You may recall my rant last month about the cable company forcing me to pay even more for sports channels I don't want, just so I could keep Turner Classic Movies (TCM). Well, now I need to thank the cable company for doing something (almost) right.
Flipping channels one recent evening, we discovered that we now receive TCM in high-definition (HD). This was completely unannounced, essentially a stealth "upgrade". I'm very happy to have TCM HD, but why not trumpet this fact? Or at least announce it in a mailing?
Even the TCM website has no info (at least on the homepage) about being available in HD. Granted, the films sampled so far don't appear to be new HD transfers; but the picture quality is improved over the regular TCM channel.
Wouldn't you think that when a company gives its customers something for "free", they would at least alert their customers to it? (I put "free" in quotes in that sentence, because I expect the cable company to force me to pay somehow; if so, a new rant will be warranted.)
Sunday, June 28, 2009
Wednesday, June 3, 2009
2% of Gross better than 50% of Net
You may have wondered how a movie that generates hundreds of millions of dollars at the US box office (let alone box office from overseas, DVDs, TV sales, etc) can show zero dollars for those who receive a piece of the "net". You probably think, "why would a major movie studio keep pouring huge sums into producing movies if they don't turn a profit?"
And there's the rub: "profit" and "net" are two very different things.
In a "gross" deal, an actor or director (the "participant") would receive a percentage of the "Gross Receipts" collected by the studio. That term Gross Receipts is always defined by the contract between the studio and the participant. It ordinarily represents most of the cash received by the studio from distribution of the movie, with a few exceptions. The biggest of these exceptions is that money collected by the studio from sale of DVDs is ordinarily reported at 20% (this figure dates from when VHS and Beta video-cassettes were "new media" back in the 1980s).
Note also that while movie theaters may collect $100 at the box office, they typically pay about half of that to the studios; the half kept by the movie theaters goes to cover their rent, electricity, salaries, etc. (Movie theaters keep all of the money they collect from popcorn and candy; none of that goes to the studios.)
In a "net" deal, a participant would receive a percentage of the "Net Proceeds" of the movie. Note that the term Net Proceeds is often used (and defined in the contract) to differentiate it from something else which may be called "profits".
The amounts paid to the participants are referred to as "participations".
Contracts differ tremendously, but Net Proceeds are typically defined as Gross Receipts less the following items:
Distribution Fees and Interest can be very large numbers on hit films, and they (along with the 20/80 split of DVD receipts) are much of the difference between "Net Proceeds" and "profits".
Regardless of the perceived success of a movie, it is very rare for "Net Proceeds" actually to be reached.
The moral of the story is that 99.999% of the time, you are better off with a single-digit percentage of Gross Receipts than you are with a double-digit percentage of Net Proceeds.
And there's the rub: "profit" and "net" are two very different things.
In a "gross" deal, an actor or director (the "participant") would receive a percentage of the "Gross Receipts" collected by the studio. That term Gross Receipts is always defined by the contract between the studio and the participant. It ordinarily represents most of the cash received by the studio from distribution of the movie, with a few exceptions. The biggest of these exceptions is that money collected by the studio from sale of DVDs is ordinarily reported at 20% (this figure dates from when VHS and Beta video-cassettes were "new media" back in the 1980s).
Note also that while movie theaters may collect $100 at the box office, they typically pay about half of that to the studios; the half kept by the movie theaters goes to cover their rent, electricity, salaries, etc. (Movie theaters keep all of the money they collect from popcorn and candy; none of that goes to the studios.)
In a "net" deal, a participant would receive a percentage of the "Net Proceeds" of the movie. Note that the term Net Proceeds is often used (and defined in the contract) to differentiate it from something else which may be called "profits".
The amounts paid to the participants are referred to as "participations".
Contracts differ tremendously, but Net Proceeds are typically defined as Gross Receipts less the following items:
- Distribution Fees -- these fees vary from around 10% to 50% of the Gross Receipts from each of theatrical, DVD, and TV.
- Distribution Expenses -- the costs incurred by the studio to market and advertise the movie, plus the costs of the film prints shipped to theaters.
