Bad Contract Terms

This is from John Scalzi's blog on Wordpress. I got his permission to spread it. I'm going to both copy/paste it in this post and place a link in a second post for spreading. Please note, he speaks his mind so there can be colorful language in it.

Note to SF/F Writers: Random House’s Hydra Imprint Has Appallingly Bad Contract Terms
MARCH 6, 2013 BY JOHN SCALZI 65 COMMENTS
Random House recently started Hydra, an electronic-only imprint for science fiction stories and short novels. But, as noted by Writer Beware here, the terms in a Hydra deal sheet shown to them are pretty damn awful:

* No advance.

* The author is charged “set-up costs” for editing, artwork, sale, marketing, publicity — i.e., all the costs a publisher is has been expected to bear. The “good news” is that the author is not charged up front for these; they’re taken out of the backend. If the book is ever published in paper, costs are deducted for those, too.

* The contract asks for primary and subsidiary rights for the term of copyright.
Writer Beware notes, appropriately, that this information comes from only one deal sheet it’s seen from Hydra. But, you know what: One attempt at this sort of appalling, rapacious behavior on the part of Random House is bad enough.

Dear writers: This is a horrendously bad deal and if you are ever offered something like it, you should run away as fast as your legs or other conveyances will carry you.

Why?

1. NO ADVANCE. Dear Random House: Are you fucking kidding me? Random House had 1.7 billion euros in revenue in 2011 (Bertelsmann, the parent company, had fifteen billion euro in revenue in the same year, with over six hundred million euro in net income) and you somehow can’t afford advances all of a sudden? Color me skeptical.

Advances are typically all authors make from a book. It’s a competitive market and most books sell relatively small numbers. One reason to go with a publisher at all — especially these days — is because you get a concrete, definable amount of money fronted to you at the start; which is to say, you know you’ll get paid at least that much. The publisher is not doing you a favor by fronting you an advance; the publisher is making a hard-headed determination of how much money it will owe you (under terms of contract) and giving you that much up front so they don’t have to bother with royalties on the back end.

It’s also — importantly — an amount of money the publisher has invested in a book, which it will not get back if the book fails. It’s the publisher’s skin in the game, as it were. If there’s no advance, there’s no skin in the game for the publisher, and no real motivation for the publisher to bust its ass on behalf of the book.

Neither Random House nor Bertelsmann is some hard-scrabble, scrappy company trying to make it in this big world; please look again at their revenues and net income. However, even if they were hard-scrabble, scrappy companies it would still be wrong not to offer advances to authors.

Now, according to Writer Beware, Hydra is offering to split the net it makes from the books 50/50, which on the surface at least is a better cut than what authors currently get from traditional publishers (which is typically 25% of net). No doubt this 50/50 net split is being dangled as a fair trade for an advance. But remember that by avoiding paying any advance at all Random House has hugely mitigated its risk — which means that it has positioned itself to start making a profit from the writer’s work from day one without any substantial financial investment on its part.

Theoretically the author would be making a profit from day one, too, but wait:

2. The author is being charged costs previously borne by the publisher. That “one time” fee for editing/design plus a continual “sales, marketing and publicity fee” of 10% of the net revenue, plus additional continual printing and warehousing fees if the book ever goes to print.
What this means is that the author starts off his or her publishing journey in the hole to the publisher for an unspecified “one time” fee that publishers previously covered as part of their ordinary expenses, and see their income permanently diminished by other charges previously assumed by the publisher; the deal sheet in question states that the “50/50 split” is after these charges are accounted for, i.e., Random House has just made sure that the real world value of that “50/50 split” is substantially closer to the 25% of net that its traditionally-published authors are offered.

And how much will that “one time” fee for editing and design be? I don’t know, but I know that good editing, cover art, page and book design aren’t cheap; Donato Giancola, the artist who did the painting for the hardcover of Old Man’s War, got paid nearly as much for his work as I got paid to write the book. It’s not in the least unreasonable to assume that “startup costs” for a book can cost thousands of dollars. So that’s thousands of dollars that are going to be applied against the income of the writer before he or she makes dollar one — but not before Random House starts making money. Remember again that Random House is shunting some (and, well, possibly all) of its editorial costs over to the writer’s ledger; it’s once again actively minimizing its own costs — and investment — by maximizing the costs to the writer.

