Minor update: rewrote the bit about academic publishing in respinse to Laura's comment Jeff Jarvis has a post where he praises Harper Collins for bravely copying a small part of amazon.com. The fact that Jeff (and others) are willing to praise such limited signs of adaptation to the internet age is itself a sign of how broken the publishing industry is. Thanks to Apple and lots of demand, the audio (and now video) publishers are realizing that they can make decent money in online sales and many are offering entire songs for download free as a way to entice punters to buy the album (or see the band at a concert or...).
In book publishing, an area which would seem, from an external perspective, to be perfectly suited for online distribution, the number of publishers with a successful ebook business is two. Of those two one is Project Gutenburg which reissues out of copyright works and is, essentially, a charity effort. The only one to issue new works is Baen; there are no other fiction publishers with a successful eBook track record - I'm not aware of any successful non-fiction publishers either apart from a few in specialized academic niches. In the textbook and academic journal world there are a few successful electronic publishers such as National Acadamies Press, PLoS, MIT etc.
Eric Flint has a socking good essay in this month's Baen's Universe about Jim Baen's eBook legacy, where he makes the reasonable claim that Baen's approach to electronic publishing (cheap, non copy-protected, multiple formats) is going to turn out ot be his most important legacy. He has the facts and figures to back up this claim too and, since you have to pay to read some or all of the article (strongly recomended - click on this link or the one on the top right to sign up), I'm going to extract that bit from the essay.
Here are the facts. They are simple ones, because Jim Baen made them so:
1) All Baen titles that are produced in electronic format are made available to the public through Baen's Webscription service, cheaply and with no encryption. That policy stands in direct opposition to that of all other commercial publishers, who insist not only on encrypting their e-books but usually making them ridiculously expensive as well.
2) That policy has been maintained now for seven years, uninterrupted, since Webscriptions was launched in September of 1999. Month after month, year after year, Baen has sold e-books through Webscriptions using this simple formula: "We'll sell e-books cheaply and unencrypted."
3) Baen earns more income as a publisher and pays its authors more in the way of royalty payments from Webscriptions than any other outlet for electronic books. Typically, a popular Baen author—I'll use myself as the example—will receive royalties from electronic sales that are well into four figures. Granted, that's still a small percentage of my income as a writer, but that's a given since the electronic market is so small. The fact remains, however, that as a percentage of my income, the royalties from electronic sales of my books are higher—considerably higher—than the overall sales of all e-books represent as a percentage of the entire book market.
4) The difference between the level and amount of these royalties and those paid by other publishers, who are still addicted to DRM, is stark. Actually, "stark" is the polite way of putting it. The more accurate way of stating this reality is that the royalties paid by other publishers in the way of e-book sales are derisively low.
I will give you two examples:
In one royalty period, from a major publisher who was not Baen Books—that was Tor Books, generally considered the most important publisher in the field—David Drake once earned $36,000 in royalties for the paper edition of a popular title, Lord of the Isles. The electronic royalties from that same book, during that same period, came to $28.
That's right. Twenty-eight dollars. Less than one-tenth of one percent of his paper royalties—where a Baen title, typically, will pay electronic royalties that are somewhere in the range of five percent or more, measured against paper royalties.
Five percent is still small, of course. As I said, that simply reflects the small size of the e-book market. But five percent reflects market reality, where one-tenth of one percent reflects nothing more than the absurdity of DRM—even on the practical level of making money for publishers and authors.
The second example, from my own experience, is not quite as extreme. My novel 1812: The Rivers of War was published by Del Rey, another of the major F&SF corporate publishing houses. In the first royalty report, Del Rey reported sales of the hardcover edition at slightly over ten thousand copies with earnings for the author of $27,810.65. The electronic sales for the same edition came to one hundred and twenty copies, with earnings of $545.30.
Translating that into percentage terms, again, that means that the electronic sales were two percent of the paper sales, in terms of money, and one percent in terms of actual sales. That's quite a bit below what Baen would have sold, but it begins to approach the ballpark.
I can't prove it, because I don't have access to the detailed records, but I'm pretty sure the difference between my sales and David's were due to the fact that several years elapsed between the two books coming out, over the course of which time other publishers were influenced by Jim Baen's policies. Del Rey agreed, after I requested it, to make at least one version of the electronic edition of Rivers of War available in an unencrypted format—something which I'm sure they wouldn't have done a few years earlier. The e-book was still grossly overpriced—they charged $17.95 for it, where Baen would have charged between $2.50 and $5.00—but it wasn't encrypted.
