Contracts

Thugs, Lawyers, and Writers

18 June 2016

From Kristine Kathryn Rusch:

Here’s the best and worst thing about writers:

We have fantastic imaginations. Those imaginations serve us well when we write books and stories. Those imaginations often fail us when we enter the business world.

What do I mean?

It’s rare to find a writer with a Pollyanna view of the world. Most writers are better at gloom and doom than they are at unremitting optimism.

Writers also have an inflated sense of self—we couldn’t do our jobs otherwise—and a weirdly introverted need to be the center of attention. If we screw up, we feel like the entire world knows—and the entire world will react.

Badly.

For reasons I don’t understand, writers also want rules. They want to know how to write, what to write, and what to do when they’re finished writing. They cobble bits and pieces of information from blog posts to Mrs. Hanson’s Fourth Grade English class, and come up with some convoluted set of rules that they believe every writer could and would follow.

And, more so than in almost any other profession I’ve encountered, most writers are ethical to the point of self-harm. For example, in the United States, we have an annual homework assignment—our federal and state tax returns. Convoluted laws and all kinds of regulation allow for deductibles and legal ways to move income from the taxable side of the equation to the not-taxable side of the equation.

Writers often won’t use those deductibles and regulations that favor them, preferring to pay the full tax burden. Why? They believe that everyone should pay their fair share.

. . . .

But the writerly weirdness causes conflict with our careers and our businesses, in part because we are (as a group) imaginative, rule-bound, pessimistic, ethical, and the center of our own small universes.

We bring all of those things into the realm of contracts.

Be honest with yourself: What do you imagine will happen to you if you don’t follow your book contract to the letter?

Many of you imagine the Worst Case Scenario. What is that? You don’t know, because it’s never happened to you or your friends or your friends’ friends. Writers tend not to discuss what happens when they don’t follow their contracts to the letter.

But most writers imagine they know. They imagine those thugs from the old Warner Brothers cartoons showing up at their doorstep, doing bad Jimmy Cagney impressions, and threatening them with everything from bodily harm to loss of their home to—I don’t know.

. . . .

I’ve spent too much time with lawyers, businesspeople, and sales executives. To them, the entire world is negotiable.

In the past month, I found myself explaining writers to lawyers. Lawyers know that contracts are not written in stone. They’re rarely written in blood. All contracts can be changed, modified, muted, and defanged with enough effort. Sometimes that effort requires a judge and a courtroom.

Often that effort is as simple as a letter of notification, saying quite clearly that one party to the contract no longer wants to follow one particular clause in the contract. If the other party may simply accept that notification, or the other party might protest. Either way, a dialogue has been opened and the contract might end up being renegotiated.

However, lawyers—all lawyers I’ve met anyway—say something when discussing contracts that confounds most writers. Lawyers use the word “ignore” a lot.

Here’s how the conversation goes:

Kris: [flailing about, describing in great and horrid detail how upset she is about a contract clause that is ridiculous, probably unenforceable, and most likely will not stand up in court.]

Lawyer Friend: I don’t think that clause is legal.

Kris: But writers will follow it anyway.

Lawyer Friend: Tell them to ignore the clause and see what happens.

Kris: Writers would never do that.

Lawyer Friend: Why not? People ignore unenforceable clauses in contracts all the time.

Kris: Writers just won’t. They follow rules.

Lawyer Friend: What’s the worst that could happen?

Kris: I don’t know. You tell me.

Lawyer Friend: [shrugs] They’ll end up in court. Might be good for everyone involved, so that there’s clarity on that clause.

Lawyers aren’t afraid of thugs and goons and cartoon characters that go bump in the night. They’re not afraid of someone who plays the Big Dog and says, You’ll never work in this town again. Lawyers generally say, Well, let’s see.

Lawyers know there’s usually a solution—and it’s often as simple as standing up and saying to the person on the other side of the contract, I’m not playing your silly game. No. I’m not doing it. Now, what are you going to do?

Link to the rest at Kristine Kathryn Rusch

Here’s a link to Kris Rusch’s books. If you like an author’s post, you can show your appreciation by checking out their books.

PG says that litigation also costs publishers money, whether they file suit or the author does.

From his own experience, he suggests that if a publisher is owned by a large European conglomerate, the big bosses in Germany, France, etc., believe the American legal system is insane and way, way too costly.

