Wednesday, May 23, 2012

Unconscionability

Unconscionability (also known as unconscientious dealings) is a term used in contract law to describe a defense against the enforcement of a contract based on the presence of terms that are excessively unfair to one party. Typically, such a contract is held to be unenforceable because the consideration offered is lacking or is so obviously inadequate that to enforce the contract would be unfair to the party seeking to escape the contract.

If you read this blog, you know where I'm going with this. I'm going to point out some of the more one-sided, onerous terms in a standard publishing contract. And make no mistake--these are practically universal, and for the most part, non-negotiable.

For decades, the only way to get widespread distribution was to sign with a publisher. Writers had no choice. You either accepted the terms, or your book stayed in a file cabinet.

Now, I'm not a lawyer, and nothing in this blog post can or should be taken as legal advice. I'm just someone who has signed publishing contracts and gotten taken advantage of. If any of my interpretations are wrong, I welcome thoughts from those who know better.

Let's start with one of the most obvious, and despicable, clauses, the Grant of Rights.

Author grants and assigns to Publisher the sole and exclusive rights to the Material throughout the Territory during the entire term of the copyright and any renewals and extensions thereof.

In other words, this contract is for the life of the author, plus 70 years after her death, plus renewals and extensions.

Off the top of my head I can't think of any contract that extends beyond the life of the person who signed it. I would guess that my heirs would be bound to this contract, and potentially their heirs as well.

Does that seem a bit one-sided? Perhaps a smidgen unfair to the author?

"Territory" refers to where in the world the publisher is allowed to exploit these rights. In several of my contracts, Territory encompasses the entire world.

I don't consider that unfair, especially if a publisher pays extra for these territories. But none of my contracts have clauses that say I get those rights back if the publisher doesn't exploit them after a certain length of time.

So the publisher can have French or Japanese or Urdu rights for my lifetime plus 70 years, and might never do anything with them. But I can't do anything with them, either.

Subsidiary rights follow a similar pattern. According to this contract I'm citing, the Publisher has the exclusive rights to:

  • Periodical or newspaper before and following publication
  • Publication of condensations, abridgments, and in anthologies
  • Book club publication
  • Direct sale and mail order
  • Braille
How many of these rights have they exploited?
  • ZERO
Why does this seem to me like a selfish child who has too many toys, but refuses to let you play with any of them, even though he won't ever use them himself?

Joint accounting, or basketing, is another clause many authors (me included) got saddled with.

Books 1, 2, and 3 will be held in a joint and open account, and Publisher shall not pay Author's share of royalties and subsidiary rights income on any Book of the Work until Author's share of royalties and subsidiary rights income for all Books exceeds the total advance.

In layman's terms, if you have a three-book deal with an advance of $30,000, you don't make a cent in royalties until all $30,000 has earned out.

Kristine Rusch does a fine job breaking down how this can hurt the author:

If book three earns royalties, those royalties go toward paying off the advances on books one and two. Like this:

  • Advance for book one: $10,000
  • Advance for book two: $10,000
  • Advance for book three: $10,000
  • Book one only earned back $5,000 toward its advance. Book two only earned $6,000 toward its advance.
  • Book three earned $12,000—paying off its advance, with a $2,000 profit.
  • In a standard contract without basket accounting, the writer would have received the $2,000 as a royalty payment.

But with basket accounting, the writer receives nothing. That accounting looks like this:

  • Advance on contract 1: $30,000
  • Earnings on contract 1: $23,000
  • Amount still owed before the advance earns out: $7,000
  • Instead of getting $2,000, the writer looks at the contract and realizes she still has $7,000 before earning out.
  • Without basket accounting, she would have to earn $5,000 to earn out Book 1, and $4,000 to earn out Book 2, but Book 3 would be paying her cold hard cash.

Got the difference?

