I was perusing a new e-publishing site, Ocean's Mist Press, and was interested to see they have a sliding scale for royalties. Their base rate is 40%, but if a book sells a hundred copies, the rate goes up to 45% (for the books sold past the first hundred), and if it sells five hundred copies, the rate goes up to 50%. I haven't seen an e-publisher do that before. (Slightly OT, e-publishers still typically sell fewer copies than New York books, in my experience, but bear in mind that if an author makes two dollars per book, five hundred copies will earn a thousand dollars. Particularly for novellas, the amount earned per word can actually wind up being higher in e-publishing than in traditional publishing, though of course it all depends on sales.)
E-publishers generally give higher royalty rates to help compensate for lower sales, which helps attract authors. This is why I'm finding it hard to understand the furor in the e-publishing community over Harlequin's royalty rates for ebooks. The Smart Bitches mentioned that Harlequin is getting into selling ebooks and paying a royalty of six percent. This has caused a lot of outrage among some e-published authors, but I really don't understand why. Harlequin doesn't need to attract authors. They have authors coming out their ears, metaphorically speaking. And they have pretty darn good sales to begin with.
I gather some e-published authors think this is going to cause e-publishers to drop their royalty rates in the long haul. I'm not sure that's going to happen, though. What Harlequin does is more or less irrelevant to small presses, just as what small presses do is more or less irrelevant to Harlequin. In a way, small press e-publishing and New York publishing are two different worlds. Those worlds intersect more and more often as small presses break into the stores, and as authors choose to write for both, but they're not the same, and I don't see why Harlequin's lower royalty rate should have any effect on the e-pubs. After all, it's the high royalty rates that encourages authors to write for e-pubs, so if one house lowers its rates drastically, authors will probably leave for a better-paying e-publisher. The market has a way of dealing with these issues.
And if all e-publishers do choose to lower their royalty rates eventually, it'll probably be because they have achieved higher sales. Which perhaps wouldn't be such a bad thing.