Random House Changes E-Book Royalty Structure

In a letter to literary agents, Random House has recently announced that they are changing the royalty structure for authors with e-books. As eReads reports:

“With the widespread use by consumers of electronic devices such as the iPod, the Amazon Kindle, and the Sony Reader, a significant market for ebooks and digitally delivered audio content is finally ready to emerge,” the letter stated.

“In response, Random House is making major investments in our digital infrastructure and is creating digital files of active titles so that they are available for sales as ebooks, as downloadable audio, and for Internet search and discovery.”

As of December 1, 2008, the new royalty rate is 25% of the amount received, rather than a percentage of the list price.

While this certainly means a reduction in e-book revenue for authors, it is an adjustment that reflects the economy of the e-content world. Deeper discounts are possible in online commerce due to the infinite numbers of copies possible to selland in theory, publishers and authors also benefit from being able to sell more even if it’s for less.

The experience of the revenue share of e-books being lower per unit isn’t new: it’s just making its way up the supply chain.