In short, you can have a successful book, but won't get royalties because other books in the basket weren't as successful (or haven't been released yet.) While this may not seem unreasonable, it certainly favors the publisher. Especially since it is often the publisher's fault a book doesn't sell.

I signed two separate three-book deals with Hyperion. My agent fought to get the basketing clauses removed, but removal was a deal breaker for the publisher.

On the first three books, I was in a royalty situation and had completely earned out within a few years. But on book #4 (the first book in the second contract) my publisher dropped their mystery line and gave my books zero support. No touring (I had two previous tours), no co-op or advertising (I'd gotten a bit of each previously) and they really messed up advance orders so books weren't available in certain key markets on release dates. Despite the fact that two of my hardcovers went into second printings, basketing delayed my royalties at a time when I really needed the money.

Speaking of royalties...

Hardcover: 10% of the invoice price for the first 5000 copies, 12.5% thereof for copies from 5001 to 10,000, and 15% thereof for copies in excess of 10,000.

Mass Market Paperback: 8% of the invoice price for the first 150,000 and 10% thereof for all copies thereafter.

On Ebooks: 25% of the amounts received by Publisher, excluding taxes and invoiced shipping and handling charges. if any.

There are several things I find interesting about this section. First, it's how very little the artist gets. I mean, the Author is the sole reason the Work exists in the first place. But getting, at most, 15% of the hardcover price and  10% of the paperback seems pretty unreasonable.

As can be expected, while sales are basketed, royalties are not. For example, in a three-book deal, if I sell 50,000 copies of Book #1, 50,000 copies of Book #2, and 50,000 Copies of Book #3 (or 150,000 copies total) it doesn't mean I get 10% royalties on them from then on. They each have to sell 150,000 copies for that to happen. That's a pretty big double-standard, ain't it?

But artists tend to get screwed all the time. I've read accounts of musicians getting pennies per album sold and how blockbuster Hollywood movies don't make money (thanks to Techdirt and the irrepressible Mike Masnik for those overviews).

Admitting the problem is widespread doesn't mean it should be ignored. Big companies are exploiting artists. They're getting rich, and the creators are getting shafted.

And for those who want to chime in with "no one forced the artist to sign the deal", that's blaming the victim. "The artist wasn't forced" is a nonsequitur response to "the contract isn't fair." Indentured servants aren't forced either. Nor are field hands picking potatoes in inhumane conditions. Nor are children working in third world sweatshops. Would you argue the conditions of their employment are fair because they went into the agreement willingly?

And for those who want to chime in that these above examples are extreme and offensive and not comparable, let me respond that a kid in a coalmine or a factory worker on an unsafe assembly line or a guy who is paying off his boat ticket to America isn't being forced to work his entire life, plus seventy years.

But besides how little the Author makes per book sold, I'm also curious how these percentages were arrived at. Especially the 25% royalties on ebooks. This comes out to 17.5% of the list price. The publisher gets 52.5% of the list price. And, correct me if I'm wrong, but it seems to be much easier and cheaper to format and upload a single ebook file to Amazon than it does to print and ship 50,000 paperbacks.

In fact, I can format and upload to Amazon, Smashwords, Kobo, Overdrive, and B&N in an hour, and it costs me around $300 thanks to the efforts of Rob Siders. And Rob's ebooks look a helluva lot nicer than many of the Big Publishers ebooks.

Yet publishers have somehow decided that 17.5% is the Author share.

Even more fascinating, they've pretty much ALL DECIDED THIS.

We call the six biggest publishers the Big 6. They envelop dozens of imprints. But there are also many other big hitters in publishing (Scholastic, Harlequin, Disney) and lots of mid-sized and smaller publishers, and somehow they've all arrived at the EXACT SAME ROYALTY RATES.

You can go to different publishers and get higher advances. But unless you are a gigantic bestselling name-brand author, I have never heard of a case where a Publisher offers an Author better royalty rates.

