Fair to Muddling

The arrival of digital books as a commercial format has opened a lot of discussions about how much they should cost, and how much of that money authors should receive. Publishers Weekly recently ran an article about electronic publishing summarizing what Authors Guild official Paul Aiken said at a panel on digital publishing:

With his math, which he walked the audience through, a publisher, on a title with a $26 list price, makes roughly $5.10 on the hardcover while the author makes $3.90. On the e-book sold through the wholesale model, the publisher brings in $9.25 while the author gets $3.25. On the e-book sold through the agency model, the publisher gets $6.38 and the author gets $2.28. (A graphic that ran in the Huffington Post displays this visually. Interestingly, though, more costs are subtracted from the publishers’ bottom line.) So with that math Aiken’s question remains the same: why should authors make less on one version of a book than another? In a fair world, authors would earn at least as much (in dollar terms) on e-book sales as on hardcover sales, Aiken said.

A short time later, the PWxyz blog offered another graphic on how the revenue gets divided, along with some bwa-ha-ha’s from poets that serious writers should expect to make serious money from their work.

Today New York Times business section noted outrage from readers that Amazon was pricing two bestselling authors’ hardcovers slightly less than their electronic editions.

Those arguments remind me of the conflict in late-1700s America between what historians call the “moral economy” and the rising “market economy.”

Under the model of a moral economy, a society, often through government but sometimes through crowd action, tried to control prices and supply to keep things fair. The selectmen of Boston determined how heavy loaves of bread should be and how they should be priced. During the Revolutionary War a crowd of women (including retailers) mobbed the merchant Thomas Boylston because he was storing coffee in his warehouse, expecting its price to rise. (That incident is the basis of The Boston Coffee Party, by Doreen Rappaport.)

In contrast, in a market economy prices are set by the forces of supply and demand, as described by Adam Smith around the same time as that coffee riot. When demand outpaces supply, prices rise—making the business more attractive, which usually brings in more suppliers so the prices fall, and so on. Of course, we hardly ever have a true free market, but in theory that’s how the system works. And the US economy tilts in that direction, never so clearly as in the last decade.

The American publishing industry has always operated in a market economy. That’s mostly because its products have never been seen as necessary for life like bread and coffee, and partly because of the First Amendment’s guarantee of a free press. What we consider a “fair” price for a book, a “fair” markup for retailers, or a “fair” royalty for authors are actually conventions worked out over years. Like the pirates’ code, they’re “more what you’d call ‘guidelines’ than actual rules.”

As a result, hardcovers for teen-aged readers cost less than hardcovers of the same size for adult readers. Serious nonfiction costs more than fiction, but less than nonfiction people would never read except for their job. Authors earn more on hardcovers than on paperbacks, but less on cheap hardcover reprints. Readers won’t spend more than $20 on a picture book, even if its art could hang in a museum. Prices are based on how big a book looks, not how many words it contains or how good it is. It’s impossible to discern rules that render all those prices and compensation levels “fair.”

Yet agents and authors are now trying to lay down markers for a “fair” royalty for electronic books. Readers are insisting that it’s not “fair” for electronic books to cost more than their paper counterparts. And small bookstores have long said it’s not “fair” that massive retailers get better terms. Those are the arguments of the moral economy, and they won’t go far. They’ll be lost in the swirl of the market economy as the industry muddles through learning what readers are willing to pay, and for what, and how much that supply will cost to produce.

After all, how many advocates of a “fair” price or royalty would stick to that level if they had the chance to earn more, or pay less?