My Response to Entangled Publishing’s Threats

Yesterday I received an email from Liz Pelletier, the publisher at Entangled Publishing, whose contract I reviewed in an earlier post. Ordinarily I wouldn’t share an email without the other party’s consent, but considering what Ms. Pelletier has to say, and its connection to my review of Entangled’s contract, I’ve made an exception. Here’s the email in its entirety:

Dear Mr. Mehalic:

Since you state in your own words on your own blog that you are aware that the contract you had previously posted was never used by Entangled, you have twenty-fours to remove your latest reposting of the contract from your website. Given this false attribution, your dissection of its contents as relates to Entangled are also false and therefore libelous and must be removed as well. Yes, libelous. I have an attorney and know what it means, and since you are using your blog to drum up new clients for your new legal endeavor, one can attribute intent with the hope to profit from your posts. If you ask me nicely and with a public apology of your previous post, I’m happy to provide you with a copy of our real contract. I have no fear of you, but lies for the shock factor simply because you need clients is shameful, Mr. Mehalic. I do hope you treat your clients with more honesty and ethics than you’ve shown thus far.

Please do not bother replying to this email as our earlier emails were a waste of my time. I’ll have my assistant simply check your site tomorrow and forward the information to our attorney should you not retract your statements. If you do however post an apology, I’ll have her send a copy of our real contract immediately.

Sincerely,

Liz Pelletier, Publisher
Entangled Publishing, LLC
http://www.EntangledPublishing.com

I’m not sure where to begin. In this post from last month, I explained that Ms. Pelletier had emailed me after my review of Entangled’s contract had been published at Pitch University, and informed me that the contract I had reviewed was six months old and had never been used. As I noted in my post and as I informed Ms. Pelletier, I didn’t know either of those things when I published my review, and they aren’t apparent from the contract. So contrary to Ms. Pelletier’s first statement, I never stated that I was aware that the contract I posted was never used by Entangled — she told me that.

In that same post, I explained that I had invited Ms. Pelletier to provide me with Entangled’s current contract and/or post a comment about my review, so that we could have a discussion, but she chose to do neither. In fact, I’ve extended that invitation to her at least twice. But all I’ve heard from her in response is the email quoted above.

So here’s my question: why play games? If Ms. Pelletier is as troubled by my earlier post as she claims to be, then why not send me Entangled’s current contract and ask (she doesn’t even have to ask nicely) that I review it and publish my review? Or why not post a comment pointing out what she disagrees with in my review? Those would seem to be more effective ways for her to accomplish her goal of correcting my supposed misstatements about Entangled’s contract than the approach she’s chosen.

I don’t do well with ultimatums (who does, really?), so for the record (and Ms. Pelletier’s edification), I’m not going to ask her — nicely or otherwise — for Entangled’s current contract, nor am I going to apologize for or retract my earlier post. I stand by what I wrote.

Do You Need Representation with an Indie Publisher?

Thanks to recently published author and Massachusetts lawyer Pete Morin, I read an interesting post from Kristine Kathryn Rusch, whose recent experiences with two editors prompted her to identify the advantages and disadvantages of the traditional publishing/agent model and those of the indie publishing model.

I mostly agree with her analysis, but disagree with her implicit assumption that having an agent or at least some representation is mutually exclusive with going to an indie publisher. There may not be room for an agent’s ongoing representation — and, as she notes, the 15% commission — with an indie publisher that isn’t going to pay any advance, but my experience, as illustrated by some of the contracts I’ve reviewed in earlier posts, is that a writer still needs the benefit of an agent or lawyer to review an indie publisher’s contract and provide some advice about its provisions.

Ms. Rusch comes down ultimately on the side of indie publishing, which is a choice that a lot of writers are making now. However, if a writer, or even a published author, goes the indie publishing route without consulting an agent or lawyer about his or her rights and responsibilities under the contract, the writer is not helping his or her career.

Here’s my bottom line to writers: don’t let your desire (also known as desperation) to be published overwhelm your judgment about whether a deal is good for your career. And if you’re not sure whether the deal is good for your career, then you’ve just answered the question of whether you need help from an agent or lawyer.

Kiana Davenport’s View of Her Problems with Penguin

I emailed yesterday’s post to Kiana Davenport because I thought she might want to know about it. She was kind enough to email back, and gave me permission to share her response, which is reproduced in its entirety below:

Dear Jeffrey Mehalic, thanks so much for your interest and support. Your readers ask if I breached my contract in any way, but it is answered there in the Bits Blog, Legal documents prove I fulfilled all obligations. Neither my attorneys nor I can understand what motivated Penguin to terminate me, other than sheer terror of Amazon, and the usual despotism of mega-corporations.

The Times article was not so much about me as about the decline of the print publishing industry, and the onslaught of the digital age. I happened to get caught in the cracks of this massive, tectonic shift. Still, I shall mourn the passing of print books and bookstores as we knew them.

Thank you again for your interest, and I wish you all the success in the world. PS…My mother was full-blooded Hawaiian but my father was from Talladega, Alabama. So I have cousins in Texas, Va., W. Va, and Alabama. You have my permission to reprint this email. Kiana Davenport

If anyone from or on behalf of Penguin wants to comment or explain its side of the story, I’m happy to publish whatever I receive.

In the meantime, however, this incident reflects very poorly on Penguin (and, unfortunately, on traditional publishers as a whole). How Penguin reacted to Davenport self-publishing some short stories had nothing to do with any breach of her contract, and has everything to do with its fear of Amazon and other publishing platforms that will make traditional publishers increasingly irrelevant unless they adapt very quickly.