Why is this? You'd think, since publishing claims to be so competitive, that they would lure writers any way they could. Yet they all appear to be in lockstep, offering the exact same royalties.

Isn't that interesting how they all came to the same conclusion and exploited authors in the same exact way? If I didn't know any better, I'd swear these publishers were maybe secretly talking to one another and comparing notes and tacitly agreeing on royalty rates. But they'd never do that, right?

Publisher shall pay Author, as an advance against sums due to the Author hereunder, as follows:

In as many small pieces and over as long a term as possible.

Of course, no contract actually is worded that way. But I've seen many contracts, and the Publisher often tries to break up the advance and spread it out over a long period of time as certain conditions are met, such as signing the Agreement, delivery and acceptance of material, delivery and acceptance of outline, publication date, six months after publication date, six months after paperback publication date, etc.

It is to the Publisher's advantage to delay payment. The longer they do, the more interest they can earn on the principal. It isn't unusual for a contract to be paid out in chunks over several years.

And once it earns out...

Publisher shall provide Author with semi-annual royalty statements showing the amount due to the Author, by April 1 and October 1 of each year for the six-month period ending the preceding December 31 and June 30th, respectively.

Now I can understand how years ago--during the age of snail mail and hand counting--it could take months to compile actual sales data.

But now we have bar codes and the Internet and spreadsheets. Information gathering and transfer is easier, faster, and more accurate than ever. So why are we getting paid every six months?

Can you imagine working a fulltime job, then not getting a paycheck until nine months later? (that's six months of data, which takes three additional months to compile.)

Smashwords pays quarterly, and Mark Coker has a much smaller staff than any major publisher. Kindle, B&N, and Createspace pay monthly. It can be done. But it isn't. And you don't see any of the companies I just mentioned doing this:

Publisher may retain a reasonable reserve against returns in any accounting period. If Author receives an overpayment of royalties resulting from copies of the Work reported sold but subsequently returned, Author shall repay such amounts to Publisher to the extent that Publisher is not able to deduct such amounts from monies due to Author at the end of the royalty payment period after the period in which the overpayment is discovered.

Huh?

Again, I'm no lawyer, but this clause looks like a Publisher can pretty much withhold money from an author. It doesn't define what a "reasonable" reserve is, and doesn't state what conditions need to be met for this to happen. Then it mentions that if it overpays (it can happen--the Publisher only had nine scant months to figure their numbers out), the Author has to repay.

Speaking of repay, during my last contract, with Ace/Berkley, I broke the contract and didn't turn in the second book in a two-book deal. The publisher wanted their advance returned within 30 days of sending me a formal letter, which it did a few weeks after we ended the agreement.

In other words, the Publisher pays the Author slowly, over a long period of time (months or years), and at any given moment can hold onto money due the Author for no specific reason. But when the Author owes the Publisher, it needs to be paid back immediately, or else there will be Trouble.

Here's one of my favorite one-sided clauses that no one seems to pay much attention to:

Unsatisfactory Material: If the Material for a given Book is not, in Publisher's sole judgement, satisfactory in all respects, Publisher may terminate this Agreement upon written notice.

This clause has no specific criteria to determine if a Book is satisfactory. It's purely a judgement call. The Publisher can end the deal for pretty much any reason it sees fit, or for no reason at all. How's that for binding?

Those who read my blog know that Grand Central/Hachette refused to publish my second book in a two-book deal. It was apparently unsatisfactory.

I published it myself. That book, TRAPPED, has gotten 167 four & five star reviews on Amazon, and has earned me over $150,000 in less than two years.

So much for being unsatisfactory. (Incidentally, I did write another book for Grand Central, called ENDURANCE. They wanted editorial changes. I refused and pulled the book. It has also made $150k in under two years. Guess it really didn't need those edits, huh?)

