Royalties, Oh Royalties, Wherefore Art My Royalties?

“It is our hope that Hachette, in light of the loyalty its authors have shown throughout this debacle, takes this opportunity to revisit its standard e-book royalty rate of 25 percent of the publisher’s net profits.” Roxana Robinson, president of the Authors Guild

So here we are. Hachette has a deal. Simon & Schuster has a deal. They have the pricing responsibility they wanted. Amazon has its “specific financial incentives” to compel them to use that power to price lower. Now we’ll get to see just how badly publishers want to institute a price-based windowing system for new releases (I’m setting the over/under on new release ebook prices at $16.99. And I’m taking the over.) But what did writers get out of this? I’m glad you (rhetorically) asked, because nobody else seems to be.

I’ve read all the coverage I can find and, as far as I can tell, the sum total of what writers got from this is that Hachette writers will have preorders reinstated and be back on two-day shipping. That’s about it. Oh yeah, there’s all the sales they lost during the past seven months. They’ve got that, too. There’s no Macmillan-like pool of recompense for those folks; no extra royalty payout for the damage done to their business. And they’ve got the hit yet to come from all those lost sales when their next contract rolls around. But at least, like the Robinson quote above, they’ve got hope that possibly Hachette (and others) maybe might take some time to reconsider their ebook royalty rates, if it’s not too much trouble. Because loyalty. My dog is loyal, but if I screw with his food, he bares his teeth and growls. I don’t screw with his food. Loyalty unrespected is subservience.

The blatantly obvious here is that anyone who thought writers would get anything but screwed on this was deluded. Especially after their authors interjected themselves into it in, bluntly, the stupidest possible way. They threw all their weight behind one side, not coincidentally, the side that needed them and they had leverage with, and asked nothing in return. Now we’re told they did it out of loyalty as if that’s some kind of honorable thing and not horribly misplaced naivete. Now we’re told authors are going to try to get better terms. My thoughts on that strategy were summed up nicely:

“What opportunity would that be? The one where they’ve settled up with Amazon, already have you all under contract at that standard, and don’t need to name-drop you morons in an obviously coordinated PR assault on a rival anymore? The opportunity to do a hell of a lot more than “hope they revisit the standard” was the past seven months when Amazon had Hachette over a barrel and the other publishers were all worried they were next.”

But don’t take my word for it. Let’s see what some publishing executives have to say:

“Speaking at a Society of Authors (SoA) panel on hybrid authors, Little, Brown CEO Ursula Mackenzie defended publishers from criticism by audience members that they now only take on books that will make money.

“Every book can’t make money,” she said. “There are careers we support for years…there are many books we publish lovingly where we don’t make money.”

Mackenzie said that publishers “are not taking a disproportionate part of the profit”, and that “no one benefits if publishers go out of business.” Little, Brown has a “fair rate for our e-books,” Mackenzie said.”

Good luck parsing the logic out of that one. “We publish lots of stuff that doesn’t make money, so we can’t pay you fairly for the things that do or we’d go out of business.”

That’s a helluva sales pitch. So even if I’m succesful, I’ll still be underpaid? Where do I sign up?!? This is the ultimate conclusion of the cultural enrichment argument. They’re not regular businesses, they’re a public good. So you can’t expect to be paid like a regular business. The company has to reap most of the proceeds so they can continue to underpay you to pay for all the stuff they produce that nobody wants. It’s all bullshit, of course, and pretty blatantly so. These are all huge, multi-billion-dollar publicly traded corporations. Do you think they’re shareholders are down with pissing money away in business-threatening chunks for culture’s sake? Or are they simply feeding you a line they know plays to your sensibilities to justify squeezing suppliers (you) to maximize profits?

Think about that last part for a minute. Just the idea of paying a better royalty rate caused her to pull the going out of business card. If you can’t even consider paying me a fair (or even just slightly higher) ebook royalty without it triggering fears of going under, does that make you more or less attractive to me as an author? You’re leveraged so thinly that fair recompense to writers can threaten the very existence of your company? What’s the upside for me to sign with you? A “quality” product no one buys or a product they do buy but I don’t reap fair reward for?