This Is Why Authors Don’t Like Traditional Publishers

You may have heard of Kiana Davenport’s predicament by now. David Streitfeld described it in his article about Amazon in Monday’s New York Times, and he followed up with this post on the Times’ Bits blog yesterday.

Davenport received an advance of $20,000 for a Civil War novel for Riverhead Books, a Penguin imprint. Her book is due to be published next year. Because that amount wasn’t enough to live on — which everyone but Penguin seems to know — she self-published a book of old stories on Amazon. (This was the focus of Streitfeld’s story yesterday, but some of the reactions prompted him to write today as well.)

Here is how Streitfeld describes what happened after Davenport self-pubbed her stories:

Penguin learned of the new work and got upset. In a brief letter
that Penguin’s general counsel, Karen Mayer, sent to the writer, it said the publication of “ ‘Cannibal Nights’ by Amazon violates the ‘next-work’ representation, the no-compete provision and the option clause.” Penguin also said Ms. Davenport had thereby demonstrated her “unwillingness to work in good faith with us” toward publication of the novel. The letter ended by saying the writer had 10 days to repay her advance “to avoid legal action.”

Penguin stated in mid-September that this was “a straightforward matter involving the publisher’s right to publish the author’s next work. It is being handled by the lawyers.”

Jan Constantine, a lawyer for the Authors Guild, wrote a letter to Penguin on behalf of Ms. Davenport. She said that the stories had been offered to Penguin 15 years ago and turned down, that Riverhead had already seen the novelist’s next novel and said it was not interested at this time and that a self-published e-book was hardly competition to the novel but might even promote it.

Davenport’s lawyer pointed out that her sales of her e-book would build her overall presence, and lead to increased sales of her book with Riverhead, but according to the post, neither Penguin nor Davenport’s lawyer had any comment yesterday.

Davenport wrote about her experience on her blog, Davenport Dialogues, in late August and described what appears to have really angered Penguin:

Recently that publisher discovered I had self-published two of my story collections as electronic books. To coin the Fanboys, they went ballistic. The editor shouted at me repeatedly on the phone. I was accused of breaching my contract (which I did not) but worse, of ‘blatantly betraying them with Amazon,’ their biggest and most intimidating competitor. I was not trustworthy. I was sleeping with the enemy.

But I think the most telling part of her story is what Penguin demanded in order to proceed with publication of Davenport’s book:

So, here is what the publisher demanded. That I immediately and totally delete CANNIBAL NIGHTS from Amazon, iNook, iPad, and all other e-platforms. Plus, that I delete all Google hits mentioning me and CANNIBAL NIGHTS. Currently, that’s about 600,000 hits. (How does one even do that?) Plus that I guarantee in writing I would not self-publish another ebook of any of my backlog of works until my novel with them was published in hardback and paperback. In other words they were demanding that I agree to be muzzled for the next two years, to sit silent and impotent as a writer, in a state of acquiescence and, consequently, utter self-loathing.

The vice president and publisher of that house called my agent, offering extra little sweetmeats if I would just capitulate and ‘adopt the right spirit going forward.’ This somewhat sinister and semi-benevolent attempt at mind-control fascinated me. It became crystal-clear to me that the issue wasn’t a supposed ‘breach of contract,’ on my part, but the publisher’s fear and loathing of the profoundly threatening Goliath, Amazon. Since CANNIBAL NIGHTS in no way ‘resembles’ or would ‘injure’ sales of the book I had sold them (an entirely different subject matter) I was not in breach of my contract. I stood firm, and refused to capitulate.

Penguin has cancelled Davenport’s contract and demanded repayment of the advance.

What is remarkable — at least to me — is that, according to Streitfeld, “much of the commentary I’ve seen comes down harshly on Ms. Davenport for supposedly violating her contract – as if these agreements were always ironclad and any deviation was punished by cancellation. There was little sympathy for a mid-list writer adrift on the digital seas, and no mention of what a publisher’s responsibility is to a writer during the years it takes to produce a new book.”

Based on what I know — which is based on what I’ve read — I don’t think Davenport breached her contract with Penguin. If Davenport had self-published her short stories on another platform, Penguin wouldn’t have complained. It was Davenport’s decision to self-publish with Amazon that caused Penguin to respond so forcefully (and, one could argue, vindictively).

And that’s a problem for authors — certainly for Davenport right now, but for others whose experiences aren’t as well known — because Amazon isn’t going anywhere, and its model of publishing is going to be more successful ultimately than traditional publishers’, which will produce more reactions like Penguin’s.

My Original Post on Crescent Moon Press and Entangled Publishing’s Contracts

This is my original Pitch University column about Crescent Moon Press and Entangled Publishing’s contracts, which I’m reposting in its entirety, followed by the comments and questions that were posted on that site. I’ll respond to all comments and questions, including those posted when the column was published last month. For any new comments or questions, use the comment box at the very bottom of the post.

This is my second column about publishing contracts. Each column reviews a publishing contract (or maybe two), and I discuss five points about each contract that are good and/or bad. (See bottom of this post to submit your contract for analysis.)

Disclaimer: My opinions here are general in nature and should not be interpreted as legal advice for any particular situation. Any recommendations or advice necessarily depends on the specific facts. If you want advice or assistance about a specific situation, feel free to contact me and we’ll discuss whether I can help you.

I had originally planned on writing about contracts once a month, but since I am receiving quite a few contracts to review, I will write as often as time allows (as long as you keep sending them to me).