All of which is to say that it wouldn’t surprise me if Random House’s charges and fees just somehow manage to zero out an author’s earnings for a year or two and possibly even longer. It should be noted that most books sell nearly all they are going to sell within the first couple of years; after that they get lost in the pile of newer releases, including from the author. Hydra’s deal model has the marvelous potential of cutting out the economic heart of the book for the writer — but not, it should be noted, for the publisher, who will do just fine because its costs have been mitigated up front.

Musicians out there reading this may be smiling ruefully at this point, because they will recognize this sort of accounting; it’s how the music labels worked their accounting for years, carefully calibrating their fees and costs to make sure their musicians made as close to zero as possible while the labels kept all the money. But at least the musical labels paid their musicians an advance; Random House’s innovation here is that they aren’t even doing that.

Note to Random House: You’re aware what the typical consumer thinks of music labels at this point, right? You’re aware that one of the reasons that people don’t feel bad about pirating music is because they believe strongly that the music labels screwed the musicians anyway, so why bother? So, if your contracts are even less fair to authors than musical label contracts are to musicians, what are they going to think about you? And how does it look for the industry as a whole? You’re not making it easier for anyone.

All of this is terrible, but if you’re the writer and you sign on to this, there’s not much you can do about it because:

3. The contract is for the length of copyright. Which means you will never get the property back to sell it to someone who will offer better terms, and apparently even subsidiary rights are covered in the deal. To use the music label metaphor once more, this is like the music label owning the master tapes of an album. And again one is left to wonder what in the last twenty years of the economic history of the music industry suggested to Random House that this would be a fine model for them to follow.

Again: This is on the basis of one Hydra deal sheet that Writer Beware has seen. But again: Even one deal sheet of such appalling excrescence is one too many. If this is the economic model Random House genuinely plans to follow for the future of electronic publishing, it deserves to die. It’s horrible for authors, which is bad enough, but it’s also horribly bad for the industry, both in terms of optics (do consumers really need another reason to hate large publishing companies?) and in chaining publishers to a cycle of diminishing returns.

It’s also bad because, frankly, it’s delusional. Dear Random House: It’s clear you’re targeting new, unagented authors here because no agent who is not manifestly incompetent would allow his or her client to sign such a terrible contract. But here’s the thing: New authors don’t actually need you to sell their work online. They can do it themselves — and are, and some of them are doing quite well at it. You are working under the assumption that these newer authors are so eager to be with a “real” publisher that they will suddenly forget that publishers are no longer a bottleneck to being published, or that you are offering nothing they can’t do themselves (or have done for them) and offering them nothing for the service — indeed your business model appears predicated on sucking as much as possible from them in fees and charges while offering as little as possible in way of compensation. Hydra is a vanity publisher, in sum.

Do you genuinely believe these new authors are that stupid? And if so, do you genuinely want an entire imprint of your publishing empire populated by such people?

Let’s talk about me for a moment. Anyone who knows me knows I feel pretty positively about the traditional publishing model; I work with Tor (part of Macmillan, one of publishing’s “Big Six”) because I get excellent service from it, including brilliant editing, fantastic art and design and top-flight marketing and publicity. Tor and its people earn every penny they make from my books, as far as I’m concerned, and I’m happy to partner with them and hope to do so far into the future; I am happy to defend Tor whenever someone blithely and stupidly suggests that my publisher is “just a middleman” sucking money from me. They aren’t and they don’t.

But make no mistake that my admiration for Tor — or any of my publishers, large or small — is grounded in the fact that ours is an equitable relationship. The minute the relationship stops being equitable is the moment when the relationship is done. Because the fact of the matter is that, if it came to it, I could put out my own work; pay for the editing and art and everything else and then put all the profit into my pocket. Because this is the world we live in now. I don’t usually want to, for all sorts of reasons. But I could. And at this point, so can anyone.

And this is ultimately what I would say to any author who is considering Hydra or any publisher (large or small) who would offer a deal as fundamentally awful as what Hydra seems to be offering: Why partner with someone who doesn’t see you as a partner? The Hydra deal sheet is pretty clear about this — it’s not a contract of partners, it’s a contract a parasite offers to a host. But the fact is that if Hydra likes your stuff enough to want it, then you can probably find a real publisher, who offers a real partnership, including the payment of advances and the assumption of risk. Or you can publish it yourself, pay your costs up front (hey, they’re business expenses!) and keep everything you make.

In short: You can do better than Hydra. So do better.

P.S.: As a note to any publishing house checking to see if authors will kick if you try to slide this shit past us and say it’s “the new reality of publishing” — this is us kicking. We will kick you plenty hard. Yes we will.

