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Authors Guild Says Cengage Failed to Renegotiate Contracts

26 August 2019

From Publishing Perspectives:

The Authors Guild in New York has today (August 23) issued a statement on the class action lawsuit filed against Cengage by a group of writers for the service.

As Publishing Perspectives readers will recall from our mention of this case on August 19 that this is the second time writers have challenged the Cengage Unlimited subscription offer for students and educators, alleging that it violates the author agreement the company has had with its writers.

The new case, as charges that Cengage’s switch to the subscription model changes the royalty formula by which authors were on contract to be paid.

As the legal team at the guild is describing it, the authors now are in court against Cengage “for violating the terms of their contracts by unilaterally changing their payment structures from a traditional per-sale royalty to a relative-use share, thereby lowering their income dramatically.

. . . .

Throughout the first round of legal action, which led to a settlement in October, Cengage’s leadership, under CEO Michael E. Hansen, maintained that its writers were informed and that its development of the subscription model didn’t violate their contracts. In one interview with us, Hanson suggested that authors could well benefit in their usage-based payments as students and instructors explore more subjects and information they can find on offer.

By the end of April this year, Cengage Unlimited was announcing more than 1 million subscriptions since the launch of Unlimited in August 2018.

But a year earlier, the company had been engaged in an effort to defend the efficacy of the subscription model for authors, stating that it was “disappointed” to find some of the writers filing a complaint.

At the time, the company stated, “We have communicated clearly with our authors that the subscription service is consistent with the terms of their contracts, which we continue to honor. … Our authors, like those at our competitors, have seen declining royalties as a result of high prices that lower demand. The subscription service addresses students’ concerns and enables a more sustainable business model for the company and our authors.”

Now, the Author Guild’s legal assessment of the situation is that the change in Cengage’s approach–”to relative-use of an author’s title as compared to other titles in the same revenue pool, instead of paying the author a traditional per-sale royalty provided for in the publishing agreement”–is problematic in ways the company knows from the first court contest.

. . . .

“Rather than negotiating the terms in good faith and giving authors a chance to bargain for their fair share of digital subscription revenues, Cengage unilaterally decided what its authors’ contributions were worth. In doing so, Cengage took advantage of authors, hedging that few authors would have the resources to mount a lawsuit.”

. . . .

[I]n the fall of 2017 [Cenage CEO Michael Hansen] surprised much of the industry–and even his own sales staff, in his telling of it to Publishing Perspectives–by announcing that some 22,000 pieces of content would be made available by subscription. “I’m not in the business of getting standing ovations,” Hansen said to us at the time with a laugh. “But at this last sales conference when we announced it in Texas, the reaction was, ‘This is bloody brilliant. This solves the price objection, it just solves it.’”

. . . .

And as early as 2016, Hansen had worried aloud in making an address to Klopotek’s Publishers’ Forum in Berlin under Rüdiger Wischenbart’s direction that “We as an industry didn’t care about students.”

By that, he meant that faculty members had become the consumer-targets of the educational industry. Cengage had seen a single quarter drop of 23 percent of sales once students had rejected $150 to $200 textbooks. Facing $5.5 billion in debt, Hansen said, “was the least of our problems. We had never designed a textbook with a student sitting next to us.”

. . . .

Update, August 26: In response to Publishing Perspectives’ request, Cengage has sent this statement:

“We are disappointed to see these complaints against our efforts to improve students’ access to affordable, quality learning materials.

“Since its inception in March 2011, the MindTap learning platform has consistently helped students achieve higher retention, grades and confidence. However, despite significant investments in proven products, it became increasingly apparent that students were not able to afford them. Our authors, like those at our competitors, saw declining royalties as a result of high prices that lowered students’ demand.

“The Cengage Unlimited subscription service was created to address this longstanding problem. It also enables a more sustainable business model for the company and our authors.

“We have communicated clearly with our authors that the subscription service is consistent with the terms of their contracts, which we continue to honor. Since the service launched, we are in regular communication with them about the impact of the subscription on their royalties.

“We look forward to vigorously responding to these complaints as we remain steadfast in our belief that our industry must do more to contribute to affordable higher education.”

Link to the rest at Publishing Perspectives

Of course, it’s all about the students. Over many years, textbook publishers have reduced their prices year after year to help rein in the escalating cost of obtaining a college education and allow students to minimize the long-term burden of paying back large student loans.

From Vox:

Hannah, a senior at a private university in New York City, can’t think of a single semester when she bought all the books she needed for her classes. “Even when I was studying abroad,” she said, “there was no way for me to get through the semester without dropping $500-plus on textbooks, which I couldn’t afford.”