Today I want to talk about the contracts offered by Crescent Moon Press, Inc., an e-publisher, and Entangled Publishing, LLC, a new publishing company.

CRESCENT MOON PRESS, INC.

I was recently asked to review the contract offered by Crescent Moon Press (CMP). Its contract is marked “confidential,” so I will not quote directly from it. However, I do want to discuss it generally with you.

In my humble opinion, this is the kind of contract that a writer should BURN, not shred.

Among its many problems is that CMP offers NO protection to the author for any copyright infringement and can’t be held liable for its failure to do so. If you’re a CMP author, and a third party infringes your copyright, you had better be ready to hire a lawyer and go to court because that’s the only way your rights will be protected.

Furthermore, my experience with publishers of a similar size and structure makes me think that CMP does not have insurance coverage (which is why it doesn’t assume the responsibility of protecting its authors’ copyrights against infringement). No insurance coverage means that for any claims or lawsuits that arise, an author is on her own. If you’re an author with CMP or a similar publisher, ask to see its liability insurance policy, including the declarations page that shows the named insureds and the types and amounts of coverage.

One other provision intrigues me. It provides that the agreement is governed by the law of one state (which is called a choice of laws clause and is standard), but that the courts of another state (actually, the courts of a particular county in that state) have jurisdiction over any lawsuits (which is called a forum-selection clause and is also standard). But when the jurisdiction whose laws control is different from the jurisdiction where suit has to be filed, one gets into thorny questions about conflict-of-laws, meaning which jurisdiction’s law controls. Plus, for reasons that I won’t get into, but which deal with federal jurisdiction, there is no way to limit lawsuits to a particular county of a state because federal courts are organized according to judicial districts, not counties.

I can understand why CMP wants this contract to be confidential.


ENTANGLED PUBLISHING, LLC

According to its website and various interviews of its principals, Entangled was formed by four authors, all of whom continue to write. Their continued writing concerns me because of the potential for a conflict that it presents. An author who actively promotes his or her own writing and also publishes and promotes the writing of authors who are clients – if the clients write in the same genre(s) – has a conflict that is going to impair the client’s rights.

Another concern is that in addition to their involvement with Entangled, it appears that the principals also have other full-time jobs, which has to reduce the time available to devote to new publishing company.

Also, I don’t see that any of the principals has any specific background in publishing or related areas, such as marketing, promotion, or editorial services, beyond what they may have done for their own books. (For example, one of the principals was a free-lance editor and still is, with Entangled. Her experience may be helpful, but it doesn’t necessarily make her qualified to run a publishing company.)

What I found particularly alarming, when I did my own research on Entangled, is the information about its financial model and business practices discussed in some Q&A with its managing editor on Absolute Write (see http://absolutewrite.com/forums/showthread.php?t=207134). You can read it for yourself and draw your own conclusions.

Another note: Entangled is interested in becoming a print publisher through print on demand (POD). I question the wisdom of that model at this point, when bookstores are dying and the printed book no longer enjoys the popularity it once had. Bookstores now stock an increasingly smaller number of titles, which makes me wonder whether a publisher like Entangled can compete effectively. In addition, since PODs are non-returnable, I question how Entangled plans to get PODs into bookstores?

Here are five provisions about this contract that you should be aware of:

Point # 1:

II. AGREEMENT TERMINATION (See page 2-3)

C. … A work shall be considered in print:

i. For a fixed initial term of eighteen (18) months after first digital release;

ii. For a fixed term of twelve (12) months after first print release;

iii. If the Work is under option or contract for publication or on sale in any edition in the United States, whether under the imprint of the Publisher or a licensee.

iv. If combined sales of all Publisher’s editions, both digital and print (from whatever technology), exceed 100 copies in any 12-month period. Should sales fall below 100 copies in print and digital editions for that period, Publisher shall have the option of paying the author $500, and thereby maintaining the book in print status on such basis for an additional twelve (12) months.

(Emphasis added.)

You’ve got to be kidding me. If all the editions don’t sell 100 copies in all editions in any 12-month period, Entangled can pay the author $500 and keep the book in print for another year. I don’t know whether to laugh or to cry.

If the book hasn’t sold 100 copies in all editions in a year, the book should go out of print so that the author can get the rights back. But it’s offensive that Entangled has the absolute right to pay the author $500 and keep the book in print for another year. You will notice there is no limitation on the number of times Entangled can invoke this provision, so theoretically, Entangled can keep a book in print (under the contract) indefinitely as long as it pays the author $500 per year. What a scam.


Point # 2:

III. COPYRIGHT (See page 3)

A. The copyright in the Work will belong to the Author. It is understood and agreed that the copyright shall be secured by the Publisher in the name of the book and the Publisher is hereby authorized to take all steps required to secure such copyright in the United States of America and other countries as needed. The Publisher agrees to print an appropriate notice in each and every copy of the published work in a place and form that the Publisher believes complies with requirements of the United States Copyright Law and to require all parties to whom it grants licenses in connection with the work to do the same. The party in whose name copyright is registered shall hold for the benefit of the other such rights as the equities hereby created may prescribe. Unless it specifically agrees to do so in writing, the Publisher shall not be responsible for securing any copyright outside the United States of America.

(Emphasis added.)

The problem is that this provision conflicts with

I. GRANT OF RIGHTS (See page 2)

B. EXCLUSIVITY. Such grant of rights shall be exclusive throughout the world.

(Emphasis added.)