For the American subsidiary to pay money to US lawyers instead of sending it back to headquarters seems like a waste of good dollars and the US CEO who does so better generate a good return on those legal fees or he/she will be an ex-CEO.

This doesn’t mean that litigation is something to be taken lightly or that publishers will always cave, but it’s a factor to keep in mind.

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‘Starting To Hit the Wall’: A Conference Focuses on Publishing Rights

14 June 2016

From Publishing Perspectives:

The rising importance of a mindful, purposeful, aggressive approach to rights management in publishing was phrased many ways during the course of Monday’s conference, Rights and Content in the Digital Age, organized by Publishing Perspectivesin the Grand Hall at New York University’s Kimmel Center.

One of the most intriguing images for the potential value of what book publishing has to offer came from digital content strategist Matt Dellinger, who has done a lot of work in archival content with The New Yorker, Esquire, and other magazines:

“The future of content is more and more about the history of content,” Dellinger said. “It’s a matter of taking the deeper end of the culture pool and circulating it in the kiddie pool of snack-food content.”

From Dellinger and other speakers—and as much in regard to frontlist as backlist—the message was clear: More orchestrated, coordinated, and supported approaches to the management of rights is fast becoming a major key for publishers at a time when sales are challenged in saturated markets: a failure to exploit rights to the fullest, most efficient degree possible is something publishers can’t afford.

Ingenta Chief Revenue Officer Randy Petway’s presentation pointed to how minimal investment has traditionally been made by publishers in the infrastructure of rights departments—something later echoed in comments by longtime rights specialist Kris Kliemann, formerly of Wiley.

. . . .

The day opened with a keynote address from author Roxana Robinson, President since 2014 of the Authors Guild, who warned of the mounting difficulties authors are facing in finding compensation of their work in digitally complicated markets.

“Suppose you want to buy a copy of my newest novel, Sparta,” Robinson said, “which was published in 2013. If you go to Amazon, you will find that they offer a new paperback for $12.98. And also another new paperback for $4.33. And a used paperback for one penny.

“Now, why would you choose to buy the more expensive copy, the $12.99 paperback instead of the $4.33 paperback? They’re both new. You’ll buy the cheaper one. But where does that $4.33 paperback come from? It’s probably a copy the publisher sold off to make room in a warehouse somewhere. It’s very common. Publishers have high hopes for every book they make, they make more copies than can sell…After a certain period of time, they realize they need that space in the warehouse, so they sell off copies cheap to a jobber, a middleman. They sell them at a very deep discount.

“Many contracts have clauses that will allow the publisher, under these circumstances of deep discount, to pay no royalties. The publisher gets paid by the middleman. And the middleman gets paid. Only the author will get nothing at all for the sale of this book which she just wrote…The publishers know this. But they do it [sell at discount to middleman vendors] because they want some money now.”

Link to the rest at Publishing Perspectives and thanks to Dave for the tip.

Permit PG to translate: Publishers are facing more and more difficulties in attracting and keeping top authors because more and more authors are learning they can make more money self-publishing. Such difficulties are, of course, adversely impacting revenues and profits.

So publishers are turning to books by authors who have already signed publishing contracts that grant the sun, moon and stars to publishers. The expanded rights management activities are aimed at maximizing revenues from those authors’ books.

As the comments from Ms. Robinson reflect, more revenues to the publisher doesn’t always mean more royalties for the author. Deep discount clauses are buried in the back of most publishing contracts and, in all such contracts PG has reviewed, he’s never seen any evidence that changes to those clauses were negotiated by anyone representing the author.

(For a number of years, it was not unusual for changes to the boilerplate contracts of large and not so large publishers to be highlighted in some way (bold type, underlines, indents, etc.) in the version of the contract the author signed. This practice continued for long after word processing software came into common use. Where such practices were followed, it is easy for PG to see what modifications to standard agreements were made to the author’s benefit or detriment and what unfair contract language was left unchanged.)

Under complex contracts granting a wide range of rights to a publisher, it is sometimes possible for the publisher to license or sell a book in a variety of different ways to affect how much money the publisher keeps. Harlequin’s former practice of licensing every book to a related HQ company instead of directly publishing it, thereby substantially reducing HQ’s royalty payments to authors, is one example of exploiting complex contract provisions in ways authors may not expect.