Now, of course, she claims to think their ebook royalty is fair, which is the problem. I don’t really believe she thinks that but enough of you do that they can continue to get away with pushing this nonsense. Here’s another:

“Questioned on author earnings, CEO Tom Weldon said that Penguin/Random House was always looking at how much authors were being compensated, but for the moment the 25% digital royalty rate would not be changed.

“Authors are, alongside readers, the foundation of our business,” he said. “We are always, always looking at our commercial arrangements with authors to make sure they’re fair and equitable. With e-book royalties, firstly and most importantly, the business model is as clear as mud. Rather than arguing about what slice of the cake we should distribute, we need to work out how big the cake should be.”

There you go, fair and equitable and the rate would not be changed. Get a load of that last sentence. We need to work out how big the cake should be? What the hell does that even mean? Is he talking about pricing? Is it a more ominous suggestion of further attempts at limiting the ebook market itself to a certain market share? Or even more ominously, is he talking not about how big the whole cake is but deciding how big the portion of the cake is that your portion comes from? The cake is a pretty big one, dude, I think portions are an appropriate topic of discussion at the moment. Look at how he phrased that, too: “Rather than arguing about what slice of the cake we should distribute…” They’re planning on keeping the whole damn cake and then deciding what tiny sliver they can afford to slice off for you. Do you need any more evidence that they see the proceeds from your book as “their cake”? Funny how they’re not waiting to work out how big the cake should be before touting the increased profits they’re reaping from this particular literary confection. But let’s not argue about it. Then they might actually have to address the issue rather than keep enjoying all that delicious extra cake they’ve got. Did you catch him wiping the crumbs from the corner of his mouth as he said “fair and equitable”?

Even the Author Guild itself admits the publishers have no will to even consider making a change in ebook royalty rate:

“Jean Craighead George’s original decision to publish an e-book edition (of Julie of the Wolves) with Open Road (which pays a 50% e-book royalty)—rather than with HarperCollins, her longtime publisher—was a principled rebuke of the major publisher’s measly 25% net e-book royalty. HarperCollins’s aggressive strategy (the publisher spent over $1.5 million to litigate a case that ended up being worth only $30,000) illustrates the importance to publishers of keeping e-book royalty rates at 25%.”

So if you already know this, please explain why you failed to do even the slightest bit of advocacy during the past year when the Big 5 in general, and Hachette specifically, were more vulnerable than they’ve been maybe in all of our lifetimes? You think it was a good idea to show unbridled loyalty to companies who, by your own admission, are being miserly with ebook royalties and intentionally underpaying your membership? Something you’ve been complaining about since, at least, 2009? That’s five years of talk with zero tangible results. Loyalty is a positive thing in some cases, but in this one, it’s high past time to bare your teeth. The question increasingly being asked, and rightly so, is does the Authors Guild have any teeth to bare? Instead of falling lockstep in line with the publishers, why didn’t you take advantage of this opportunity to make some progress? That’s what real advocacy is. What you’re doing is no different than what I do, talking. Only I’m not collecting dues or pretending I’m representing anyone’s interests.

Speaking of the blind leading the blind, here’s the Authors Guild meeting with members of Congress ahead of an upcoming review of copyright law:

“Executive Director of the Authors Guild, Mary Rasenberger’s speech was part of a panel co-hosted by the Authors Guild and aimed at giving the Congressional group a behind-the-scenes look at “a book’s passage from manuscript to marketplace.” The panel consisted of authors, editors, and publishers.

In her speech, Rasenberger focused on the “urgent state” of authorship today. “Even authors who made a living writing books for decades now need to find alternative sources of income,” she told the assembly. “This means they write less—and, in some cases, not at all. Fewer professional authors means fewer types of books that might take years of research and writing. These are precisely the kinds of books that further the knowledge and learning that copyright is meant to foster.”

