Fiona Inglis’s 2011 APA seminar address

Here is a very scary statistic I read on a publishing industry newsletter last week:

“Smashwords, one of several US e-publishing companies, is now releasing 6,500 new [selfpublished] ebooks every month, while Lulu.com publishes around 20,000 new titles a month.”

That is 26,500 new books per month, which is nearly 1000 per day. And that does not include the ‘main players’ like Amazon, Kobo, soon Google, locally Dymocks. And of course there are publishers popping up every day that we do not even hear about. There is no way of knowing for sure but by my calculations I reckon that by the time I will have finished this talk there will be about 5,000 new books in the world that weren’t there when I started. I wonder how many of them will find an audience?

To cut to one of the main questions of this panel, I will put to rest straight away the notion that Curtis Brown,  as agents, will be adding to this! We will not be publishing books, nor will we sell books or market books. We rely, as we always have, on publishers to do what they do, and we will be negotiating the best possible terms for our authors.

It has been very interesting watching the digital developments over the last few years. It’s only a few years ago that the idea of a CD-rom to accompany a book seemed cutting edge and out there, now we laugh at the outdated technology, and agonise over definitions of verbatim e-books and enhanced e-books. The change has been enormous, and it has been extremely rapid. Every time we open an industry newsletter or report, there is some new development, or another takeover, business model to get your head around. Booksellers becoming publishers, publishers becoming booksellers, on Thursday as I was writing this, Penguin US announced that it’s opening a self-publishing arm. Wow!  It’s completely impossible to be across everything (although people like Mike Shatzkin do a very good job of keeping up with the news and reporting it succinctly and efficiently) so I’m going to keep my talk very general.

It’s been about five years since publishers started requesting that we include e-book rights in contracts. Yes, long before we knew what an ebook would look like or feel like, but they could see that this was the way the world was developing and they wanted to ensure that they had these rights secure, otherwise other publishers could snap them up in the future, which they knew even then would have a serious impact on their investments. We did agree to allow publishers to have these rights and included what were then admittedly quite vague definitions of what these rights were.

From the very outset we were concerned that whatever rights we granted to the publisher would in no way conflict with the rights we were granting to other third parties, most particularly audio rights or film rights. More enthusiastic techno-people were talking about books that would have moving parts, video clips, interviews with the author, links to related subjects, characters etc , which naturally alarmed us. We could see a world coming that meant the chance of us optioning film rights to producers was going down with every new digital development.  And we work on the basic premise that the more rights we can separate,  that is the more we can exploit the author’s intellectual property, the better the deal for the author, and of course for us.

It has taken a number of years but we are now generally happy with the definition of ebooks included in our boilerplates. In simple terms, the publishers are allowed to produce a VERBATIM electronic edition of the original book, that is exactly as it appears in printed form with no ‘enhancements or embellishments’. Our definitions vary between different publisher boilerplate contracts but at its simplest our definition for ebooks is:

eBook: the Work in whole or in part in digitally accessible and/or electronic form for the purposes of reading/viewing

Enrichments: additions to an eBook aimed at enriching the reading/viewing experience in the form of images and/or sound and/or graphics but excluding a film, TV programme, video, DVD or stand-alone game

There are instances in which enhance ebook rights have been granted to publishers – but they are rare and generally only for books that fall more in the reference category, or cookbooks etc. In my opinion I think the market for anything other than pretty much straight-forward verbatim ebooks will be limited. Personally when I’m reading text I want text only, and don’t want to be disrupted by links that will take me somewhere else away from the task at hand, which is reading. And this does seem to be borne out (p 10 Book Industry Strategy Group report.)

So now we know what they are, we need to consider what other elements need to be considered for inclusion in contracts.

One of the most contentious issues has been, and will probably continue to be, pricing. Way back when we were first talking about ebooks we were dimly aware that the costs of producing them might be lower than print books. No publisher was prepared to give us figures or costings – which is fair enough since we don’t share the intimate details of our author contracts with publishers – but we knew that printing, paper, warehousing and distribution costs at the very least would be diminished or eliminated. The difficulty was always going to be negotiating what we considered a reasonable royalty for our authors. We did start by pushing for a royalty based on published price, but it has become apparent that costing ebooks is a very fluid thing, and that it benefits a publisher to vary the prices at different stages of publication or even for a few days at a time for special marketing opportunities, so we have now agreed that the fairest royalty is one based on net receipts.

Thereby introducing another curly issue – what exactly are net receipts? Net of what? We have probably been remiss in not nutting out a proper definition acceptable to all parties before now, as it might prove hard to include a definition retrospectively in a contract. Our ideal would be something along the lines of: a percentage (and it’s generally been agreed that 25% is reasonable, although some publishers are still digging their heels in at 20%) of the gross amounts received by the Publishers, net of the discount offered by the Publishers to customers and any applicable taxes.  Where possible, we’d add something like: For the avoidance of doubt the cost of all production, marketing, and third party fulfilment and customer service shall be borne by the Publishers.