The standard contracts of other large and small publishers would permit them to do the same thing HQ did to increase profits and reduce royalty payments. It’s something PG has seen and corrected more times than he can remember.

When lowering the price of a book to increase sales, a publisher that is paying attention to the deep discount clause can make more money by pricing the book at a penny less and triggering deep discount royalties (or non-royalties) than it will make by pricing the book at a penny more and paying standard royalties.

PG suggests that aggressive rights management activities are more likely to materially increase the publisher’s income than the author’s income.

On the True Costs of Bargain Books, Or Guilting Readers Because Authors Signed Bad Contracts

10 June 2016

From The Digital Reader:

James Mayhew has taken up the cause of trying to guilt, harangue, or otherwise convince readers to overpay for books from legacy publishers.

About a month ago (I just now found it) Mayhew published a post where he argues that fans should not buy bargain price books because an author’s royalties are slashed as the price drops.

So how does it all work? Authors get paid royalties, which are a percentage of the book price which you may (or may not) earn from books sales, usually around 5-10% of the price, but very often less; most books are discounted in any case, and the royalty shrinks accordingly. In simple terms, you would expect to get between 50p and £1 for each hardback book sold (and less on a paperback). This is completely normal, and I have no complaints, although it’s often a shock to people.

What happens when books get discounted further? Subject to contractual terms, the royalty may shrink on cheaper books. So you end up getting a tiny % of an even smaller amount. We are talking pennies. Once upon a time there was a system called the Net Book Agreement, limiting the extent to which books could be discounted. But that was abandoned in favour of a “free market” years ago. The result? books can be reduced to next to nothing.

But increasingly, publishers broker cold, hard, cynical deals with these people and then print to order. The publisher is complicit in the arrangement and sells books at extremely low prices (less than 50p per book) to the discount catalogue (but not at a loss to themselves) who then sell them on at a very nice profit – usually £1 per book. Tens of thousands of copies. And the author? I get less than 4p a book, while the discount company makes millions every year. …

. . . .

Authors and publishers might see things differently, but what I see here is an author who is trying to guilt readers over the price they pay for books.

That is a pretty obnoxious behavior, but it gets worse when we look at it sideways. That’s when we realize that the real issue here is not the price of the books but the contract terms Mayhew agreed to. He’s trying to make readers responsible for his, and other authors’, bad business decisions.

Link to the rest at The Digital Reader

That’s just the strategy for attracting more book buyers – make them feel guilty for doing so when books are discounted.

PG suggests that when indie authors are talking to readers, in addition to thanking them for buying the author’s books, it might be a good idea to let the readers know that when they buy indie ebooks on Amazon, in many cases, most of the money goes directly to the author. That’s why Amazon is such a great friend to authors and readers.

An Important Notice on The Non-Compete Clause

9 June 2016

From Kristine Kathryn Rusch:

I wrote about the non-compete clause in mid-May. It’s a pernicious horrid little clause that has shown up all over contracts involving creative works—not just in traditional publishing deals here in the U.S., but works in translation, game rights, movie deals, and more.

In that post, I said that I wasn’t sure if the clause would hold up in court, but that was a bit of fudge. I knew that some states had already litigated the non-compete clause and found it wanting.

. . . .

I’ve had the pleasure of emailing back and forth with Teri Kanefield for over a year now. She writes books for young readers as well as adults. She also practices law in California. Here’s what her website says about her law practice:

Teri’s law practice is limited to representing indigents on appeal from adverse rulings. She believes that when the rights of society’s most vulnerable members are denied, everybody’s rights are imperiled. She also believes that the purpose of literature is to expand our sympathies.

She emailed me after reading the non-compete blog and mentioned that non-compete clauses are mostly illegal under California law, with rare exceptions.

She also suspected that they were illegal and thus unenforceable under New York law.

. . . .

So, without further ado, here’s Teri:

Hi, Kris,

First, all the usual disclaimers: I am a lawyer, but this is out of my area of expertise, and I am not authorized to practice in New York.

So, while nothing here is legal advice, maybe we can start a discussion that will help writers deal with these non-compete clauses.

After our email chat, I visited the law library and did a little research on New York non-compete agreements. Here is what I found.

Why I suspect that non-compete clauses in publishing contracts are disfavored under New York law

As far as I can see, New York has no statutes governing non-compete clauses. The law is entirely case law (meaning that judges make the law according to established principles and follow the precedent set down from other judges).

