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A couple of years ago, no one in Canadian publishing – authors, agents, publishers, booksellers, distributors – paid much attention to digitization, digital content delivery and the emerging e-book.

Sure, the industry had seen the havoc digitization had wrought on the music recording industry, but hadn't digitization, via the DVD, also provided Hollywood with billions in additional revenue?

Publishers, meanwhile, were including electronic-publishing-rights clauses in their author contracts but there wasn't too much call or opportunity to do anything with them. “Digital” tended to mean the Internet, which publishers used primarily to promote and sell the analog wares (a.k.a. books) stacked in their warehouses. A brave wag might occasionally declare that the digital delivery of books was destiny, that the book as physical object, beloved by five centuries of Gutenbergians, was condemned to lose its privileged position in the writing-and-reading firmament.

Still, the general feeling was that the scary future was, well, in the future.

Now, however, the future appears to be present, and for all sectors of the industry it's a messy, confusing thing. As Jack Illingworth, executive director of the Toronto-based Literary Press Group and a consultant for the Association of Canadian Publishers, remarked recently, “There's no real orthodoxy out there; the rules seem to change every week.”

There has not been a wholesale overthrow of the traditional book in favour of portable handheld devices such as the Apple iPhone and Sony Reader, or even the home computer. It's estimated that no more than 3 per cent of total annual retail book sales in North America can be attributed to digital consumption, and most of that is occurring in the United States.

But in the last year or so there have been harbingers of what veteran publishing guru Jason Epstein calls “a historic paradigm shift.” And the “ongoing and accelerating interest,” as Illingworth describes it, has anxious authors and jittery publishers bobbing and weaving around the issue of what's a fair split of the revenues in this Brave New World.

Earlier in the decade, there was Apple's successful introduction of both the iPod, which created the expectation that, henceforth, media (and lots of it) should be portable, and iTunes, which showed that people would pay for e-content if the price was right. There's been widespread acceptance, particularly among younger people, of accessing visual content, including text, on the teensiest of smart-phone screens.

More recently, we've had the $125-million (U.S.) resolution of the lawsuit filed by American publishers and authors against Google Book Search's digitization and archiving of millions of copyrighted titles. We've witnessed the arrival of the Sony Reader and Amazon's Kindle e-books, with their huge storage capacities and paper-like screens with adjustable fonts (a boon to eye-strained baby boomers!), and the concomitant development of e-book stores to provide content to these devices. Last fall, the Canadian Research Knowledge Network, a partnership of more than 70 universities, paid 47 Canadian publishers $11-million to license e-book rights for 8,000 titles.

And just this week the country's largest book retailer, Indigo, introduced its Shortcovers service to permit the purchase and download of e-books and chapters of e-books directly to a smart-phone via a wireless Internet connection.

For Lisa Charters, this is “the real tipping point.” While the idea of the e-book has been around since the late 1990s, “it's been largely a chicken-and-egg proposition,” the senior vice-president of digital production for Random House, Canada's largest trade publisher, said. “Since we never had anywhere to sell an e-book, why would we bother to make them?”

With Shortcovers, “e-books will be available, essentially, on any and all mobile devices, and since pretty much everyone has a mobile phone, that changes the game completely.”

Random House initiated its e-book program last fall, a few months after it bought 60 Sony Readers for staff at its Toronto headquarters. Early next month it's going to have 100 electronic-format Canadian titles ready for sale through Shortcovers and the Sony Reader e-store.

Certainly publishers are excited: Electronic rights are now pretty much a non-negotiable part of any author's contract, whether defined as a primary right (that is, the equal of the printed book) or a subsidiary one (like the right for audio-books or a TV show). You want to see your book all decked out with a nice cover and stacked five deep on the shelf of your neighbourhood bookstore? Hand over electronic publishing rights.

Wayne Grady shares some of this excitement, but as chair of the 1,800-member Writers' Union of Canada, he's also uneasy. “What we want to know is how and if we're going to get paid,” he said recently, “and whether the traditional royalty foundation will work in the same way.” It's an important issue not only for writers being published now, but also for those writers who may have signed in-perpetuity contracts before the digital revolution, and whose backlist now has the potential to be resurrected electronically.

For decades, the publisher has paid an author a royalty based on the suggested list price of his or her book. Say a hardcover book has a list price of $30: The author would see a royalty of 8.5 to 10 per cent applied to sales of the first few thousand copies of that book, with other, higher royalty rates kicking in as (or if) the book sold more copies. If that $30 book sold 5,000 copies at a 10 per cent royalty, the author would earn $15,000.

