Book Reversion Game Theory & Consent

05 October 2014

Let’s say the following:

You’re a small press with a lot of authors, most of whom still have books that you get right of first refusal on their next books, either in the same genre or in the same series.
You’ve had a downturn in sales, and that means staff cuts, including editors that would accept/reject and/or edit new titles.
There’s a lot of grumpiness out on the ‘net, and you need some good PR.

Right now, this is EC’s defense: “Authors hate working with Ellora’s Cave so much, they formed a massive conspiracy to escape.” #notchilled

— Courtney Milan (@courtneymilan) October 4, 2014

What are your best moves?

Things I hadn’t Considered About Right of First Refusal Clauses

When I started looking at romance publishers a couple of years ago, I found this clause of Samhain’s:

5.3. If I contract the first book of a series with Samhain, do I have to give you first refusal on subsequent books in the series?
No. Samhain contracts one book at a time. We hope you’ll love working with us enough to send us all your other books, but we want you to be free to make that decision for yourself.

I hadn’t realized the prior association of Samhain’s founder with Ellora’s Cave, but I found that to be an interesting clause.
Of course you’d rather have authors writing for you who want to write for you.
Also, the more I think about it, the more I wouldn’t sign a right of first refusal clause unless there were an advance involved, where the reversion fee’s some explicit portion of the advance.

The Cold Harsh Realities of Series Numbers

Here are the current Amazon rankings for the first six volumes of H. M. Ward’s The Arrangement, a bestselling indie new adult series that’s currently up to 16 books. (Which, frankly, this series is like crack for me. Loved it.)

1	656
2	612
3	638
4	711
5	755
6	789

The cold, harsh reality of series is that, overall, the later books in the series sell less well than the earlier books in the series. Some percentage of readers never pick up that next volume. Sure, there are times when the newer books sell better—like when they’re first released. In the long run, though, they will tend to sell less well.
Ergo, the value of that next book in the series is necessarily lower than the income from the previous books.
For a troubled publisher, some writers may feel, as Lolita Lopez/Roxie Rivera (hell of a #micdrop post) apparently does, that not writing more books in the series is the right answer for them.
If you’re the publisher who’s published, say, books 1-5, and there will be no book 6, then the revenue of books 1-5 will tend to decrease over time. If, however, another publisher (including self-publishing here) publishes book 6, and books 1-5 are still listed on the author’s website, then there will still be some level of increased demand for books 1-5.
I read a lot of authors. I mostly don’t read their blogs. When I do look them up, I tend to look at their website for new books.
So what’s the publisher’s best strategy here?
Releasing the author from right of first refusal for the next books in the series, in exchange for which the author puts the publisher’s books back on their website for, say, a year.
But…but….

I haven’t really seen this come up, which kind of surprises me given the subsection of romance Ellora’s Cave is in.
A lot of their books are about the boundaries of consent. BDSM, for example.
What struck me in Lolita’s post: she’d essentially said she no longer consented to future publication from Ellora’s Cave.
It doesn’t matter why someone no longer consents. Contractually, it may, but consent is important, and it really, really gets me that there are, in fact, so many consent issues at the heart of this debacle.

Slower Paying?

One of the data pieces that’s been corroborated by several authors, including Lolita Lopez (at the link above) and Cat Grant: the payments, once regular, are alleged to have been getting slower.
Several authors have alleged they received their payment for May royalties at the end of September (4 months later). Lolita alleged she received December’s payment (assuming this is for royalties received in November) in mid-February, which would be 2-1/2 months later:

In February 2014, I received my 2013 Form 1099 from Ellora’s Cave. It included $13,354.79 worth of income that I did not receive in 2013. In fact, a few days after my 2013 Form 1099 arrived, a royalty check with a December 2013 date on it finally made its way into my mailbox. That’s right. A royalty check that was cut in December of 2013 took more than 6 weeks to arrive in my mailbox. The amount was enough to push me over the income limit for the next hop in tax rates so the IRS slapped my hand with a fine for underpayment.
The accounting firm that I use was not amused by this. They encouraged me to file a complaint with the IRS, but I declined. I paid the fine and the extra taxes. Clearly, I should have listened to the professionals. Hindsight, right?

