Monthly Archives: March 2013
Most book publishers’ contracts have provisions granting authors the right to examine the books and records of their publishers under certain conditions: for example, the examination must take place on the premises of the publisher during normal business hours; no more than two audits may be conducted in any given year; an audit must be commenced within a reasonable time after the issuance of the royalty statement in question; the records on any given book shall not be examined more than once; the publisher is not required to keep records on a book for more than a certain period of time, etc.
Although, I am told by one accountant, examinations of publishers’ accounts are on the rise, invariably these have been conducted by authors with lucrative contracts. I can say with certainty that the vast majority of authors has only the vaguest notion of what is involved in an audit. Perhaps we can rectify that problem here. Harder to rectify is the somewhat bovine attitude on the part of many authors that their contracts are too small to merit auditing, and the royalties to be liberated by an examination of a publisher’s books would not be worth the cost, which can run to a thousand dollars a day or more.
These assumptions are not necessarily correct. While a publisher’s profits from midlist and category books are indisputably smaller than those from best-sellers, the total profits from the former can be immense by virtue of the fact that there are so many more of them on publishers’ lists than there are best-sellers. And because most best-sellers are by established big-name authors, the huge royalties they earn are usually paid in advance, giving publishers little leeway to reserve royalties, whereas publishers commonly hold at least half the royalties collected on midlist and category books for which modest advances are paid.
If collective audits of such routine books could be undertaken, thus spreading the cost per author, they might well yield a surprisingly good return on the authors’ investment in an accounting firm. More important, such group audits would keep publishers honest by exposing questionable accounting practices. It is therefore heartening to note that some author and agent organizations are sponsoring such group audits or making funds available for them. Because your book, or books similar to yours, might be spotlighted by an audit, you might want to tag along with the C.P.A. for a visit to a publisher’s ledgers.
Before we embark, we ought to discuss just what gives us the right to audit a publisher, anyway. As I said at the outset, many publishers grant that right in the boilerplate language of their contracts. Certainly, every author or agent negotiating a book contract should insist on an audit provision. But if it is absent from a contract through oversight or design, or if a publisher refuses to grant that right to an author, does that necessarily rule out the possibility of an audit? Not according to the attorneys and accountants I have spoken to. They maintain that any licensor whose contract calls for royalties is entitled to examine the statements and supporting data of the licensee. Therefore, whether your contracts stipulate that right or not—indeed, even if you’ve been so foolish as to waive that right—your publisher cannot legally prohibit you from auditing his books. He can make it extremely difficult: he can postpone and stall, he can “misplace” and “lose” documents, he can subject your accountant to unpleasant conditions—a monastic cell with a hard chair, rickety table, and one flickering taper. But he must, ultimately, let your accountant go over the books.
Within recent memory there were some shady publishers who did that sort of thing, but happily they were driven out of business by their legitimate competitors. Today, while some publishers are frugal with their hospitality toward accountants, many shrug and say, “Come on in, we have nothing to hide.”
Assuming your publisher is cooperative, the first step is for the accounting firm to make an appointment. The accountants will have examined the author’s contract and all royalty statements from publication date to the present and will use these as the jumping-off point for their investigation. They will then request the printer’s affidavits stating how many copies of the book were run off, along with information about damaged or destroyed copies. They will, of course, expect affidavits for all printings of the book. If there has been more than one printing, the accountants will want to know if the cover price of the book was raised.
Then the accountants will examine the records pertaining to distribution of the books, either to wholesalers or directly to book chains. The number of copies distributed plus the number of copies left in the warehouse plus the number of copies damaged, destroyed, or given away for free should add up to the number of copies printed. If they don’t, suspicion will certainly be aroused that the publisher printed copies he has not reported.
The next critical source of information is copies returned. In hardcover publishing, the books themselves are returned to the publisher for credit, and counting these, while tedious, is not as stupefying a task as counting returned paperbacks, for the dimensions of hardcover printings and distributions are nowhere near those of paperback. In paperback publishing, however, returns are usually effected simply by stripping the covers off the bound books and returning the covers to the publisher’s warehouse, saving the substantial cost of shipping whole books back whence they came.
Obviously, the job of counting paperback covers, which even for a modest-sized publisher number in the hundreds of thousands each month, is impossible to do by hand. Modern paperback houses handle the problem by printing product codes, those black-and-white coded bars similar to those you see on canned and packaged goods at your grocery store, on the backs of their book covers. The stripped covers are fed through machines that read the codes and compute title, author, list price, number of copies returned, and other data.