- Negative Cost -- the costs to produce the movie, the final result of which is the completed negative of the movie (from which positive prints will be made). This includes salaries for cast & crew, the costs of sets, special effects, travel to locations, costumes, music, etc.
- Interest -- this is charged by the studio at a contractually-defined rate, and is applied to Negative Costs, and often to Distribution Expenses as well.
- Participations -- this would certainly include Gross participations, and may also include Net participations paid to others
Distribution Fees and Interest can be very large numbers on hit films, and they (along with the 20/80 split of DVD receipts) are much of the difference between "Net Proceeds" and "profits".
Regardless of the perceived success of a movie, it is very rare for "Net Proceeds" actually to be reached.
The moral of the story is that 99.999% of the time, you are better off with a single-digit percentage of Gross Receipts than you are with a double-digit percentage of Net Proceeds.
Friday, May 15, 2009
More unfairness from Google book settlement
A few more thoughts to add to my recent post about the proposed Google books settlement:
Libraries are incurring significant unreimbursed costs as they provide books for scanning. Rick Prelinger (a board member of the Internet Archive) recently pointed out to me that it costs several dollars per book for librarians and conservators to inspect books, OK them for scanning, and reshelve them upon return. He says large libraries are running up costs in the millions, and some libraries are unlikely ever to agree to similar deals in the future. Thus, not only are our tax dollars and donations further supporting Google in their efforts, the fact that these costs are never recovered means that Google's effective monopoly is even more entrenched.
I noted in my earlier post that authors and publishers will receive a share of the revenues derived from books which were written and published by others. You might ask "why" or "how can this be"; both are good questions which deserve to be addressed in more detail.
The answer to "how" is fairly simple: for all books still under copyright protection, Google will report and remit revenue to a yet-to-be-built Book Registry. Authors and/or publishers of books under copyright must register their books with the Registry in order to receive their fair share of revenues. Any books still under copyright but not claimed by any author or publisher comprise what have become known as "orphan" books. Google will report and remit monies derived from orphan books, along with other books; in fact, Google may not even know which books are orphans. Any money that is derived from orphan books will first be put toward defraying the Registry's operating costs; any remaining "orphan" monies will be split between suitable charities and all registered authors/publishers by some "fair" formula. Thus, authors and publishers will receive funds for books to which they have no relation at all.
The answer to "why" is not so simple, except that the authors and publishers were the parties who filed the class-action suit. Libraries were not a party to the suit, so they're effectively left out.
Given that (a) the libraries (as supported by our tax dollars and donations) have preserved the books for decades to make scanning possible, and (b) given that the libraries have spent significant amounts of their own money preparing and shipping the books for scanning, doesn't it thus seem fair that the libraries ought to get a chance at the revenue stream? Perhaps a share of the "orphan" book money? Or a small (single-digit) percentage of all the money flowing into the registry? After all, without the work of the libraries, none of this new revenue-stream would have been possible.
Libraries are incurring significant unreimbursed costs as they provide books for scanning. Rick Prelinger (a board member of the Internet Archive) recently pointed out to me that it costs several dollars per book for librarians and conservators to inspect books, OK them for scanning, and reshelve them upon return. He says large libraries are running up costs in the millions, and some libraries are unlikely ever to agree to similar deals in the future. Thus, not only are our tax dollars and donations further supporting Google in their efforts, the fact that these costs are never recovered means that Google's effective monopoly is even more entrenched.
I noted in my earlier post that authors and publishers will receive a share of the revenues derived from books which were written and published by others. You might ask "why" or "how can this be"; both are good questions which deserve to be addressed in more detail.
The answer to "how" is fairly simple: for all books still under copyright protection, Google will report and remit revenue to a yet-to-be-built Book Registry. Authors and/or publishers of books under copyright must register their books with the Registry in order to receive their fair share of revenues. Any books still under copyright but not claimed by any author or publisher comprise what have become known as "orphan" books. Google will report and remit monies derived from orphan books, along with other books; in fact, Google may not even know which books are orphans. Any money that is derived from orphan books will first be put toward defraying the Registry's operating costs; any remaining "orphan" monies will be split between suitable charities and all registered authors/publishers by some "fair" formula. Thus, authors and publishers will receive funds for books to which they have no relation at all.
