Will Random House Chicken Out Again?

Revolutions produce unlikely heroes, and the Digital Revolution has produced a very unlikely one in the form of a man that many believe is so wanting in ethical principles that he is nicknamed The Jackal. Yet it is on literary agent Andrew Wylie’s fangs and claws that the populist dream of a fair e-book royalty rests as he dares the world’s highest profile trade book publisher to do something about the slap he has administered to its face.

The smart money is on The Jackal, and to understand why you have to think like a jackal.  While pundits debate contract law and publishing ethics, the real war is being conducted on a less visible battlefield. But it is one on which Wylie holds the high ground.

To understand Random House’s reluctance to protect its rights from Wylie and other marauders you need to understand a number of not so obvious factors.  The most salient of them is this: Publishers are loath to sue authors (or the widows and children of authors).

Let’s see how these factors play out in the power struggle unfolding before our eyes.

Random House not confident of its legal position

In 2001 Random House sued Rosetta, an e-book startup that acquired directly from authors the digital rights to books by such Random House lions as Kurt Vonnegut Jr., Robert B. Parker and William Styron, books that were still in print in paper format under Random House imprints. Random had published them before there was such a thing as e-books, but nevertheless considered a book is a book is a book whether in tangible or digital form. The courts however rejected Random’s position, denying their request for an injunction against Rosetta. Random filed an appeal and the court turned it down. A second appeal was rejected too, forcing Random to work out a settlement with Rosetta. The critical issue – what is a book? – remained unlitigated and left Random uncertain about its legal position.

Random Backs off from Open Road Threat

When publishing superstar Jane Friedman launched her Open Road e-book venture she declared her intention to start with several works by Styron including Sophie’s Choice and the Pulitzer Prize-winning Confessions of Nat Turner. The problem was, Random House claimed it owned those rights (presumably having recovered them from Rosetta as part of the settlement) and it issued a stern warning to all “third parties” without naming Friedman specifically. Authors, stated CEO Marcus Dohle, are “precluded from granting publishing rights to third parties that would compromise the rights for which Random House has bargained.” By drawing a line in the sand, Random expected Friedman and other potential interlopers to back off or face the full wrath of the publisher’s litigators. (see Random House Serves Notice on Would-Be E-Interlopers)

It is  a fundamental business principle that you don’t make threats you aren’t prepared to act on. And that is why we were flabbergasted four months later to learn that Random House had released e-rights to the Styron estate (See Random Returns Sabre to Scabbard in Styron E-Book Standoff). What was that about?

“The decision of the Styron estate is an exception,” Random executive Stuart Applebaum explained. “Our understanding is that this is a unique family situation.”

Why, after rattling its saber so truculently, did Random give in? In our estimation it’s because ultimately, to make good on their threat, they would have had to sue Styron’s widow and children. And that would be a public relations disaster.

Whether Styron was truly an exception or Random blinked, one thing was clear to publishing professionals: sooner or later there would be further tests of the publisher’s determination. How would Random react the next time?

We’re about to find out.

Don’t Bother Suing Agents

Claiming that he hates the low e-book royalties paid by traditional publishers (see Random House Changes E-Book Royalty Policy), agent Wylie, representing hundreds of distinguished authors such as Salman Rushdie, Martin Amis and the late John Updike, announced that he is starting his own e-book publishing venture and intends to launch it with books published by Random House and other trade book publishers.

Does he have the right to do that? Wylie says he does: “The fact remains that backlist digital rights were not conveyed to publishers, and so there’s an opportunity to do something with those rights,” he declares.

Despite what happened with Open Road, some industry observers expected Random House to threaten to sue Wylie’s ass into pebble-sized pieces. But Wylie knows they won’t, because, generally speaking, agents are not legally liable for breaches of contract committed by their clients. A lawsuit against Wylie would in all likelihood be thrown out of court, and the judge would tell Random that if they have a beef it’s with Wylie’s authors, they’ll have to sue Wylie’s authors. Which brings us back to our thesis: Publishers are loath to sue authors (or the widows and children of authors).

