I found your blog via Nathan Bransford's and Eric of Pimp My Novel fame.
As a yet un-published writer and an entrepeneur considering a small press venture, I found your blogs on money and royalties extremely useful.
Something I did not see addressed, however, was audio books. I have several friends who cannot or have difficulty reading - I myself prefer to listen to a book in the car on a long drive. Unfortunately, not every book published becomes an audio book so I have to assume that there exists audio book making companies and the rights to do produce these are sold separately.
Is this correct or am I making things up? Any information you could share about audio books 'from the inside' would be very much appreciated. I am just beginning my own research now, but your insight would be invaluable.
When a book and a CD player love each other very much...
Seriously, this is how audio books happen: When you sell a book to a publisher, they will specify what rights they're buying, and the overwhelming majority of the time that will include audio rights, followed by a royalty percentage that's generally higher than royalties on book format. I'm sure they exist, but I've never seen a contract that didn't include audio rights.
This means it's the publisher's responsibility to find a company that will produce the audio book, if they feel that it would be worth their investment - and for most mid-list authors, it won't be. For those that it will be, major publishers generally have an in-house production group responsible for it, while others might hire out. Someone will be in charge of setting it all up, especially if a celebrity needs to be hired to read it.
The author actually can't make the audio book themselves because they've sold off the right to do it to the publishing company, so if the publishing company decides, "Hey, not worth it," then they're probably right, and also no audio book for that particular book. If the small press didn't buy audio rights (which is weird, but OK), the author can hire a company to do it and distribute it, but it will be wicked expensive.
When the Kindle first came out, it had a text-to-speech option, which was quickly disabled because it violated the copyright on audio rights held by publishers (Amazon was doing it without permission). Or maybe it was another e-Reader, but I'm pretty sure it was the Kindle.
EDIT: The above paragraph is disputed in comments. Other people are probably right.