Fact-Checking the Productivity Commission

I don’t know about you, but I’ve been heartened by the number of authors speaking out against the draft report of the Productivity Commission. Most of the outcry has targeted the push to remove parallel import restrictions, which has proven ineffective in the only jurisdiction to attempt it — New Zealand.

The other point of strong contention has been Draft Finding 4.2:

“While hard to pinpoint an optimal copyright term, a more reasonable estimate would be closer to 15 to 25 years after creation;”

Several authors argued against this recommendation, and I’ve argued against it myself. But we’ve all been focusing on the likely outcome rather than examining the premise the commissioners base this recommendation on. Don’t be fooled by the assertions in the report. Despite its tone, which seems to aim for avuncular but strikes closer to condescending, many of the claims it makes are wrong.

Just. Plain. Wrong.

Let’s start with this gem: “the commercial life of most works is less than 5 years.”

This statement is almost certainly based on the traditional publishing model, where authors get an advance when their book is published and only receive royalties if they sell enough copies to earn out that advance. Given that many new books sit on the bookstore shelves for about three months, the advance sometimes makes up the bulk of the earnings an author receives on that particular title.

But what about ebooks? They take up no shelf space and cost next to nothing to reproduce, so there is no reason for them to go out of print. A book can sit on Amazon or iBooks and earn royalties for as long as people continue to read digital content. The life-cycle of books is dramatically changing, and had been for a decade by the time the Commission sat down to dream up its report.

I’ll come back to ebooks in a moment. But first, here’s one reason I think the Commission is fixated on the traditional publishing model.

“Evidence suggests much of the returns from copyright protected works are earned by intermediaries, rather than authors…”

The intermediaries in this telling sentence are publishers. But where does this evidence come from, and is it reliable? Surely the growth of self-publishing, or indie publishing as it’s now called, should be taken into account. Once again, the rise of ebooks seems like a critical factor.

Well, the Commission did look at ebooks. Sort of.

“Price comparisons of more than 120 e-books books sold in Australia and the United States (US) revealed average price differences of 16 per cent, while the median difference was 13 per cent.”

This appears to be their sole argument about ebooks — that Australians pay a median 13% more than Americans. (That’s only 3% more if you exclude the GST imposed on the Australian sellers.)

The Productivity Commission seems to base its assessment of the impact of ebooks on the publishing landscape on a sample of around 120 titles. In comparison, the industry group at Author Earnings began reporting in 2014 with a sample of over 120,000 titles. As of May 2016 their dataset includes over 1,000,000 titles — over 82% of all daily Amazon Kindle ebook sales. It also includes over 900,000 top-selling print books and 67,000 top-selling audiobooks. Although the data is harvested from the US Amazon site, it includes Australian authors and is likely to be representative of the publishing industry as a whole.

What does this enormous dataset tell us about the state of the publishing industry?

One interesting analysis is the number of authors who, based on their Amazon sales figures, earn a living wage of US$50,000 or more. Out of all of those titles, including print, audiobooks, and ebooks, there were around 2,500 authors making $50,000 or more from their Amazon sales.

Figure from the Author Earnings Report, May 2016
Figure from the Author Earnings Report, May 2016

The breakdown of who is in this earning bracket goes directly against the assertions of the Commission.

“…among the traditionally-published contingent we see predominantly authors whose careers began decades ago, including all of traditional publishing’s longest tenured best sellers and most recognizable names.”

When you look at the charts, again and again the pattern is inescapable. Authors who have been publishing longer are earning more money. More even than debut authors with runaway bestsellers. Why? It’s glaringly obvious to everybody except the Productivity Commission.

The books on an author’s backlist continue to make money for decades after they were first written.

If the Commission’s claim that a book only makes money for 5 years after publication were true, you’d expect to see little difference in author earnings between a relative newcomer with great sales and an old hand with equally great sales for books released over the same time period. But in the real world the established authors are getting royalties from the books they wrote ten, twenty, thirty or more years ago.

So what about the claim that most of the money from the sale of books goes to intermediaries and not the author? Where do indie published titles fit into the picture?

From the May 2016 Author Earnings Report:

  • 31% of all ebook titles on Amazon are indie published
  • 42% of all ebook daily unit sales on Amazon are indie published titles
  • 47% of all author revenue from ebooks on Amazon went to indie published authors

The rise of indie publishing has been astonishing to watch. It reflects the fact that many authors see themselves as more than just artists — they are small businesses. Authorpreneurs is the term I’ve seen. There are dozens of books about how to wrangle the business side of your writing, and even short courses run at universities on becoming an authorpreneur. And one of the key lessons is to actively produce and manage your backlist, because building a volume of work is part of any strategy to earn a living as a writer.

“Cutting the copyright protection period to 15 or even 25 years is robbing authors of their chance at making a living wage.”

On face value, the Commission’s argument seems to be that authors aren’t all that interested in money, and they make so little that they won’t miss it if you take that away from them. Even if the premise was correct, the conclusion would still be outrageous. But the premise itself bears no resemblance to reality.

Just because authors care about something other than money doesn’t mean they don’t want or deserve to be paid. Can you imagine the same argument going down well with any other profession? Let’s say, doctors? Most medical practitioners are not motivated by financial rewards, and much of the return from procedures goes to intermediaries like hospitals. So let’s curtail the scope for doctors to get paid fairly for their work. Yeah. Didn’t think so.

Cutting the copyright protection period to 15 or even 25 years is robbing authors of their chance at making a living wage. Building a strong backlist is critical. The data from Author Earnings shows it can take decades for the cumulative royalties from all those books to amount to enough to live on. Stripping the copyright protection from books will mean authors will see their backlist earnings eroded as fast as they can write new books.

What bothered me when I first read the draft report still bothers me today. The position of the commissioners seems to be that we can ignore any financial disadvantage to writers based on our recommendations because they will write anyway. To me, this straddles the line between cynical and sinister. It is cold-hearted economic rationalism shaped for a conservative audience. And right now it represents the authoritative advice to our government.

Where to next?

The time window for responses to the Productivity Commission has closed. But we are in an election year. If you care about Australian authors being able to afford to keep writing Australian stories, think about taking steps to secure their future.

Write to your Federal Member of Parliament. Tell them what you think. Remind them of the Australian stories they read and loved over the years. Tell them that the authors of those stories deserve to be paid for the gift they’ve given countless readers.

Stand up and be counted.