Monday, June 14, 2010

Bargains

A good bargain of course is where both parties feel they got the best possible deal. If one or other side feels they're being screwed, well, to go back to Adam Smith, it is not in not in the enlightened self-interest of either party. Unfortunately, we dwell in stygian darkness... or so it would seem because it seems that those doing the screwing think it's a great idea and their skills in terms of either common sense or empathy are not very well honed. You see this, of course, in every class of humanity and in every sector of life, but there is a neat linear relationship between the disparity in relative power of the two parties and the inclination to screw the other party. If you live in a country where for example there is monopoly (or a cosy oligopoly as in South Africa) of banks, you can be fairly sure that the bank's little-man-in-the-street client is being screwed 16 ways to breakfast. All he'll ever get out of his bank is flat feet from standing in the queue, and he'll be lucky if they only charge him an extra 20% of the medical bills he gets as a result of their generosity. If competition between many little banks is real and vicious you can be sure that clients are getting a better deal. Of course power remains disproportionately with the bank, so getting a good bargain is unlikely. Anyhow, I'm here to talk about writing and books, not economic philosophy, so let's move on to that subject, with just one relevant addendum: a good bargain is actually to the long term benefit (and in the self-interest) of both parties.

So what got me onto this track? Well, the Wiley saga Amanda posted, and a little letter I got on Friday from the publisher that I sold the African print rights to a teens/YA sf novel I wrote. Contracts are of course something authors have to deal with. There is a sort of inverse square law here: simply - the closer to a good bargain it is, the shorter the document is. So for example the short story contracts I have had from Baen and Tekno are less than a page. They're good, fair contracts, sign them and both parties get a good bargain.

The next rule is: the more legalese the more certain you can be that this is no bargain. When the breakteeth lawyer words arrive, get the vaseline and bend over. The truth is a publishing contract is really quite simple (or at least potentially so). Intrinsically, it contains an agreement for the publisher to use the material for a specific purpose for a specific period, for which they will pay you xyz. You probably need to gaurantee that the material is yours to rent to them (this is what it this is: renting a property) and they probably need to provide some mutually agreed accounting mechanism (if the sum is likely to be large enough to warrant either party giving a damn - with a short it's usually money up front, and that's it. I've had one short pay me a royalty - out of 25. I suspect if I trawled through the rest I would come up with a few more dollars owing to me. Shrug.)

This can very easily fit in half a page of clear text: you have that, you have probably got a good bargain.

The other clear indicator is that the language in any covering letter is neutral. Do you believe and can you trust the that glib bloke on the Telly saying ‘The Best deal! Order now at the low, low price of $230 000 and get one FREE'? Well if you do, you deserve to fall for "Good news" or "I don't think it would be fair to keep you hanging on any longer" (to quote the little letter I got from the South African house I sold the African print rights to YA book I wrote to). Now in the case of the South African house I'm mildly amused because to be frank it's actually a win for me of sorts, because their own legalese and evasions have tripped them up. My hackles went up when I got the ‘let's be considerate and fair part' and I went and had a long look at the very dense legalese contract: They're legally obliged to publish and market the book at their expense ‘within a fair and reasonable time' -- there is no ‘kill'clause (and thus no punitive kill fee) - they baulked at that, so by stating that it isn't fair to keep me hanging on and I am free to look elsewhere, they've stated that they're in breach of contract. If I had money to waste or this was a first-and-only book, well, so long as I don't try and resell the book... I could take them to court and make them print and market it. What this boils down to is that the book was bought by a previous editor, has been handed down to one who doesn't know/like/believe in the value of speculative fiction (ergo she calls the story ‘fantasy'... it's science fiction) and if she can get me to huff off, the company is off the hook. Lesson: do not react in a hurry (or without a lot of thought and circumspection) to any contractual matter. If it sounds like normal business language, consider it carefully. If there is even a hint of ‘we're being nice to you'... back off and get professional advice. Your mum, partner, friends or kids are nice to you. You can be friendly with publishers, but it is a business relationship.

For your delectation I provide you with another snippet of the same letter
"In the light of this, I revisited your contract that was drawn up when [edited out] was in charge of this project. I see that the royalty agreed upon was 17½ %. We are not offering anything like this on current contracts and in the light of the recent recession, I am not sure that if we did publish it we would be able to sell enough copies of your book to make it viable."

