Ebook Subscriptions

Authors Guild Says Cengage Failed to Renegotiate Contracts

26 August 2019
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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

Pearson Launches Digital-First Textbook Strategy

17 July 2019

From Copyright and Technology:

Pearson, the world’s largest educational publisher, announced on Tuesday that it is transitioning to a digital-first model for textbook publishing, moving away from the print-edition-based model that has been the foundation of higher education publishing for centuries. In its press release, the company announced that it will move almost all of its 1500 U.S. textbook titles to continuously-updated digital-first content and will only make print textbooks available on a rental basis.

This is a major turning point in higher ed publishing. Pearson’s move contrasts with that of its rival Cengage, which launched a subscription model called Cengage Unlimited last year. Whereas Cengage is offering access to all e-textbooks from its catalog to students at a rate of $120 per semester or $180 per year, Pearson is renting them individually for an average price of $40. Both Pearson and Cengage will make print textbooks available as rentals only. The e-textbook rental model has been around for several years through providers such as eFollett and VitalSource (formerly CourseSmart, a joint venture of Pearson and other higher ed publishers).

. . . .

Yet the switch to digital-first has a whole host of implications beyond student access or pricing models that indicate how big a deal this is. Higher ed publishers have been talking about going digital-first for many years, and there are several reasons why none of them — at least none of the major publishers — have done it until now.

First are all the implications of moving from one edition at a time to a program of continuous updates for digital textbooks. This requires major changes to editorial processes and technologies, and it requires that textbook authors — typically full-time faculty members at universities — commit to continuous updates to their material rather than committing only to one edition of a book at a time. Pearson has been putting in place the editorial infrastructure and processes required to do this for several years now and has been leading the way in setting standards for online educational content such as EDUPUB.

Then there are all the rights clearance challenges. Textbook publishers typically license thousands of items of content for use in each of their textbooks — illustrations, photographs, quotations, tables, etc. — and do so for discrete editions of those textbooks. In many cases, those rights have to be re-cleared for continuously-updated digital textbooks.

. . . .

The impetus for Pearson’s announcement is very simple: higher ed publishing is (finally?) in enough pain to make these disruptive transitions necessary. Publishers have been competing with a combination of used textbooks, third-party textbook rental services such as Chegg, and course instructors using online materials that are free and potentially more up-to-date than material that had to be committed to print-oriented textbooks months or years in advance.

Publishers’ strategy in coping with these forces over the past several years has been to keep raising textbook prices. But as prices go further and further into the stratosphere and backlash increases, that strategy has become self-defeating; Pearson’s revenues are expected to fall up to 5% in the U.S. this year.

. . . .

The other important implication of digital-first is that it can enable publishers to build their own distribution channels to students, bypassing college bookstores as well as third party distributors like Chegg and MBS Direct. The first evidence of this happening for e-textbooks was in 2014, when the four major publishers involved in the CourseSmart joint venture sold it off to VitalSource, a unit of the publishing services giant Ingram Content Group. The deal involved moving CourseSmart e-textbooks to VitalSource’s platform, and the publishers decided not to make all of their titles available on a platform they didn’t own. More recently, Pearson and McGraw-Hill have been working towards distribution channel control for print textbooks through something called consignment rentals. And certainly Cengage Unlimited is a further move towards distribution channel control by publishers.

It seems likely that Pearson will insist that students engage with its own service to obtain their course materials as part of its digital-first strategy.

Link to the rest at Copyright and Technology

PG says this is entirely about money – killing the used textbook market once and for all plus taking all the markup generated by sales of new and used titles from college bookstore and redirecting that money to the publisher.

PG hopes college and university departments are motivated to create their own course materials and distribute those to their students at a reasonable price. This could benefit individual professors with an additional income stream and help the students avoid piling on more and more student loans to acquire textbooks they won’t be able to keep or sell after the class ends at exorbitant prices.

Russian Book Market Players Explore Digital Serialization

20 June 2019
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From Publishing Perspectives:

The growing popularity of ebooks in Russia is prompting publishers to look at online serialization as an option for distribution and sales, both for complete titles and writers of works in progress.

. . . .

Russian-language ebook services are beginning to test a format new to this domestic book market, involving publishing books by chapters. This, according to comments from company representatives and industry observers.

. . . .

As Litres’ general director Sergey Anuryev has announced, the new service is known as Chernoviki—the word means “drafts”—and provides an opportunity for authors to publish books in chapters or in other increments, and to discuss the options for the development of the plot with readers.

. . . .

According to Litres officials and representatives of other Russian ebook services, online publishing is gaining popularity in Russia.

. . . .