The answer to "why" is not so simple, except that the authors and publishers were the parties who filed the class-action suit. Libraries were not a party to the suit, so they're effectively left out.
Given that (a) the libraries (as supported by our tax dollars and donations) have preserved the books for decades to make scanning possible, and (b) given that the libraries have spent significant amounts of their own money preparing and shipping the books for scanning, doesn't it thus seem fair that the libraries ought to get a chance at the revenue stream? Perhaps a share of the "orphan" book money? Or a small (single-digit) percentage of all the money flowing into the registry? After all, without the work of the libraries, none of this new revenue-stream would have been possible.
Monday, May 4, 2009
Help! I'm being held hostage by cable sports channels
I'm a movie fan. Decades ago, in college, I learned to run 35mm projectors (we also ran 70mm, and we had variable-speed controls for silent pictures...but that's another story). As a kid, I borrowed 8mm versions of classics from the library, and ran them on the home-movie projector. I'm not (too) embarrassed to admit that I still have a library of LaserDiscs at home (LaserDiscs were effectively the 8-track tapes of the video business, a format that never caught on).
This is all to explain why I had no choice but to "upgrade" my cable package, because that was the only way I could keep Turner Classic Movies (TCM), the best channel around.
I didn't want the extra half-dozen sports channels that came with this "upgrade". I never even wanted basic ESPN, let alone the various ESPN spin-offs that are part of the new package. But I'm now paying much more, mostly for channels I don't watch and didn't want, just so I can keep TCM.
Why can't we buy cable channels a la carte? (I know the standard argument, and I'll get to it shortly.) Why can't I drop ESPN, which charges cable operators roughly $3 per cable-subscriber whether we watch or not? If I could drop ESPN, I ought to be able to cut my monthly bill by at least $3, perhaps more. If I could drop all the other sports channels, maybe I could save another $10-15.
I would happily pay $10 per month for TCM, if I could simply add it on the cheapest basic cable package.
The arguments about why a la carte pricing will inevitably lead to ruin for everybody run along these lines : The practice of "bundling" allows cable operators to use the popular channels to subsidize the less popular channels. Without bundling, only the popular will survive, the niche will die, and there will be fewer choices for all.
Maybe. Maybe not.
I'm sure there are far more households that would want ESPN than would want TCM. But maybe the way to balance this out is to charge variable pricing. If I want just one channel in addition to the basic package, maybe I pay $10 for it. If I want 5 channels, maybe they're $4 each. If enough fans of a "niche" channel are willing to pay more for it, perhaps it can survive.
None of the analyses I've seen considers variable pricing. Ardent fans of a channel could pay more (note that some tests of "free" song downloads with a price of "pay what you want" have actually generated significant amounts of money). And the price per channel could vary based on number of channels, similarity (or difference) of channels, any number of variables.
Until we see some tests and hard data on this, I'm not convinced that a la carte is a bad thing.
And the ability to stopped getting fleeced for a dozen sports channels I never watch would be fabulous!
This is all to explain why I had no choice but to "upgrade" my cable package, because that was the only way I could keep Turner Classic Movies (TCM), the best channel around.
I didn't want the extra half-dozen sports channels that came with this "upgrade". I never even wanted basic ESPN, let alone the various ESPN spin-offs that are part of the new package. But I'm now paying much more, mostly for channels I don't watch and didn't want, just so I can keep TCM.
Why can't we buy cable channels a la carte? (I know the standard argument, and I'll get to it shortly.) Why can't I drop ESPN, which charges cable operators roughly $3 per cable-subscriber whether we watch or not? If I could drop ESPN, I ought to be able to cut my monthly bill by at least $3, perhaps more. If I could drop all the other sports channels, maybe I could save another $10-15.
I would happily pay $10 per month for TCM, if I could simply add it on the cheapest basic cable package.
The arguments about why a la carte pricing will inevitably lead to ruin for everybody run along these lines : The practice of "bundling" allows cable operators to use the popular channels to subsidize the less popular channels. Without bundling, only the popular will survive, the niche will die, and there will be fewer choices for all.
