‘By Forcing The Issue In Book Contracts’
The US Authors Guild is making common cause this month with its counterparts across the Atlantic, the Society of Authors. These are lead advocacy bodies for the creative communities of the world’s two largest trade-publishing markets. And the Guild and the Society are speaking with unusual harmony, candor, and urgency about how authors are paid. As the Guild puts it:
Our sister organization in the UK, the Society of Authors, has gone so far as to propose legislation holding both publishers and sublicensees to “regular reporting obligations…detailing all exploitations undertaken and revenues yielded.” It’s time for royalty accounting to move into the 21st century. The only way that will happen is by forcing the issue in book contracts.
In an industry that tends to dislike open dissent, some will hear these as fighting words. They reflect a rising presence not only of the typically outspoken indie sector of professional book writers but also of the less frequently heard traditionally publishing authors’ bloc.
The Guild writes:
The publishing contract dictates the terms of royalty accounting, and as usual, those terms are mired in the practices of a bygone age. For openers, most publishers pay royalties twice a year on income that they may have received as long as nine months before. In an era when financial records were kept by hand in ink, that might have made some sense; today, when computers account for money and it can be transferred electronically to authors’ accounts, it makes none.
And the Society calls for:
Legislation to enforce fairer and clearer contracts including… proper accounting clauses…Revenues and profit margins of digital content providers must be known to adequately share the value generated by those services along the value chain.
The Society’s effort based in London predates the new administration of the Guild. Its evocation of the challenges for authors in publishing contracts is couched in a document called Unfair Contracts: A Blueprint For Change from February 2014. In its more recent embrace of the so-called “CREATOR contracts” effort, we read a simple, forthright call for:
Fair, understandable and proper accounting clauses.
‘Individual Creators Are At An Inherent Disadvantage’
Even a quick look at the objections being lodged by these advocacy organizations might surprise laypeople. The Guild’s approach led by its new executive director Mary Rasenberger recognizes that. As she mentioned earlier this month at the Novelists Inc. conference in St. Pete Beach, her organization’s Fair Contract Initiative is, in no small part, a public relations campaign aimed at calling attention to contractual traditions that have been evolved over decades.
Do readers know, for example, that some authors whose names they revere—whose books inspire the films and television work they love—traditionally haven’t been able to understand their own “royalty” statements from their publishers with any assurance that those documents were accurate?
Ask any literary agent you meet. Only in very recent years have publishers begun offering, in some cases, author dashboards that display sales figures and other information about how their books are faring in the marketplace. So common is the semiannual author payment in traditional publishing that Amazon Publishing—the trade wing, not the self-publishing platform—has made a selling point of offering “some things authors might not expect, including monthly royalty payments, access to daily sales reports.”
The Authors Guild white paper on ‘Publishers’ Payment and Accounting Practices’
And the Guild and the Society are going about exposing details of what they characterize as unfair and inadequate payment practices that they say damage authors’ ability to make a living and take advantage of authors’ comparatively weak stance in the face of a corporate publishing infrastructure.
Nicola Solomon, who heads the Society of Authors in London, has written:
Authors are not in a strong negotiating position. Publishers are often large multinationals while authors typically work alone. Especially at the start of their careers they may have little or no advice and are thrilled to be offered publishing contracts. Creators frequently need to negotiate with monopolies or with dominant players in highly specialised markets, such as scientific publishers. Individual creators are therefore at an inherent disadvantage when negotiating the terms of their contracts.
Solomon is one of the lead speakers I have invited to address Author Day on the 30th of November at the conference center of London’s Royal College of General Practioners, 30 Euston Square. Author Day is The Bookseller’s inaugural issues-conference about writers. It’s being staged as the opening to The FutureBook 2015 Week. Because Author Day is designed as an organized discussion among independent authors, trade authors, and members of the established publishing community, issues of author-payment accounting are likely to be front-of-mind for many delegates.
And in what has become a slowly building picture of alleged inequity, the Authors Guild’s Fair Contract Initiative continues to add specific-issue white papers to its project, a widening and informative litany of the sometimes surprising conditions under which authors are working and have worked for decades.
The Guild’s latest initiative paper, Publishers’ Payment and Accounting Practices Need To Keep Up With The Times, is sure to hit many raw nerves in the writerly community.
The last thing some publishing houses want to hear about is the influence that Seattle may have had on the proud industry it has disrupted. But there could be no more direct demonstration of that influence than when the Guild, in its paper, demands prompt payments for authors:
We understand that publishers themselves often have to wait months for payment from wholesalers and retailers, but in a world where Amazon manages to pay its Kindle Direct authors monthly, there’s no reason why traditional publishers can’t tighten up the turn-around time and pay out to their authors more quickly. We believe that fair book contracts should specify quarterly payments of income received by the publisher no more than three months in the past.
Angie Hodapp, Nelson Literary Agency
And the Guild is just warming up when it comes to “the money authors’ books have earned”:
The delay in payments is bad enough. But in the real world, most authors don’t even receive the untimely payments they expect of the money their books have earned. The reason is the pernicious “reasonable reserve for returns” that virtually all publishers hold back from disbursements.