But besides a Publisher being able to--on a whim--refuse to publish a book, the really unfair thing about this clause, and many of the clauses in a standard boilerplate book contract, is the author doesn't have even remotely equal power. Show me this clause:

Unsatisfactory Publication: If the Printed Book of the Work created by the Publisher is not, in the Author's sole judgement, satisfactory in all respects, Author may terminate this Agreement upon written notice.

Can you imagine? How would you like to fire your publisher for giving you a terrible cover or awful title? (Publishers have final approval on titles and covers.) What if they screw up the printing, like omitting the first line or publishing a book riddled with errors? What if they price it too high for the market which costs you sales and income?

The cover for my novel TIMECASTER was unsatisfactory in my opinion. It was generic, and conveyed nothing about the tone, plot, character, or setting. TIMECASTER takes place in a green, utopian future where plants grow on buildings and drugs are legal, the hero is a peace officer decked out with high-tech gear, and the book is loaded with humor and sex.

Though my self-pubbed sales were booming when this was published, Ace insisted on a pen name (and a tiny one at that.)

Compare their cover with the one my cover artist Carl Graves did for the UK edition.

Theirs shows a generic man (hero? villain? male model?) in a decidedly non-green urban area without anything high-tech or futuristic happening. There's fog and a moon (neither of which appear in the book) and nothing that indicates the novel is funny, sexy, or filled with action. It looks noirish and drab, which is the polar opposite of my story, and seems like the title should be BROODING ROMANCE OF THE WEREWOLF instead of TIMECASTER. And WTF is he standing on?
Ace Cover
My cover conveys humor (the smirk), sex (lipstick prints), drugs (leaf tattoo, 4:20 on belt which also speaks to the title), a cool taser, a badge indicating the hero is a cop, plus a tech/futuristic background.
My Cover
Now, some people may prefer Ace's cover, even though it misrepresents my book. That's not the point.

The point is that I find theirs terrible, but I have no recourse. The Author's opinion has none of the weight of the Publisher's opinion.

Publishing contracts ACROSS THE BOARD allow publishers to make a varied and infinite number of potentially career-ending mistakes on the writer’s behalf.

When Hachette found one of my novels unacceptable (and they were wrong) I had no defense--they simply refused to accept it. Even if I'm 100% wrong and Ace's cover is better than mine, I should still have a say. I wrote the book. But I lacked even miniscule bargaining power.

I spoke at length to my editor about TIMECASTER, telling her what I wanted in a cover, and was ignored. But I couldn't do anything. I certainly couldn't terminate the contract because I found my Publisher’s performance to be unsatisfactory.

TIMECASTER has been out for over a year in ebook and paperback, and I've seen it in just about every brick and mortar bookstore I've visited. Kudos to Penguin for doing a great job  with the distribution.

So far, in two royalty statements, TIMECASTER has earned me a total of $3708. That's $309 a month. Last January (in one month) I made $7700 on TRAPPED. So it’s pretty clear my publisher is dramatically underperforming. It also suggests that perhaps I understand a bit more about covers than they do.

But I can’t do anything about it. I don't have an Unsatisfactory Publication clause in my contract. No Author does.

Instead, the Author is faced with the continual threat of action against him by the Publisher at any time, and no definable cause.

Such penalties include (a) withholding payment due; (b) refusal to publish; (c) being forced to reimburse the Publisher for advances or monies due; (d) refusal to extend time for delivery (when Publisher consistently takes a lengthy amount of time to return signed contracts, pay advances, and pay royalties); (e) Indemnity (Author shall indemnify and hold Publisher harmless from any losses, expenses, settlements, recoveries, or judgements arising from or related to any claim, action or proceeding which would constitute a breach of Author's representations and warranties.)

So even though the Publisher takes the lion's share of the profits, it doesn't make any effort to protect the acquired Work from any lawsuits, so the Author takes all the blame and financial burden.

Contrast that to any Third-Party Infringement, where the Publisher can take legal action against copyright violators, then split the recovery 50/50 after being compensated for legal expenses.