. . . .

Leading cases in New York on non-competes are Reed, Roberts Assoc. v. Strauman, 40 N.Y.2d 303, 307-08 (N.Y. 1976) and BDO Seidman v. Hirshberg, 712 NE 2d 1220 (N.Y. Ct. App. 1999)

Both cases hold that non-competes will only be subject to specific enforcement to the extent that they are:

  1.   necessary to protect the employer’s legitimate business interests,
  2.   reasonable in time and area, 
  3.   not harmful to the general public and 
  4.   not unreasonably burdensome to the employee.

Obviously, it is important to define “legitimate business interest.”

Here is what I found on “legitimate business interest” in New York:

Employer legitimate interests include protecting a customer base, trade secrets and an employer’s investment in training or educating employees. Business or financial information, such as market reports or market strategies, do not trigger the trade-secrets legitimate interest. Customer lists are generally not considered to be confidential information unless such lists are discoverable only by extraordinary efforts and not through public sources. As a general rule, a restraint against ordinary competition remains against public policy.

Merely preventing ordinary competition is not a legitimate business interest.

Today, a mobile workforce in a digital economy creates opportunities for employees to compete unfairly against their former employers, so courts will prevent employees from using inside information to compete unfairly against a former employer.

In other words, as in other areas of business law, fair competition is allowed. Unfair competition is not.

In addition, non-competes cannot be used to prevent a person from earning a living:

Courts in New York are less likely to enforce non-compete clauses if the restriction would leave the employee without compensation from the former employer and without the right to earn compensation in his or her field. When evaluating the enforceability of a non-compete clause, New York courts may take into consideration whether or not the employer will make any payments to the employee for the period of “garden leave,” when the employee is no longer employed by the former employer but is restricted from working for a competitor. See, e.g.,Cornell v. T.V. Dev. Corp., 17 N.Y.2d 69, 75, 268 N.Y.S.2d 29, 34 (1996); DeCapua v. Dine-A- Mate, Inc., 292 A.D.2d 489, 744 N.Y.S. 2d 417 (2d Dep’t 2002).

A recent (2013) New York case held that a non-compete may be enforceable if the departing employee agrees not to compete in exchange for financial compensation. Lenel Sys. Intl. v. Smith, 106 A.D. 3d 1536 (2013). In this case, an employee accepted stock options in exchange for a promise not to work for a competitor for two years.

Link to the rest at Kristine Kathryn Rusch

Here’s a link to Kris Rusch’s books and to Teri Kanefield’s books. If you like an author’s post, you can show your appreciation by checking out their books.

Non-compete clauses in publishing contracts have been a burr in PG’s saddle for a long time. He first blogged about them five years ago and if you type “non-compete” into the TPV search box, you’ll find a whole bunch of posts on the topic.

PG says Teri’s overview of New York law on the enforceability of non-compete agreements mirrors the way such agreements are handled in a great many states. As she mentions, California is effectively death on non-compete agreements and has been since the California Territory’s first constitution, adopted in 1849, in advance of California attaining U.S. statehood the following year.

So can an author simply ignore the non-compete provisions in a publishing agreement that includes a provision saying New York law applies to the interpretation of the contract and any litigation on the subject will take place in New York?

PG says that any author who wanted to do so and was prepared to pay for a court fight in New York City would probably be doing a favor for a lot of authors. If the Author’s Guild wanted to do something that really benefited a great many trad-pubbed authors, it would fund such litigation.

Unfortunately for the general state of justice, not a lot of authors are likely to be interested in becoming a test case to determine the status of author/publisher non-compete agreements under New York law.

In the meantime, authors involved with traditional publishers should make a big fuss about these provisions and instruct their agents to do the same thing. More importantly, such authors should negotiate changes in the standard non-compete provisions that effectively neuter the clause – no competing publications for a period beginning one month before and ending one month after the trad-pubbed book is released with a tight definition about what is and is not a competing publication.

 

Author Sues Universal Over Musical Theater Adaptation of ‘October Sky’

7 June 2016

From Yahoo Movies:

The author of the New York Times best-seller Rocket Boys is suing Universal Pictures for overstepping the life rights he granted in the 1990s and shutting down a musical adaptation of his book in favor of launching its own, according to a complaint filed Thursday in Los Angeles County Superior Court.