Do you think her presentation of “manuscript to marketplace” included even a word about indies who skip the publisher involvement altogether? I don’t either. I’m certain it was a glowing testament to how essential publishers are, with writers and editors simply add-ons to the process, shepherded by their greatness. Maybe the urgent state of authorship wouldn’t be so urgent if authors had effective advocates. Maybe there wouldn’t be so many authors needing outside income streams if you did something about low royalties other than hope and talk. Don’t miss the loaded use of the term “professional” in there either. Who does this woman represent? They’ve done nothing about the royalty rate, they are dismissive of indies in presentation and implication if not in direct language. And they just came to heel when the publishers blew their dog whistles over the past few months, a time when they actually had some leverage to get something done. Amazon was practically begging them to do something. Is it any wonder publishers think they have you all locked down?

The question I’m asking is can authors get some real representation at these things? The only seat at the table we get is through groups like the Authors Guild, and sometimes that’s even less useful than having no seat at all. So what were they talking about at this congressional get together other than how crucial publishers are? Here’s the release from the committee:

“Great books, both fiction and non, have an incredible ability to capture our hearts and minds, taking us to another place or time with words on a page. Yet many of us do not think about the hard work and collaboration that goes on between authors, publishers, and many others to help take a book from manuscript to marketplace,” said Reps. Judy Chu and Howard Coble, co-chairs of the Creative Rights Council. “Together, this collaboration is at the heart of a $27.2 billion industry, but challenges like digital first sale, unreasonable expansion of fair use, and online piracy are threatening the livelihoods of the hard working men and women who bring these works to life. We are proud to have hosted this important panel in order to influence the conversation on copyright law as we continue moving forward.”

Notice authors is mentioned only once, in the context of the collaboration. Is it authors’ livelihoods they feel are threatened, because, as everyone should have already been expressly aware, the vast majority of traditional authors don’t have livelihoods from their work to be threatened. And that is in no way a recent development, rather a consequence of the industry’s very structure. So get ready for copyright law as publisher bailout (none of the benefits of which will even trickle down to the writers), coming soon to a congressional hearing near you.

It’s telling that both first sale and fair use were specifically cited as “threats”. Is this how the Authors Guild presented them? What exactly does Rasenberger mean by what “copyright is meant to foster”? First sale and fair use are both consumer rights granted by copyright (yes, consumers have rights under copyright law, too. Although maybe not for much longer if these folks are any indication.) How about we discuss life+70 that flies directly in the face of what copyright intended as a limited time of exclusivity for creators. It exists not for the benefit of creators, but of transferees (not mentioned there, by the way) so they can continue to profit from creators’ works for generations after their death. Or how about the fact that this standard has basically caused the public domain of recent material to wither and die (another element copyright law intended to be vibrant and available for both creators and the public).

But, alas, no. The “threats” here are like they are every time copyright comes up; the rights of consumers are given short shrift, if acknowledged at all, and the rights of creators are subverted, in direct opposition of what was intended, to protect corporate licensees’ profits. If you want to have a frank and open discussion of copyright law, let’s do it. But can we get someone other than the Authors Guild at the table please? I have no faith they’re even on the right side of these issues for authors and won’t simply fall lockstep in with publishers when push comes to shove (again). I’m sure they’ll talk a good game but when it comes time to pick a side to support, they’ll be right there with the publishers, no matter how much more ground creators and the public have to give up so Disney can continue milking Mickey Mouse in perpetuity.

Maybe I’m wrong. Maybe I’m being too harsh. Maybe the Authors Guild, once it sinks in that their loyalty has gotten them squat, will finally break out the snarl and get down to the real business of business and stop validating the publishers’ “enriching themselves while underpaying writers is essential to culture” argument. And maybe pigs will fly.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

The Great Lie Behind DRM: Just like that, a little truth seeps out…

Yesterday, I ran across this piece by internet maven (and author) Cory Doctorow detailing the contents of a letter sent by HatchetteUK and its imprint Little Brown to its writers who also publish in other territories with publishers who don’t use DRM, principally Macmillan imprint Tor, presumably. It set off a bit of a pissing contest with Little Brown’s CEO Ursula Mackenzie. In the letter, Hatchette makes a rather interesting demand of its writers, that they force their publishers in other territories to place DRM on their ebooks. Here’s Doctorow:

“I’ve just seen a letter sent to an author who has published books under Hachette’s imprints in some territories and with Tor Books and its sister companies in other territories (Tor is part of Macmillan). The letter, signed by Little, Brown U.K. CEO Ursula Mackenzie, explains to the author that Hachette has “acquired exclusive publication rights in our territories from you in good faith,” but warns that in other territories, Tor’s no-DRM policy “will make it difficult for the rights granted to us to be properly protected.” Hachette’s proposed solution: that the author insist Tor use DRM on these titles.