Speaking as a reader of both Flint and Drake and lots of other SF I can relate to all of this. As you can tell if you click around links on this site, I live on the Côte d'Azur - that is the SE of France. This is, you will not be surprised to learn, a place that lacks huge numbers of bookstores offering English language F&SF, whether new or used. Hence if you want the paper version you have to go to Amazon.fr (or amazon.co.uk or amazon.com) or travel to the UK or US. Even though Amazon.fr does an excellent job of delivering English langauge books at reasonable prices, you still end up paying more than you would if you lived in the US (or UK) and the books show up later. With Baen I get the eBook earlier than anyone gets the paper version and I pay less for it ($5 usually). Not only that but although I pay less, the author, who is of the person that I wish to induce to write more, gets a greater proportion of my money than he or she would if I bought a paper copy.
This is what is known as win-win.
In fact thanks to Baen's excellent marketing tricks (putting up the first few chapters for free - far more than the amount that Harper Collins seems to be intending to make available), I frequently end up paying a lot of money for the eARC of a book - an electronic edition available (with limited proofing) months before publication at a relatively high price - $15. This gives the author even more of my money, but it is completely voluntary and consensual so that if I want to pay less I just need to curb my impatience. Compare that with the $17.95 or so that many publishers charge for eBooks that are issued only after the hardback comes out and which frequently include irritating copy protection mechnisms that stop me from moving the book from one computer to another.
It is worth comparing this with another Harper Collins program "First Look" which permits interested readers to obtain ARCs of books published by HC. At first sight this sounds like a similar idea but there are two differences you note when you read the About and FAQ pages:
Reviewers for each book are selected in random drawings. At least 25 advanced reading copies will be distributed to chosen readers along with instructions for filing the review.
Is there a fee for participating in the First Look program?
Harper Collins is giving away the books in the hope of getting a review and it is limiting the number of books sent out to 25 because they are paper. I reckon the idea is to build up buzz and momentum but I'm going to guess that the Baen approach works better. Why? because people who pay for something tend to appreciate it more. By paying $15 for an eARC, if I like it, I am more likely to rave about it to my friends to tell them how clever I was to get this book, and if I don't like it having read the first few chapters I'm unlikely to write a negative review becasue I haven't bought it. Not only does Baen get money for the ARCs it also gets greater publicity because rather than 25 random fans it gets many (I'm guessing dozens to hundreds depending on the author) of readers who can write reviews and spread the buzz, almost all of whom will be positively recommending the book.
It isn't as if there is not a demand for eBooks, there is, the problem is the demand is only there at the right price. Consider the evidence above - David Drake's Baen published works give him thousands of dollars of royalties from electronic sales. The books are, however priced at $5 or so each upon publication. His Tor books only approach that price when they have been issued in paperback form and the new ones go on sale at prices above $20 (see this fictionwise page). Something tells me that Mr Drake still earns $28/book from Tor in eBook royalties while earning $2800/book (or more) from Baen. This despite Baen charging less for the product and not having any copy protection.
Some other pieces of anecdotal evidence - unlike books from other publushers it is comparatively difficult to get illegitimate versions of Baen ebooks. Why? because the majority of pirate sites simply refer the seeker to one of the places such as the Baen free library where many Baen books are available for free or to Webscriptions where they can be bought cheaply. The "pirates" see no point in pirating something that only costs $5 and is readily available. There is simply no challenge to it and no real point. On the other hand pirating a book laden with DRM retailing for $25 (or even with no electronic version such as Harry Potter), is both a challenge and in monetary terms five times as much point.
$5 is the cost of a beer or a fast food meal so if it takes you more than a few minutes to find and download an illegitimate copy of a Baen book then you have wasted that time merely to obtain save yourself the cost of one beer at your fevourite watering hole. $25 on the other hand is the cost of an evening out and is effectively an insult because it is the cost of the hard cover book at full retail and offers you none of the benefits of the hardcover but rather, thanks to DRM, makes it harder to read. I have had some success with reading DRM crippled books but it hasn't been a pleasant experience on the whole, and I have in fact taken every single DRM crippled book I have bought (all 3 - compared to well over 100 Baen books) and converted them to a non DRM version - usually also turning them into easy to read HTML at the same time.
I don't know if eBook sales would harm traditional book sales - although Baen's experience presents evidnce that it doesn't - but I can't see why any sane publisher would mind if it did. At $5/book Baen can afford to pay $1 in royalty, $1 in internet/server costs and still keep $3 for the publishers other costs and profit. Once you strip out the far greater costs of printing and of distribution of a traditional hardback (or paperback), not to mention marketing costs etc., I find it hard to believe that the average paper book gives its publisher more of a return, and heck you know I bet there's sufficient price elasticity that $6 or even €6 ($7.70) would still work, and if the $5 plus of publisher income per copy sold at $7.50 isn't more than he gets from selling a hardback at $25 I'd be extremely surprised.