The Paper Chase

How the battle over rights and royalties is shaping publishing's future

The Paper Chase-Andrew WylieSuper-agent Andrew Wylie -- unaffectionately nicknamed "The Jackal" for his ability to turn books into big money -- certainly knows how to stir the pot, and he made headlines in the turbulent publishing world when it was announced this summer that his agency had signed an exclusivity pact with Amazon's Kindle. Wylie's new ebook-specific imprint, Odyssey Editions, had released 20 classic backlist novels -- including works by literary big-hitters Amis, Roth, Borges, Updike, Ellison, and Nabokov.

The news sent already on-edge big publishing into a frenzy, with bypassed Random House announcing they'd no longer conduct "new English-language business" with the Wylie Agency, and even terming them a "direct competitor."

"I don't get the sense that Wylie is really that serious about pursuing this long-term," says Richard Nash, founder of Cursor, and former frontman of Soft Skull Press. "Short-term, he's using it as leverage for better royalties on digital and that's it, really."

The leverage Wylie seems to be after is the agency- and author-held belief that backlist titles -- a roster of older books available from a publisher --  warrant a 50/50 royalty split (right now, the industry standard in the United States and UK gives the author 25 percent of gross sales). Big publishing, on the other hand, argues that a higher royalty rate for ebooks is a very limited short-term view.

"You don't create ebooks from nothing," says Maja Thomas, senior vice president of digital and audio publishing for Hachette Book Group in the United States, and vice president of digital publishing for Hachette Group Livre. "There's the design, the editing, the advance paid for the paper version of the book that becomes the ebook. People say ebooks should be cheaper, and that there's an immediate saving of 15 percent, because there is no shipping and no returns. But we're paying for anti-piracy monitoring, digital warehouses, bandwidth, legal partners. Many of these costs are annual (not one-time fees), and in the end, we're not saving 15 percent, but spending 30 percent."

To make sense of who's really profiting financially, Evan Schnittman, Bloomsbury's managing director of group sales and marketing, print and digital, crunched numbers on his blog,, explaining that a hardcover title retailing for $30 earns the author between $3.00 to $3.75 per copy sold (10 percent to12.5 percent), and that if the publisher paid those royalties on a $15 ebook, an author would make $1.50 to $1.75. But if authors are paid the standard 25 percent, they're making $3.75 -- the same as on the pricier hardcover.

Because most agents understand that the simultaneous release of hardcover and ebooks means they're actually competing products, they concede that digital rights should be part of the package for new books -- Hachette's Thomas and Dennis Johnson, cofounder of indie publisher Melville House, both said they would never sign an author unless ebook rights were part of the deal. So the real battle being waged, as Wylie's aggressive action showed, is for ebook royalties on the backlist.

Sterling Lord Literistic Inc.'s agent Ira Silverberg believes the discussion of rights and royalties is only just starting. "Settling, right now, for an inappropriate royalty isn't too smart," Silverberg says. "There's pressure from the marketplace and retailers to have every book available digitally, but if we allow that to happen at substandard rates the whole ecosystem of publishing goes into the toilet."

This entire Wylie-Amazon vs. Random House argument goes beyond the splitting of revenues, though, into the legality of Wylie's partnership with Amazon - and generally an argument as to who holds rights to publish ebooks, from contracts signed before DRMs, iPads or "enhancements" were even synaptic ether.

"How can a publisher argue that, say, Ralph Ellison signed away his ebook rights to a publisher?" asks Adam Penenberg, a journalism professor at NYU and author of Viral Loop. "This was the same argument the Beatles' record company made when it informed the band it would rerelease its albums on compact discs. The Beatles said no, because their original contract stated that the record company had the right to release their music on phonograph record. It didn't say anything about compact discs. Years later the Beatles prevailed, and the contracts had to be renegotiated -- at a much more favorable level for the Beatles."

Still, Random House is pursuing an injunction, though it seems the precedent was already set in 2001, when the injunction they filed an against e-publisher Rosetta Books was denied after Rosetta had published e-versions of some Random House titles. That case established that an author owns the ebook rights to his work, unless specifically noted in the contract. In short, Wylie has the digital rights to sell to publishers, or do what he did: publish them himself.

Melville House's Johnson, who never works with authors who have agents, says a move like Wylie's won't come from another literary agency, and that it would be a "very self-destructive trend if it were to catch on." Like Cursor's Nash, Johnson doesn't believe Wylie was very serious about launching his ebook imprint. "I think Wylie did it as a threat, he did it awkwardly, and I think was really taken aback by the strength of Random House's response to him," Johnson says. "Wylie isn't a publisher. He doesn't have an apparatus to support those titles. It was an agent being a tough guy, but his bluff was called. He tried to muscle a guy that had more muscle than him."

