Wylie vs Random: The Thrilla in Manila (Folders)

It's all too easy to complain about media coverage of the publishing business, but as my mother used to say, honestly.... It was surprising to see the wildly erratic spins that some outlets put on yesterday's news that Andrew Wylie had come to terms with Random House for the latter to publish e-books of several prominent backlist authors whose contracts predated the electronic era and made no provision for such editions. (Those contracts are typically tucked away in yellowing manila folders somewhere in the bowels of a publishing house. Consulting those documents, typed on old Royals and Underwoods, sometimes existing only as "carbons," feels like traveling back to the age of three-martini lunches.)  What made this newsworthy was that Wylie and Amazon.com had annouced with much fanfare that the agent was starting his own publishing house that would partner exclusively with Amazon to sell the work of some 20 authors.  Random, which has already asserted unilaterally that it alone may publish e-books of its backlist authors, regardless of contractual omissions, said it would boycott the Wylie agency over the issue. (Sarah Weinman gives a good summary of all this at Daily Finance.)


The press treated the original Odyssey announcement as a bombshell--the normally sober FT intoned, "many executives fear[ed] the showdown over e-book rights would lead to the death of the 500-year-old publishing business as it is known." Yikes! 


This was, ahem, an overstatement. The real issue regarding backlist e-book rights was not whether Random had a valid claim on them (they had some claim, but whether it would have prevailed in court was quite uncertain). It was simply (as I said at the time) that if Random did publish the e-books, they'd have to negotiate royalty rates, and the authors and agents involved would want higher royalties than the 25% of net that has been Random House's usual boilerplate. 


The matter has been resolved, apparently with Random agreeing to some kind of sliding royalty scale on e-books that goes as high as 40%, and Wylie conceding to Random control of e-editions for 13 of his 20 Odyssey authors.  This is a reasonable resolution that probably could have been arrived at with less heavy breathing all around. But press accounts of yesterday's agreement shot off in all directions. One headline said "Random House Wins Battle with Wylie," while the WSJ, apparently looking for its own angle, reported it as "Amazon Loses E-Book Deal."  Evidently "the death of the 500-year-old publishing business" has been averted.


However, whether you consider it a "loss" for Wylie or his clients depends on whether you view Odyssey editions as something he was really committed to, or a great negotiating tactic.  We may have a better sense of that when we see whether Wylie strikes deals with Penguin, Harcourt Houghton, and the other publishers of the remaining "Odyssey seven." 


It's a "win" for Random in that they are surely happy to keep the e-books of authors like Updike and Nabokov; but they are probably not thrilled to have their improved e-book royalties discussed in "the colyums." Especially if they have, as many houses do, "most favored nation" clauses in contracts with other authors. (As a precedent, it won't be cheered by other big publishers either.) 


As for Amazon, I'm sure they would have loved to have exclusive e-books (though just for two years) of Lolita or Invisible Man, so this is a setback for them. But they're still going to be able to sell all those e-books on any device that can access the Kindle store, so they can cry all the way to the bank. 

E-Books: Do I Smell Another Rights Battle Brewing?

I don't know about you, but I can hardly bear to hear any more about e-books for a while, after a couple of weeks of hearing various experts' predictions for the future of publishing; hearing about the cornucopia of new e-readers being shown at the Consumer Electronics Show; and the incessant drumbeat of rumors about the Apple tablet, aka Unicorn. But a new wrinkle in the e-book rights tussle occurred to me as I was pondering Jonathan Galassi's New York Times op-ed that argued why e-book rights to backlist titles like William Styron's Sophie's Choice should remain with Styron's hardcover publisher, Random House, even though their contracts were written before e-books existed.

As I have written here before, there is legitimate (and spirited) debate about that assertion. But what I'm wondering about now is books whose contracts were drafted more recently. In the early 1990s, when the internet was starting to happen and books on CD-ROM were the hot new thing, publishers sensibly began revising their contract boilerplate to include electronic book publication among the rights granted by the author.  However, this new language drew a distinction between what's usually called "verbatim text"--i.e. the display of the author's words via some electronic device--and what was often called "multimedia"--i.e. something that included video, sound, or interactive elements (John Waters' Odoroma, perhaps) along with the written text. And in a large majority of contracts--I'd guess almost all contracts where agents were involved--multimedia rights were reserved by the author.

Most agents back then concurred with the general notion that the publisher ought to control any version of the book that involves reading it as you would the print edition. But most all of us, agents and publishers alike, thought of "multimedia" as something different from "book." (As I said in my last post, it is different from a conventional book and requires a different level of investment in content and editing.) Several agents also maintained that movie studios--agents had wrested movie rights from book publishers decades earlier--would refuse to acquire book properties unless they hoovered up anything multimedia-ish in the deal.

So from that day right up until now, most book contracts  grant "verbatim text" rights to the publisher and reserve multimedia versions to the author.

Are you seeing the problem here? Today, publishers are eager to publish "enhanced" e-books, and the enhancements include, say, author interviews on video. One company, Vook, has launched a business specifically to create versions of print books that include pictures, film clips, hyperlinks and so on.