Now, dear readers, 17.5% is of NET not of cover price. To run that through the calculators... that's probably somewhere around 8% (which yes, I had to argue them up to). That's about a standard paperback rate, and allows no escalation. There was a slim chance that the book would come out in paperback, so actual fact the net rate should be something like 25% to equal hardcover rates. In other words -- anywhere but in that very small exceptionally asymetric pond -- that's already a very good deal for the publisher.

It's also mildly amusing in that Ms Neweditor assumed the contract was the same as most would-be South African authors gets stiffed with and didn't bother to read the whole thing... or she'd have noticed something that would have given her conniptions. I went into this as an author published in the US with I think 15 contracts at that time. And when we got to a certain part of the negotiations they said ‘we don't' and I simply copied the relevant page of my most recent contract and sent it to them and said ‘with me you do and this is actually normal and how business is done.' Lesson: experience counts. Sometimes you have to get shafted getting it.

You see: According to a friend of mine who is professional illustrator and who knows just about every poor sap-author in this little arena... I am the only South African author she's ever heard of EVER getting an advance - and the advance they paid me - while small by US standards, means that actually the company is going to be substantially worse off not publishing, than publishing. Lesson: always try to get some form of advance (as big as possible), or something enormous in leiu which they stand to lose. It keeps them working on the book, and the more they've spent or risked, the more effort they'll put into getting at least that back. If you can't get an advance (and this may be be true in e-pub), get a clear, short timeline on publication and payment, preferably with a kill-fee. And the rates then go up, up a long, long way.

So long as they're in breach of their contract, I get to keep the advance. Actually, maybe Ms Neweditor may have been smarter than I thought. All she had to do was get me to breach contract and they could ask for it back. But I don't think so.

Now seriously, a book published in my old country would have been vaguely satisfying, especially while I was there. I could have sold quite a lot of copies (almost certainly enough just to my fans to pay the advance), aside from any effort they might have made. It was of course a neat subtle stab in the PC-back of South African political correctness, so it would have had a good social purpose too... On the other hand I've probably earned as much as I was ever likely to from the company. I'll be honest, I got a free coffee cup at their imprint launch and a month or so ago it came to light (the imprint launch BTW had maybe 40 or so staffers, and bunch of guests and the MD left in a brand new merc - someone makes money out of publishing in South Africa, just not the authors) and vaguely wondered if it would ever happen, but I never bothered to fuss about it. They might have made a good thing out of it if they'd tried, but forcing them probably isn't worth it. I've kept the E-rights, and rest of the world print rights bar Africa. I'm hoping to have it out as an e-book before Christmas (this has been on the cards for the last month or so, long before this). So: while I'll let it fester for a few more days I'll probably play the game right back... saying that it is terribly considerate but I'd need a letter revoking all their rights before I could even think about it. And then do nothing of the kind. Trying to resell the Africa print rights is near worthless. World rights are different matter. So are POD rights (which are mine).

Or what do you guys think?
How do you feel about ‘big 6' publishers working in what appears to be a ‘cosy'fashion?
What do you think a contract needs to say?
What are things we need to make a good bargain?
What do both both sides stand to gain?

31 comments:

Rowena Cory Daniells said...

Dave, my contract for my first trilogy was 75 pages long, 25 pages for each book.

My contract with my new agent was one paragraph. LOL

Dave Freer said...

Rowena - my Baen novel contracts are IIRC 7 pages all in clear English :-), including the trilogy contract. This hole-in-the-corner South African publisher is roughly twice as long and very full of legalese.

matapam said...

I think it's partly a factor of the size of the world today.

The publishers don't have to worry about what the neighbors think of them. In the unlikely event the neighbors knew a writer who was being poorly treated by his publisher, chances are they wouldn't realize that they knew the publisher.

I wonder if the internet will fill the function of village gossip? And if we'd even want it to?

Darwin said...

I think the feedback loop is broken. Publishers/publishing are/is currently finishing off what little "fat cat" cream is left effectively unopposed, diverting resources away from those who create to those who predate. This is an open loop system that cannot be sustained, especially in the face of market changed driven by the internet.

