One in Five Bloomberg Authors Received Royalties Based on Retail List Price, Says Wiley

June 14, 2010. John Wiley issued a new press release Friday afternoon regarding the contractual modifications it’s seeking from its Bloomberg Press authors. In that release, Wiley says that one in five Bloomberg contracts provided royalties based on retail list price. As we’ve previously noted, Wiley’s proposed amendment would slash royalties for those authors by up to 50%. (Our earlier alerts on this matter are here and here.)

Wiley commits to reach out to Bloomberg authors. Reaching out will only help, however, if the authors are provided with accurate information. Based on Wiley’s latest release (below, following our alert), we’re not optimistic.

1. Wiley says that in Bloomberg “list price” agreements, royalty rates were lowered when discounts exceed 50%, that the average discount rate for the books was greater than 50%, and that therefore “we believe the authors will benefit with the proposed, simplified Wiley terms.”

This belief doesn’t stand up to an examination of the Bloomberg contracts. While it’s true that Bloomberg contracts often provide that royalty rates are reduced when sales discounts reach certain thresholds, Wiley’s suggestion that these reductions uniformly apply once discounts exceed 50% is wrong. The royalty reductions kick in at various levels, depending on the contract. Sometimes royalty rates are reduced when books are sold at 51% discounts to retailers and sometimes at 53% or 55% discounts. But here’s the thing: even taking that into account, authors do far better under the original Bloomberg contracts than under the Wiley amendment. We’ve tested this under a number of contracts and at a series of discount rates.* Authors would, at some discount rates, do as well with the Wiley amendments, but they wouldn’t do better.** When deeper discounts kick in, at 56% or greater, Wiley’s amendment would reduce the author’s royalty rates for every contract we’ve seen by 25%.

2. Wiley suggests that for Bloomberg authors with “net receipts royalties” all is well.

We don’t know that this is the case. We suspect that those authors are seeing substantial royalty reductions when books are discounted 56% or more, but we haven’t seen these contracts, so we don’t know for sure.

3. Wiley’s ignoring the matter of termination rights.

Bloomberg had no print on demand program. Authors would reasonably expect that if their books didn’t sell enough to justify replenishing stock with a traditional print run, then the rights in the books would be revertible. Wiley’s letter seeks not only to allow it to use print-on-demand technology to keep a work in print without negotiating a minimum sales threshold for a work to be deemed in print (as all literary agents and knowledgeable authors insist on), but it also seeks to do this at a royalty rate of 5% of net, the lowest such rate we’ve ever seen.

We plan on making a simple proposal to Wiley today which we hope will resolve this matter in a fair way for Wiley and its Bloomberg authors.

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Here’s the math. At a 54% discount, in one typical example, the author’s royalty rate would be reduced under the original Bloomberg contract from 12.5% of the cover price to 8.5% of the cover price. For a $25 book, the author would get a royalty of $2.13 per book under that Bloomberg agreement. The Wiley amendment would cut that royalty by 33%, since Wiley would (under the most generous reading of its amendment) pay the author 12.5% of net receipts. At a 54% discount, the net receipts on a $25 book are $11.50; 12.5% of $11.50 is $1.43.

Except, as we’ve previously mentioned, when discounts are 75% or greater. These are essentially remainder sales, which have never been a significant money-maker for authors. We’ve also found a theoretical anomaly when (for at least one book contract) a book is sold to a retailer at a discount of precisely 55%. In that case (again, under the most generous reading of Wiley’s amendment) the royalty per book under the Wiley amendment would exceed that of the original Bloomberg contract. However, we found no actual sales at a 55% discount in the royalty statements we reviewed. Moreover, that theoretical advantage disappears at a 56% discount, since the Wiley amendment cuts royalty rates sharply to 7.5% of net for such sales. Wiley in fact does better by selling books at a 56% discount than it does at a 55% discount, because of the sharp drop in the royalty rate. We’d be surprised, in such a situation, to ever find books sold at a 55% discount.

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JOHN WILEY PRESS RELEASE

June 12, 2010

Wiley Commits to Reaching Out to Bloomberg Authors Hoboken, NJ

On April 29th, Wiley sent out letters to one-hundred-and-seventeen (117) authors.  Of those, a small subset (24)involved any type of “list price” royalty.  The overwhelmingly majority(93) involved “net receipts” royalty terms.

Of the ninety-three authors with “net receipts royalties” who have responded to Wiley’s contract modifications to date, all have accepted them.  Why?  Because precisely as Wiley’s letter accurately depicted, the royalty calculations will be simplified and royalty payments overall are likely to increase, not decrease, due to factors plainly described in Wiley’s letter to our authors.

What about the small subset of “list price” authors?   In the existing agreements, royalty rates under the relatively few “list price” contracts are lowered for discounts greater than 50%.  For most of the financial books involved here, the average discount rate is higher than 50%. Therefore, we believe the authors will benefit with the proposed, simplified Wiley terms.

Wiley is well known for excellent relationships with our authors. Given the inaccurate information that has been recently disseminated, we will contact the affected authors again to be sure they are not in any way confused.

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