So the Publisher will use lawyers to get money it feels it is owed, but not use lawyers to protect the Author who is being sued. It only protects itself, then bills the author.

Let's see what else is unconscionable in publishing contracts, shall we?

Competing Works: During the term hereof, Author shall not publish any book on the same or similar subject matter as any Book of the Work that would directly compete in the marketplace with sales of that Book of Work. Author shall not undertake to write another book for another Publisher until the Material for the last Book of the Work is delivered.

Again, I'm no lawyer, but to me this seems a lot like: Not only do we own your book, we own you.

What I do with my time is my business, isn't it? Shouldn't I be able to write other books, for myself or for other publishers?

And why do publishers think books compete with each other? Every bit of evidence I've accumulated, by both self-publishing and legacy publishing, shows that the more books I have available, the more I sell. Readers like one of my books, then buy the others. More titles means more chances of being discovered.

Yet this clause basically says, "as long as you work for us, you can't do anything else."

It gets even worse when there's also one of these:

Option: Author agrees not to submit an outline and sample chapter for Author's next book to any other publisher until such outline and sample chapter has first been submitted to Publisher, and Publisher has had 45 days to advise Author whether it wishes to publish the book and to negotiate a publication agreement with Author.

So not only does the Publisher own the Author in the present, it also holds the Author's future hostage.

Imagine if the reverse was true. What if the Author told the Publisher it couldn't publish any other author's books while it was publishing the Author's Work, and that the Publisher would need permission from the Author to publish any other books by anyone else in the future? How ridiculous does that sound?

But here is my favorite unfair clause.

Out-of-Print Termination: If a Book of the Work is out-of-print, Author may serve Publisher with a written notice requesting reversion of the rights granted hereunder. Publisher shall, within six months of receiving such notice, do one of the following: (i) declare in writing its intention to reissue an edition of the Book in question within six months; or (ii) enter into a licence providing for the publication in the United States of a new edition of the Book in question within six months; or (iii) revert in writing to Author the rights granted to Publisher herein for such Book. A Book of the Work shall be deemed out-of-print is, after two years from the date of first publication, no edition of that Book of the Work is available in the United States from Publisher or a licensee of Publisher and there is no license in effect which provides for the publication or reissue of an edition of that Book of the Work in the United States within 12 months from the date of notice.

Here's my burning question: When does an ebook ever go out of print?

I assume publishers are going to argue that an ebook counts as an "edition." If that's the case, why have an Out-of-Print clause at all? Isn't this absurd, contradictory, unjust, and/or unreasonable?

Let's say my many predictions are correct, and ebooks are the future. What's to prevent a publisher from keeping a book in print just to maintain control over the ebook rights? After all, when I ask for my rights back, they can take as long as 18 months to print more copies.

Is this fair? Especially since this contract was signed before the current ebook boom? Or can this be considered inadequate consideration?

I believe a reasonable person could look at these clauses and come to the conclusion that they are heavily weighted against the Author, and overwhelmingly biased favorably toward the Publisher.

But, hey, we should just be happy we got a deal at all, right? Especially one that gets us this fantastic clause that makes everything all better:

Twenty-five free copies of each book of the work and 50% off additional copies! Woo-hoo!

That, right there, is the ultimate slap-in-the-face placation.

"We understand what you want, Little Author. We know that the most important thing for you is  to get published, no matter what it takes. You can't pick your own title. You can't pick your own cover. You have to bend over and take everything we force upon you, and receive piss-poor compensation for it. But who cares! You're a real author now! And you get to buy books from us for half off!* Isn't it great to see your name on a real book! You finally made it! You should be so happy we did this for you!"

(*Half off as long as you don't resell them--that's in the contract.)


So... who represents our interests in these onerous, one-sided, contracts?

Is it agents?

Few agents have law degrees, so most aren't legally able to interpret or advise their clients on contract matters. (This while the Publisher has a whole team of lawyers.) Worse, agents have revealed themselves to be on the Publishers' side, which is an enormous conflict of interest.