This may not be an issue for new titles, where the enhanced edition is conceived when or before the contract is drawn.  But it's going to be very tricky for the last 15 years' worth of books. Unlike the situation with authors from the 50s or 60s, where publishers can argue the author's general grant of book rights included a form not yet invented, we're talking about contracts that explicitly do give the publisher the right to a Kindle-type, text-only e-book, but not to a Vook-type, text-plus-video/audio/Odorama version.  Even if the "enhancement" is a two-minute Q&A with the author, filmed with a Flip cam, one could argue that's multimedia.

I still believe e-book rights should stay with the original publisher, but we will have to revise our definitions of e-books and our boilerplate language to avoid a situation where the publisher could find his author issuing a competing e-edition on the grounds it's a "multimedia adaptation."

It won't be the main theater of operations, but this could be a new front in the e-book wars.

How to Make a Small Fortune in Publishing, or, A Bit More on the E-Book Wars

Whew. As I might have expected, last week’s posts on the E-Book Wars (part 1 here and 2 here) attracted a lot of lively and thoughtful comments. They expressed several points of view but two opposing themes can be seen.

One group of commenters asks: Who needs publishers? In a digital marketplace authors can readily reach readers directly. Sure, editing is important but, wrote one, “what’s to stop authors from forming consortiums that hire editors?” Instead of settling for a big publisher’s split of royalties, you could distribute the book yourself and keep 100 percent of the profits, or use a service like Smashwords that offers an 85 percent share. This commenter continued, “Right now the business model is that writers are the suppliers of publishers. But it is conceivable that it could become the other way around.”

Another group sticks up for publishers. In defense of Random House’s claim to control e-book rights, these commenters noted that “Books are words in a precise order and meant to be read,” and ask why an e-book is any different. They also point out “the amount of time, effort and money [involved in] making what goes between the two covers of a traditional book.” They ask, not unreasonably, shouldn’t the publisher be entitled to a significant share of income from an e-book whose value is enhanced by the careful editing, copyediting, proofreading, and so on that go into it?

Both groups have legitimate points to make. The book business looks from one perspective like publishers “buy” content from authors and then resell it. But from another perspective, we’re providing a service—enabling the author to reach readers (and collect money for his content). Around Bloomsbury we sometimes say “the author is our customer.” In a sense we are selling the services of editing, design, printing, marketing, distribution and so on. Could a group of authors do the same things themselves? Yes. Of course, then in effect they’d become….publishers. An authors’ co-op might produce more money for writers than a conventional publishing contract, but I don’t know if it would make either writing or publishing radically more lucrative.

As old hands in the business like to say, “If you want to make small fortune in publishing, start with a large one.”

Much ink and many pixels have been spilled on the Random House e-rights issue discussed here last week, and I don’t think I’ll wade into that still-unsettled question again now. I would observe here that although I raised questions about Random’s position on backlist contracts, I agree with them, and most every other publisher, that e-book rights should not be separated from print rights.

Reading a book is reading a book, whether the item being read is a hardcover, a Kindle, or a PDF on a laptop. Amazon and other e-vangelists argue that e-book sales are additional to print sales—that e-book lovers wouldn’t be buying print copies if they weren’t reading them on their Kindles. I’m sure that is true for some books and some readers, but to some extent we know e-book sales replace print sales. It’s clearly essential for a publisher to control all versions of a book that their readers might want to buy. That much is widely accepted by both houses and agents, though there is still debate about what royalties should be paid.

I also agree that those who want to chop down publishers’ share of e-book royalties are often neglecting the big picture. Not only do publishers enhance the value of an author’s work by editing, proofreading and performing those other tasks that go into producing the product you find in a bookstore. They perform a range of other functions that contribute materially to that value. And one of the most important things that publishers do to market electronic books is—sell printed books! I’ll talk about this more in a future post.

(illustration: Grub Street, later known as Milton Street, from Chambers' Book of Days)

The E-Book Wars Have Really Begun, Part 2

Yesterday, in Part 1 of this post, I wrote about a flurry of events that suggest the phony war over digital publishing is over and live ammunition is now flying. First, three big houses tussled with Amazon over “windowing,” or delaying publication of e-books relative to hardcovers. Then, more momentously, Random House attempted to put barbed wire around e-rights to its backlist.

Next, the most aggressive move yet: mega-bestselling author Stephen Covey—who has long published with Simon & Schuster—announced he had made a deal with Amazon to sell Kindle editions of two of his biggest titles via another electronic publisher.  This, of course, is exactly what big publishers have feared and what Random House’s bluster is trying to forestall. To the extent that e-book sales of Covey’s books supplant sales of their print editions, that’s vital backlist revenue disappearing from S&S’s p&l, not to mention potential growth the house is losing out on. Covey will apparently be releasing some of his new titles through Amazon exclusively, so S&S won’t see those dollars either.