Predators make use of obfuscatory language and always seek to make sure the slope favors their inertia.

Ergo, I'm with Dave in believing that the longer and more esoteric a contract is, the less likely a fair deal.

Darwin said...
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Darwin said...
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Dave Freer said...

Matapam, I do think it is beginning to do exactly that. The internet effectively shrinks the world, and at least buts some isolated individuals (writers) into a linkage. Simply knowing what happens and what you can expect make a huge difference to how badly you can be taken to the cleaners. And while at this stage writers remain 1 000 000 a penny... what publishers are slowly (and painfully I suspect) begining to find as they establish as brands is that readers will punish brands for behavior they see as unacceptable (See BufoCalvin who won't buy from publishers who disallow text-to-speech as a small example). I can see boycotts of publishers products where some abuse is reported and becomes widely known. This will hurt authors, of course. It'll hurt the cash-cows particularly (if someone is getting a pittance and having to do a second job to make ends meet, well, that means they're cushioned. Jim Bestseller isn't.) But if you think about it - Those who get 90% of the income means they get 90% of the pain of a boycott too.

Dave Freer said...

Darwin - while business can deduct the cost of lawyers entirely from their tax bill, it will remain the easiest option - lawyer it, don't consider good business practice. Ergo the frantic anti-pirate prosecutions etc. If normal un-tax influenced business was allowed to operate the answer is it it a lot cheaper to make a great product, at a good price, and widely available, than to say you'll take whatever I can be bothered to hand you, at as much as I can possibly charge you and if you dare do anything about it I'll sue you. But great product, good price, widely available are hard work.

Stephen Simmons said...

I think the blow-up of the "agency model" is going to bring publishers more sharply into focus as "brands" for the average net-based consumer. This may well even spill over to people like me who haven't made the jump to e-books yet, just because the publishers are now a "visible" layer of the process if we order books online instead of venturing out to brick & mortar stores. And for some houses, this will bring those "publisher brands" into the consumer's consciousness in the worst possible light.

Publishers aren't just signing contracts with authors; they also form "contracts", after a fashion, with their readership. Brand loyalty and brand avoidance among the most active readers are real possibilities here. The problem is, how do Baen - and the indie startups that are striving to emulate Jim and Toni - grow enough to accommodate the worthwhile authors and readers, without ending up with the same flaws that are threatening the current megalithic houses?

Chris McMahon said...

Hey, Dave congrats on the contract!

As a general rule for contracts, people advise not to give away any rights that are not actually currently being proposed to be used by the publisher. i.e. keep audio rights if they have no current plans for develop audio books, erights if they have no plans etc. And to ensure the reversion clauses are not too harsh.

I like your idea of making sure they have something at stake in the deal - like an advance on royalties - so they need to keep working on the book.

I just wanted to add for other general readers of the blog that local writer's centres usually have a subsidised contract review service, which is worth using if you don't have much experience with contracts. I think the Australian Society of Authors also has a service.

Dave Freer said...

Stephen - you're dead right about the changing landscape and publishers as brands. My own feeling is most them are as naturally skilled at this as I am at publicity. They're used to being the big kid on the block, calling the shots. The idea - which Baen got LONG, LONG ago of having to get readers to approve of them is just so alien I don't think it has even started to dawn on most of them. That's why I think it is fairly important that we, as writers start to get readers on our side. It's taken a while with musos but I think most serious music fen are aware that recording labels get rich and musicians crumbs - and it is slowly starting to have an effect. Sooner or later someone is going to hit on the idea of branding their company as an ethical middleman in the music industry and will make a killing as the public will follow, and musicians will too. I can see this happening in publishing too.

Dave Freer said...

Chris the contract is more than two years old, and the company are in breach and are cheerfully certain that this not an issue for them. So I think commiserations are more in order ;-/. I'm just lucky I'm not quite as badly screwed most of their authors would be.

Chris McMahon said...

Errg ... sorry Dave. Must be one of my glass-half-full days:)

Dave Freer said...

No worries Chris :-)

Kate said...

I use a pretty simple guideline. If they expect you to bring your own vaseline, someone's getting screwed, and it isn't them.

Except of course it is - only they don't realize it. I wonder why they think sales keep dropping?