But again, as with nearly everything to do with digital rights, there will be exceptions. We have just signed an agreement, for instance, with Allen & Unwin to digitise some of our backlist titles, which have been long out of print. They are offering better terms than 25%, but they are not covering all the costs of production because some of these books are not only out of print, but in some cases extremely rare. We have agreed that we, or the Estates we represent, will supply mint copies of these out of print books (which will involve raiding our shelves, or purchasing books from websites that source old and out of print books such as Abe Books) so the above definition, whereby all costs are borne by the Publisher, is not appropriate.

One of the most important inclusions in all of our recent contracts is a reflection of the fact that we are all very much feeling our way along the digital pathway. Wherever possible we have included a clause at the end of the ebook royalty clause that states effectively that the royalties should be able to be reviewed at a later date, usually around two years from signing.  One such clause: The Author’s royalties relating to the electronic book forms of the Work shall be subject to review at any time after two years from the date of this agreement  on the receipt by either party on a written request from the other party. Such review shall be conducted in good faith and shall take into account the relevant terms prevailing in the industry at such date.

Even though this doesn’t lock either Author or Publisher into specific terms, I do believe that both parties will work together effectively to make it fair. I have contracts in my file from 2005 which grant a 50% net receipts royalty on ebooks in the UK, and I have others that have granted the author 10% of net receipts on ebooks. I think we have seen a working together to come to a middle position that seems to be reasonable for both authors and publishers. [I firmly believe that neither can survive without the other, despite what some writers may believe. ]

There is also the issue of reversion of rights. In a standard book contract the reversion clause usually states that the rights will revert with the print book falls below a certain stock level, and after a request from the Author the Publisher states it has no plans to reprint. Of course there are no ‘stock levels’ for ebooks, and the existing wording of many contracts would effectively mean that the publisher retained those rights in perpetuity, not a good situation for the author! We have negotiated a compromise based on sales and/or revenue generated from ebooks to structure a fair reversion clause, and it’s generally something like:  ‘the Publisher shall retain the right to continue to sell the electronic verbatim edition of the Work under the terms of the Agreement. If after termination of the agreement the ebook is not earning a sum greater than $xx per annum then these rights revert to the Author upon written request with the exception of any extant licences.’

One issue we are still very much negotiating (though some publishers might refer to it as ‘arguing’) is that of electronic files and security. Who owns the copyright? Yes, the publisher owns what we refer to as the presentation rights (the typesetting, design etc) and they have invested money into creating that copyright, but once the book is ready for production, both print and ebook form, we need to extract the copyright in the actual words if we want to use that separately.  We have a number of authors whose backlist titles have been out of print for many years, who are now looking at entering arrangements with new publishers, (NOT Amazon! And if any of my clients say they want to go down that path, I say ‘you’re on your own, my friend’) but who cannot get their files back from the originating publisher, even in some cases when they’re offering to pay. The publishers claim that to send out word files or pdf’s is too risky in terms of security, that piracy is rife on the internet and we shouldn’t be making it easier for people to pirate books, but our argument is that the copyright in the words belongs to the Author, and once the publisher has reverted the rights they licensed, the Author should have access to the electronic file of that copyright material. We’re still battling on that front, and there’s a way to go.

I started this talk by referring to the explosion in the number of books being published, and I reckon we’re now up to about 4,500 new books since I started talking. It wouldn’t matter if there were 4,500 or 450,000 really, the biggest problem is still the same: how those books are going to find readers.  We don’t have specific guidelines in our contracts about how publishers should market books to readers, how much they should spend, how much should be electronic mareketing or via traditional means, but I’m inclined to trust the traditional publishers far more than I’m going to trust behemoths like Amazon or Google or even some of the smaller digital publishers. Don’t forget that Amazon make a lot more money from selling a Kindle than they do from selling an ebook, that is always going to be their focus (and is the reason they have not made a profit for many years). Google make money out of advertisting, not out of books, and Apple of course will be focussing their attention on selling ipads, iphones and Apple computers which are much more lucrative than an ebook. What I am telling my clients though, is that that should not be frightened of new digital marketing, and anything they can do to help their publisher get their books noticed (including establishing Facebook pages for their titles, Tweeting news about awards etc) will aid sales.

In all of this, only one thing is guaranteed: there are more and more people writing. I’d like to hope that this trend will be reversed sometime soon, and that only the very best and most talented people write, and the rest of us read, read and read some more!

Fiona Inglis
29th November 2011