We now have all the information we need: number of copies printed, number of copies distributed, and number of copies returned. But there is still a gap between what the author feels is owed him and the actual amount of royalties he has been paid. That gap is the royalty on the number of copies the publisher has reserved against returns. As most authors now know, publishers create such reserves in order to give credit to distributors and stores that might return copies of books in the future. The reserve is determined by the executives who run the publishing company, and while it is to be hoped that these individuals will base their judgments on experience, reasonable evaluations of market conditions, and common sense, the existence of this tempting pool of undisbursed money has a tendency to cloud executive judgment, particularly in the pressure cooker of corporate bottom-line expectations.
Here, then, is the answer to the commonly asked question, “Is it possible for print, distribution, and return figures to be falsified?” The answer is, not without enormous difficulty, for it is neither safe nor practical to do so. For that to happen, the entire publishing organization—the clerks who document the printing and distribution information and count the returned covers, the bookkeeping and accounting departments of the publishing company, and the staffs of the printer and distributor—would have to be in on the conspiracy and sworn to secrecy. That is plainly preposterous: there simply isn’t enough profit in the publishing business to make such wide-scale corruption worthwhile.
It is also completely unnecessary, because the same results are achieved by the decision of a handful of publishing officers to fix reserves against returns at an excessively high level. And it’s all perfectly up-and-up from the publisher’s viewpoint, because the establishment of reserves is a business judgment that may be argued but cannot be cited as fraudulent—unless one takes the position that the entire system is a license for publishers to earn interest at the expense of authors.
No, my observation is that print, distribution, and return information are not falsified, at least not in a way that could be described as deliberate and systematic. It would be closer to the truth to say that publishing bookkeeping is subject to the same goofs as the bookkeeping of any other industry. And though it may seem that the errors always fall in favor of publishers, the accountants I’ve spoken to state that as many fall in the authors’ favor. Thanks in good measure to the consignment method of selling books, publishing bookkeeping is far, far more complex than it has to be, and that makes it a breeding ground for error.
One of the standard provisions of every audit clause in book contracts is that if errors of more than a certain amount, usually 10 percent of the sum stipulated in the publisher’s royalty statement, are found by auditors, the publisher pays for the cost of the audit. Such a provision might make it tempting for authors who feel shortchanged by their publishers to hire an accountant, figuring the accountant will certainly be successful in detecting an excessive reserve against returns and get at least 10 percent of that reserve released. Thus the publisher would be required to pay for the audit, right?
Wrong. A high reserve against returns may not be considered an error. It’s merely—in the publisher’s eyes at least—a judgment call, a prediction or anticipation that a certain number of copies will be returned. Anybody contemplating an audit of his publisher’s records should therefore be prepared not to recoup his accountant’s fees from the publisher. Released royalties might defray or pay for the audit, but the publisher will stoutly maintain that no bookkeeping error was made.
Is there some alternative to hiring an accountant to find out whether your publisher is giving honest weight? Well, if you can prevail on your publishers to furnish you with information about the number of copies printed, distributed, and returned, you need nothing but a pencil and paper and a grade-school math education to figure out whether you have collected everything that is due you, and what the reserve against returns is. Then it’s simply a matter of arguing with your publisher over the propriety of holding so much reserve money, or holding it for such a long time. The problem is getting that information: if publishers wanted you to have it, they’d put it up front routinely in their royalty statements. With persistence, however, you or your agent or your lawyer will be able to secure the information.
After reviewing it, however, you may feel in your bones or have other reason to believe that the figures furnished to you are incorrect, that your publisher printed or distributed more copies than he’s told you, or took in fewer returns. You will then have to hire a professional accountant to examine the publisher’s books, as the job is too complex and time consuming for untrained individuals. This is especially true if there is reprint, book club, foreign translation, or other subsidiary rights revenue—another very common source of bookkeeping errors among publishers but one that space prohibits me from analyzing in detail.
Some agents are able to build into book contracts provisions requiring publishers to furnish details of printing, distribution, returns, and reserves against returns in royalty statements, or copies of contracts and statements from sublicensees, such as book clubs and reprinters. For many agents and authors, however, it is futile to attempt to make publishers comply with such demands. This can only be achieved by collective action on the part of a determined, organized, and fearless cadre of professional writers or agents.
Four years ago we issued this warning about the dumping of used e-books and other computer devices. At last the issue is receiving some front page attention (see the New York Times‘s story Unwanted Electronic Gear Rising in Toxic Piles).