The Authors Guild? Nope. They've also come out on the side of Publishers. Unlike the Writers Guild, which represents screenwriters, the Authors Guild has never lead a strike, never eliminated any of the unfair clauses mentioned above, and to my knowledge has never managed to improve or remove any of the unfair clauses mentioned above.

What we have here is an entire industry using boilerplate contracts and universally accepted one-sided clauses to exploit an entire segment of people.

This system is designed to take advantage of Authors' naivete and lack of bargaining power, and it uses the promise of publication as a carrot to get them to accept onerous, deeply biased terms.

Writers, and their agents, cannot effectively negotiate if the majority of the boilerplate is "my way or the highway."

Moreover, because the Big 6 are in such lockstep when it comes to this boilerplate, they have effectively created a unified front (don’t want to use the inflammatory M word--that’s only for Amazon). In other words, there is simply no other option because the Big Publishing Cartel have the unfair-contract market thoroughly cornered.

Finally, the contracts are so heavily weighted toward the Publisher that the Author can't get out of the bad deal he had no real choice but to sign.

And let's make that clear. Prior to the current ebook explosion, the Author had no choice. The only way to get into the stores that sell books was to sign a deal with a Publisher. Authors accepted unfair terms because the alternative was never seeing your book in print or making any money at all.

Does this fit the legal definition of unconscionability? I don't know, I'm not a lawyer. But it sure seems to fit the moral one.

I'm not an agent, either. I'm just a writer. But doesn't it make you wonder why a writer wrote this piece bemoaning the bias in publishing contracts, rather than an agent, or the AAR? Yet the AAR is sure quick to point out how fair the Agency model is, aren't they? Why isn't their board of directors sending letters to Publishers criticizing these unfair clauses, rather than letters to the DOJ supporting Publishers?

Rereading what I've written here, certain ideas and parallels spring to mind. We've got an all-powerful industry unfairly negotiating with the weak and hopeful. I believe this qualifies as exploitation. But there's something more going on here. Writers aren't just being exploited financially. Their dreams are also being exploited.

This is taking advantage of the desperate. It's akin to price gouging by overcharging for potable water after a disaster, or quacks who get a terminally ill patient to sign over his mortgage in the hopes that electric enemas will cure his cancer, or coyotes charging a whole year of wages for the chance to be smuggled into the American dream.

It's a sister to influence peddling, a cousin to payola, and a distant relative to price-fixing where the publishers universally maintain control via onerous contract terms.

It's reprehensible.

This is institutionalized corruption. And we can't expect anyone to fight for our rights. Until the rest of Big Publishing follow Houghton Mifflin Harcourt into bankruptcy, or a group of authors band together to fight these unconscionable contracts, nothing is going to improve.

But authors won't band together. The rich, successful ones don't want to jeopardize their favored status. The newbies and disenfranchised still scurry for a pat on the head, and are more than willing to fill any slot that opens up, even with onerous terms.

Agents won't form any sort of united front. They've already shown who they really work for. And even if a handful summoned up the courage to fight the status quo, chances are their authors wouldn't back them up out of fear.

Publishers won't change, because they have no incentive to.

So what's left?

Education. Information. Data. Knowledge. Logic. Common sense. Fisking. Debating. Arguing. Beating the drum over and over and OVER until it gets heard by all.

This industry is sick, and it isn't going to get better. But the more we talk about how unfair it is, the easier it becomes to break away from it.

Big Publishing needs to be exposed for what it is. It needs to be ridiculed. Those who defend it need to be revealed as ignorant, as cowardly, as wrong.

We can't change the industry. But we can damn sure hasten its demise by showing all authors--old veterans, struggling newbies, and those not even born yet--that there is another way to reach readers.

It's called self-publishing. If you read this blog, maybe you've heard of it.