So even though Entangled insists on receiving a worldwide grant of rights, it will not do anything to obtain those copyrights for its author. This is important because other countries have their own copyright laws and operate under various copyright conventions and treaties, which require an author (or publisher) to register his or her copyrights (For more information, take a look at http://www.copyright.gov/circs/circ38a.pdf). This strikes me as a provision that is fundamentally unfair to an author. If Entangled insists on receiving an author’s worldwide rights, it should be committed to securing and protecting those rights for its author.

Point # 3:

IV. MANUSCRIPT (See page 4)

A. The author agrees to deliver the most recent version of the first manuscript of the Work in English language in .rtf or docx format via email to the Publisher no later than _______.

If the Work consists of one or more book, the delivery date of a draft of the second manuscript contained in the Work shall be delivered no more than twelve (12) calendar months from the date noted herewith.

Subsequent books contained in the Work shall be released within twelve (12) calendar months of the final delivery date of the previously submitted manuscript within the Work.

I realize that these provisions use 12 months as the outside number, but they should have definite dates, rather than estimates. Instead of “no more than 12 months” or “within 12 months,” the contract should state exactly when (in months) the draft of the second manuscript, for example, needs to be delivered. Likewise, the release dates for subsequent books should be specified in a number of months from the final delivery date of the previously submitted manuscript.

This is also an example of language that an author needs to narrow. Broad, vague language generally favors the publisher, so the more that an author can narrow or even remove the language, the better.

My concern is that unless those dates are specified, Entangled has complete discretion under the contract. Thus, an author could wait up to two years between books, which makes building and keeping an audience difficult, if not impossible. Readers who like the first book and look forward to the next one are not going to maintain their enthusiasm for two years. They’re going to move on to another author whose books are released more quickly.

Point # 4:

F. SUBSEQUENT REVISIONS (See page 5)

When the Publisher considers it necessary, it shall have the right in its sole discretion to call upon the Author to revise the Work, and the Author shall make such revisions. The provisions of this agreement shall apply to revision of the Work by the Author, as though any such revision were the original Work being published for the first time, except that the manuscript of the revised Work shall be delivered in final form by the Author to the Publisher within a reasonable amount of time; further, no initial payment shall be made in connection with such revision. Should the Author not provide the revision within a reasonable time, or should the Author be deceased, the Publisher may have the revision done and charge the cost of such revision against royalties due or that may become due the Author, and may display in the revised Work, and in advertising, the name of the person or persons who revised the Work.

(Emphasis added.)

This provision means that if an author doesn’t provide the revisions within a reasonable time – which is not specified and thus is subject to Entangled’s discretion – or if the author dies, Entangled can have the revisions done and charge the author (or his or her estate) for the cost against royalties that are or may be paid. I don’t like that, but it’s understandable, particularly if the author doesn’t get the revisions done “within a reasonable time.”

But what I think is really offensive is that Entangled can display in the book and in advertising “the name of the person or persons who revised the Work.” An author should not have the rights to his or her intellectual property diminished because the publisher needed to have revisions performed. I suspect Entangled’s likely response would be that someone else would not have needed to make the revisions if the author had done so, but that, to me, is an inadequate reason to give that person(s) credit not only in the book, but in advertising.

Under this rationale, a publisher could claim that it had some interest in an author’s IP based on revisions that its editorial staff made. Don’t laugh: I encountered this issue a couple of months ago when a small publisher claimed that it shared in its author’s IP based on editorial changes to the manuscript. Fortunately the publisher came to recognize that it had no claim to its author’s IP, Entangled’s provision creates the potential for an unnecessary dispute between the author and the publisher.


Point # 5:

XVIII. RECOVERABLE PAYMENTS (See page 15)

All payments made by Publisher to the Author, whether under this agreement or not, shall be chargeable against and recoverable from any or all monies accruing to the Author under this contract and for all other contracts between the parties or their assigns.

This provision is known in publishing as “joint accounting,” and you should run, not walk, away from it. What it means is that if your first book doesn’t earn out, i.e., the book’s sales didn’t exceed the amount of the advance, Entangled can recover what it is owed for that book from future books in the series until it’s been paid. Likewise for reimbursement of its expenses. Entangled can withhold monies owed from subsequent books in a series to recoup its expenses incurred on the first book. I will say again that joint accounting offers nothing remotely favorable or beneficial to an author. Only the publisher benefits, which is why the provision is in the contract. Insist that the publisher remove the provision from the contract (assuming that you’re going to sign with the publisher).

There are a number of other provisions in this contract that concern me, such as the grant of rights worldwide, rather than on a limited basis, such as North America or specified English-speaking countries.

Also, I don’t like the arbitration provision, but bear in mind I don’t like arbitration provisions in any contract. This one, though, requires the arbitration to take place in Colorado, which is where Entangled is located, unlike arbitration provisions that typically provide for the arbitration to take place in a location that is mutually acceptable to the parties. Here, besides having to arbitrate your dispute with Entangled, you have to travel to Colorado to do it, which favors Entangled at the expense (literally) of the author.

Finally, one last point about this contract. Entangled wants all rights, and agrees to divide any proceeds therefrom with the author on a 50-50 basis. My problem is that Entangled has no history of placing any of these rights (dramatic, audio, graphic, serial, etc.), and therefore has no basis upon which to determine whether the author could sell the rights on her own at terms more favorable to the author. This is where an agent or attorney would negotiate to retain these rights for the author.

I recommend you SHRED this contract (one star on my rating scale) because, between the terms of the contract and what Entangled can provide an author, you’re better off elsewhere.

On my rating scale, I give Entangled’s contract: ☆

____________________________________________

Rating scale:

☆☆☆☆☆ Very good (few revisions needed);

☆☆☆☆ Good (some revisions needed);

☆☆☆ Fair (needs substantial revisions);

☆☆ Poor (contract is heavily weighted against the author)

☆ Shred it.