The only difference between then and now is that the E-Trash isn’t just being dumped on Asia’s poor. It’s now being dumped on America’s.
Below is the original posting.
When the next generation of laptops, tablets and e-readers arrives, what’s going to happen to the devices you replace?
If what’s happening in Europe is any guideline, it will end up in a toxic e-waste landfill in Asia and Africa where the destitute, many of them children, will scavenge it for scrap. These scavengers incur horrifying and often fatal skin, lung, intestinal and reproductive organ ailments from the plastics, metals and gases that go into discarded cell phones, televisions, computers, keyboards, monitors,cables and similar e-scrap. Elizabeth Rosenthal, covering the story for the New York Times, tells us that “Rotterdam, the busiest port in Europe, has unwittingly become Europe’s main external garbage chute, a gateway for trash bound for places like China, Indonesia, India and Africa.
“There, electronic waste and construction debris containing toxic chemicals are often dismantled by children at great cost to their health. Other garbage that is supposed to be recycled according to European law may be simply burned or left to rot, polluting air and water and releasing the heat-trapping gases linked to global warming.”
Jessika Toothman, blogging on HowStuffWorks, describes how “A whole bouquet of heavy metals, semimetals and other chemical compounds lurk inside your seemingly innocent laptop or TV. E-waste dangers stem from ingredients such as lead, mercury, arsenic, cadmium, copper, beryllium, barium, chromium, nickel, zinc, silver and gold.” In fact if you want to see what this “bouquet” of poisons is doing to your fellow man, woman and child, you can view this sickening video of a Chinese e-trash village.
One device not mentioned in Toothman’s list of e-waste is e-book readers. The obvious reason is that we are still in the first generation of e-book devices (or second if you count progenitors like the Rocket Book) and there haven’t been enough readers manufactured to make them a formidable source of trash like cell phones and TVs. But when the next generation of e-book readers floods us with Kindle and Sony rivals – better, cheaper, faster, more colorful, loaded with special features and options – will we simply add them to the tons of lethal junk earmarked for miserable dumps in China, Indonesia or Africa?
Because it is still young, the e-book industry has an unprecedented opportunity to exercise its social responsibility, as we recently pointed out.Here is a three-point program to make sure the e-books business remains green.
- First, manufacturers must be compelled to disclose the chemical components of the e-book devices they produce so that we can evaluate environmental hazards.
- Second, Amazon, Sony, Plastic logic, Philips and other developers must develop programs for either returning their devices for safe (and monitored) disassembly and recycling or for donation to students, armed services personnel and other charitable recipients.
- And third, The cost of recycling and safely disassembling e-books must be built into the price structure of e-books.
Right now the hidden cost of computers and other electronic devices is human suffering. It is unacceptable for the e-book industry to boast about environmental advantages while secretly sticking the helpless poor with the bill or contributing to the poisoning of the world’s water and air. If safety measures and sensible recycling add $25 or $50 to the price of their devices, that is an acceptable tradeoff. Because it would be assessed equally on all manufacturers, none would have a competitive advantage over its rivals.
We expect the e-book industry to do the right thing.
Every Blogger owes a debt of gratitude to newspapers and magazines. This posting relies on original research and reporting performed by the New York Times.
FROM TIME TO TIME a writer bursts upon the literary scene with a first novel of astonishing accomplishment, and the world gasps as if witnessing the genesis of a supernova out of a hitherto undetected star. Critics poring over the author’s pedigree for clues to his development usually find only such banal biographical facts as that he was a reporter for his high school yearbook or a bridge columnist for some obscure midwestern newspaper. But this author had apparently been struck to his knees by a sublime inspiration and spewed the work out of his soul in one volcanic eruption. One thinks of Catch-22, The Naked and the Dead, Gone with the Wind, or Raintree County. In some cases the author never again rises to the height of his first book, and in not a few the author never writes another book at all. But that first book is enough to make the author’s name a household one forever after.
Professional writers often greet such events with mixed emotions.
For most authors the worst fate is to be ignored, and they spend long hours promoting themselves and their books on social media to make sure that doesn’t happen. Yet the biggest obstacle to discovery may be authors’ own Web sites, where visitors eager to learn more about their books and who are perhaps interested in buying them encounter a frustrating array of challenges.
This is particularly true in the case of authors who are putting their old books back into print. As a publisher specializing in reissues, I find that some authors seem to be doing everything they can to make it hard for readers to buy their books.
