Including notes on the costs involved, the Society's principal concerns, proposals on enhanced and unenhanced e-books, and meaningful termination clauses.
1: The costs
The major publishers have invested heavily in establishing their digital infrastructure and e-book lists. These set-up costs are borne by publishers at their own risk and are not passed on to individual authors. However, publishers, conscious of their large write-offs, have been negotiating very firmly with authors and their agents over e-book royalties. At present royalties of more than 25% of receipts are rare; some trade publishers are reluctant to pay more than 15%. Authors writing for academic, educational and specialist non-fiction publishers are often stuck with even less.
When considering what would be a fair starting royalty we bear in mind that many publishing costs apply regardless of format (notably the author’s advance, along with editorial, marketing and publicity input) and that publishers need to cover their overheads and make a profit. For enhanced e-books there will often be fresh creative costs. On the other hand, the costs of originating, producing and keeping an e-book ‘in print’ are low (e.g. no printing costs, warehousing and distribution costs are eliminated, as are losses from dealing with returns and unsold stock).
2: Our principal concerns
We are very uneasy about members being obliged to accept fixed royalty rates that will apply for the life of the contract when the e-book market is in its infancy. Publishers need to justify more precisely why they consider that authors should not receive a substantially higher proportion of their receipts.
We are also concerned that members may find that they have lost control over the ways their works may be adapted or ‘enhanced’ in e-forms. Some publishers seem to have been rather carried away with the possibilities and to have forgotten to liaise properly with the original author.
We are disappointed that many publishers have not yet adapted their ‘out of print’ clauses to reflect the existence of e-books and print-on-demand. Some publishers who have made changes have (unintentionally we suspect) ended up with wording which still does not give authors a proper opportunity to revert rights when sales have been very low.
3: We make the following proposals to agents, bestsellers and other authors who are in a strong bargaining position:
3a: Unenhanced e-books:
Consider granting publishers a licence for verbatim unenhanced e-book rights for 5 or 10 years, rather than for the full duration of copyright;
Royalties on e-books should be considerably higher than they are. Until the economics and scale of the market become clearer, we consider that publishers should share e-book income equally with their authors. In any event we particularly encourage authors to try to negotiate steep increases to their royalties at agreed sales thresholds (as publishers recoup their set up costs). On other forms of electronic access – e.g. rental and pay-per-view – authors should receive at least 50% of the publisher’s receipts.
Authors should have the right to initiate a review of e-book royalty rates every two years and have the right to insist that royalties be increased to match those then prevailing in the trade.
3b: Enhanced e-books:
Examples of enhanced e-versions: the text of the work with an author interview tacked on; a children’s story including sound and graphics and interactive elements e.g. a supporting computer game; a recipe app for a mobile. All are different sorts of content, accessed in different ways, often on different platforms. Therefore terms for enhanced e-books - both the use and the royalties - must be negotiated on a case-by-case basis.
The author should have a right of approval over any enhanced or otherwise altered version of his/her work (as opposed to a straight change of format). The author should also have right of first refusal to create enhancements, abridge the work, etc where practicable - and be entitled to a fee or fresh advance for so doing.
Based on our experience of e-versions in the educational publishing sector (where internet, intranet, whiteboard and other digitised forms of learning are already a reality):
even if the author’s work is a small part of the whole in terms of quantity, if it remains the principal component, the author should receive as close as possible to full e-book royalties. Likewise full royalties may well be appropriate for the reuse of only a small part of the original, e.g. for an app;
if the new version includes a substantial amount of additional literary, artistic or musical material created by freelances, it is reasonable for the royalties to be shared with such creators (and it may also be reasonable for the royalty to be shared with the supplier of dedicated - but not generic - software). If the suppliers of significant original new content are being paid one-off fees (as is often the case), it may be reasonable for some of those costs to be a first charge against the author’s royalties but the author’s royalty should not be reduced in perpetuity. If the work includes enhancements which are created by the publisher in-house and/or are more in the way of packaging and marketing, the publishers should absorb the costs. If the enhanced work includes additional materials from existing sources (e.g. illustrations or music), it should generally be the publisher who pays copyright permission fees (though in some instances it may be reasonable for some part of those fees to be offset against the author’s royalties).
3c: Meaningful termination clauses:
Contractual provisions giving the author the opportunity to terminate the agreement and revert rights have traditionally been based on the premise that arranging a reprint would be time-consuming and costly. Now works can remain ‘in print’ indefinitely in electronic form or as print-on-demand at almost no cost to the publisher, when sales have all but ceased. Contracts need to reflect this, especially where the author is committed to an e-book royalty for many years.
Many contracts, particularly those negotiated by agents, specify a sales threshold below which the termination provision can be invoked. But some publishing contracts specify that if sales fall below the agreed threshold, the remedy is for the author to give written notice that the publisher must reprint the book. An obligation on the publisher to reprint when sales are already very low makes no sense. Likewise when a work is available only as an e-book or by print-on-demand, there should be an obligation that the work be available almost instantaneously, in which case a reprinting notice period is not appropriate.
The Society’s model termination clause is: If, at any time, the Work becomes unavailable in volume form, the Author may terminate this agreement unless either the Work is reprinted in a print-run of no less than [500 copies] within nine months from written notice by the Author, or the Work is made available as POD within one month from written notice by the Author. Should the work be available only as POD and/or as an e-book, and sales have been below [200 copies] in the preceding 12-month period, the Author may terminate on one month’s notice provided the advance has been earned out or more than [three years] have passed since first publication (whichever is the sooner).