Stephen Simmons said...

Chris, The glass is neither half-full nor half-empty. It has 50% reserve capacity to accommodate future growth ...

Or, as my daughter would put it: "Half full? Half empty? Who cares? I'm half-done with my drink, and they haven't brought my darn cheeseburger yet."

Stephen Simmons said...

Dave - yes, and that's yet another matter of effective branding. Someone not only has to set out to become the "even-handed middleman connecting readers to the authors they seek", that entity also has to effectively market him/her/it-self as such.

In a world of pure e-publication, I almost catch wavy glimpses of agents keeping whatever input/slush filtration systems they use now and grafting on a layer of editors/graphics geeks, and the current "agents" becoming the new de facto "publishers". After all agents already have the marketing skills, at some level, and they already have that aforementioned input filtration process - kinda makes th publisher's second layer of filtration seem redundant, if your agent is good enough, n'est pas?

Amanda Green said...

Dave, I come from the old school where a contract is an agreement between two individuals where value is given for value. Now, value may be money for a service or service for service or whatever the parties agree upon. It isn't you give me everything and I'll still take more from you as technology changes and new options become available. So, for me, certain things should be spelled out. Such as what is "in print"? Also, e-rights should be for a set period of time with an option for renewal. There should be reasonable and fair cancellation clauses. Most of all, there has to be a way for authors to insure they are getting a fair and accurate accounting of ALL sales.

Dave Freer said...

Kate - this is what I have been saying about enlightened self-interest. It doesn't help anybody, really, if you get temporarily much better off and kill the business in the process.

Mike said...

Amanda -- just thinking that the question of accounting for sales assumes that the basic model is advance plus a slice of the pie from sales -- but perhaps in the brave new world of ebooks, that isn't going to be the best model? E.g., what if "publishers" went for a work-for-hire model, where they pay authors a flat fee, and then own it? Removes all that confusion about trying to count sales, at least. And if "publishers" are doing ebooks with relaxed distribution (to push their advertising numbers up, etc. -- that's how free newspapers used to pay their way), it might make sense?

Just pondering. I suspect we'll see various models, with contracts following...

Dave Freer said...

Stephen, you know when we were talking about disintermediatation (gah that word), it seemed obvious that either publishers would become retailers, or that retailers would become publishers. But I hadn't even thought of agents...
hmm. let's look at the 4 (as I see them core functions of publishing.
1)Gatekeeping - which they've now largely outsourced to agents - for 15% of the author's cut. ie -they do the job for around 1.5% of gross.
2)editing proofreading and cover copy and art. - all of which you can contract out. Art and proofs are already contracted out. putting guesstimates on the values (based on relative to author pricing) 2%-3% of gross. Which leaves editing - which agents do on occassion have a stab at, at least when it comes to structure, and publishers still sometimes do very well.
3) Production, warehousing and shipping. Are mostly contracted out and do not cost much for e-books

4) Access to market. Access to retail space and marketing in that space is the property of large publishing - just about exclusively... until Amazon and the web. As is this a fast diminishing asset. That could change, but unless it does withing 10 years it will be worth very little.

So yep. Agents are as possible a player. As Ori said: you can outsource yourself to irrelevancy. Because that is one of the few areas that cannot really vanish. We really do still need a gatekeeper. I'm hoping it will be more popularity driven than agenda or preconcieved idea of what is right for the great unwashed to like. (because popular = growth).

Dave Freer said...

Amanda - that transparency can be VERY VERY powerful marketing tool. I don't mind paying good money for a good service. I don't mind paying an author for a good read - or a muso for a good song -- the opposite is true! We like to show our appreciation. But find me the human who believes he should be paying the intermediate 90% and the creator 10 and I'll cheerfully eat a coronet, let alone a hat. Just as 'ethical' coffee etc etc are powerful marketing tools, that could be too.

Dave Freer said...

Mike, it has happened before - back when publishers controlled distribution and publicity utterly and authors were really desperate. ie 1930. I forget which of penny horrible authors it was, but he made a fortune for his publisher, and then asked for more money. And basically got the bum's rush and they used the name... which succeeded for a few years and gradually crashed.