Litnet, another Russian ebook service—which also operates in English, Spanish, and Ukrainian—has also expanded into the new format, as confirmed to Publishing Perspectives by company co-founder Sergey Grushko.

He says the first book issued by Litnet in the new format is Swiss: A Better World, written by fiction writer Roman Zlotnikov. It was given a digital-first publication as an ebook on April 23, and hasn’t been published in print until this month.

The spokesman for Vladimir Medinsky, Russia’s minister of science and culture, tells Publishing Perspectives that Medinsky sees a growing audience for digital-first publishing in fantasy, adventure literature, women’s novels, and comics.

. . . .

One thing Grushko likes about serialization, he says, is that it’s less vulnerable to piracy, presumably since until an entire book’s increments have been published, the work is incomplete online. He says he also thinks that serialization can lead to a big boost for publishers in the first year of sales, as users pay to read sections of the work.

Link to the rest at Publishing Perspectives

A Cengage Buffet

6 December 2017

From Inside Higher Ed:

Cengage, the publisher and technology company, is introducing a subscription service that will enable students to access Cengage’s entire digital portfolio for one set price, no matter how many products they use.

The new offer, called Cengage Unlimited, will give students access to more than 20,000 Cengage products across 70 disciplines and 675 course areas for $119.99 a semester. For 12 months’ access the price is $179.99, and for two years the price is $239.99. For students taking three or four courses a semester with assigned course materials from Cengage, the subscription could offer hundreds of dollars of savings a year, versus buying or renting the products individually.

Cengage described the introduction of the Netflix-style subscription service in a press release as a “bold move”; the company has set a strategic goal of being 90 percent digital by 2019. The new strategy is a notable departure from the traditional publishing sales model, which historically has relied on the sale of individual print textbooks. Print sales have been heavily disrupted, however, by the introduction of rental programs, piracy, the sale of secondhand books and the failure by some students to purchase textbooks at all due to prohibitively high costs.

Link to the rest at Inside Higher Ed and thanks to Elizabeth for the tip.

Why O’Reilly Media is no longer selling books online

21 August 2017

From The Bookseller:

We recently announced that O’Reilly is no longer selling books and videos on shop.oreilly.com. We heard from some of our customers that they were unhappy about that decision, especially because no other sellers offer DRM-free e-books in multiple digital formats. They’re right about that, but there’s more to the story. And since we’ve always been transparent with our customers, here’s some additional context about why we made those recent changes.

O’Reilly has always been a privately held, self-funded company, and it’s a distinction we wear with pride. We don’t have any investors but our customers, who fund us by buying our products and services. That keeps us attuned to what the market is really telling us. But it also means we have to make decisions as we grow and change while living within our means—decisions about investments, about markets, and about our customers and employees.

O’Reilly started out as a book publishing company. I remember with pride joining the “animal” brand. But from the beginning, I knew that our core competency was not the actual books we printed but rather the knowledge of the network of authors and speakers who agreed to work with us to produce important and relevant content. That talent developed content that worked its way into books. But we always recognized that there were other ways to spread that knowledge, which led us to add a conference business, and a digital subscription business.

. . . .

Access to new subscription customers, both individuals and businesses, gave us even greater visibility into the needs of our users, which also took us into topic areas beyond technology. At the same time, digital enabled new learning modalities such as video and interactive content.

. . . .

Meanwhile, sales of books have declined consistently year after year since 2000! E-books expanded the market for a while, and direct distribution from oreilly.com was a great way to make them widely available while traditional retailers other than Amazon were slow to embrace that market. But starting a few years ago, e-book sales too started to flatten, and then to fall. Running oreilly.com as a distribution platform was effective, but also costly. It required a dedicated investment in e-commerce software, staff, marketing, and so on. It also required us to choose whether to direct incoming customers to the declining e-commerce business to buy standalone units, or to our growing subscription business.

As the slowdown accelerated, the contrast between the rapid growth of the subscription business and the interest in learning in new ways became ever more striking. Now, don’t get me wrong, we believe in books, and the effectiveness of text as a tool for sharing knowledge, but the business model that had given us such a great start three decades ago has changed deeply. Amazon is pretty much the only retailer still supporting computer books, and the unit sales are a small fraction of what they were in the past. We came up with creative ways to keep publishing books, supplementing our “definitive” books with smaller reports that we give away for free download, or as sponsored products, to capture either niche technologies or new approaches to learning. But all of this new creation meant we had to grow while balancing our total investment spending.

. . . .

So we had to make a tough decision, and we chose to support the side of the business that has the most customers, that is growing the fastest, and that supports all of the learning modalities that customers are demanding.