“The letter also contains language that will apparently be included in future Hachette imprint contracts, language that would require authors to “ensure that any of his or her licensees of rights in territories not licensed under this agreement” will use DRM.

Let’s forget for a moment that territoriality, once essential in publishing, is quickly becoming threatened by digital encroachment, and will soon be little more than yet another publisher-inflicted hindrance between readers and the books they want, if it isn’t already. (It probably is.) Primarily, I was a bit taken aback, as was Doctorow, by the audacity of a publisher dictating in pretty forceful, albeit polite, terms to writers what they can do with rights the publisher doesn’t own. Doctorow himself said, “Hachette has balls the size of Mars if it thinks it can dictate what other publishers do with titles in territories where it has no rights.”

He’s absolutely right about that, and, if it had been me who received one of those letters, I’m pretty sure my two-word reply would consist of the terms “piss” and “off.” If you’d like to tell me what I can do with the rights to my work, then buy them. Otherwise, you’re entitled to your opinion and I’m entitled to laugh at it.

Anyway, Doctorow went on with his usual anti-DRM line, one I personally find a lot to agree with. This, in turn, spurred Mackenzie to release a statement clarifying their position, taking a few jabs at Doctorow in the process. Here’s Mackenzie, as reported via The Bookseller:

“In the statement, Mackenzie confirmed that the publisher did plan to change the wording in its
contracts, but said the modification was designed to make the position clearer and that “variations” on the boiler-plate could be negotiated.

“Our new wording is clearer and we will, as always, negotiate variations of that wording with the many parties with which we trade, nearly all of whom agree with the basic principles of our DRM policy.”

So Hatchette is going to make you follow their terms whoever you publish with, in whatever territory, whether they own the rights or not, but don’t worry, it’s only negotiable boilerplate. Go back and read that second paragraph from Mackenzie again. I’ll wait. Sounds negotiable, doesn’t it? Especially the parts about variations of that wording and the various parties who nearly all agree with their position. Sure, you can negotiate to your heart’s content, you just can’t actually change anything substantive. Sounds perfectly reasonable.

Mackenzie goes on, and here’s the kicker, for me at least. In her spirited condemnation of Doctorow, she let slip a dirty little secret about said DRM and what its real purpose actually is. (Hint: it’s not fighting piracy):

“Mackenzie, who is also president of the Publishers Association, was critical of Doctorow’s position on DRM, saying that it contained “the usual long list of anti-DRM arguments”. Mackenzie stated: “We are fully aware that DRM does not inhibit determined pirates or even those who are sufficiently sophisticated to download DRM removal software. The central point is that we are in favour of DRM because it inhibits file-sharing between the mainstream readers who are so valuable to us and our authors.”

You get it now? They know DRM has no effect on piracy, and they know it doesn’t stop people with the moderate technical knowledge to do an end-around. They use it specifically to handicap what their good, paying customers can do with their legally purchased ebooks. Nice. At least, for once, I can say someone from big publishing was actually honest, for a change. If I owned that company, Mackenzie would have a pink slip on her desk this morning, along with a security guard standing by to make sure the front door didn’t hit her on the ass on the way out. Even if I willfully supported using technical means to screw the people buying my products, I would be incensed that the head of my company openly admitted it.

There, in a nutshell, is the giant lie beneath the concept of DRM. It has nothing to do with anything but creating constraints on the majority of the ebook buying public, then profiting from those artificial restrictions. If readers really were valuable to them, as she says, they wouldn’t treat them so poorly. Their value isn’t in a loyal customer relationship sense, but in an overtly exploitative one. Most of us out here paying attention already knew that, of course, it’s just a little surprising to me to see someone perpetrating the DRM fraud to openly say as much.