___________________________________________________

Diane Holmes, I’m the Founder and Chief Alchemist here at Pitch U!Collapse

Jeff, thank you for reviewing Crescent Moon Press and Entangled Publishing.

Writers often say, “Contracts, why aren’t they written in the writers’ favor?”

Uh, because we didn’t write them, of course. Publishers (and all
businesses) write their contracts holding their own interests at heart. That’s
their job.

Our job? Look out for our best interests. And never, ever expect a contract
we didn’t write to represent what will be best for our careers.

It is always wise to be careful who you do business with and what you sign.That said, I find myself hoping that Entangled improves their contract and becomes a champion for writers. After all, they are writers themselves. So, I hope they’re able to do great things in a way that truly partners with writers and creates career-level income.

There’s a long history of writers creating (VERY) small presses to publish what they’re passionate about (not necessarily their own writing). In fact, I co-owned a small press that did this back in the day. We gave an advance and paid royalties (for short stories), back when there was no e-anything.

But always in business there is risk, that that’s the genius of your contract reviews.

Authors need to understand the risks they’re taking and make wise decisions.Many writers “trust” publishers and don’t ask any questions. They just want to be published (by somebody else, one assumes). This trust is the riskiest way to run your writing career.

Some publishers really aren’t nice to writers. I have friends who have had their careers ruined by an agent or publisher. Some just lost money. Just money! Like any writer can afford to lose the money owed to them.

But there are publishers and agents and industry professionals who love this industry, have high-integrity, and are GREAT business partners.

So, what I love most about your reviews is the subtext: you need people on YOUR side, people who can advise you, point out risk, and make sure you are as wildly successful as possible.

Jen Tanner

Jeff…thanks for another eye-opening and informative post. Diane…you’re spot on about writer’s looking out for their own best interest. Great post!

CarrieSpencer

Excellent post. Jeff and Diane, keep this series going! We need it!

Primrose3111

I don’t understand why there is anything in a contract with these small electronic and/or pod publishers about joint accounting when they don’t even pay advances??

jink

Great post!!!

Sue T

Wow. I know a bunch of reputable agents who have sold clients’ work to Entangled. Wonder if they got these provisions changed? I do, often, wonder about authors writing and publising books and doing the same for others and how they manage the conflict of interest. So far, though, I haven’t heard of issues. Authors with Entangled seem to be pretty content.

Lily C

I’m not sure if I would want this guy negotiating any of my contracts. As most of that is all standard clause. Has he seen any of the big NY publishing contracts, like Harlequin? POD is actually returnable, by the way.

Not all contracts are perfect. The joint venture throws me off because there is no advance to even worry about. Probably just standard clause.

Also, agents are making deals with Entangled left and right— reputable agents. Obviously they don’t have any problems with the contract, and a good agent looks out for their authors. All the Entangled authors are really happy and content. Just look at their blogs and twitter feeds.

Also, many agents and editors have their own separate writing careers. Is there a conflict of interest there, too? I don’t think so. Many people is this business are passionate about writing and reading, and wear many, many different hats.

This was an eye opening post, but not how it was attended. I think some research on pub contracts is needed before giving opinions.

Oy!

Oy.


WriterGirrrl

This seems like a basic contract, the boilerplate, that’s probably given to most authors. Depending on if there’s an agent involved and who the agent is, they will work to change some of the more onerous provisions. Some agents may just let it go through, figuring they’ve got nothing to lose since there is no advance. Why bother to hustle for no payment? For the possibility of a future 15% of 5% or similar? Not worth the time to negotiate better, and if their client wants the deal what do they do? Tell them no?

My main objection is referring to these placements of materials with such presses as “sales.” They are not sales. They’re not paying anything for these books. Authors are so desperate to be published that they’ll accept the terms, which just incites more publishers to offer similar crappy terms.

The commenters are correct in that a lot of NY editors and agents have writing careers on the side. However, these editors also have a company structure behind them that supports the business side of the publishing. Their day job isn’t a hobby or something they do on the side — the writing is the sideline. No matter how well meaning a group of writers is, their limited experience and exposure to publishing doesn’t qualify them to become publishers. But this isn’t stopping a whole cadre of people from jumping in, claiming they can “do it better than NY publishing,” when their ignorance is going to lead them into complications they can’t even imagine.

Without a corporate structure behind them, these publishers at best will stumble along, learning their trade on the backs of the writers they publish. Some may survive and thrive. At worst, the writers will be screwed and unhappy with the outcome as it won’t live up to expectations.

When I worked in a bookstore, pod books were not returnable. That was the whole point. We did not allot shelf space to them, as they were mainly self-published books with little or no quality control. I would be surprised if that has changed now. To take back books there needs to be a whole distribution system (small publishers sign up with distributors or larger publishers to distribute) which is pricey. I doubt a small startup is in a position to pay for distribution. Or sales staff.

We are in an exciting time now, and there are more opportunities than ever before for both success and heartbreak. I wish this small press well. I wish RWA was as proactive as it used to be when it came to publishers. When Kensington started their imprint in conjunction with WalMart, and paid authors “only” $3000. per book, there was a huge outcry about underpayment. But people couldn’t wait to sign up because they wanted to be published. Now, they are lined up for no money at all, and RWA says nothing. Boo.

And back in the day, the RWR used to have a column by an attorney who went through contracts in just this way and commented on the good and the bad. They don’t do that anymore, either.