So she didn’t buy them. That semester, Hannah, who asked that her name be withheld due to privacy reasons, found most of the books she needed on Scribd, an e-book subscription service. “I used my free trial to do pretty much all my work for the semester and to take screenshots of things so I could access everything once the trial ended,” she said. If she couldn’t find them there, then she would do without.

Hannah’s tuition and housing is covered by scholarships, but she has to use student loans to pay for her health insurance; she pays for other necessities, including textbooks, out of pocket. In other words, her generous financial aid package isn’t enough to cover the essentials. Her situation is far from unusual: A 2014 report by the Public Interest Research Groups found that two-thirds of surveyed students had skipped buying or renting some of their required course materials because they couldn’t afford them.

Textbook publishers, for their part, have begun acknowledging that textbooks and other course materials have become so expensive that some students simply can’t afford them, even if it means their grades will suffer as a result. Publishers claim that new technologies, like digital textbooks and Netflix-style subscription services, make textbooks more affordable for all. But affordability advocates say that if anyone is to blame for the fact that textbook costs have risen more than 1,000 percent since the 1970s, it’s the publishers — and, advocates claim, these new technologies are publishers’ attempt to maintain their stranglehold on the industry while disguising it as reform.

. . . .

Some professors don’t assign textbooks at all, instead opting to fill their syllabi with a combination of journal articles and other texts, some of which cost money, some of which don’t. Thanks to the advent of textbooks that come bundled with online access codes — a single-use password that gives students access to supplementary materials and, in some cases, homework — other professors can rely on one textbook for almost everything.

As a general rule, though, the amount of money students are expected to spend on course materials has rapidly outpaced the rate of inflation since the ’70s. Affordability advocates point to two major factors behind this: a lack of competition in the higher education publishing industry, and the fact that professors, not students, ultimately decide which texts get assigned. Four major publishers — Pearson, Cengage, Wiley, and McGraw-Hill — control more than 80 percent of the market, according to a 2016 PIRG report. Major publishers also tend to “avoid publishing books in subject areas where their competitors have found success,” which ends up limiting professors’ options for what to assign.

Digital textbooks, especially those that come with access codes, have also contributed to rising costs. When students buy a textbook, they aren’t just paying for the binding and the pages; they’re paying for the research, editing, production, and distribution of the book. And when that book comes with an access code, they’re also paying for the development of — and, as the name suggests, for access to — all kinds of supplementary materials, from lessons to videos to homework assignments.

Access codes, the PIRG report notes, also undercut the resale market. Since the codes can only be used once, the books are essentially worthless without them. They can also prevent students from turning to other cost-saving measures like sharing a book with a classmate.

Kaitlyn Vitez, the higher education campaign director at PIRG, told me she’s met students who couldn’t afford to buy books that come with access codes, even if they knew their grades would suffer. “One student at the University of Maryland had to get a $100 access code to do her homework and couldn’t afford it, and that was 20 percent of her grade,” Vitez said. “So she calculated what grade she would have to get on everything else to make up for not being able to do her homework.”

“On a fundamental level,” Vitez said, “you shouldn’t have to pay to do homework for a class you already paid tuition for. You shouldn’t have to pay to participate.”

. . . .

Student advocates don’t expect the move toward truly affordable course materials to be led by publishers. Instead, they’re encouraging professors to adopt — and help develop — free, open source textbooks. Kharl Reynado, a senior at the University of Connecticut and the leader of PIRG’s affordable textbooks campaign, told me she’s had to pay “upward of $500” for books and access codes and has dropped courses because she couldn’t afford the costs. “I’ve had friends who spend entire paychecks on just their textbook costs in the beginning of the semester and had little money left over to cover food, gas, and sometimes, in extreme cases, rent because of it,” she said.

“We work closely with students and campus partners such as the UConn Library to promote open textbooks to different professors and educate students on their options,” she added.

The real challenge is getting professors, who are ultimately responsible for which books get assigned, to adopt the free options. Professors don’t assign books by major publishers or books with access codes because they want students to suffer — they do it because, more often than not, it’s easier.

As Vitez noted, an increasing number of universities are replacing full-time, tenured staff with adjunct professors. Adjuncts, many of whom are graduate students, are paid by the course, typically don’t receive benefits, and occasionally find out they’re teaching a class a few weeks before the semester begins. In other words, they don’t necessarily have the time or resources to spend the summer developing a lesson plan or to work alongside librarians to find quality materials that won’t come at a high cost to students.

That’s where books with access codes come in. These books come loaded with vetted, preselected supplementary material and homework assignments that can be graded online. They require a much smaller time investment from underpaid instructors.

Link to the rest at Vox

Contracts, Ebook Subscriptions, Ebooks in Education, Legal Stuff, Non-Fiction