Homer Hickam Jr. says he agreed to give Universal the rights to one book to adapt into one film, October Sky.

Now he is suing Universal, and its president James Horowitz and vp of live theatricals Christopher Herzberger, for a host of claims including breach of contract, fraud, misappropriation and unfair competition. Hickam is seeking at least $20 million in damages, an injunction to shut down the October Sky musical and a declaration from the court that Universal does not have any rights to his life story other than the right to make the original 1999 film.

Rocket Boys is the story of Hickam’s life, centering on the family conflict surrounding his decision to build rockets instead of entering the coal mining business.The author claims he sold that story to Universal in 1996, and his now-deceased literary agent Mickey Freiberg assured Hickam that his sequels were protected and reserved, that the agreement was for one film only and that Universal would have to provide significant payment if it wanted to remake the movie or create a new project.

A decade later, Hickam developed and produced Rocket Boys into a live stage musical with the approval of Universal, according to the lawsuit. In 2015, Universal decided to create an October Sky musical, purportedly based on the film and Hickam’s memoir, and has shut down the author’s stage show.

“Universal has demanded that Hickam cease and desist in developing, producing and performing the Rocket Boys musical and accept a complete gag order that would punish him if he ever said a word about Universal’s wrongful and improper conduct,” states the complaint. “Universal has taken the completely fallacious position that Hickam has optioned all rights to Universal to make any and all motion pictures or live stage productions arising from any and all stories he may write about his life.”

Link to the rest at Yahoo Movies and thanks to Meryl for the tip.

PG will observe that deceased agents are not very useful for determining the meaning of ambiguous contract clauses.

If an author contractually grants rights to his/her book for the full length of the copyright (the remainder of the author’s life plus 70 years in the US and similar durations in other western countries), everybody involved in creating the contract will be dead before the contract ends. This is one of the many reasons for getting the language of the contract exactly right.

Of course, the consequences of poorly-drafted contract language would have fewer potential adverse consequences for the author if the contract’s duration was a more reasonable period of time. A misunderstanding that impacts an author for three years or five years or seven years is less serious than one the author will never outlive.

PG will also observe that the contracts of KDP and other ebook sales channels of which PG is aware may be terminated by either party at any time. This is not to say that authors should not take their KDP contracts seriously and understand the obligations contained therein, but an author who wants to take their book in a different direction can easily do so.

Consumers believe they have more rights than they really do in digital media

27 May 2016

From Chris Meadows at TeleRead:

To buy or to license? That is the question that’s stumped a lot of e-book and other digital media consumers over the years, recently culminating in an author’s lawsuit against Simon & Schuster over sales versus licensing revenue. But just how badly has it stumped consumers? A pair of law school researchers undertook to find out, and the 60-page report on their study is fascinating reading.

Called “What We Buy When We ‘Buy Now,’” the study of almost 1,300 online consumers divided its participants into four groups, presenting each of the four with a different purchase option from a fictitious Internet retail store: a “buy now” button for digital media, a “license now” button for digital media, a notice listing the various things they could and couldn’t do with the digital media, and a “buy now” button for physical media. Afterward, the participants answered some questions about what rights they believed they had in the media they bought: the rights to keep, sell, gift, lend, copy, etc. said media.

. . . .

[C]ustomers presented with all three digital media purchase options by and large believed they had considerably greater ownership rights in their digital media than they actually do, though the ones who got the list of rights had the lowest level of misunderstanding. Conversely, the people who bought the physical media had the best understanding of the rights they had in it, but many of them believed they had fewer rights than they did. The researchers concluded that getting online stores to move to a rights list rather than a misleading “buy now” button would work best from a standpoint of reducing those misunderstandings.

. . . .

Another part of the report looked at how much consumers value these ownership rights, and whether they would be willing to pay extra for them. It concluded that many consumers do value ownership rights enough to pay extra for them, and would use streaming services or even illegal peer-to-peer to obtain media instead of “buying” it if such rights were not provided.

. . . .

The final part of the report looks at the possibility that Internet media stores using a “Buy Now” button could constitute false advertising, and the potential remedies that consumers might have against such stores.

Link to the rest at TeleRead

Simon & Schuster Hit with eBook Royalties Class Action

21 May 2016

From Copylaw:

A book is a book, except when it comes to eBook royalties. That’s the premise of a class action lawsuit filed on Thursday, May 19, 2016, in New York Supreme Court by class representative  Sheldon P. Blau, MD.