In an ideal world, the payments for authors would be put immediately into a separate account. Assume 45%, then fix it for the amounts that are less (I see some sales are 40%). There would be no need to pay slower because the money would always be available on time for the authors.
Ergo, the implication when royalties are being paid slower like this (or, as others have reported, no check at all arrived for a given month): the company is using the received royalty income for operational expenses instead of setting it aside for the authors.
Edited to add this paragraph: one of the confusing parts of the various author accounts: it’s not clear if people reporting missing checks were meaning they never received a check for that month (let’s say April), or if they never received any check in April, but may have received royalties they expected to receive in April in a subsequent month.

Chop the Long Tail

With over 800 authors, some of those authors are going to be bringing in peanuts and others whole food trucks. Release the authors that are consistently not performing.
As an example, calculate how long it takes to put together all the royalty information, divide by the number of authors. Figure out how much you’re paying the people who do that work, including cutting the checks. Triple that cost. For the authors who aren’t making, on average, that much for the house over the last year, offer to release their titles (for no fee).
Probably, that’s more than half the authors. It’ll take more work temporarily, but it’ll be less work long term. Then the business is focused on the higher-performing writers.

Release the Remaining Long Tailers from Right of First Refusal

In addition to releasing existing books from the end of the long tail, release the right of first refusal for those people, too. (Might even want to make it for a larger pool.)

Charging for Reversions

Victoria Strauss runs Writer Beware, a site that warns about predatory practices and predatory companies in publishing.

@victoriastrauss I thought I remembered that you said somewhere that publishers shouldn’t be charging for reversions? (except advances)

— Deirdre Saoirse Moen (@deirdresm) October 5, 2014

@deirdresm Correct. I don’t think there should be any fees associated with reversion–a red flag if you see this in a contract.

— Victoria Strauss (@victoriastrauss) October 5, 2014

@deirdresm I’ve also heard of pubs who ask for reversion fees even if there’s nothing in contract to allow this.

— Victoria Strauss (@victoriastrauss) October 5, 2014

@deirdresm No matter how pub justifies it, I think it’s abusive.

— Victoria Strauss (@victoriastrauss) October 5, 2014

Contract One Book at a Time

The editorial staff has shrunk. Money’s tighter than it should be. People are complaining. The future isn’t looking as bright as it used to.
Only contract the books you can afford to edit and produce. Given the changing market conditions, an agile approach is needed here: limit scope of future projects.
D. Renee Bagby/Zenobia Renquist has quite the post on her attempt to get reversions for twelve proposal titles.
So apart from the fact that it sounds like EC is intending to publish the books outside their contract terms (and wouldn’t that be an interesting DMCA takedown quarrel?), here’s the gotcha, in the form of a letter from EC CEO Patty Marks (emphasis added):

We have already cut staff, special EC projects and other expenses, but the drastic drop in sales has resulted in large net short-term variable production losses and slow and often negative return on investment for EC on almost every new book we publish, with the exception of a handful of the highest sellers.

So what do you do? Only contract multiple books from people who already are the highest sellers.
Renee/Zenobia has said that she was not released from twelve books under contract. Yet, in the same post, she shows that her royalties for May would not put her in that group of “a handful of the highest sellers.” And yet, EC doesn’t want to release those books back to Renee/Zenobia despite it appearing that would put her in the negative return on investment?
These things have to be business decisions and not emotional ones. There’s an old economics maxim:

If the expected added benefits exceed the expected added costs, do it. If not, don’t.

If Renee/Zenobia were to self-publish, she’d undoubtedly do better, and EC wouldn’t lose money. Isn’t that win/win?

As a publisher, you want readers, reviewers, and authors to stick with you through tough times. You want them to continue to consent to be in your corner.
Those perceptions can be managed if you look beyond initial blame and hurt. Win/win negotiations are still possible.
Respecting the word “no,” however phrased, is key.
Related: Coerced Consent: When “Yes” Really Means “No”
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