The rationale for a reserve for returns is that some of the books the publisher has shipped to booksellers may end up coming back to its warehouses for refunds. But if the publisher is the sole judge of what’s “reasonable,” it may continue withholding funds long after there’s any possibility of returns…Unlimited reserves for returns allow publishers to hold onto authors’ earnings and manipulate payments forever.
And when those infamously incomprehensible royalty statements arrive, who has had oversight of them to be sure they’re accurate? Well, according to what’s required in most contracts, says the Guild…no one.
Another way to help make sure publishers don’t make mistakes is to include an audit clause in the contract. Without an audit clause, an author’s only recourse if he or she suspects a publisher of improperly accounting for royalties is to bring a lawsuit—an expensive and unpleasant way to settle differences.
Publishers will often agree to an audit clause if the author pushes for one. But too many standard audit clauses make the author pick up the check for the audit even if the publisher is found to be at fault. That’s unfair. A fair clause should stipulate that if an error of 5% or greater is found in the author’s favor, the publisher must pay the audit costs in addition to the money it owes the author, preferably with proper interest on the amount in question.
Royalty Statements, Royal Pains: An ‘Impenetrable Jumble’
One of the nation’s leaders right now in exposing and discussing royalty-reporting inadequacies is literary agent Kristin Nelson, founder of Nelson Literary based in Denver.
This summer, Nelson posted an article headlined Like Finding Loose Change In The Sofa—Kind Of, in which she wrote of requisitioning a royalty statement from an Australian house for a client because:
Oddly, there were no ebook sales listed anywhere on the statement. Dating back to 2013. Not a single ebook sale in the last two years is a bit hard to believe. So we pinged the publisher.
That publisher will remember the ping. Nelson writes:
Sure enough, the ebook ISBN wasn’t linked to this title in their accounting system. It was there but floating out in the ether with no title to attach to. Once it was appropriately linked, voila, almost $1,000.00 was owed to the author.
Nelson’s agency makes a specialty of auditing its authors’ statements.
In another post by Nelson Agency contracts and royalties manager Angie Hodapp—Authors, Do You Know Where Your Money Is?—Hodapp writes:
Every six months, you get an envelope from your agent. You tear it open, take out the enclosed check and royalty statement, and glance at the numbers on both. You shrug and mutter, “Guess that looks about right.” Then you toss the statement on your to-be-filed pile at the back of your closet, endorse the check, and head to the bank.
The folly of not really knowing what’s in one of those statements, not knowing what’s been added or left out, Hodapp demonstrates, can be costly. She offers precise examples of errors the Nelson team has uncovered. One of them:
Unpaid royalties of approximately $5,000 because the publisher had applied a $10,000 advance against the author’s earnings when the actual contracted and paid advance had been only $5,000. This means the author had actually earned out—though the statement said otherwise—and was now owed nearly $5,000 in earned royalties.
It’s important to note that agents who talk about these problems rarely say they see malice at work in the publishing house accounting departments. Here’s Hodapp on that:
Does this mean that publishers are nefarious, knowingly cheating authors out of a few bucks here and there to improve their own bottom lines? In our experience, no. (In fact, not all errors we find are made in the publisher’s favor!) Every error we’ve called to a publisher’s attention has immediately resulted in the issuing of a corrected statement and, when called for, a check covering the difference.
The problem is that in most cases, no oversight is catching these problems. You begin to wonder if publishers can read their own royalty statements.
And more to the point, you begin to wonder how, even over the creep of time and tradition, we could have come to a point at which authors are typically paid in such an industry-idiosyncratic way, at such odd intervals, with so little verification of what’s owed and what’s paid.
You can bet that most readers would be shocked if they learned how little their favorite authors make and in what odd and unprotected procedures they’re paid.
Guild-ing No Lilies
The Guild’s paper speaks quite forcefully to how crippling these traditions of reportage are.
As a reader, have you ever considered that your favorite author may not be told how many copies of his or her book have been sold? Or where? Or when? By which store? Here’s the Guild on “the impenetrable jumble of information contained in the royalty statements themselves”:
Despite, or perhaps because of, computer technology, royalty statements have become either woefully threadbare—where the publisher lumps all sales together and the author is forced to “trust” the numbers—or so detailed that a CPA specializing in royalty statements is needed to decipher them.
And since publishing contracts typically don’t require more than generalities in royalty statements, publishers are happy to comply. Essential information, such as how many copies were printed and which books were sold for how much, is often missing. This means that there is no way to know if the statement is correct unless the author conducts an audit.
Kristin Nelson, Nelson Literary Agency
What should your favorite author be able to find out from a royalty statement? Here’s the Guild’s list:
- The number of [book] copies sold and returned;
- The list price;
- The net price;
- The royalty rate;
- The amount of royalties accumulated;
- The amount of reserve for returns withheld;
- The gross amount received by the publisher pursuant to each license along with copies of statements received by the publisher from its licensees during the accounting period;
- Itemized deductions;
- The number of copies printed, bound, and given away; and
- The number of salable copies on hand.
And no, the Guild isn’t finished yet, writing:
Authors can no longer tolerate being at the mercy of the publisher to accurately and honestly report the actual numbers behind these revenue streams as opposed to just some bottom-line figure computed in secret; it’s essential to know how many people are accessing a work and the income attributable to it in clear and precise terms.
What do you think? If you agree that these things need changing, what do you think the Authors Guild and Society of Authors will need to do to see them changed?