I want to thank this blog and this attorney for pointing out some of the problems in this contract and others. Don’t shoot the messenger. The basic contracts for big NY publishers are awful, too, but you know what you’re going to get there, and if you have a brain you get an agent.

My Original Post on Sourcebooks’ Contract

This is my original Pitch University column about Sourcebooks’ contract, which I’m reposting in its entirety, followed by the comments and questions and my responses that were posted on that site. For any new comments or questions, use the comment box at the very bottom of the post.

I’m glad to be back at Pitch University. This is the first in a series of posts I’ll be writing about publishing contracts. Each post will review a publishing contract (or maybe two) and I will discuss five points about each contract that are good and/or bad.

Disclaimer:My opinions here are general in nature and should not be interpreted as legal advice for any particular situation. Any recommendations or advice necessarily depends on the specific facts. If you want advice or assistance about a specific situation, feel free to contact me and we’ll discuss whether I can help you.

Today I’m going to start with a contract from Sourcebooks, Inc., a mid to small size publisher based in Naperville, Illinois. I have redacted all of the identifying information (names, addresses, titles, amounts). But I have retained all of the contract’s provisions in order to discuss them here.

I will quote (in bold type) the provisions that I discuss, but I have attached the entire contract for your reference.

POINTS #1 & #2:

(Page 8)

9. EARNED ROYALTIES

A. Primary Rights

(3) For electronic editions of the Works published by the Publisher either directly or through a third party electronic provider, the Publisher shall credit the Author’s account with the following royalties: 

(a)On all electronic editions of the Works sold in its entirety, except as provided below, a royalty of fifteen percent (15%) of the Net Receipts on the first five thousand (5,000) copies and twenty percent (20%) thereafter. Copies sold pursuant to any other subparagraph of this paragraph-9.A shall not be counted in computing sales pursuant to this paragraph 9.A.(3)(a).

(b)Discounted sales. On all net electronic editions sold where the discount to dealers or others is fifty-five (55%) or more of the List Price, a royalty equal to one-half the regular royalty.

Considering that the standard royalty rate on electronic editions is 25%-70%, Sourcebooks’ is the lowest payout in a contract that I’ve seen.

To put things in perspective and let you know what these numbers mean to an author, under Section 9.A.(3)(a), at 15%, a digital book sold for $6.99 (a typical Sourcebooks price) and downloaded from Sourcebooks’ website generates a royalty of $1.05. The author has to sell 5,000 copies in order to move up to the 20% royalty rate, which would then generate a royalty of $1.40 on a book costing $6.99.

Let’s face it, Sourcebooks isn’t going to sell very many copies under this section, so let’s move on to Section 9.A.(3)(b), which covers sales by third party vendors, such as Amazon.com, Barnes & Noble, etc. Sourcebooks placed the author’s book covered by this contract on Amazon for $.99. Let’s do that math. For the first 5,000 books sold, the royalty will be one-half of the regular royalty, or 7.5%, which, on a book selling for $.99, will earn the author $.07. A seven-cent royalty. So if you sell the 5,000 books necessary in order to move up to the higher royalty rate, you will have made a total of $350 in royalties.

For sales above 5,000, the royalty increases to ten percent, so the author would earn a royalty of $.10 per book.

POINT #3:

(Page 10)

9. EARNED ROYALTIES

F. Other Costs and Expenses.

The Publisher is entitled to debit the Author’s account for all costs which the Author is required to pay hereunder. In addition, the Publisher may deduct any invoices arising out of this Agreement outstanding to the Publisher by the Author.

The problem with this provision is that it doesn’t specify what Sourcebooks’ costs (or expenses) are, and therefore doesn’t limit how much Sourcebooks can debit the author’s account.

For example, as written, Sourcebooks can charge an author for telephone calls, postage, photocopies, facsimiles, etc., all of which can add up. And one can even argue that under this provision, Sourcebooks could charge an author for such expenses as copyediting, cover art, product placement, etc.

Publishers tend to favor broad or general language in their contracts that is subject to interpretation. An author, therefore, needs to define and narrow the scope of the language wherever possible in order to avoid disputes about what the parties intended.

POINT #4:

(Page 4)

1. The Manuscript.

C. Right to Edit. The Publisher shall have the right to edit the Works provided the meaning of the text is not materially altered, and shall have the right to publish, distribute, reproduce, sell and use the Works under the Primary and Secondary Rights in suitable style as to paper, printing, binding, cover and/or jacket design, to fix or alter title and price and to select the characteristics and media for all electronic versions, electronic adaptions, and ancillary and derivative products.

The first problem with this clause is that it allows Sourcebooks to change the author’s intellectual property without permission. Even Sourcebooks’ use of the phrase “provided the meaning of the text is not materially altered” is troublesome, because “not materially altered” is not defined or explained. I suspect that what constitutes a material alteration to Sourcebooks is not the  same as what constitutes a material alteration to an author.

The second problem with this clause is that Sourcebooks has control over every facet of the book and the author has no means to object. If Sourcebooks wants to sell a book for $.25, it can do that under this provision: “to fix or alter title and price ….”

This is usually where the author has cover and title approval, or at least has to be consulted on those issues. But the author has no such rights here.

Finally, look at this language: “to select the characteristics and media for all electronic versions, electronic adaptions, and ancillary and derivative products.” Again, there are no definitions or limitations imposed on Sourcebooks here, so this clause means what Sourcebooks says it means, which is a bad place for an author to be, whether it’s Sourcebooks or any other publisher.

