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Scott Turow loses the plot

Authors Guild president Scott Turow’s jeremiad on the death of the American author in Monday’s NY Times has already been picked apart, by Jeff John Walker and others, so I won’t bother with my own debunking. But just as even a blind squirrel sometimes finds a nut, Turow did stumble on one important point about the current publishing business, although he misses its significance:

Take e-books. They are much less expensive for publishers to produce: there are no printing, warehousing or transportation costs, and unlike physical books, there is no risk that the retailer will return the book for full credit.

But instead of using the savings to be more generous to authors, the six major publishing houses — five of which were sued last year by the Justice Department’s Antitrust Division for fixing e-book prices — all rigidly insist on clauses limiting e-book royalties to 25 percent of net receipts. That is roughly half of a traditional hardcover royalty.

Best-selling authors have the market power to negotiate a higher implicit e-book royalty in our advances, even if our publishers won’t admit it. But writers whose works sell less robustly find their earnings declining because of the new rate, a process that will accelerate as the market pivots more toward digital.

Right, but pace Turow, that is not an “example of how the global electronic marketplace is rapidly depleting authors’ income streams.” It actually has nothing to do with the electronic marketplace at all, or with digital technology as such. It has to do with the cartel-like structure of the publishing business and with publishers taking advantage of technology change to take advantage of authors. It’s actually a very old story in rights-based businesses, and Turow does his cause no good by conflating it with piracy, Google Books, or any of the other villains he identifies.

Back in the earliest days of the home video business, when movies were being released on very-analog Beta and VHS cassettes, the major studios established the 80-20 rule. When Warner Bros. released a movie on video, it technically “licensed” the film to Warner Home Video, it’s wholly owned subsidiary. Warner Home Video paid nothing up front for the rights but returned a 20 percent royalty from cassette sales to the parent studio. When it came time to share the revenue with the creative talent or others with a financial interest in the picture, whose deals were with Warner Bros., not Warner Home Video, only the 20 percent of video sales returned to the studio went into the pot. Warner’s wholly owned subsidiary kept the other 80 percent free and clear.

The studios got away with that bit of legerdemain at first on the grounds that home video was a new technology, and the studios needed the flexibility to experiment with the business model. It wasn’t long, however, before that experiment became the studios’ main cash cow, eclipsing the revenue from theaters and other channels. By then, however, the system was entrenched. As with best-selling authors, A-list creative talent in Hollywood was able to negotiate a better deal. But for those who relied on industry-standard residuals rather than individually negotiated profit participation got screwed.

When digital video came along the studios tried the same trick again but by then actors, writers and others were wise to the ruse and fought a series of pitched battles with the Producers Guild over the division of the video spoils. If Turow really wanted to do something useful for his mid-list members he would stop helping the publishers deflect attention by pointing to Google and off-shore piracy sites and help authors demand a better deal.