Being legalistic, I’d dispute the co-ownership characterization unless the author explicitly transfers a fractional interest in the copyright to the agent. It’s really an interest in an income stream the copyright generates.

What you’re describing is the “agency with an interest” that Kris Rusch warns about, something different than traditional literary agency contracts.

PG believes two people, two organizations, etc., are and should be free to enter into any contractual relationship they wish, within very broad parameters governing what’s legal and illegal for contracts. However, he also believes each party should be fully informed concerning what the contract means and obscuring or hiding important contract rights when dealing with a legally unsophisticated and unrepresented contracting party is not right. The longer the contract and the more money involved, the more problem PG has with taking advantage of someone’s ignorance concerning the true meaning of the agreement.

This is why, as a general proposition, in all business contracts PG negotiated, he insisted on a firm termination date that didn’t rely on anything other than the passage of time.

The statement in Paul’s second paragraph is the one that clouds this issue: “…they’re business people who make money on commission.”

No. They’re not. The 15% is NOT a commission.

(Those people who hear themselves shouting, “Yes, it is,” need to take a big breath, clear their minds, and read objectively. I’m not bashing. I’m just talking finance. Former Fortune 500 VP Finance. We talk shop, too.)

My simple definition: Commission = “I sell your stuff and take a small percentage off the top for my trouble.” Okay?

If we can agree with that definition, here’s a VERY simple example of why signing an agent to 15% of e-rights is not a commission.

Upstanding Agency works a deal to help Eager Author put his one book on Kindle and Nook. Upstanding Agency receives 15% of the monies flowing from these two cash streams for its work.

Two years later, Curious Author contacts Upstanding Agency to find out why the same one book is not offered at Apple, Kobo, Diesel, and the 147 other e-tailers that have popped up since the book went to Kindle and Nook. Upstanding Agency (for any one of a variety of reasons) replies, “We don’t think those markets would be prudent for your product at this time.”

Frustrated Author pays someone else to put the book up at those other 150 places.

Upstanding Agency finds out and demands immediate payment from Stunned Author for its 15% of the e-book royalties generated at those 150 places, per the contract.

Commission = huh?

Upstanding Agency not only took the 15% from the two income streams it helped “negotiate,” but from the other 150 income streams, as well. It got paid for work that it not only didn’t do, but for work that it refused to do.

(And for work that it will continue to refuse to do as new markets open up in the future… 200 income streams, 500 income streams, 1,000 income streams. Upstanding Agency will still get “its 15% cut.” Not a bad payoff for the twenty minutes it took to post the book to those two income streams — Kindle and Nook — back in 2011.)

That’s not a commission. It’s co-ownership. Understanding the difference is the first step in understanding the larger problems that you and Kris are discussing. Keep up the good work.

Rick

When an agent has a stable of writers, it isn’t about the biggest/best possible sale for you, it’s about an acceptable deal cut within an acceptable time frame. Taking the quickest path to a signed contract is often the most money for hours invested, while needling and dealing with an advance that’s say, 10% bigger, isn’t often “worth” the extra hours of negotiation it would take. Far better from an agent’s standpoint and time-management to close two quick deals in one week than one slightly larger one.

I’m not saying your agent is bad or actively does this, I’m just saying, to assume that anyone cares as much about your career as you do is dangerous thinking. Yes, your success is their success, but at the same time, your mediocre success is their acceptable success. And your failures don’t hurt them near as bad as they hurt you.

I agree it’s dangerous to listen to and read only those with whom you agree and the creation of an online lynch mob mentality doesn’t result in intelligent discourse. I don’t think Dean, Mike, Jon and I are near that point, but recognize the danger.

I also agree that it’s perfectly appropriate for agents to act in their commercial interest and take steps to avoid a situation in which they have expended significant effort to obtain a contract for their client only to have the client pull out at the last minute, depriving the agent of fair compensation for his/her labor.