For the last provision I want to discuss, there are actually three that work in tandem:
POINT #5, part 1:

Page 5

6. Indemnity.

A. The Author shall indemnify, defend and hold the Publisher, its subsidiaries and affiliates and its and their respective agents, officers, directors and employees harmless from any claims, demands, suits, actions, losses, costs, damages, reasonable attorney’s fees, and expenses that the Publisher shall sustain or incur by reason of any breach or alleged breach of any of the foregoing representations and warranties, and until such claim, demand, or suit has been settled or withdrawn, the Publisher may withhold any sums due to the Author under this Agreement. The foregoing representations, warranties, and indemnity shall apply to all derivative works, adaptations and improvements. The provisions of this paragraph shall survive the termination of this Agreement.

Point #5, part 2:

(Page 6)

D. Security.

In the event any suit is filed, the Publisher shall have the right to withhold payments due the Author under the terms of this Agreement as security for the Author’s obligations under this Agreement as stated above.

Point #5, part 3:

(Page 10)

9. Earned Royalties.

E. Reserve against Claims.

In the event of a Claim against the Publisher that, if sustained, would constitute a breach of any of the Author’s representations and warranties pursuant to this Agreement, the Publisher shall have the right to withhold royalties and any other payment that may be due pursuant to this Agreement pending a final determination thereof. The Publisher shall have the right to apply any of said withheld royalties and other payments then or thereafter accruing hereunder in reduction of the obligation of the Author. If a suit shall not be commenced for a period of six (6) months from the assertion of a Claim, all withheld royalties and any other payments shall be payable at the end of the next succeeding accounting period.

To be fair, most publishing contracts, and most contracts of any type, have indemnification and hold-harmless provisions. So if an author represents to the publisher that the manuscript is an original work but turns out to have been plagiarized or have been published elsewhere, the publisher can ask the author to indemnify or make it whole for its losses. There is nothing unreasonable about that.

But these three provisions seem to conflict in their effect, if not their language. My objection to the Security clause, which serves as a sort of “pre-judgment attachment,” is that Sourcebooks has the right to withhold money owed the author “as security for the Author’s obligations” even before there’s been a determination that the Author owes any money to anyone. In addition, there is no limitation on the amount that Sourcebooks can withhold or the period of time for which Sourcebooks can withhold the author’s money, and you see that this provision can really harm an author.

When you move to the “Reserve against Claims” provision, this gives Sourcebooks yet another means of withholding money due an author simply because a “Claim” has been made. And because there are separate references to a “claim” and a “suit,” a claim is sufficient to trigger this provision. A claim can be a letter demanding payment or some other relief as opposed to an actual lawsuit, but that letter is all that Sourcebooks requires to withhold an author’s royalties and other money, again for an indefinite period of time.

Bear in mind that a claim or lawsuit need not have any legal merit for Sourcebooks to invoke these provisions. In other words, even if a claim or lawsuit has no chance of succeeding, Sourcebooks can still withhold an author’s payments as security or a reserve, until the matter has been resolved, which can take months or years.

Overall, this contract is poorly written, confusing, and often vague.
On my rating scale, I give Sourcebooks’ contract: ☆

____________________________________________

Rating scale:

☆☆☆☆☆  Very good (few revisions needed);

☆☆☆☆      Good (some revisions needed);

☆☆☆          Fair (needs substantial revisions);

☆☆              Poor (contract is heavily weighted against the author)

☆                  Shred it.
______________________________________________
Angelica R. Jackson

Yikes, that is scary! Thanks for breaking this down.

Jeff Mehalic
You’re very welcome. It is scary, but I hope that with some knowledge and understanding of language in contracts such as Sourcebooks’, authors will be able to make informed decisions that end up helping, rather than hurting, them.
Take care.

Katemacnicol
I’m stunned. This is empowering knowledge that all authors present and future should have. I appreciate Mr. Mehalic and Pitch University for doing this series. Thank you!

Jeff Mehalic

Thanks for your kind comments. Diane does a great job for authors, and I am delighted to be with such a dedicated, enthusiastic group. I hope my column helps authors understand what contract language helps them, and particularly what language hurts them.
Thanks again.

JamesT

Wow, what agent signed off on that contract?

Jeff Mehalic

Never underestimate the desire of a writer to be published.

The job of an agent or lawyer representing an author is to negotiate the most favorable terms possible for the author, keeping in mind that publishers will only move so far (especially in the current market and on a debut author), then present the pros and cons of that contract to the author.

I know several agents who have advised authors against signing contracts like Sourcebooks’, but the author’s desire to be published outweighs his or her agent’s objections to the contract, which is the author’s right.

One agent consulted with me even after an editor at Sourcebooks told her that their contract was take-it-or-leave it. The agent raised hell with the editor, but the editor said she wouldn’t fight about it, and if the agent’s client didn’t want to sign, then the editor had 15 other authors waiting who would be happy to sign the contract without any changes

So I repeat: never underestimate the desire of a writer to be published.

Thanks for your question.

Tina Moss

Wow. That’s disgraceful that a publishing house would have such disdain for authors. I hope they amend their contract. I never would have considered this house to have a contract of this nature.

Pete Morin

Isn’t this the publisher that’s gotten into trouble for not paying their authors royalties owed? What’s going on with that?

Jeff Mehalic

Pete,

Thanks for your question. I can’t speak for any other agents or lawyers, but I recently resolved two claims (for two separate authors) against Sourcebooks.

Good to hear from you. How is your practice going?

Hrwdebhale

>>at 15%, a digital book sold for $6.99 (a typical Sourcebooks price) and
downloaded from Sourcebooks’ website generates a royalty of $1.05.