What I don’t understand is why Simon didn’t pre-empt this move by issuing their own Kindle edition: they have already released e-books of several other Covey titles so you’d have thought the terms of an arrangement were in place. You’d also have thought S&S would hustle to get the Kindle edition of a backlist leader like The Seven Habits of Highly Effective People into the market-especially given that Amazon reports Covey stands 13th on their all-time bestseller list. 


I can only assume there are other issues in play or that some negotiation between S&S and Covey broke down--quite possibly over royalties: the author is apparently receiving more than 50% of the net proceeds from his e-publisher. (Adding piquancy, the e-publisher who’s handling Covey’s Amazon title is RosettaBooks, the same one Random House sued over backlist e-rights in 2001.)

This creates an interesting situation.

Simon & Schuster has not conceded that they don’t control e-book rights to backlist titles; they say it’s “their intention” to publish those books digitally. They probably don’t want to pick a fight with Stephen Covey, one of the biggest authors on their list. He says he is happy with them, and they are surely hoping to publish new Covey titles in the future. But if they let him walk away with e-rights to backlist bestsellers, how do they hold the line with other authors? They may suddenly find the whole backlist vanishing.

And if that happens, it will leave Random House—and the other Big Six publishers--in a very awkward position, trying to cling to electronic rights that one of their biggest competitors has given up. 

In short, it looks to me like the free-for-all we have long been expecting has begun. 

(Illustration from "The Seven Habits of Highly Effective Soldiers, Starring Sgt Rock," at Chris's Invincible Super-Blog)

The E-Book Wars Have Really Begun

It seems quite likely that we will look back on this week as the moment when the e-book wars officially began. We may have forgotten it, but electronic books of one kind or another have been with us for a couple of decades (beginning with ill-fated ventures into books on CD).  For most of that time, the actual market was negligibly small. In the last few years the e-book market became significant, but although it generated vast amounts of chatter—ranging from dark mutterings by publishers to utopian visions from technophiles—a sort of uneasy calm prevailed at the frontier where authors and agents, publishers, and Amazon and its competitors eyed each other warily.  There were occasional skirmishes and plenty of saber-rattling (over matters such as Kindle prices or Digital Rights Management) but no party seemed ready to make a move aggressive enough to start a real fight.

But that has now changed—inevitably, because the e-book market has exploded and digital books are the hottest (perhaps the only) growth area in the industry. The calm is over, and real punches are being thrown. You might say the first jab came from three houses (Simon & Schuster, Hachette, and HarperCollins) who announced they were going to delay releasing e-books of their titles until several months after hardcover publication. I agree with the analysis of Mike Shatzkin that these houses are not so much concerned over pub dates as trying to find some leverage to use with Amazon over the pricing issue. 

But the timing kerfuffle was minor compared to the dustup that broke out on Friday when Random House CEO Markus Dohle declared, with chutzpah one can only admire, that the house controls e-book rights for thousands of backlist titles whose contracts made no mention of such rights. This was drawing a line far out in the sand.  Dohle’s bold assertion is, essentially, that e-books are just another kind of “book,” so the contractual language that gives Random exclusivity over all editions of a work includes e-books—even though they had not been invented at the time most of these contracts were signed. 

It’s hard to believe Random can make this claim with a straight face. They went to court with this argument years ago and didn’t get very far. But you can see why they’re trying it on. At stake is potentially millions of dollars in backlist revenue that the house could lose out on if authors take e-rights of their old titles elsewhere.  Even though Random’s argument may be legally weak, by making a show of defending this territory they are presumably hoping to discourage authors from battling them for it. Agent Richard Curtis, who is himself a an e-publisher, observes at his blog, "Someone would have to have a lot at stake to be willing to spend hundreds of thousands of dollars to go up against Random House in court.”

Random may be betting that for individual authors, it won’t be worth the fight. But now that we are seeing explosive growth in e-book revenues, I believe there’s too much money at stake for authors not to contest this ground. The Authors Guild has already blasted back at Dohle, calling Random’s position on the backlist a “retroactive rights grab.”

The Guild also points out that Random House rewrote its contract boilerplate in 1994 and specifically added language to cover e-book rights, which wouldn’t seem to be necessary if they were already bundled in with the rights acquired. I worked at Random House at the time, and well remember sitting in meetings where we discussed the new contract language. I certainly don’t remember anyone saying, “well, we already have these rights, but let’s throw in some extra language about them just to make sure.” The conversations I recall were much more like, “Hm, our old contract language didn’t say anything about electronic books so we’d better make sure we get them from now on.”

In the end, just as the fight with Amazon over pub dates is largely about pricing, the fight over who owns backlist e-rights is largely about royalties. After all, Random House is a hugely potent marketer of books and content; to an author, it’s not clear there’s any company out there that’s going to do better selling your backlist title, and there’s clearly an advantage to marketing print and e-editions together. But Random is paying an e-book royalty of 25% of net receipts, while others offer a 50-50 split or better. That’s a lot to leave on the table.

And that brings us to the second roundhouse blow landed this week. I’ll talk about that in tomorrow’s post. 

(illustration: The Taking of Lone Pine  by Fred Leist)