Author Royalties in the Hot Seat

"E-books may well create a large, distinct and profitable market," Ellenberg says. "The audiobook market is believed to be worth $3 billion, and not many people would argue that it has aggressively cannibalized hardcover book sales. We believe we've gotten new readers: the people who drive and listen, and the people who no longer can read that well. It's a revenue stream and a successful one."

In the meantime, however, uncertainty and anxiety will continue, especially as some of the most potentially marketable names—authors already commanding followings or having built up some kind of public profiles—begin to see high-royalty arrangements or even self-publishing as better deals than what traditional publishers offer.

The situation has led to some experimentation among traditional publishers, with Vanguard Press (an imprint of the Perseus Books Group) leading the way in trying a no-advance, profit-sharing model that offers much higher royalty rates in exchange for shifting a more balanced share of the risk (and profit) to the author (marketing commitments are spelled out in the contract to assuage fears that the publisher will have less 
incentive to promote the book).

Also going this route has been Harper Studio, whose concept of no- or low-advance author contracts emerged from President Robert Miller's experience at Hyperion.

"For me, it came from feeling frustrated that even at our most successful … the amount of money we left on the table in terms of unearned advances was frustratingly high," he says. "It seemed like [for] the big six publishers—competitive landscape publishing—the advances were just kind of spiraling out of control to a point where the level of risk was unacceptable. We were putting our ability to stay in business at risk.

"I wanted to find a way to share risk differently with authors," he says, "and I was willing to give up more of the profitability of a book if I were able to find an author who, in exchange, would not require us to bet our jobs every time we signed up a book."