The lawsuit alleges Simon & Schuster has been cheating its authors by improperly categorizing eBook transactions as “sales” rather than “licenses.”

The distinction is significant, because the royalty rate for sales is much lower than the rate for the license of rights.  If categorized as a license – rather than a sale — the author receives 50% of net receipts, rather than 25% of net typically paid to authors for the “sale” of an eBook.

. . . .

The eBook royalty class action looks back approximately six years, the statute of limitations on contract actions in New York State.  It alleges Simon & Schuster engaged in a “pattern and practice of paying Plaintiff and others similarly situated royalty payments for the distribution of licenses for electronic books, or “e-books,” at a rate for book “sales,” or some other lower rate than that required for “license” transactions.”

This issue arose, in a different context, in F.B.T. Productions v. Aftermath Records, a 2007 federal lawsuit brought by Eminem’s management company against his record label over digital royalty rate splits.  Like the music industry, publishers have taken the position that digital downloads should be accounted for as sales not licenses.

Link to the rest at Copylaw

PG is pleased to hear about this and wishes the plaintiffs well.
.



Long-Term Thinking: The Non-Compete Clause

20 May 2016

From Kristine Kathryn Rusch:

I probably should have called this post Short- and Long-term Thinking, or maybe just Thinking. Because no one should ever sign a non-compete clause.

Ever.

And yet, for the past several years, traditional publishers are trying to control everything about a writer, from the rights she sells to the amount of money she makes. They also want what they’re calling “a non-compete” clause.

In reality, it’s a “do-not-do-business-without-our-permission” clause.

I first wrote about this in 2011. Then I revised the piece for 2013. And now, well, things are much worse than they were five years ago for any writer who wants to become traditionally published.

I’m going to be as blunt as I can here.

If you sign any version of a non-compete clause, you will never be a full-time professional writer. Writing will not be your career. Something else will, and you will write on the side for the rest of your life.

Got that?

Can I be any clearer?

In the past five years, publishers have gotten draconian about the non-compete clause—and they’ve also gotten sneaky about it. Many writers have gotten wise to the non-compete clause, and refuse to sign it.

But most writers don’t realize that contracts are one long document that works as a whole, not a series of linked paragraphs. Just because you whacked one mole doesn’t mean you’ve gotten rid of the moles altogether.

. . . .

Around 2012, publishers started requiring non-compete clauses in almost all of their contracts, and are making those clauses a deal breaker from the publisher’s side. In other words, the publisher will cancel the deal if you do not sign a non-compete. The choice you are given is this: either you let the publisher control your entire career just because you sold that publisher one book for $5000 or you walk.

If that’s the choice you’re given, walk. Hell, run.

You have other options now. You can go to a different traditional publisher if you want. You can publish that work yourself.

You’re even better off putting that book in a drawer and not mailing to anyone than you are signing that clause.

Got it?

Because the moment you sign that clause, you give over your entire career to a corporation that cares nothing for you. Even if the clause does not hold up in court (and quite honestly, I don’t think the clause can hold up but I am not an attorney), you’d have to spend years not writing and litigating to prove me right.

. . . .

I know of at least two mystery writers who need their publisher’s permission to put up a blog post. I know of several more who have had to get a document granting them blanket permission from their fiction publisher to write nonfiction.

. . . .

Your current publisher might not enforce that clause; the publisher/business your current publisher sells out to might enforce the clause, and make you pay damages for anything you’ve previously published after you signed the contract (and ignored the clause).

Worst case, right? Yes, it is. But before you sign a contract—any contract—, you must imagine the worst-case scenario. The contract you negotiate should protect you from bad things, but you have to realize how bad those things can actually be.

. . . .

If your publisher refuses to remove language like this from your contract and you still sign it, you will have no one to blame but yourself for your tanking writing career. Because you put your signature on a legal document giving someone else control of your output.

Link to the rest at Kristine Kathryn Rusch

Here’s a link to Kris Rusch’s books. If you like an author’s post, you can show your appreciation by checking out their books.

What’s Driving Self-Publishing? “Company Policy.”