 

http://whatever.scalzi.com/2013/03/06/note-to-sff-writers-random-houses-hydra-imprint-has-appallingly-bad-contract-terms/#comment-446475

 

This is definitely some sort of second class publishing scheme from Random House. It looks like they're trying to appeal to self-publishers, though I don't think it's going to attract as many writers as they hope.

 

Simple solution - read the contract, understand the terms, if you don't like them, don't sign. Move on.

 

They're trying the record company tricks, but there's more people in writing who are aware of crap like this than in music.

 

http://whatever.scalzi.com/2013/03/06/a-contract-from-alibi/

 

It looks like Random House wants to be the new Publish America.

 

Just how much autonomy do imprints have? Or is that solely dependent on which company they belong to?

 

This is even worse than the contract I was offered. My trad publisher offered me 6% royalties, no advance. But copyright to them, and only for printing (translations,movies etc remains mine) for i think 10 years ( can't remember exactly). They would cover all costs. So to me, 6 % was too small, I suggested to go to 25% after 5000 copies of the book are sold (I knew it would sell and so did the publisher) This is when he started to be impatient and was telling me that as a new author I can't expect any better than that. Overall I wasn't interested in publishing that material, but if I was offered the same deal now, in the UK, I might accept only to put my foot in the door. Don't know..,

 

re advances...
new, unknown writers are next to never paid an advance nowadays, anyway... so that's no big deal-breaker...

can't say as much for the rest of that contract, however!

 

Yes. The big issue is grabbing all the rights, keeping them essentially forever, and never having to do anything with them. That alone is a deal breaker even with an advance.

 

I have seen this many times with bands and record labels. For new writers this is a giant risk that the companies are taking, however these terms can be negotiated. When I used to work with bands and dealing with contracts I always advise them to get a lawyer! Worst case scenario is if the contract cannot be negotiated for any reason, I would rather turn down the contract and owe a lawyer for the services than lose out on both.

Companies give special treatment to successful writers because of their track record and in sales. Even if you started self published, if a company sees your success and the money that is being profited, they will offer better terms and better pay.

I do not recommend going as far as selling your book for $$$ and giving full rights to the publisher of what they can and cannot do. That is a no no. I have heard this happening with bands doing this with small labels and ended up getting the short end of the stick.

 

To clarify they're not MY reasons but the one's from the current President of the Science Fiction Writers of America (which you have to be a commercially published author through certain agencies/companies, magazines, etc etc to qualify for.). I'll take Scalzi's word over what's going on over anyone on a forum (I'll take Maia's word any day) about how things are going. If it's a big enough disagreement to feel that vehemently over, than I suggest following the link to his blog and you two can debate it over there. I didn't post it for anything other than to spread the word out.

 

Case in point: John Fogerty and Fantasy records. Anyone can do a Google search and see how that went. He gave up his publishing rights to Fantasy to buy out Credence Clearwater Revival's remaining contractually obligated albums. It lead to him being taken to court for PLAGIARISM due to the song 'Old Man Down The Road' that the head of Fantasy claimed was a copy of 'Run Through The Jungle.'

While Fogerty won that case (and lost a civil trial for defamation, which is a different story), the record company tried to get him for plagiarizing himself. And note, John Fogerty wrote all lyrics and music to CCR to boot. Good reasons why it's a bad idea to give away all your rights...

 

I do think we should keep music industry and book industry separate, though. It's like comparing horses and donkeys - they may look alike but they're two different animals.

 

exactly!

 

While different, it is an example of what happens when you give up ALL your rights to your work. There's nothing to keep the same thing from happening to a writer either. Write something very close to a work you no longer have the rights too (even if it's yours) and see if they don't go after you. Companies are quite willing to go to court-as are individuals...

 

I can't fault Random House for heading this way. Times are changing. Electronic publishing has created a new way of looking at making a buck. They have to get involved in new ways. They'll have many takers because so many want a publisher to pick them up, no matter what the terms. It could be a way in where others avenues have failed.

I'd have to see the contract with my own eyes and run it by an attorney first, but it may have merit for some.

 

Uh, when I was working on indie movies from the mid-90s to mid-2000s, the general rule of thumb of 'lower end distribution deals' was that the advance was all you'd ever get. Since the distributors paid you a percentage of profits after they'd paid their expenses, they could always find something to spend money on so you'd never make a profit.

From what I understand, this deal is the same, except you don't even get an advance: the writer is paid a percentage of profits after expenses, but there's no limit on the expenses the publisher can claim. Correct me if I'm wrong.