To be honest I'm not sure it's a bad idea. Look, at the moment wannabe writers are paid in dreams. Really, you'd battle to hire more than unskilled labor in Vietnam for the same hourly rate in cash. The difference is the dream. So: you all go to 'work for hire' And never being able to leverage off that name work because it belongs to Fred publisher? And just who do you think will do the job for the present rate? Noobs, who battle along and do vast amounts of 'free' networking, research and promotion, and take on average a year (of no holidays and 14 hours minimum a day, of book or book related) to do a book... at $4000 are earning around 80 cents an hour. You think they'll queue for the job? Not likely. You might get Joe Desperate-for-a-job who will knock it off for you in 6 weeks for the same price. But it won't be much of book (a Joe won't be much of an inspired writer either), and all those freebies you've taken for granted... won't happen. You want maps? Proof reading? research? Websites? conference appearances? Sure: for a considerable price. The Publisher might still win on the bestsellers -- BUT those will cost upper white-collar worker type dollar. And... um, it's the ordinary books that carry the lions share of the costs (ergo, publisher does 4 books a month. One is a bestseller and gets 99% of spend. But the accounting of running costs is divided equally between all four). So the work for hire for at least 75% of books for that publisher is going to cost the publisher at least, conservatively, 10 times what they pay now, by paying in large in dreams. And the other 25% they'll get cheaper (their bestsellers) but not cheaper than they do most authors now.

I think you'll find they prefer to pay in dreams.

Brendan said...

I don't think work for hire will ever fly simply because publishers who seem very risk adverse now would have to stump up a lot more cash up front. If they are reluctant to pay advances now what real chance is their of them stumping up 5 to 6 times that for 'total' ownership. And asuming they do 'buy' a winner the author is not going to be any mood to sign the same sort of contract again for any future work.

Dave Freer said...

Brendan, precisely. If all publishers moved to work-for-hire then - as they're selling no 'dream' the base rate of pay would have to go at least mimimum wage (which is much better than rates per hour now) - which would hire the sort of person who works for minimum wage, and mean almost no chance of retaining talent. If some did... authors would use them as stepping stones. If they tried to stop them moving on with their names... they'd get no-one. So if anything, I can see work for hire at the lowest tier of entry, with negotiated cotracts on royalty above that. And if that meant new authors started at minimum wage - that would mean our incomes went up a lot at the bottom tier.

Mike said...

Might be. I do think we're going to see something like this for the "web presented" works -- if a Tor.com or a Google wants to buy something to put up on their site to get "eyes on the site," they probably aren't interested in trying too hard to track number of readers and pay the writer different amounts for how many they bring in. So they'll want a piece they can put up, basically for a flat fee (or maybe hired?). Actually, I'm not sure how tor.com (as an example) is recompensing the folks who are blogging, posting "free" stories, and so on. Is it just visibility?

Didn't Victor Appleston (the Tom Swift pseudonym) and maybe some other YA series work something like that? Here's the bible, here's what you'll make, and by the way, it will be published under the series name?

I suspect you're right, it may be a route for entry. We've tried to kill off the midlist, maybe it's time to build some new routes?

Kate said...

Dave,

Here's an example of why it's not a good idea for an effective monopoly to screw over its customers...

For many years the Oz government had a two airlines policy - it wasn't legal for anyone to try to start an airline in competition with TAA (the Qantas affiliate) or Ansett. It was cheaper to drive two days and stay in a hotel overnight than it was to fly from Brisbane to Sydney.

Then came deregulation. First the little regional airlines were swallowed by Qantas (and TAA lost its name and became officially Qantas) and Ansett. Then came Compass v1. They tried to compete directly - and Qantas-Ansett duopoly dropped their prices below cost to drive out the interloper. Air travel on all three boomed - until Compass v1 was driven bankrupt and prices went up again.

Compass v2 (different founder) suffered the same fate. Then a local entrepeneur started a competitor at about the same time as Richard Branson joined the fray with Virgin Blue (I don't remember the other one's name). Prices dropped fast again.

Fast forward a bit. Qantas made the competitor one of those too good to refuse offers, and the owner took it. Not much else changed, because Virgin Blue was busily adding to its flight schedule and keeping prices low and service levels high. Ansett merged with/was bought out by Air New Zealand.