14 May 2016

From The Zack Company (a literary agency):

While self-publishing experienced huge growth driven by authors who could not get publishers to pay attention to them and agree to publish their books, there are now very good authors—even authors who have deals with major publishers—getting into the self-publishing game. Why? Two words: “company policy.” And, no, I don’t mean banning casual Fridays. If only. I mean insisting on certain rights or royalty rates and refusing to negotiate on those rights or rates.

I have repeatedly been informed by publishers that they must have audio rights and that there will be no offer without the inclusion of audio rights. I have also been informed that they must have World English rights or even World rights, or they will not make an offer. This is not about negotiating the best package of rights given the advance; these are firm take-it-or-leave-it positions. Yet, in most cases, the editors have not even yet read the book!

Whenever I make a submission, I specify the rights I’m offering. And what I offer US publishers is the United States, Canada, and the non-exclusive Open market, excluding Audio, Film, TV, Graphic Novel, Comic Book, and other traditionally retained rights.

All too often, the editors respond by saying, “We appreciate your position, but it’s company policy.” Really? Company policy to withhold an offer or break off a negotiation over rights the house may or may not exercise? Company policy to alienate the author you want to do business with by drawing a line in the sand not after a series of offers and counter-offers, but at the very start? Seems like a terrible way to start a relationship.

. . . .

Authors should feel excited about getting a publishing deal. Not as though they just agreed to an arranged marriage in which the terms were dictated to them. The vast number of authors who get publishing contracts do not get them after an auction or bidding war. Most are patiently waiting for editors to get to their manuscripts and make an offer. That doesn’t mean the offer won’t be for good money from a good publisher. But when the offer comes and it ignores that certain rights were on the table or it takes the position that getting World rights including Audio is company policy and those things are not negotiable, I think most authors end up feeling boxed in and bullied into giving up rights they would otherwise have hoped to license for additional advances and income elsewhere. Perhaps we should just be grateful that getting movie rights has not become “company policy” anywhere . . . yet.

And I understand authors can always walk away, but we both know that it’s not a realistic move.

Link to the rest at The Zack Company and thanks to Joseph for the tip.

Know Your Rights

23 April 2016

From Kristine Kathryn Rusch:

I recently got an email that sent a chill through me. It was a newsletter from a traditional publishing organization. This organization is geared toward publishers and editors, not toward writers.

The newsletter was essentially an ad for an upcoming seminar that will teach publishers to understand intellectual property and expand their rights business.

Why did this send a chill through me? Because the one thing that has protected writers who signed bad contracts is the fact that their traditional publishers have no idea how to exploit the rights they licensed.

. . . .

[I]n short, most publishers ask for more than they have ever used in the past. Publishers have been very short sighted in how they published books.

. . . .

Ten years ago, it was relatively easy to get the rights reverted on a book like that. Essentially both parties agreed that the terms of the contract had been met, that the parties no longer had need of the relationship, and so they severed their business relationship.

It wasn’t easy-peasy, but it wasn’t hard either. It usually took a letter or two.

By 2005, however, most agents refused to write that letter which severed the contract. The reason was simple from the agent’s perspective. Many, many, many agents used a combination of their agency agreement and a clause in the writer’s book contract to define their relationship with the writer, and determine who controlled the marketing and finances of that book.

It wasn’t in the agent’s best interest to cancel the contract. In fact, the longer the contract existed, the better it was for the agent.

Writers with agents would have to write those letters themselves—and then, publishers would often contact the agent to find out why the agent was “letting” the writer do this.

. . . .

In the last year or so, I’ve been hearing from writers who say it’s almost impossible to get their rights reverted. The publishers want to hold onto those rights as long as possible.

The main reason for this has nothing to do with reprinting the book or keeping the book in the marketplace. It has to do with the changes in accounting that have occurred in the big traditional publishing companies.

The Big 5 (4? 3? Whatever. Jeez.) are now part of international conglomerates. Those conglomerates understand that intellectual property has as much value or more value than the buildings and land that the conglomerates use to house their businesses.

Those conglomerates put all of the intellectual property on their account books as an asset. So your novel—even if it’s more or less out of print (or has a $19.99 ebook like my novel Fantasy Life)—has a value assigned to it that reflects not only its earnings right now, but its potential earnings in the future.

The command came down from on high that publishers should retain the assets as best as possible. (I’m pretty sure some of these publishing companies were purchased for their intellectual property assets, not because of their bottom lines. I have no interest in proving that, though.)

So, publishers have kept the assets, doing the minimum to retain the rights to them. But they really haven’t maximized their profits.

