digital rights in the content we publish in print book formats must be included in the basic grant of rights that we receive from authors.  In addition, as the methods for dissemination of content rapidly change and the distinctions between sales and licenses blur, we have determined that a single royalty rate, based on the amount received by the Publisher, should apply to all exploitation of the content of the book in digital form.”

That standard royalty rate Sargent is talking about?  Turns out it’s 20% of monies received.

Back to our example.  If that $10.00 book is published by one of MacMillan’s companies, that $2.50 royalty is now reduced to $1.00.

As both a Tor author and one who is highly interested in digital rights, let me give you my honest opinion.

That sucks.

To show you what I mean, let’s compare that to my recent deal with Blackbetty Mobilemedia.  Under that contract, I get a royalty rate that is 20% of the catalog retail price of the book.  Each episode of The Cerberus Protocol (the first book in the HELLstalkers series) will sell for $2.99.  There will be six episodes – one will be free to bring people into the story and the other five will be at the above rate.  The cost to buy the complete book is therefore $14.95, or roughly the price of a trade paperback.  Of that $14.95, I walk away with $2.99.

$1.00 versus $2.99.  Which would you take?

But there is another issue here that needs to be examined and that is MacMillan’s insistence that digital rights be included in the initial sale.  That clause means I can’t sell the print rights to the HELLstalkers series to any MacMillan subsidiary, since I’ve already licensed the rights elsewhere.

Question is, should I be upset by that?

Let’s say Tor bought the rights and decided to bring the book out in paperback. Standard royalty rates on a paperback run 6% on the first 25K copies, 7% on the next 25K and 8% thereafter.  To make things easier, let’s just use that higher royalty rate.

Paperbacks typically sell for $7.99 now.  8% of $7.99 is 63 cents.

What becomes the determining factor now is not the royalty rate but the distribution model.  If I can get the book in front of as many people in digital form as I can in print form, I am far better off doing it the non-traditional way.

Something like 450% better off, in fact.

Part of my reasoning in accepting the recent offer from Blackbetty was to test if that distribution model is in place yet.  By partnering with a major telecommunications giant like Vodafone (who, incidentally, also own Verizon here in the States) I’m betting that we can put this book in front of as many pairs of eyes as I could if I sold it to a traditional publisher.  If I take into account the fact that it will be published in seven different territories simultaneously, I believe that I can even beat that pre-existing model.

Time will tell.

(Note – MacMillan did include a higher royalty rate on direct-to-consumer sales in the new contract – 10% of net receipts on the first 10K copies, rather than the old 5% industry standard, but I’m not giving them any credit for that because they don’t make any kind of commitment to changing how they market direct to consumers.  The higher royalty ate does little good as a result.)

Now that the Frankfurt Book Fair and the press conference announcing HELLstalkers is over, it is time for my co-writer and I to move into the next phase of the project – building up the online presence and promotion before the December 1st launch of the first book in the series, The Cerberus Protocol.

We’ve taken some definitive steps over the last week that will help us immensely in this area.  The first of which was to hire a graphic designer and an artist.

You see, both Jon and I believe that the project has legs; that it will continue to expand into other mediums if we provide the impetus it needs to do so.  While we are happy with the mobile phone publication deal, we strongly believe that there is potential for a print deal, a comic/graphic novel deal, a possible film or tv adapation, and even a video game based on the project.  While strong sales will probably net us a print deal even if we did nothing to secure it, the other mediums are more graphically oriented and we wanted to set ourselves up properly to take advantage of that as time goes by.

To do that properly, we needed someone who understood design to help us plan and create the series’ online presence and we needed an artist who could take our vision and translate it into a slick graphical content to promote that online presence.  Luckily, we found what we needed in two guys we’ve known for a while.  The fact that they also happen to work together on a daily basis simply allows us to cut down on the “feeling each other out” stage and get right down to business.

Our new teammates got right down to work, creating both a basic logo concept (the image of the Collider’s core with the word HELLstalker beneath it) and the military patch worn by the HELLstalker unit members that will be a common image in our promotional ads and displays.  For the next few weeks, we’re going to be working with them to modify our website design, look, and feel – putting in custom background images, designing the cover art for the first book in the series, preparing banner ads and promotional fliers that utilize QR codes to help spread the word about the launch.

At the same time, we haven’t simply sat back on our laurels when it comes to marketing other potentials deals to spin off this one.  We would certainly like to sell the series to a major US publisher, to begin with, and given how long it takes to bring a book to market we could sell the series today and still not interfere with the exclusivity we promised to our small screen publisher.

