Passive Guy hadn’t heard of a law firm called Hagens Berman before yesterday, but so far he’s a big fan.
Hagens Berman is investigating claims that several large e-book publishers are under-reporting the number of e-books sold, paying authors less than their share of royalties.
E-book authors typically receive royalty statements, which report the number of e-books sold in a specified time period. The authors are paid based on these sales numbers.
According to reports, the so-called “big six” e-book publishers may be using an outdated accounting systems to track the sales of e-books. As a result, some authors have reported various accounting errors on their statements, including the under-reporting of sales of the e-books.
Link to Hagens Berman
We’ve previously discussed reports from authors and agents that ebook royalties seem suspiciously low. See here, here, here and here. In PG’s mind, there is little question that there are problems with ebook royalty reporting by at least several publishers. Some people suggest it’s a reflection of antiquated royalty accounting software, but PG is not that charitable, in part because no one is reporting that they’re receiving more ebook royalties than they deserve.
PG is going to do some additional checking on Hagens Berman. At first glance, they look like a plaintiff-oriented firm that handles a variety of consumer rights, fraud, class action, etc., and they have some significant wins under their collective belts.
While PG has no reason to believe Hagens Berman is not the real deal, some mass tort and class action firms have a well-deserved reputation for watching out for themselves first and their clients a distant second. In a prior life, PG was heavily involved in working with courts that were overwhelmed by asbestos litigation. While some plaintiff’s firms in asbestos litigation were completely legitimate, others utilized unethical and illegal tactics. Also, some (not all) class action firms are noted for filing suit then settling on terms that provide each member of the class a few dollars and pay the firm a large legal fee.
With those caveats, it appears Hagens Berman is developing a practice that’s focused on big publishing. In the majority of cases, the losses of any single author from something like ebook royalty under-reporting would not justify the cost of mounting a lawsuit to collect royalties. What PG suspects is happening is Hagens Berman is collecting information and possible plaintiffs for a class-action suit on behalf of all authors who have been harmed by ebook royalty shortfalls.
If PG is correct, this is good for authors and bad for big publishers.
What are the implications for authors besides being paid proper ebook royalties? If the agency pricing suit and a class action suit on eroyalties move forward, big publishers will be spending serious money on legal fees and, quite possibly, settlements. We’ve already heard numerous reports that advances are down and we know publishing contracts are becoming more and more onerous. Serious lawsuits accelerate, but don’t change that trend.
If, as PG believes, big publishing is in a financial death/downsizing spiral because of indie publishing, ebooks, Amazon pricing pressure, death of physical bookstores, etc., that spiral will grow tighter if it has large losses in class action suits. You’ll see some consolidation, so unwary authors may end up publishing with a different house than the one who gave them their contract. Bankruptcy is also a possibility, so unwary authors may end up having their books unpublished or poorly published and their copyrights in a legal limbo.