But while Wylie's move of skipping links in the food chain is oddball in publishing, it's not rare in the music industry. with major artists taking chances.

Thing is, while big-time musicians can give their music away they have the ability to make revenue off live shows and merchandise. The struggle for writers, and their agents, is to find different avenues of income to be made from a book (beyond potentially selling film rights), and ebooks seem to be the most obvious cash calf.

Stephen King is one author willing to bypass the usual powers, as he teamed with indie publisher Cemetery Dance Publications to release his latest novella, Blockade Billy (which he told The New York Times it took him two weeks to write), as a Kindle-exclusive ebook a month before the hardcover version. And popular business author Stephen Covey sold exclusive digital rights for two of his bestsellers, via Rosetta Books, directly to Amazon. So Covey scored 70 percent instead of the 25 percent print publisher Simon & Schuster likely would have offered -- and right now his The 7 Habits of Highly Effective People ranks at No. 169 in the Kindle Store (Lolita was at No. 260 and is rising quickly).

"Wylie's a special case, as these authors are known -- everyone knows Lolita; it's a cultural icon," says Hachette's Thomas, who doesn't believe a trend will emerge in which agents go direct to distributors. "It's shortsighted for authors to start with an agent and do these types of deals. They're basically turning their backs on the machinery of publishing. What's the value of getting 50 percent if your book's sales are in the dozens, then disappears?"

Sterling Lord's Silverberg believes, though, that there are other instances of authors and agencies bypassing publishers and going straight to retailers. "We're just not hearing about them because they're not part of such an impressive list," he says.

Because publishing is a hits business -- where, Adam Penenberg says, "the Malcolm Gladwells and Dan Browns subsidize the rest of us" -- Nash believes it will collapse in on itself, shrinking "until they focus solely on generating big hits and milking the backlist" -- the latter being a perilous task with the emergence of ebooks, and the arguments over who owns the rights.

Enter indies like Baltimore's Publishing Genius Press, ballyhooed for its release of Shane Jones' Light Boxes in 2009, a book that had a run of only 600 copies, but was optioned by Spike Jonze. While the option has since been dropped, the book was sold by William Morris Endeavor to Penguin, and to publishing houses across Europe. Publishing Genius's founder, Adam Robinson, believes ebooks and indies are a perfect match.

"I just launched a really small imprint called Awesome Machine, which plans to print short runs of books that we basically give away, then release in ebook format for the rest of the book's life," says Robinson, who expects the royalty split to be 75/25 in the author's favor.

"We're on the cusp of an era where authors really can do it all themselves," says author Kemble Scott, an ebook pioneer who was the first writer to digitally debut his novel, The Sower, on Scribd in May 2009. The book garnered so much attention that it went into a limited edition hardcover with Numina Press and became a San Francisco Chronicle bestseller. Scott still holds all rights, and is currently prepping a version 2.0 of The Sower for release in the fall. "Scribd pays 80 percent of the cover price to the author, gives writers up-to-the-minute book sales info, and pays out in 30 days -- with no money held back for returns. Compare that to the 7.5 percent writers traditionally receive for a trade paperback and waiting 18 months for royalties. The emergence of ebooks has just given authors the first real negotiating tool since Gutenberg. There's going to be a showdown. Just wait."

Johnson concurs. "There will be a very long and ugly war over that royalty rate," he says. Funny that many of the authors of the books being e-battled over never even had email addresses.

With so much up in the air, now, even the direction of typical book publishing - hardcover, then paperback/ebook, then audio -- could change. Both Scott and Hachette's Thomas think there'll be a growing number of titles published as original ebooks, which is a great way to test the waters for new authors, take risks without as much overhead, and then, if interest dictates, bring the book out in printed form. "And should it become hugely popular, a hardcover edition -- for gifts or keepsakes -- would be issued," Scott says.

"Big publishers will become like Hollywood movie studios, doing big sequels, some distribution deals, the occasional arty flick by an established writer," says Nash. "And the independent publisher will need to take on more and more of the publishing responsibility. We'll need an extra 10,000 publishers in North America in the next decade, and another 10,000 in the EU."

It seems like a high number, until you think it over. Many of those 10,000 publishers might be better known to the public as "authors."

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