Why Agents Will Morph Into Electronic Publishers

Once you remove the complexities of distribution from the book equation, an author has to ask herself what she gets from a publisher. After all, publicity is a function of the author’s own fame, talent, or personal story. And publishing is, at its very core, nothing more than publicity plus distribution.

In the contemporary book business, the publishing house’s role is really one of risk displacement. A publisher puts up a guarantee in exchange for a portion of the profits if the book sells better than the author or her agent expected. Remember, that’s what an advance is: The author and agents bet that more money is to be had up front than over time. (Yes, they still get royalties, but at a lower rate than the effective royalty rate for all but a few advances.)

Most times, the agent gets it right because most books fail in the marketplace. A few times, agents and authors get it wrong. Their book becomes a big hit and they have to give the publisher a greater share of the proceeds than they might like. In other words, the publisher gets to make a profit. Don’t feel bad for the agents and authors, though. They usually make it back on the next deal when expectations run higher.

Well, that’s the way publishing used to work. But as the marketplace shrinks and publishers are forced to become more selective, agents are having a harder time placing work. They’re also waking up to the fact that distribution is easy to accomplish with e-books. So a number of agents or former agents have gotten into the e-book business, including Arthur KlebanoffRichard Curtis, and Scott Waxman.

Today, in a nice feat of publicity leverage, Andrew Wylie announces in the New York Times that he, too, is becoming an e-book publisher:

Odyssey Editions will begin modestly, with 20 titles that have never been available in e-book format. Among them are “Invisible Man” by Ralph Ellison, “The Naked and the Dead” by Norman Mailer, “Midnight’s Children” by Salman Rushdie, “Lolita” by Vladimir Nabokov and “Fear and Loathing in Las Vegas,” by Hunter S. Thompson.

All of the books will be priced at $9.99 at the Kindle store, said Russ Grandinetti, the vice president of Kindle content for Amazon.

Mr. Wylie said on Wednesday that he had not discussed the project directly with the publishers who own the rights to produce in print many of the books on his list. Stuart Applebaum, a spokesman for Random House, said in a statement:

“We can’t comment on this matter, in part because we have not been made directly aware of any plans affecting specific Random House Inc.

What Wylie is doing here is something different. Having built his international business around exploiting the backlist rights of literary writers, often through their estates, Wylie’s core business is mature and somewhat threatened by the global transition away from print. If the future of reading, especially in college courses, is on tablets, Wylie needs to get his substantial backlists in a broad range of languages selling in digital form. And he can’t accept the publishing house’s meager e-book royalties. The decline of backlist sales makes it unsustainable for his estates.

So Wylie is absolutely right to circumvent the publishers. There is precious little marketing done to promote backlist literary titles. All the work has been done over the lifetime of the author or posthumously by the culture that validates a writer. A publisher, in this instance, is only making sure the books are printed and arrive at the bookstores on time. With e-books, the publisher really has no role.

However, Wylie’s backlist business in author estates is somewhat unique in the publishing world. Once he has established a digital publishing house—and by giving Amazon (AMZN) an exclusive he really hasn’t created a publishing company so much as given the books to Amazon to publish—will Wylie be willing to risk his own capital as a publisher?

Once all such backlist books are released in electronic form, what’s next for the evolution from agent to electronic publisher? Will any of the agencies be willing to risk their own capital when an author needs some money to pay the bills while she takes time off to write?