Author Michael A. Stackpole dismantles a proposed modification of his publishing agreement with financially-troubled Nightshade Books. See this post for additional information.
Speaking generally, Michael’s essay describes a horror show of terrible contract provisions in publishing contracts.
What is worse, Skyhorse, the would-be new publisher, didn’t make up a lot of new contract clauses, it just used provisions that are common in the publishing contracts of many publishers, including most large ones.
Night Shade Books recently sent a letter to all of their authors announcing that they were in negotiations with Skyhorse Publishing to complete an “acquisition of assets.” In essence, Skyhorse would pick up all their assets, assume none of their liabilities, but would pay NSB a sum of money which, according to the letter, would pay off outstanding debts to authors. If such a sale cannot be completed, NSB states clearly that they’re broke, and that who knows what a Bankruptcy Court will do with author property in any settlement.
Now, to be paid, authors just have to agree to some slight modifications of their contracts.
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I’ve always found it useful to measure any agreement not by what someone tells me they will be doing, but what I imagine their heirs or evil twins could do with the contract terms.
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2) Physical Book Royalties: The agreement requires authors to accept a royalty rate of 10% of Net income. Net is defined as the amount of money the booksellers and distributors pay Skyhorse—usually 50% of cover price. For me this net amount is a 50% reduction in my royalty rate.
More importantly, net income is illusory. Let’s say that Skyhorse, in order to get more of my books into a store, offers a distributor or chain an extra 30% off, on the condition that they buy an extra dozen books. So, 36 copies of a $15 book pays Skyhorse $189, of which I make $18.90 as opposed to the $27 I’d make if all 36 had been sold at a normal price, or the $54 I’d make under the NSB contract.
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3) Ebook Royalties: The agreement requires me to lower my cut of ebook income from 50% to 25%. Skyhorse might have a shred of an argument if they actually had to put money into the production of the ebooks, but they don’t. That’s pure turnkey, so why do I take half of what I was getting before? That makes no sense. There’s no expense to them, so digital income is pure profit.
4) Audio and second serial rights: The agreements stipulates that I’ll grant Skyhorse audio and second serial rights to my books—rights which NSB never purchased. They want these rights for no money up front. Moreover, the clause says that the author will be consulted on the sale of same, but that “approval shall not be unreasonably denied, delayed or withheld.” Income from the sale of these rights will be split 50/50 between Skyhorse and the author.
This can lead us to an interesting situation for which there is ample precedent in the publishing world. The publisher forms a sister corporation to handle audio book production and sales. They sell a property to the sister corporation for a tiny advance and pitiful royalty. The sister company makes the money actually selling the product, and yet the publisher can say that they’re following the letter of the contract because they’re splitting all income half and half. (Harlequin just had a lawsuit dismissed against them for doing a similar thing with ebooks.)
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5) Term of Copyright: The agreement is a “term of copyright” agreement which, unless I badly misunderstand SFWA’s complaints about the Random House HYDRA contract, was a sticking point there.
6) Reversion Clauses: Reversion clauses allow an author to request a return of all rights granted if, after two years from the date of publication, the book goes out of print. Out of print is defined as fewer than 100 copies sold per annum for a physical book, and less than 100 copies sold for a digital book in a twelve month period. The publisher has six months to reprint the book, and has 90 days to kick the rights back if they choose not to go to press.
Here’s the problem with this wording in the case of digital books: How do you “reprint” an ebook? You can’t, so applying the print standard to an ebook is complete nonsense.
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So, how does a publisher beat the ebook out-of-print criterion? Let’s say a book has sold only 60 copies as we are coming down to the end of the year. It’s an $8 ebook. Publisher nets $4, pays the author $2. The publisher, for doing nothing more than letting Amazon and Apple shoot you some electrons, nets $120 a year. Coming down to the end of the year, the publisher puts the book on sale as a .99 special, hits Twitter, moves 40 copies and kills the sale. They’ve guaranteed not only their share of the secondary rights for another year, they’ve guaranteed $120 in income for the next year, and they’re out zero expense since those digital copies cost them nothing to sell cheap.
Link to the rest at Stormwolf
To be clear, Passive Guy is not familiar with the history of Nightshade or its existing contracts nor has he reviewed the proposed Skyhorse contract.
However, Michael’s prior blog posts on a variety of topics seem to have been reliable and, as PG said at the outset, the contract provisions Michael describes in this post are not unique or exotic in the traditional publishing business.
As PG mentioned in his prior post on Nightshade’s problems, bankruptcy is not much fun. However, while the bankruptcy court has a lot of powers, it’s difficult for PG to believe authors will be treated as badly by the court as they potentially will under this revised contract.