A couple of weeks ago, I posted about a Kristine Kathryn Rusch article discussing ways that major publishers may be vastly under-reporting ebook sales in royalty statements.
Ms. Rusch has a followup article about the aftermath of her first disclosure, which she believes was the first public mention of the royalty problems.
I also heard from several lawyers who, without breaking confidentiality in their own cases, said, “I read your blog and none of it surprises me.” Meaning: they had known about this and were confirming what I had blogged about.
I received the same comment from a few forensic accountants and one or two agents.
The early comments that surprised me came from indie writers who had never gone the traditional route. The indie writers, who had traditionally published friends, couldn’t believe that the friends had such low e-book numbers. The indie-published writers kept hearing from their traditionally published friends that there wasn’t much money to be made in e-books.
. . . .
Apparently, some of the Big Six publishers are significantly underreporting the actual number of e-books sold on writers’ royalty statements.
I heard from dozens upon dozens of traditionally published writers last week, and to a person without exception, they had all looked at their royalty statements and found discrepancies like the ones I found. Some—and I find this terrifying—had the exact same numbers reported on their statement as were on my statement.
That’s not possible, folks. In a six-month period, each individual book title sells a different number of copies than another individual book title, even if the titles are in the same genre.
But within one company at least, the one I was most familiar with, several of us had identical e-book sales for the same period. Some writers in that company who had published books in a series had identical e-book numbers for each book in that series. Again, not possible.
Because of my blog post, at least a dozen writers sat down with numbers and calculators in hand. These writers compared the sales of their self-published e-book titles to the sales of their traditionally published e-book titles, and found startling discrepancies. Even adjusting for price differences (Big Six e-books were priced higher than the self-published books), these writers discovered that their Big Six publishers reported e-book sales of one-tenth to one-one-hundredth of their indie-published titles.
Some of these writers are bestsellers. Their bestselling frontlist novels (released in the past year)—with full advertising and company wide support—sold significantly fewer copies than their self-published e-books, books that had been out for years, books that had no promotion at all.
. . . .
The changes need to happen. It is clear to me, from the emails I have received, that at least one Big Six publishing house is using a formula to calculate e-book sales. No one in the accounting department is looking at the actual e-book sales of each individual title. I know from experience that this house is still issuing royalty statements that look no different from royalty statements issued in the 1990s. This suggests to me that someone tried to shoehorn the new technology into an ancient program.
. . . .
I also know that two major agencies are also investigating the e-book royalty problems. Several other agencies have directed their accounting departments to do exactly what the writers above did: compare the e-book sales as reported by the Big Six for each writer and/or book title represented by the agency. The agencies are already finding what I learned: that at least one company has identical e-book numbers for writers whose print books sell at similar levels.
. . . .
During the past seven days, another problem—just as severe—also crossed my desk. Several writers complained that their print sales numbers, as reported on their royalty statements, did not jibe with their Bookscan numbers. One writer went so far as to say not only did the numbers not jibe with Bookscan, the numbers also don’t match the print runs their editor told them that the book actually had (not the estimated run, but the actual run) nor did the numbers match the sales figures provided to the writers by some independent booksellers. In fact, in the case of yet another writer whose book is still on sale—and selling—the numbers are even more baffling. That writer’s royalty statements show no sales at all for the first half of last year, even though the writer knew of hundreds of sales through various outlets.
All of this caught my attention, but the part that really made me sit up and notice were the repeated references to Bookscan numbers.
Why do I consider it important that these writers’ sales do not jibe with Bookscan?
Because Bookscan only tracks 50-70% of the books sold in America. (This percentage may go down with the downfall of Borders.) To a person, each writer reported that their Bookscan numbers were higher than the sales reported on their royalty statements, even for backlist titles on which no reserves against returns were supposedly held.
In other words, the sales figures on the royalty statement should be higher than the Bookscan numbers, and in each writer’s case, the reported numbers from the publishing house on the royalty statement was significantly lower than the Bookscan number for the exact same time period.
Link to the rest at Kristine Kathryn Rusch
Big Publishing may do some things well, but they are really stupid crooks. Auditing the sales of physical books is not an easy thing because of books being shipped to distributors, then to bookstores, then returned from bookstores, etc., etc., etc. The Reserve for Returns line in royalty statements is a great way of managing cash for any publisher.
But ebooks? Ebook sales are ridiculously easy to audit. Amazon and Nook account for 90%+ of all sales, so if the under-reporting is as large as it appears, you don’t even need to talk to Apple, Kobo, etc., to confirm there is a problem.
Amazon and Nook make their numbers available to indie authors online, so they have the infrastructure in place to report sales by book and by author. With ebooks, there are zero or near-zero returns. (I included near-zero in case there is some way to return an ebook to Amazon. I’m not aware of one.) No unsold inventory of ebooks is sitting in publisher’s or distributor’s warehouses or bookstores to count.
Once Amazon was convinced it needed to release sales figures for an author’s books, you’d get access to sales figures online in about five minutes or a spreadsheet overnight.
And there it would be, a record kept by an uninterested third party, how many ebooks the publisher sold at what prices and how much Amazon paid them for those sales. Passive Guy formerly practiced law and will assure you that this is a lawyer’s dream. Adding an additional claim for punitive damages for fraud would be close to a slam-dunk.