Maybe. Maybe not.
I'm sure there are far more households that would want ESPN than would want TCM. But maybe the way to balance this out is to charge variable pricing. If I want just one channel in addition to the basic package, maybe I pay $10 for it. If I want 5 channels, maybe they're $4 each. If enough fans of a "niche" channel are willing to pay more for it, perhaps it can survive.
None of the analyses I've seen considers variable pricing. Ardent fans of a channel could pay more (note that some tests of "free" song downloads with a price of "pay what you want" have actually generated significant amounts of money). And the price per channel could vary based on number of channels, similarity (or difference) of channels, any number of variables.
Until we see some tests and hard data on this, I'm not convinced that a la carte is a bad thing.
And the ability to stopped getting fleeced for a dozen sports channels I never watch would be fabulous!
Monday, April 27, 2009
Google gets richer thanks to your tax dollars
For some time now, Google has been scanning millions of books, with the goal of making the contents available as part of its search results. The vast bulk of the books were provided by libraries, largely university libraries (both public and private). A group of publishers and authors filed a class-action suit against Google for copyright infringement (which the legal eagles at Google must have expected). Google, the authors, and the publishers have reached a proposed settlement agreement. (It runs over 130 pages, plus attachments which bring the total to well over 200 pages. I've slogged through it to bring you some highlights.)
Note that the libraries are not parties to the proposed settlement. The libraries, which have preserved the books in question for decades (with the help of our tax dollars), get very little out of this deal. Each library will be allowed to receive and keep one digital copy of any hard-copy book of theirs that Google scanned. And they can make this one copy available via only one single computer at the library. That's it. The libraries cannot provide the digital copy to a potential competitor of Google; nor could the libraries even use their digital copies to create their own consortium digital library.
The settlement allows Google to sell access to these digital books on a subscription basis; so the libraries can buy access to digital copies of their own books, to be made available on more than one computer.
Money that Google collects for access to digital books will be shared with authors and publishers. BUT money will be shared only if the author or publisher of a book still under copyright actually registers the book with a newly created Book Registry. Funds collected for use of un-registered books will be allocated amongst those authors and publishers who do register their own books. Thus, the vast corpus of "orphan" books (books still under copyright, but effectively abandoned by their author and publisher) will be generating money for Google, and for the publishers and authors of other books.
The libraries get nothing from this.
And Google will be able to sell access to public domain books (those whose copyrights have expired), without the need to share receipts with anyone (which is the way public domain books should be treated). BUT a rare public domain book, a hard-to-find book, which may exist in only a couple of libraries...well, shouldn't the library get something for their time and efforts in protecting and maintaining that book?
Shouldn't we, the taxpayers who supported those libraries and made the preservation of the books possible, get something from this?
Instead, Google gets a free pass to profit from the decades of work by librarians. The libraries and library-patrons get next-to-nothing.
Oh, and by the way, Google effectively has a monopoly on all those digital books. The only way for competition to appear would be for some other company to start scanning books, get sued by authors and publishers, and then settle with the authors and publishers.
Note that the libraries are not parties to the proposed settlement. The libraries, which have preserved the books in question for decades (with the help of our tax dollars), get very little out of this deal. Each library will be allowed to receive and keep one digital copy of any hard-copy book of theirs that Google scanned. And they can make this one copy available via only one single computer at the library. That's it. The libraries cannot provide the digital copy to a potential competitor of Google; nor could the libraries even use their digital copies to create their own consortium digital library.
The settlement allows Google to sell access to these digital books on a subscription basis; so the libraries can buy access to digital copies of their own books, to be made available on more than one computer.
Money that Google collects for access to digital books will be shared with authors and publishers. BUT money will be shared only if the author or publisher of a book still under copyright actually registers the book with a newly created Book Registry. Funds collected for use of un-registered books will be allocated amongst those authors and publishers who do register their own books. Thus, the vast corpus of "orphan" books (books still under copyright, but effectively abandoned by their author and publisher) will be generating money for Google, and for the publishers and authors of other books.
The libraries get nothing from this.