Where our opinions may diverge is over the concept of agency. From the dusty recesses of ancient British common law to the present, when one person (or organization) acts as an agent for another, a fiduciary duty falls upon the agent to act in the best interests of the principal, the author in this case. The agent is permitted to receive agreed-upon compensation for the work performed but, once the agency relationship is in place, the agent is not permitted to act against the interest of the principal.

The agency/principal relationship gives rise to the potential for a conflict of interest for the agent between what is in the agent’s best interest and the principal’s best interest.

Under present U.S. law, the attorney/client relationship, a sub-species of agent/principal relationship, is probably the one where conflict of interest issues have been most thoroughly explored. Without going into excruciating detail, where the possibility or even appearance of a conflict of interest arises, an attorney must immediately inform the client of the actual or potential conflict and take substantial steps to avoid harming the client and remedy the conflict, including, if necessary withdrawing from representation of the client. One of the fundamental steps an attorney must always take is to advise the client to seek independent legal advice on the matter and, in some cases, insist the client consult independent counsel before continuing with representation of that client.

To bring the attorney’s obligations down the the specific domain we’re discussing, an attorney specializing in negotiating and drafting agency or publishing contracts would have identical obligations to an author-client regarding conflicts of interest as a criminal attorney would have to a criminal defendant.

I see serious conflict of interest issues where agents present new, more restrictive agency contracts to existing clients or propose becoming publishers for their clients. Search this blog using the term “conflict of interest” for more detail.

I also have substantial philosophical and legal concerns about contracts that last for the life of the copyright or some other similarly extended period of time. I believe every business contract should have a specific and reasonable length with an identified termination date. If both parties are satisfied with the relationship as the termination date approaches, they can agree to extend the contract on the same or modified terms.

I’m happy to hear why it’s not a good idea, but I can’t understand why an agency contract would require an initial term of more than ten years. So you know I’m consistent, I’ve suggested the same term for a publishing contract.

Anticipating one response to my ten year initial term, I am aware of a handful of books that continue to generate large royalties for more than ten years. However, I believe this group constitutes only a tiny minority of all books published by traditional publishers. Setting the contractual term for agency and publishing contracts to capture extreme outliers ends up being unfair to the large majority of authors whose works do not have such happy financial results. I would add an additional question as to whether, considering the effort expended, the publisher and agent of a blockbuster book would have received more than adequate compensation during the ten year period.

Thanks again for your comments and keep participating in the discussion.

For writers that have been around for a long time, you all seem surprised that your agents are running a business. They are not doctors who took an oath to do no harm, they’re business people who make money on commission. How that commission is calculated changes their profits — the size of the pie determines the size of their slice.

Why would an agent put in a non-termination clause? Maybe because for every story that an author can trot out about an agent who didn’t behave as perfectly as they would like them to, I’m sure agents can point out lots of examples of how they negotiated a sweetheart deal, busted their butts, etc., and then just when they went to take their slice of the pie, the author terminated the contract. Or the publisher switched pies for a smaller one.

For a mid-list author, they probably had short-tail revenue streams under legacy print publishing. So, everyone probably got all their money in the first two years after release. Now, with long-tail ebooks, the agent is saying “Wait, I want a longer deal so that I get the 15% of that book”. Because even after the agent, the author and the publisher have stopped doing anything to promote it, that ebook may still be generating a long-tail revenue stream.

The agent is doing what s/he SHOULD do as a business person — looking at the old revenue stream (where they got 15%) and the new revenue stream (where they’re getting 15% of just the paper stuff which is going down and missing out on the long-tail e-stream if/once the contract terminates) and trying to figure out how to protect their share. The author is still going to get their piece of the long-term; the publisher is still going to get their share. Why would the agent want to get cut out of the deal simply because it’s digital now?

I like Eisler’s description of his new Amazon contract, and it would be nice if all contracts were that simple. But it is only that simple because it’s two parties splitting the pot with both parties knowing the pot, not three parties initially splitting the pot but with two getting to decide when the third doesn’t get to share anymore.

PolyWogg