Monthly Archives: March 2010

Random House, HarperCollins Look to Lock In Low E-Book Royalty Rates: 5 Ways to Protect Yourself

March 18, 2010. Random House and HarperCollins are sending letters to authors and agents seeking amendments to contracts regarding e-book rights.  These letters, although some suggest that the author’s work was “selected” for digitization, appear to be going to virtually all authors who have no stated e-book royalty rate in their contracts.  In some cases, the letters have gone to authors who have never granted e-book rights to the publisher. 

These amendments should be treated with extreme care.

E-book royalty rates are low at the moment.  Both publishers are trying to lock in e-book royalty rates at 25% of net receipts.  As we’ve previously said, we believe this will prove to be a low-water mark for e-book royalties:

Authors and publishers have traditionally split the proceeds from book sales.  Most sublicenses, for example, provide for a 50/50 split of proceeds, and the standard trade book royalty of 15% of the hardcover retail price, back in the days that industry standard was established, represented about 50% of the net proceeds of the sale of the book.  We’re confident that the current practice of paying 25% of net on e-books will not, in the long run, prevail.  Savvy agents are well aware of this.  The only reason e-book royalty rates are so low right now is that so little attention has been paid to them:  sales were simply too low to scrap over.  That’s beginning to change.

Here’s how to protect yourself:

1. Get the absolute right to renegotiate.  If you accept these low royalty rates, don’t lock yourself in.  Try to obtain the unconditional right to renegotiate the royalty rate after a period of, say, two years.  If you don’t get the unconditional right to renegotiate, then, at a bare minimum, you should have the right to renegotiate if industry standard royalty rates change or if the publisher’s standard royalty rate changes.  We can help you with the contractual language.

2. Negotiate for a royalty floor.   Insist that your royalty amount (in terms of dollars and cents, not percentage points) for e-books will never fall below the royalty amount for the print edition of the work.  It’s best to peg the minimum to the royalty amount for the hardcover edition of your work.  If not, then have the minimum royalty tied to the royalty for the prevailing print version at the time the e-book is sold.  This will keep e-book sales from eroding your royalties.

3. Double-check your reversion of rights clause.  This is critical.  If your reversion of rights clause doesn’t have sales thresholds in it, your publisher can argue that availability in any edition — regardless of the number of sales — means your book is “in print.” (We don’t agree with this interpretation of older contracts, but some publishers argue this with a straight face.)  Take this opportunity to clarify your reversion of rights clause by inserting a minimum number of annual sales for a work to be deemed in print.  Again, we can help with the language.

4. Check your contract; you may control e-rights.  Some of these letters have gone to authors of books for which the author hasn’t granted the publisher electronic rights.  Others have gone to authors for books in which all rights have reverted.  Please contact us or your agent if you have questions about your contract.

5. If you can’t obtain adequate safeguards, you may want to bide your time.  The e-book market is still a small, developing market, with uncertain economics.  Publishers and distributors are fighting major battles over business models.  For some books (children’s picture books, for example), the market has been especially tiny, although some believe Apple’s new iPad may soon change that.  In any event, e-book publication isn’t a now or never proposition, and signing the contract amendment will prevent you from seeking e-book publication deals with other publishers.  Take your time, weigh your options carefully.

As always, if you need help evaluating the terms of your existing Random House or HarperCollins contract to see whether it contains a more favorable e-book royalty rate or whether you granted e-book rights to those publishers in the first place, send in your contracts.  We’re here to help.

White House Applauds Joint Effort for Print Disabled

March 9, 2010. The Authors Guild, the Association of American Publishers and the Reading Rights Coalition agreed to work together to ensure access to books for people with print disabilities. On the White House blog, Kareem Dale, Special Assistant to the President for Disability Policy, endorsed the effort.

Joint Statement

The Reading Rights Coalition, which represents thirty million Americans who cannot read print due to disabilities; the Authors Guild, with a membership of eight thousand American writers; and the Association of American Publishers, whose more than three hundred members include most of the major commercial publishers in the United States as well as smaller and non-profit publishers, today issued the following statement regarding access to books by Americans with print disabilities:
“The growth in the number of books offered in electronic and audio formats has created tremendous opportunities for the millions of Americans who are blind or have other print disabilities that make it difficult or impossible to read printed books in the same way that other Americans typically do.  This large community constitutes a previously-untapped market that is hungry for the educational, inspirational, and recreational opportunities that books can provide, and now offers a significant commercial opportunity to the publishing industry.

“The Reading Rights Coalition, the Authors Guild, and the Association of American Publishers believe that the contents of books should be as accessible to individuals with print disabilities as they are to everyone else.  To that end, these groups agree to work together and through the communities they represent to ensure that when the marketplace offers alternative formats to print books, such as audio and electronic books, print-disabled consumers can access the contents of these alternative formats to the same extent as all other consumers.”

Supreme Court Reverses Appellate Decision on Freelance Settlement

March 3, 2010. There’s big news in our freelance electronic database class action.  Yesterday, the U.S. Supreme Court overturned an appellate court ruling that the settlement, entered into in 2005, was impermissible because it encompassed unregistered as well as registered freelance works.  The Supreme Court opinion is here. (Please note: this is a separate action from our Google lawsuit.)

The freelance settlement, valued at up to $18 million, would resolve the copyright infringement claims of freelance writers against database and media companies, such as Dow Jones, the New York Times and the owners of Lexis-Nexis, which had made digital use of the writers’ articles without permission.  Plaintiffs include individual freelancers as well as three associational plaintiffs — the Authors Guild, the American Society of Journalists and Authors and the National Writers Union.  After federal court in Manhattan approved the agreement in September 2005, a group of freelance writers appealed, arguing that the settlement failed to allot sufficient funds to the claims of authors of unregistered works.

In a surprising ruling, a federal appellate court in November 2007 reversed the district court’s approval of the settlement on grounds that no one had raised.  The appellate court ruled that the district court lacked jurisdiction over claims relating to unregistered freelance articles.  (Copyright registration is required to bring a suit for infringement, but since registration is viewed as a formality — comparable, many believe, to the requirement that one file a complaint in order to get into court — lawyers on both sides believed the settlement could resolve infringement claims for both registered and unregistered works.)

The Supreme Court, in its ruling yesterday in Reed Elsevier v. Muchnick, disagreed with the appellate court.  The Court held that a settlement of claims for infringement of copyright in unregistered works can be adjudicated by a federal court.  The appellate court, which hadn’t rendered an opinion on the fairness of the settlement terms, is now expected to review the settlement on its merits.

We’ll keep you updated on the progress of the freelance electronic database settlement through the 2nd Circuit.  For more information about this class action, please visit the official settlement website