And Google will be able to sell access to public domain books (those whose copyrights have expired), without the need to share receipts with anyone (which is the way public domain books should be treated). BUT a rare public domain book, a hard-to-find book, which may exist in only a couple of libraries...well, shouldn't the library get something for their time and efforts in protecting and maintaining that book?
Shouldn't we, the taxpayers who supported those libraries and made the preservation of the books possible, get something from this?
Instead, Google gets a free pass to profit from the decades of work by librarians. The libraries and library-patrons get next-to-nothing.
Oh, and by the way, Google effectively has a monopoly on all those digital books. The only way for competition to appear would be for some other company to start scanning books, get sued by authors and publishers, and then settle with the authors and publishers.
Tuesday, April 7, 2009
Wall Streeters can't mind own store, so become...film critics???
Brooks Barnes reported in yesterday's New York Times that Wall Street analysts, who were unable to prognosticate the downfall of their own businesses, are now acting as film critics. They are down-grading their ratings on Disney because they don't believe the movie Up will be a hit. (Up is produced by Pixar, which Disney acquired for billions a few years back.)
And these folks are to be believed why?
Even the experts producing the movies have difficulty in forecasting the success of a film. Back in the mid 1970s, every studio in Hollywood turned down Star Wars. Fox finally took it on, but never truly believed in it; Fox was sure their big hit for 1977 would be Damnation Alley (which I'm sure you all remember). They distributed Star Wars just to have something to ride the sci-fi wave that Damnation Alley would create for them. In fact, Fox was so sure there was no future for Star Wars, they negotiated a deal that let George Lucas retain all merchandise rights and all sequel rights. We all know how that ended up. Similar stories could be told about many blockbusters and many flops.
Barnes also suggests that Wall Street is worried because Pixar seems not to care about the marketplace. Barnes reports that Pete Doctor, the director of "Up", has said that the film's commercial prospects never crossed his mind. And that Pixar co-founder John Lasseter regularly says that marketability is not a factor in deciding what pictures to produce.
And Wall Streeters really believe that? Pixar has yet to produce a flop. The Pixar folks seem to have an inherent sense of what will sell, which is primarily a good story with intriguing characters. The Pixar folks don't have to think consciously about marketability, because it seems to be ingrained. Remember, "marketing" is figuring out what the public needs or wants, and providing same to them. If the public wants stories and characters, then the Pixar folk are right on the ball.
I suppose if the Wall Street gang had accurately predicted their own melt-down, I might be more willing to believe them when it came to movies.
And these folks are to be believed why?
Even the experts producing the movies have difficulty in forecasting the success of a film. Back in the mid 1970s, every studio in Hollywood turned down Star Wars. Fox finally took it on, but never truly believed in it; Fox was sure their big hit for 1977 would be Damnation Alley (which I'm sure you all remember). They distributed Star Wars just to have something to ride the sci-fi wave that Damnation Alley would create for them. In fact, Fox was so sure there was no future for Star Wars, they negotiated a deal that let George Lucas retain all merchandise rights and all sequel rights. We all know how that ended up. Similar stories could be told about many blockbusters and many flops.
Barnes also suggests that Wall Street is worried because Pixar seems not to care about the marketplace. Barnes reports that Pete Doctor, the director of "Up", has said that the film's commercial prospects never crossed his mind. And that Pixar co-founder John Lasseter regularly says that marketability is not a factor in deciding what pictures to produce.
And Wall Streeters really believe that? Pixar has yet to produce a flop. The Pixar folks seem to have an inherent sense of what will sell, which is primarily a good story with intriguing characters. The Pixar folks don't have to think consciously about marketability, because it seems to be ingrained. Remember, "marketing" is figuring out what the public needs or wants, and providing same to them. If the public wants stories and characters, then the Pixar folk are right on the ball.
I suppose if the Wall Street gang had accurately predicted their own melt-down, I might be more willing to believe them when it came to movies.
Friday, March 27, 2009
Print-on-demand migrates from books to movies
Earlier this week, Warner Bros launched the Warner Archive, where consumers can order DVDs of movies from the Warner vaults. These will be made-to-order, in much the same way that publishers have been trying out print-on-demand options for their back catalogs of titles.