. . . .

In practice, publishers have started to claim rights they never had. They’re interpreting the contract terms for something negotiated in 1997 by 2016 standards, and finding ways not to pay for those uses.

Big corporations are all about profit for the corporation. The best way to maximize profit is to lower expenses.

That’s why, after these big companies merge, you see layoffs a year or so later. That gives the new company time to define itself, find employees with overlapping duties, and streamline production.

Once the layoffs are over, once the agreements with the subcontractors (like printers and distributors) end or get renegotiated, the corporations look around for other ways to cut expenses.

The easiest way is to cut the payments to the suppliers—the writers.

. . . .

Just be aware that publishers often cut payments, and they use the contract as their guide. Not necessarily the contract negotiated in good faith with a corporate entity long merged into five other corporate entities, but the corporate entity that exists now.

Link to the rest at Kristine Kathryn Rusch and thanks to Bruce for the tip.

Here’s a link to Kris Rusch’s books. If you like an author’s post, you can show your appreciation by checking out their books.

As usual, Kris does an excellent job of talking about the business/legal aspects of being a successful professional writer.

PG would like to talk a bit about authors making a decision to sign a publishing contract with a particular publisher or editor.

Isn’t that a huge reason why most authors sign a publishing contract? RomancesRUs is the hottest publisher around and some of their authors are New York Times Bestsellers. And Leticia is the best romance editor who ever walked the earth plus she is so nice on the phone. (ditto for SciFiRUs, etc.)

The idea that no one will remember RomancesRUs in ten years and Leticia will be fired in six months doesn’t enter most authors’ calculations.

It is the nature of declining businesses to attempt to consolidate their way to survival. That’s what’s been happening in big and small publishing for awhile and what will continue to happen.

Many authors sign with a publisher because of that publisher’s reputation for quality books and successful authors. Some authors will sign because they’ll be working with an editor with a great reputation for excellence and success, the kind of editor that bestselling writers mention in interviews.

Similar thinking goes into an author’s decision to sign with a star agent, one with many happy authors who say nice things about the agent’s work.

These would be good business reasons to sign a contract that lasted for five years.

However, current reputations and past successes are a terrible reason to sign a contract that will tie up rights to an author’s books for the full term of the copyright. As a reminder, in the US, copyrights last for as long as the author lives plus 70 years.

In a successful business, management can last for a long time and often the original management hires new managers with similar business acumen and passes down the business principles that lead to that success through the hierarchy. Such businesses can work their way into long-term success.

When a business is declining, especially when it is part of a declining industry, management turnover and ownership changes become near-constants. Yesterday’s management practices are no longer today’s management practices. Some investors make a lot of money by acquiring problem businesses, cutting costs to the bone, then harvesting profits (pulling cash out the business) or finding someone else to buy the business because its financial statements now look better.

Traditional publishing is in decline. How long the decline might last is speculative. However, the words of Ernest Hemingway are instructive. “How did you go bankrupt? Two ways. Gradually, then suddenly.”

The Securities and Exchange Commission requires mutual funds to warn their investors that “Past performance is not a predictor of future results.”

Of course, an investor who bought into a mutual fund can sell his/her shares and have nothing further to do with that fund and its managers. A hedge fund that purchased a publisher can sell the publisher and be done with it. Since no US state permits life-time employment contracts, a publishing executive or editor can either quit immediately or wait a couple of years, then bail out on a failing publisher.

Only the authors who signed contracts that last for the full term of the copyright are tied to whatever corporate entity once called itself a publisher, but now is a hedge fund asset, for the rest of their lives plus 70 years.

(PG will note that a provision in US Copyright Law permits the creator of a copyrighted work or his/her heirs to terminate a contract 35 years after publication or 40 years after the contract was signed, but it doesn’t happen automatically and 35/40 years is also way too long. PG won’t get into the technicalities of this part of the law.)

“But it’s a contract for only one book,” an author might say. PG won’t take more space to discuss unfair non-compete clauses, option clauses, etc., can undercut the excuse that it’s only one book. Such clauses can affect a whole bunch of books.

Under current contract practices, the author is the only person who has to think in the long term while everyone else in the publishing business is focused on the short term.

Publishing contracts need to include provisions that end the contracts after a few years so the author can have the same flexibility as everyone else involved with the author’s books.

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