So? How does Random intend to punish Wylie? “Regrettably,” Applebaum declared, “Random House on a worldwide basis will not be entering into any new English-language business agreements with the Wylie Agency until this situation is resolved.”

This is known as the We’ll Cut Off Our Nose to Spite Your Face ploy, and it will avail Random nothing. Wylie’s clients are so coveted by Random’s rivals that if Random made good on its threat you’d see the greatest migration since the Aleuts crossed the Bering Land Bridge.  Jackals are standing by!

Buyer? Seller?

Though legal threats won’t faze Andrew Wylie, handling the challenge of being both an agent and an e-book publisher might. A number of knowledgeable people like Macmillan’s John Sargent have not only deplored Wylie’s decision to put all his authors’ eggs in Amazon’s basket but have questioned whether it’s in the best interests of his authors. There is arguably more money to be made selling not just to Amazon but to Sony, Barnes & Noble, Apple, Kobo, and other retailers.

Navigating the shoals of conflict of interest between buyer and seller is another daunting task. Even if he is able to build a “Chinese wall” insulating the two functions from short-circuiting each other, Wylie’s own clients will reasonably want to know how it’s going to work: “If my agent is now my publisher, who am I supposed hire to negotiate with him?”

Will Wylie’s stratagem succeed in forcing publishers to raise their royalty rate?  Not a chance.  E-book royalties will eventually go up, but it will be no thanks to Crusader Wylie. But we thank him for articulating the dissatisfaction of authors and agents with low royalty rates and for so fearlessly acting on his convictions.

Richard Curtis


5 Responses to Will Random House Chicken Out Again?

  1. The unanswered question is how much right Wylie has to exploit the talents of his writers? Does he have a carte blanche contract? Can those authors leave Wylie and release their own ebooks and then let Wylie face the prospect of suing THEM?

    What kind of cut is Wylie taking in addition to his 10 or 15 percent commission? Today these authors can upload their own books at Amazon and get 70 percent, presumably the same deal Wylie arranged, though admittedly without the publicity.

    This is just a footnote in the evolutionary history of the digital market.

    Scott Nicholson

  2. Jack W Perry says:

    Thanks for the well-thought out view of the Wylie decision to go direct to Amazon. It will be interesting to see what the next step is in the chess match.

    I completely understand why ‘The Jackal’ would go direct with these 20 titles. All are classics of the 20th century and have been selling in print form for years. So there isn’t a lot of marketing that needs to be done.

    But what would happen if this was a fiction debut or a make book that depends on marketing? Is the agent willing to invest to create the buzz to the consumer? It is a much different game trying to convince consumers to read someone they never have — as compared to classics that they already know.

  3. Steve Boyett says:

    “Information wants to be free” is a maxim that doesn’t just mean it wants to not cost anything. It also wants to be openly available. The nature of information on the Net is such that a kind of “forced transparency” in ebook accounting and production costs is inevitable, as figures are outed and circulated.

    I believe that this is what will eventually alter the royalty rates paid by major publishes for e-books.

    I only wish such transparency would become available for the movie industry. It would be gloriously ruinous for them to have the public become aware of how much money is made by movies that ostensibly bombed. (Here’s a hint: if there was a sequel, then the original made money. Period.)

  4. Steve Boyett says:

    I have to disagree a bit with Mr. Nicholson’s comment above. Rather than being an evolutionary footnote, this is a transitional stage, as writers, agents, and indeed readers, begin to understand that digital media — freely reproducible, freely distributable — are eradicating barriers erected by a business model based on the production and distribution of a physical object.

  5. Shem says:

    Given the low barriers to entry to the ebook market what Wylie has done isn’t all that impressive. Why doesn’t he stop issuing statements and just become a publisher? Oh, right, that thing: money. The banking function. His authors like to get paid, and they like someone else to take the risk, therefore they like an advance. Even if you ignore the amazon exclusivity and other important issues, Wylie just doesn’t have the money. if HMH paid Philip Roth over a million for Nemesis, do you think Mr. Roth is willing to take nothing on the next one in exchange for a potentially larger share of ebook royalties?

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