The Warner Archive DVDs will be sold directly from the Warner site, giving Warners the full retail revenue stream (cutting out both wholesalers and retailers). The $20 price-point is a bit higher than many films of similar vintage at retail; but these are films otherwise unavailable to the fans at any price. Some online discussion has even hypothesized that Warner under-priced them; but we'll need to wait until the first flush of excitement passes amongst the fans. Once they've paid their first credit-card bills with payments to Warner Archive, we'll see whether they're still clamoring for more.
Warner will not get rich from this scheme. The titles available via Archive were deemed to have too small a demand for the expense of manufacturing and shipping a significant volume to retail (where DVD shelf space is in short supply already). This is a way for Warner to accomplish 3 things: (a) keep some die-hard fans happy, (b) squeeze some money out of deep-catalog that might otherwise circulate in pirated copies, and (c) test the waters on unique direct-to-consumer product (without seriously ticking off their very valuable retail partners).
The Warner Archive DVDs will be sold directly from the Warner site, giving Warners the full retail revenue stream (cutting out both wholesalers and retailers). The $20 price-point is a bit higher than many films of similar vintage at retail; but these are films otherwise unavailable to the fans at any price. Some online discussion has even hypothesized that Warner under-priced them; but we'll need to wait until the first flush of excitement passes amongst the fans. Once they've paid their first credit-card bills with payments to Warner Archive, we'll see whether they're still clamoring for more.
Warner will not get rich from this scheme. The titles available via Archive were deemed to have too small a demand for the expense of manufacturing and shipping a significant volume to retail (where DVD shelf space is in short supply already). This is a way for Warner to accomplish 3 things: (a) keep some die-hard fans happy, (b) squeeze some money out of deep-catalog that might otherwise circulate in pirated copies, and (c) test the waters on unique direct-to-consumer product (without seriously ticking off their very valuable retail partners).
Monday, March 16, 2009
360-degree deals for book publishers?
As the record labels watched CD sales plunge, they started to move their focus away from suing fans (though several suits against file-trading sites remain in progress), instead trying to encourage fans to buy music online through legitimate sources. Apple's iTunes is the most visible example.
But the record labels also began looking at the underlying economics of their business: pay advances to sign artists for multiple albums, fund the production of said albums, and hope that enough artists sell enough albums to cover the losses on the many others that never bear fruit. As CD sales dropped, and online sales have made up only a portion of that, the labels considered something else -- although they front much of the money to launch and establish new artists, the labels don't participate in revenue streams such as concert tickets, nor in things like t-shirts and tchotchkes sold at concerts.
What if the labels could instead sign artists to all-encompassing deals? In addition to CD sales, the label and artist would be "partners" in the cashflows from live shows and tours. Thus, the so-called "360 [degree] deal" was born. The labels now boldly tout these deals as reason for optimism about their business.
Could such a scheme work in the book business? Publishers traditionally acquire only the rights to print and distribute an author's work in book form. The publishers never have rights to movie or TV adaptations; they often don't even participate in revenues from sales of the book in other languages or countries.
I noted in an earlier post that publishers have been loathe to negotiate "net" deals, as opposed to the "gross" deals authors ordinarily receive. But perhaps some sort of packaging of rights could make this more palatable. Obviously, established authors like Stephen King would refuse; but it might be a reasonable business-proposition for an unpublished author.
What about 360 deals for publishers and authors?
(As an aside, I'll note that Stephen King is not averse to experimenting with the publishing business model, in that he recently released a Kindle-only exclusive of a new work.)
But the record labels also began looking at the underlying economics of their business: pay advances to sign artists for multiple albums, fund the production of said albums, and hope that enough artists sell enough albums to cover the losses on the many others that never bear fruit. As CD sales dropped, and online sales have made up only a portion of that, the labels considered something else -- although they front much of the money to launch and establish new artists, the labels don't participate in revenue streams such as concert tickets, nor in things like t-shirts and tchotchkes sold at concerts.
