Music publishers want Apple to pay more. Not more per song, but for more things per song (in the end adding up to more per song, so I guess it’s all the same, right?) They’re arguing that in addition to paying a royalty when someone buys a song, Apple should also pay when someone downloads a movie or tv show in which the song is played, when someone samples a track, and when someone streams radio through Itunes.

Here’s the deal: I understand that in the past, these folks made their money by figuring out how many different ways they could charge for the same transaction.What they need to understand is that if they want to make money in the economy we now live in, they’ve got to create new things to charge for, not new ways to charge for the same stuff.

Take, as an example, Derek Webb’s latest album launch (note: I still haven’t heard this album. This is simply a discussion of the business wisdom behind it). You can go to a store and buy it, probably for somewhere between 12.99 and 24.99, depending on the store. His label will get paid, and will eventually pay him a pittance.

You can also go to his store. He offers six different ways to buy his new album. There’s a digital download for 7.99, there are options if you want to pay a little more (15.99 gets you a documentary, ringtones, desktop backgrounds, etc, along with the album, and there’s a $60.00 package that comes with the digital copy, two physical copies of the album, the documentary DVD, a t-shirt, and participation in song selection for a cover album). Derek has gone the extra mile to be accessible to every fan possible. Don’t have much cash? Buy the digital download, hear the music, and hopefully love it. Have money and love the artist? Get all the extras.

And, he’s already seeding the concept of his next project. People are going to help him select songs to cover. He’ll then record the covers and put together the album. And then he’ll sell it.

Think about that whole process. What are the chances that someone having invested their time into selecting the songs would turn around and not buy the resulting album? Those people are going to buy. So, Derek builds community, gives his fans a chance to buy extras, and guarantees that his next project (side-project, most likely) will have guaranteed buyers. It’s brilliant!

He’s likely going to make more doing it this way than if he sat back and tried to figure out how to bill the establishment for it three times.

All that to say, the economy has changed. Music publishers, take the warning. Help your people to understand how to sell in this economy. Can you make money in this economy? Absolutely. You just can’t do it the way you used to.

I read this article by way of Brandon Sanderson mentioning it in a Twitter post. It’s all about how royalties and advances work in the publishing industry, put together by an editorial assistant.

The most interesting part for me was the section on returns:

Reserve against returns: This is the reason you won’t have gotten every royalty dollar you were due during a period. Your publisher has a right to retain up to a certain percentage of your royalties–the actual percentage varies on your contract and on the situation–against future returns from booksellers. Returns are pretty complicated; we’ve talked about them before, but they’re always hard to wrap our heads around. These are big, corporate returns, not the kind of customer-by-customer returns (“My Aunt Wanda bought this cookbook for me but I don’t like Russian casseroles” etc). Basically, there are scenarios wherein a publisher may print and sell 10,000 requested copies of a book to book sellers, and, if expectation was wrong, receive all 10,000 copies back, for which they’d have to relinquish the entire dollar amount they originally earned for those books. Alas for returnable industries.

I just can’t understand how you can have a functioning business model where any day a product you thought was sold comes flying back into your warehouse, possibly in terrible condition (if my days in publishing are remembered correctly), and the “buyer” expects all their money back.

I’m with him, alas for returnable industries. One day we’ll have to dialog a little bit about various ways of getting content to readers without going through traditional bookstores — not that I want to cut them out. There just seems to be a multitude of opportunities to think differently about selling books with technology advancing the way it is.