One of the first things we did was take advantage of the things we’ve been learning about QR codes to create a special post directed at editors on the website PublishersMarketplace. com.  As my page at PM is consistently one of the top 20 blog pages viewed on the site, we decided to embed the entire proposal for the series into a QR code and invite editors to download it with their mobile phones.  This has the added advantage of using a new and different type of technology to get the editor to give it a try and also supports what we say in the marketing section of the proposal about our intended use of cutting edge tech to promote the series once it is published.  We’ve also setup a tracking program to know who is downloading the proposal so we can gauge how effective the process might be.

If you’d like to take a look, you can see the post HERE

PM also allows you to list projects that are available for acquisition in their Rights Offering section, so I put up a post there as well that also utilizes the QR code, which you can see HERE

As time goes on, I’ll keep posted on whether or not they work the way we hope.

(To view the proposal, use your mobile phone QR code reader, take a picture of the image, and active the link.  Doing so will download the file directly to your mobile phone for easy viewing.  If you don’t have a QR reader, simply do a Google search and download one for your phone.  Most of them are either free or less than a $1.00)

Next month a press conference will be held at the Frankfurt Book Fair announcing the pending launch of HELLstalkers, which is that super secret project I’ve eluded to several times both here and on my personal webpage.  More information on the project itself – what it is, who’s publishing it, how people can get it – has been posted on the official series website, http://www.hellstalkers.com.

I’m not going to repeat all of that here, but instead take RockYourWritingCareer.com members behind the scenes and into the birth and production of the series itself.  How did it come about?  What hurdles did we have to go through to get it approved?  How are we incorporating mobile and web technology to expand and build upon the text of the novels themselves?  We’ll be examining these and other issues over the next few months as decisions are made and the project is launched.

So let’s begin with the most obvious question – how did all this come about?

In order to answer that, we have to go back a few years.  My second novel, HERETIC, was released in 2005 by Pocket Books.  Just a month before it hit the streets, my editor left S&S and moved to Random House to handle non-fiction, leaving me effectively “orphaned.”  (Orphaned means you have no in-house champion to fight for you or your work.)  My lack of internal support left me hanging high and dry and as a result, Pocket passed on picking up books two and three in the series.

My career might have ended then and there if it wasn’t for the fact that I’d already been cultivating overseas contacts.  An editor from Droemer-Knaur made an offer for all three book in the Templar Chronicles and I’ve been writing for them ever since.  (December will see the launch of my fourth novel for them, with at least two more still under contract.)

Why am I telling you all this?  Because it is the fact that I was writing for a German publisher, and enjoying some decent success while doing so, that made the HELLstalker series possible.

You see, a few months before the 2008 Frankfurt Book Fair, I was doing some research on publishers who planned on being in attendance so that I could suggest editors for my agent to meet with at the Fair.  I stumbled upon an article about a multimedia company in Vienna called Blackbetty MobileMedia GmbH that was going to be launching a new mobile books platform for the German market.  The same article also noted that the company intended to expand into the US six to twelve months later.

Given that I had a bestselling series currently on the shelves in Germany at the time, I tracked down the company’s website and, unable to find an email address, used their contact form to send the following message:

I’m an American author published in Germany through Droemer-Knaur.  I’m interested in speaking to someone about having my German works available through your company.  Could you let me know who I should have my agent contact?

To my surprise, the company CEO wrote back that very evening, stating that he was familiar with my series and asking that my agent get in touch so that they could talk about licensing it for the mobile phone platform.

Several months went by, with discussions taking place between Blackbetty and my publisher, Droemer-Knaur, but nothing solidified during the process.  While all that was going on, I began corresponding with Blackbetty’s VP of Development, talking about the mobile books industry in general and Blackbetty in particular.  I knew that I wanted to find a way to do business with them and while chatting one day I asked if they might be interested in having me write something original for them instead of licensing my already existing work.  To my delight, they jumped at the opportunity.

What, they asked, did I have in mind?

Stay tuned for Part Two, where I pull a story out of my, uh…hat right there on the spot.

As you’re no doubt aware by now, I’m always watching what’s going on around me, both in and out of the publishing industry, looking for ways I can expand my general readership and the success of my writing projects.  By paying attention and then reaching out when I think it appropriate, I’ve added all sorts of new endeavors to my list of publications – from comics to role-playing games to independent film productions.

Later this week, I’ll start sharing a series of posts related to an entirely new endeavor, one that I hope will take my career to the next level.

The reason I’m telling you all this in advance is because, just as I did with the recent series of posts where I walked you step by step through the process I use to secure foreign rights sales for my novels, I’m going to take you right into the heart of this new project.  I’m going to give you an inside look at the process as it unfolds step by step – from the original development of the idea to the pitch to the contract negotiations and finally the launch.  Most importantly, I’m going to be showing you how you can take advantage of similar opportunities should they come your way.

Contracts are currently being signed, press releases are being written, and I should be able to take more freely about the entire project in just a few days.  In the meantime, let me just leave you with a title:

Hellstalkers: The Series

(Stay Tuned!)