Mackenzie goes on:

“We are glad that we have adhered to a model of selling e-books one by one at fair prices and protected by DRM. This model is working very well; although some would like us to change it, the risks are huge and the upside is negligible.”

Of course she’s glad. She’s not the one paying overpriced rates for intentionally handicapped products. Fair prices from who’s point of view? Again, she let something slip. It’s their higher than needed pricing structure that’s protected by DRM, not the IP itself. How can you even begin to justify ebook prices anywhere near print prices in the same sentence that you admit to purposefully limiting them, effectively removing much of the tangible value that exists with a print book? You can do it because this has a lot to do with defending print. Charge higher prices while offering less value with ebooks makes print look better by comparison. That’s the theory, anyway.

Doctorow, apparently always thinking ahead, actually had a response to this in his piece before she even wrote her’s:

“If the Big Six thought Wal-Mart and the other big-box retailers had them over a barrel, just wait until the DRM vendors do to them what they did to the music industry before it abandoned DRM in a Hail Mary attempt to get some competition back into the music retail market.”

Yes, by all means, let’s follow in the music industry’s footsteps with DRM, because, you know, it only very nearly wiped out their business, but hey, this is publishing, we know best, right? Who was it that spurred all that damage to the music industry, again, after DRM locked themselves into a platform? Oh, that’s right, it was Apple, who leveraged their dominance in the mp3 player market with the iPod to redefine digital music sales. This is also the same Apple who’s iBookstore agency pricing arrangement has gotten publishers into serious, potentionally deathly hot water with anti trust investigators.

It’s also the same Apple who’s currently dominating the tablet market with the iPad. In 2012 alone, Apple is responsible for 64% of the the tablet sales for the entire planet, more than six times as many as the second place company, Samsung. By the way, Apple is also suing Samsung for those tablets, with chances of a win looking pretty good while doing it. Smartphones are also fast becoming an ebook reader of choice for many. Guess who’s a major player in that market too? Apple’s iPhone. Oh yeah, let’s totally lock ourselves into DRM in an environment where Apple is the dominant device manufacturer. What could possibly go wrong?

Not only is DRM ineffective against piracy, and easily circumvented, its only effective use seems to be exploiting paying customers who lack the expertise to get around it, as Mackenzie basically admitted. But much like publishers exploiting these poor, unsuspecting readers, DRM also serves Apple’s purposes as the dominant device manufacturer, which they will use to exploit publishers much like they did with the iPod and music companies. And all the while, the entire industry ties itself in knots over Amazon, just like the music industry did with Napster while simultaneously handing the keys to the store to Apple. This would all be hilarious if it weren’t so damn serious.

It reminds me of a line from the recent remake of Battlestar Galactica, “This has all happened before and it will happen again.” Unfortunately, while it had a good, often great run, the finale of that show ultimately sucked. Hopefully, publishers will wake up before it’s too late or find themselves facing an ending much like it.

Correction: Originally, I stated that the iPhone was the leader in smartphone sales. Turns out, they are actually third, trailing Samsung (who Apple is suing over their phones, as well as their tablets) and Nokia, who is falling precipitously but still a good ways ahead of Apple in marketshare. My confusion was probably spurred on by first hand observation. Of the 30 or so people in my immediate circle with smartphones, easily 2/3 have an iPhone (I don’t. I have an HTC. I’m contrary like that) and I’ve heard most of the holdouts suggest that they’ll be getting an iPhone on their next upgrade. Maybe they’re just more popular here in Maryland, I don’t know, but everybody and their brother seems to have one, particularly younger people. Also, I can count the number of Nokia smartphones I’ve seen folks with on the extended fingers of one hand clenched in a fist. Even so, my point stands. Apple’s marketshare on phones is growing, even if they’re not yet at the top. They’ve got Samsung tied up in court on patent related issues and Nokia is falling backwards. It’s not out of the realm of possibility the iPhone could reach #1 in the not-too-distant future. Their tablet is unquestionably dominant, however, and when talking about ebooks, the tablet is king.

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