What if the labels could instead sign artists to all-encompassing deals? In addition to CD sales, the label and artist would be "partners" in the cashflows from live shows and tours. Thus, the so-called "360 [degree] deal" was born. The labels now boldly tout these deals as reason for optimism about their business.
Could such a scheme work in the book business? Publishers traditionally acquire only the rights to print and distribute an author's work in book form. The publishers never have rights to movie or TV adaptations; they often don't even participate in revenues from sales of the book in other languages or countries.
I noted in an earlier post that publishers have been loathe to negotiate "net" deals, as opposed to the "gross" deals authors ordinarily receive. But perhaps some sort of packaging of rights could make this more palatable. Obviously, established authors like Stephen King would refuse; but it might be a reasonable business-proposition for an unpublished author.
What about 360 deals for publishers and authors?
(As an aside, I'll note that Stephen King is not averse to experimenting with the publishing business model, in that he recently released a Kindle-only exclusive of a new work.)
Thursday, March 5, 2009
Unlike studios, book publishers prefer gross deals to net
The "Kindle Revolution" story today on Slate's Big Money says that "publishers have been ferocious in defending the fixed royalty", which is the percentage of retail price typically paid to authors. Many agents have tried to get back-end deals for their authors, whereby a larger percentage of the "net profits" would go to authors. The publishers don't want to risk a potentially huge "net" payout on a blockbuster title, and they'd rather pay authors huge advances against the royalty.
This is the flip-side of the movie business, where the studios desperately want to eliminate "gross" deals for stars and move the talent to a "partner" level where they would share in the "net". Movie talent much prefers the "gross" deals, typically not trusting the studios to fairly define the breakeven point for "net" deals". (as I've discussed earlier)
The article in Big Money also says with regard to the large advances, "Since no one really knows which books will succeed or why, this is actually a strangely rational system, even if it has created a terrible overhang of unearned advances." [my emphasis]
In fact, there is nothing "terrible" about an unearned advance. A book can be profitable to a publisher, even if the advance is not yet earned out; or a book could have earned out its advance, yet still show a loss for the publisher. There is no direct correlation between "profits" and earned/unearned advances.
The same situation exists in movies, wherein a star may not have earned out her huge advance, but the movie may show a "profit" for the studio. Or, a star may have earned back her advance and be receiving overages, yet the movie is a real "loss" for the studio.
This is the flip-side of the movie business, where the studios desperately want to eliminate "gross" deals for stars and move the talent to a "partner" level where they would share in the "net". Movie talent much prefers the "gross" deals, typically not trusting the studios to fairly define the breakeven point for "net" deals". (as I've discussed earlier)
The article in Big Money also says with regard to the large advances, "Since no one really knows which books will succeed or why, this is actually a strangely rational system, even if it has created a terrible overhang of unearned advances." [my emphasis]
In fact, there is nothing "terrible" about an unearned advance. A book can be profitable to a publisher, even if the advance is not yet earned out; or a book could have earned out its advance, yet still show a loss for the publisher. There is no direct correlation between "profits" and earned/unearned advances.
The same situation exists in movies, wherein a star may not have earned out her huge advance, but the movie may show a "profit" for the studio. Or, a star may have earned back her advance and be receiving overages, yet the movie is a real "loss" for the studio.
Wednesday, March 4, 2009
Amazon : e-books :: iTunes : music ?
Amazon announced a new app for the iPhone, allowing its formerly Kindle-only e-books to be read on multiple devices. And Apple is not competing on the e-book front, perhaps because Steve Jobs last year said "people don't read anymore."
Will this further cement Amazon's power over the book business? Will Jeff Bezos be able to dictate terms and prices to publishers, in the way that Steve Jobs has dictated to record labels and movie studios?
Will the book publishers band together and try to create a competitor to Amazon? Just as the movie studios are attempting to learn from the mistakes of the record labels, will book publishers do likewise?
Time will tell.
Will this further cement Amazon's power over the book business? Will Jeff Bezos be able to dictate terms and prices to publishers, in the way that Steve Jobs has dictated to record labels and movie studios?
Will the book publishers band together and try to create a competitor to Amazon? Just as the movie studios are attempting to learn from the mistakes of the record labels, will book publishers do likewise?
Time will tell.
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