Then Ansett made Branson the offer that was too good to refuse.

He held a press conference on the tarmac in front of one of his planes with a good chunk of the Virgin Blue staff there - who weren't in on what he planned. Where he announced that he'd received the offer, it was indeed a too good to refuse offer, and this was what he thought - and tore the letter into pieces right there, to the cheers of his employees (Can't say the man has no sense of drama).

Ansett spat the dummy and said there wasn't room in the Oz market for more than two domestic carriers. Branson retorted that even if this was true, Virgin Blue was going to be one of them.

Ansett later went bankrupt, to a general sentiment of "serves the bastards right" (Particularly since Virgin was willing to honor the tickets of people flying Ansett as best they could given that they typically flew full planes).

The moral? If you've got a monopoly and abuse it, when the inevitable reckoning comes, no-one will miss you when you fall. The publishing industry should remember this.

Ori Pomerantz said...

Dave: It doesn't help anybody, really, if you get temporarily much better off and kill the business in the process.

Ori: Depends on who you are and how long you plan to stay in the industry. If you own shares in a publisher and plan to keep owning them, you're right.

However, if you're a manager who is in publishing today, and expect to be in a different field in a couple of years, then maximizing short term gain might be in your best interest. Especially if you can say "I increased the income of publisher X by 50% in a difficult economic environment - so difficult that a year after I left the company collapsed" in later job interviews.

Dave Freer said...

Ori you make a good point given the way modern business works. However, it's been the criticism levelled at the banking industry (re bonusses) and there is no doubt that it's why banks like Hoare's said 'crisis? what crisis?' while around them many short-term benefit operators cost the tax payer (a terrible mistake IMO) a fortune. Its always been an aspect of business culture, but it's really only the last 30 years that it has become the dominant culture. It's not an evolutionary survival strategy for ALL (yes, a few cannibalistic execs can do well, but if they all start doing it, the edifices fall. It's rather like the 'sneaky f*ck#r' strategy (a real biological term BTW) in sexual behavior. While 5% of the population is using it, it works well for them and actually has no particularly deletarious effect. As soon as that rise above a certain point - the population crashes) so I expect to see dis-incentives emerge. Of course governments don't help by 'rescueing' these people. (How often do I have to say this: reward _good_ behavior, punish bad, not the other way around, for a desired outcome?)

Dave Freer said...

Kate - Branson has provided an excellent example (and not just this time) of how getting the public on your side can be very profitable. I still don't publishing in general has got the idea that they need to be visible and supported... if they are going to be supported. They're used to using their janissaries (AKA authors) for this (In the Amazon fight, and in the campaign for cheaper books fight her in Oz.) The 'reward'for this has always been 'be happy you are allowed to survive' simply because there were no alternatives. The janissaries might detest them, but they had no alternatives. I believe alternatives are opening. Publishing-as-we-know-it-in-general (there are exceptions) needs a seismic shift in attitude or it will go extinct. And when it is in trouble and needs help again, I think it may find it thin on the ground. I really don't think they've got their heads around this yet, and I predict more attempts to do it through legalese and restrictive contracts.

Stephen Simmons said...

Dave: "Its always been an aspect of business culture, but it's really only the last 30 years that it has become the dominant culture. It's not an evolutionary survival strategy for ALL ..."

I has a theory about that, actually. And it's funny that you mention "the last 30 years".

Up until forty years ago, US Dollar was pinned to gold at a fixed exchange-rate. When Nixon removed that restriction from the Federal Reserve, the resulting devaluation of the Dollar caused a massive outflow of capital from the US equity investment markets. To save American corporations from bankruptcy, Nixon's successors created new derivative investment instruments: the money-market account and the mutual fund, enticing middle-class American households to move their nest eggs out of conventional savings accounts and into equity instruments. European and other equity markets quickly followed their example.

Prior to the invention of those indirect investmnt instruments in the late 1970's, the shareholders had always served as the "conscience" of any corporation, threatening to move their money if the corporation "behaved" in a manner of which they disapproved. Now, that decision is made by our mutual-fund managers, and the only message they send to boardrooms is: "maximize the short-term bottom line, or we'll move these billions somewhere else". That has created a pervasive cultural change throughout the business world.