But we are also sensitive to those who still prefer to learn from and to own books. We are still publishing books, and you can buy them directly, either on paper or in a variety of electronic formats from a number of resellers, just not directly from us. We’ve closed our online store, not our publishing operation! We still support those who prefer the model of ownership to subscription.

Link to the rest at The Bookseller

How Do Kindle Unlimited Subscribers Behave (And How Does it Impact Authors)?

14 April 2017

From Written Word Media:

Kindle Unlimited has revolutionized the eBook experience for both readers and authors. Last year we took a look at how Kindle Unlimited affects authors and publishers. This year we want to take a closer look at the habits of KU readers compared to non-KU readers, and what that means for authors whose titles are enrolled in KU. We surveyed almost 1,000 readers and analyzed the results to find out what the takeaways are for the author community.

. . . .

The service currently costs $9.99/ month, and there are over 1.4 million titles available to enjoy. Most of the books available are either classics or titles published through Amazon imprints and Kindle Direct Publishing. This means that if, as a reader, you most frequently read titles by popular, best-selling authors, you may not find the names you recognize available in the KU library. To date, none of the major publishers have opted to make their titles available through KU.

KU readers can read as many books as they want per month. The one limitation is that readers can only have 10 Kindle Unlimited books downloaded to their devices at a time. This means that readers can’t “hoard” books the way that they may normally feel inclined to.

. . . .

When you divide the global fund by the payout by KENP payout, you get the total number of pages read in KU for a given month.

For this exercise let’s use the data from February 2017. The Fund was $16.8 million and the payout per KENP was about $0.005.

KDP Global Fund / KENP Payout = Total number of Pages read in the month on KU

16,800,000 / 0.005 = 3,360,000,000

That’s over 3 billion pages read! If we assume the average novel is 250 pages, we can back into the number of novels read: 3,360,000,000 divided by 250 gives you 12,440,000 average length novels read through KU subscriptions per month.

Based on our survey data, KU subscribers read about 5 books per month. We can use this data to estimate a subscriber count for KU.

Number of KU Novels Read / Number of Novels read by one Subscriber = Total Number of Subscribers

12,440,000 / 5 = 2,488,000 KU subscribers

2.5 million readers in KU is a lot of readers, and because our calculations are based on pages read it’s likely that the 2.5 Million number represents the active readers enrolled in KU. We would guess there are even more inactive users who are subscribed but are not reading. There are limitations with our data, and we’re making quite a few educated assumptions but we think it’s safe to assume that there at least 3 million readers in Amazon’s Kindle Unlimited.

. . . .

Over 71% of KU subscribers read 5 books per month or more. Compare that to non-KU readers, where only 57% of readers read 5 books per month or more. That makes sense since KU subscribers pay $9.99 per month for the service, there is an incentive to get your money’s worth. Also, people who read a lot of books will get the most value from KU as they were likely spending more than $9.99 per month purchasing books. 20% of our KU subscriber sample said they read more than 20 books per month!

Link to the rest at Written Word Media and thanks to Lucy for the tip.

Rakuten Kobo and bol.com launch ‘Kobo Plus’

28 February 2017

From the Kobo Newsroom:

Booklovers from The Netherlands and Belgium will never run out of things to read thanks to Kobo Plus. The new subscription service jointly created by Rakuten Kobo, leader in the digital eReading space, and premier online Dutch and Belgian retailer bol.com, offers readers the largest all-you-can-read selection of digital books in The Netherlands and Belgium, with titles ranging from new releases and bestsellers to classics and old favourites, including both Dutch and international titles. Customers can try the eBook subscription service free of charge for 30 days.

Digital reading enables people to carry their entire libraries with them wherever they go— gone are the days of having to choose which book to take on vacation or on the daily commute. In 2014, Kobo and bol.com partnered together, making it possible to access thousands of eBooks anywhere, on any device. The Kobo Plus subscription service is the next step in making the largest selection of books even more accessible, offering more than 40,000 titles—16,000 in the Dutch language—with considerable growth expected in the coming months.

. . . .

Kobo Plus was developed in close collaboration with leading Dutch publishers. The subscription service operates on a fair-share model, with payouts funded by subscription revenues, which enables a self-sustaining service built for the long-term—encouraging publishers to offer a wide selection of books from all genres. Kobo Plus was designed with the booklover in mind, and provides book recommendations tailored to individual readers’ interests.

Patrick Swart, CEO of Dutch publisher WPG Uitgevers, says: “As with any new business model, it will take some time for those involved to become accustomed with this new way of delivering books to readers. For publishers, a new business model entails a different approach to marketing books and for our authors it means they get compensated in a different way.

Link to the rest at Kobo Newsroom and thanks to Melissa for the tip.

PG is more than a little suspicious about authors being “compensated in a different way.”