It does?  I can see it if the digital royalty rate was 15% of cover price, but it is actually 15% of NET.  If Sourcebooks sells through Amazon at either a 50% discount model or 70% agency model, the author’s take would be significantly less.  Or am I missing something about how Sourcebooks calculates Net?

Hrwdebhale

Duh!  I see where you say “downloaded from Sourcebooks’ website”.  Still, could the publisher not deduct certain expenses as part of the Net calculation to reduce the author’s take?

Jeff Mehalic

To clarify your question, are you asking if the publisher could hold off from deducting certain expenses in order not to reduce the author’s take further? If that’s your question, the answer is that the publisher will absolutely deduct everything that it can justify, regardless of the effect on the author’s take.

If I still haven’t understood your question, send me an email or post a comment, and I’ll give it another try.

Thanks for writing.

Jkduvall

A good agent would more than likely renegotiate a contract like this. Publishing contracts are rarely written in stone, but if it is, run like hell.

Guest

Not written in stone. I’m a Sourcebooks author and was going to go without an agent until I saw this contract. I scrambled and got an agent who explained a lot of it to me. She renegotiated and even got the first right of refusal clause taken out. She didn’t think she could, but I insisted she try. They didn’t giver her a hard time.

Jami Gold, Jami Gold writes paranormal romance and urban fantasy stories where normal need not apply. Just ask her family—and zombie cat.

Jeff, You’re now one of my new favorite people for sharing this information with authors.  We all need to be aware of these issues.  Thank you, thank you, thank you!

Jeff Mehalic

You’re very welcome, Jami.
Thank you for your kind words, and take care.

Anne R. Allen

Thank you, thank you! A friend suggested I submit to Sourcebooks, but another said be careful because their contract is iffy. Now I know there are no ifs about it–it’s terrible. Thanks for educating us.

Jeff Mehalic

Anne,
You’re welcome, and thanks for your comment.

I think it’s important to share information like this. The more that authors educate themselves about the legal issues that affect their writing careers, the better off they are.

Take care.

~Christine @ Book Cents Lit~

As an agent…

– I will no longer do business with Sourcebooks, Inc.
– I filed 3 complaints (on behalf of three different authors) with the RWA against Sourcebooks, Inc.
– Sourcebooks’ contract has the lowest payout on digital books than any contract I have seen.

Guest

Thank you.  This is very interesting and informative.  I’m looking forward to your regular posts and will check out your site.

Jeff Mehalic

Thank you very much. I appreciate your interest.


Kelle

Jeff,  Thank you so much for giving us an easy to follow lesson in contract reading.  More than ever, I’m thankful that I have a reputable agent to help with contracts when the time comes.  In the meantime, I hope I don’t miss a single one of your columns here or elsewhere.  Off to put a google alert on your name. . .

Jeff Mehalic

Kelle,

Thank you very much. I’m glad you have an agent to represent your interests. That is more necessary now than ever.

I look forward to reviewing and writing about contracts, and appreciate your interest.

Take care.

Lindsay

Jeff,
Thanks for the frighening information.

Jeff Mehalic

Lindsay,

I agree that it is scary. I hope that with some information about contracts, writers and authors will be treated fairly and get better deals from publishers.

Take care.

Suzan Harden

So what it comes down to is if you sue Sourcebooks for not paying, they still won’t pay you?  Or am I misreading something?

Still, I don’t want to be this desperate!

Jeff Mehalic

Suzan,

Sorry for the delay in responding. With it’s Sourcebooks or any other publishing contract, if you aren’t paid according to its terms, you have a potential lawsuit against the publisher. Whether you should pursue the lawsuit is a different question and depends on the circumstances of your situation.

As you recognize in your last comment, an author has to guard against wanting to see his or her work in print so badly that a contract like this one becomes an option. As an author, before you sign on the dotted line, you need to know what your and the publisher’s rights and responsibilities are, so that you don’t have to learn them in a courtroom.

Thanks for your interest.

Traditional Publishers Face New Competition in E-Book Market

As if publishers don’t have enough problems. Julie Bosman and Jeremy W. Peters write in today’s New York Times that publishers have a new source of competition: news organizations, magazines, and newspapers, such as The Huffington Post, The New Yorker, and Vanity Fair, that have started to publish e-books. Their infrastructure allows them to get e-books on the market more quickly than traditional publishers, and the quality of the writing rivals what is offered by big publishing houses.

For example, here’s how Vanity Fair published a recent e-book:

When the phone-hacking scandal erupted at Rupert Murdoch’s News Corporation in early July, Vanity Fair collected 20 articles, his family and their businesses and put them in a $3.99 e-book that went on sale July 29. Graydon Carter, the magazine’s editor, wrote an introduction. The articles were then grouped into six chapters, each with a theme that reflected various aspects of Mr. Murdoch’s life.

It’s like having a loose-leaf binder and shoving new pages into it,” Mr. Carter said. “E-books are a wonderful way to do a book and do it quickly. They don’t need to be fact-checked again. They do go through copy-editing. But you’re not reinventing the wheel each time.”

But some publishers are adapting. For example, Random House is partnering with Politico to produce a series of four e-books of 20,000-30,000 words each on the 2012 presidential campaign, which will be released periodically during the campaign.

And of course these e-books lend themselves to e-readers such as the Kindle and the Nook.

I wonder how many other traditional publishers will team up with a different content provider in order to publish e-books. Random House and Politico’s e-books won’t replace Theodore White’s The Making of the President series, but their frequency and timeliness will cause them to appeal to a lot of consumers.

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