A few years ago, when e-books shimmered more as promise than reality, the deals apportioning digital revenues were a patchwork that varied according to publisher, author and agent. Some publishers offered a royalty of 50 per cent of net publisher proceeds; others pay 25 or 20 per cent, some as little as 10. Still others used a traditional royalty-on-list-price model but inverted it by agreeing to pay a royalty of 20 per cent, for example, to a certain threshold of unit sales, then dropping it to 15 as sales ebbed.

The situation has stabilized somewhat. Random House, for instance, now uses a 25-per-cent-of-net-proceeds clause for most of its contracts. Illingworth thinks the net royalty scheme rather than the old per-unit rate will prevail.

“That's just because the degree of pricing terms out there in the marketplace for e-books is so ridiculously variable,” he says, adding: “A publisher might get anywhere from $5 to $90 for an e-book, depending on whether it's a sale through a Sony Reader or an institutional sale, like for multi-user access with the Canadian Research Knowledge Network.”

Illingworth believes “the suggested-retail-price model has essentially become meaningless in the digital marketplace. It's a particularly bad unit of measure when you start thinking about, say, the chapter sales for Shortcovers, or advertising revenues being realized by a book's presence on Google Book Search. These are all part of the same digital revenue stream, but they don't look anything like an old book sale ever did.”

It's a position not necessarily embraced by authors or their agents. Veteran Toronto agent Beverley Slopen agrees that the e-book is “something very much within the domain of the publisher and certainly the big publisher is in the best position to realize its potential.”

But she and another Toronto agent, Dean Cooke, believe that some adjustments are going to have to be made in remunerating their clients (Slopen represents Howard Engel and Kenneth McGoogan, among others; Cooke's clients include Guy Vanderhaeghe and Richard B. Wright). It's something that likely will occur sooner rather than later, especially if, down south, the American Authors' Association, the Authors Guild and the Association of Authors' Agents start to throw their weight around. (The AAA, in fact, is hosting a four-day conference in Portland, Ore., next month called “It's Not Easy Being E.”)

“It's a market that's undetermined at this point,” notes Cooke, adding: “We don't know how it will shake down and I think publishers have taken advantage of this situation. … We don't like what we're having to accept, and we expect things to change.”

Authors and agents agree a publisher may face steep costs, anticipated and otherwise, in initiating and consolidating a digital program and in trying to get its digital market share up. But eventually the publisher should realize considerable savings, compared with the expense of manufacturing a conventional book. And with that, there'll be the need to recognize, as Jason Epstein, a former publisher himself, the fact that the author “contributes relatively more value to the final, digitally published book than publishers … and therefore this author can claim a larger share of proceeds” than from a traditionally published title.

Cooke outlined some of the savings, particularly on printing, binding and paper: “You don't have to print and bind, you don't have to pay for paper. The most expensive part of the traditional publishing process? Eliminated. You do not have to warehouse. Eliminated. You do not have to ship hard copies anywhere. Eliminated. You're not going to get returns from the bookseller. Eliminated.”

Why, he wondered, “should an author be taking less money for a product that, to my mind, has got to be more profitable given that all these costs have been eliminated?”

At the same time, Cooke is critical of the heavy discounting currently defining the electronic realm. It's not uncommon for a hardcover with a publisher's suggested list price of $30 or $35 to sell as a $9.99 e-book, a differential of more than 70 per cent. Sometimes it's even as little as $4.99 if the e-book is part of a bundled sale with two or more titles.

“What kind of discount are the Amazons and Shortcovers of this world negotiating from publishers for this to happen?” Cooke asks. “And why are publishers allowing their product to be devalued in this way?”

As a 2008 report on e-books by BookNet Canada noted: “If consumers come to expect a fixed price point [like $9.99], publishers will be hard-pressed to maintain per-book profits comparable with paper-book sales.”

No one is predicting the e-book will drive the printed book to extinction, at least not in the next few years. Books, after all, are valued as objects in their own right; as the British art director Storm Thorgerson observed recently: “People like objects. Objects tend to fashion their lives and serve as memory. … People take their favourite objects whenever they move, and those objects often help define who they are.”

But the expectation is high that digital adoption will increase, steadily and relentlessly. As it does, its impact on all facets of the book industry will be profound, from the independent bookstore that closes its doors because of lost revenues to the distributor faced with moving to a smaller warehouse and laying off staff as book orders dwindle.