Below are some of the most commonly committed sins:
● Covers of dead books: If your book is out of print, why are you displaying the old cover? And worse, why are you linking to the page on Amazon where the only copies sold are used ones (for which you make no money on sales)?
● Covers to nowhere: It isn’t enough to paste the image of your cover onto your Web site; it must also be linked to retailers’ sites.
● Links to only one retailer: Unless you have an exclusive relationship with Amazon, you should also have links to Barnes & Noble.com, Kobo, iBookstore, and all other sites where your book is offered.
● Links to nowhere: If a link on your website only points to the homepage of your publisher instead of the page dedicated to your book, how is that going to help you sell it.
● Bio? Reviews? Blurbs?: Biographical information and reviews can be long and tedious. Who has time to read them? Display only the short version.
Remember that fans have limited time and patience. Their goal might be described as Veni, Vidi, Emi (I came, I saw, I purchased). They want to promptly see what they came to see, and if their impulse is to buy it, they should be able to do so in one or two clicks. If there is any impediment to satisfying that impulse on your site, you will have no one to blame but yourself for being ignored.
The above suggestions are condensed from an article entitled Discovery Begins on Authors’ Homepages published in the March 4, 2013 issue of Publishers Weekly. It can be read in its entirety here.
The following piece was published ten or fifteen years ago. If I didn’t think it still had validity I wouldn’t reprint it here…
A literary agent’s life involves far more than reading, lunching, and deal-making. His or her services embrace the literary, legal, financial, social, political, psychological, and even the spiritual; and the jobs we are obliged to tackle run the gamut from computer troubleshooting to espionage. But because our business is a day-to-day, book-to-book affair, we tend to lose perspective. With our preoccupation with advances and royalties, payout schedules and discounts, with movie rights and foreign rights and serial rights and merchandise rights, with option clauses and agency clauses and acceptability clauses and termination clauses, it is all too easy for us to forget that our primary goal is to build careers, to take writers of raw talents, modest accomplishments, and unimpressive incomes and render them prosperous, successful, and emotionally fulfilled.
This endeavor demands the application of all the skill and experience we command, plus something else: vision. Vision in this context may be defined as an agent’s ideal of the best work an author is capable of achieving, matched to the best job his publishers can perform. An agent’s vision should illuminate the author’s path, oftentimes far into his future, if not for his entire career.
In order for our vision to be fulfilled, three conditions must be met.
The screenplay opens the doors to securing financing by stimulating the interest of stars and their agents, and then to assembling the rest of the elements. Once these all come together and the money has been put up to make the film, the author can be paid. Until then the author is in effect asked to subsidize the writing of the screenplay by being moderate in his asking price for the option. In many cases authors are asked to give producers a free or nominal option against a big purchase price and share of the profits. These strangely unbalanced deals—often options of a few hundred dollars against purchase prices of hundreds of thousands—result from the fact that the option money has to come out of the producer’s own pocket, whereas the purchase money comes out of someone else’s.
Although there is a lot of activity in options of books for the movies, it can be argued that the option system is actually harmful to a book’s chances of being made into a movie. Options are usually purchased in six-or twelve-month increments, but are renewable at the producer’s option for several more six- or twelve-month periods with the payment of additional option money. The process can tie up a book for eighteen months, two years, or longer while the producer frantically tries to juggle screenplay, financing, distribution, director, and stars in the hopes of getting them to sign a contract. Nobody wants to sign a contract until he has a guarantee. The financiers may want a distribution commitment before they fork over their money; the director may want a particular star to agree to appear in the film; the star may want a terrific screenplay; the screenplay writer may want a huge fee; the studio may want the book to be on the best-seller list.
Since the odds against everyone signing are so high, it’s likely that when the option or renewal lapses, your book will have been shopped all over the movie business. Though you’ll then have an opportunity to market the rights again and pursue those who might have been interested in your book a year or two ago, the book will probably have the smell of death clinging to it, and you’ll be unable to revive it.
Clearly, it’s a lot cheaper and easier for a modestly heeled producer to option or commission an original screenplay than to get involved with books. But with the kinds of movies that are pulling in big bucks at the box office these days, it may reasonably be asked, “What do producers need books for, anyway?” So many of these films are youth-oriented, exploitive, devoid of ideas, predictably plotted, action-packed, and populated with stick-figure characters. A producer contemplating making one of these teenage fantasy films is certainly not going to seek those values in books. Indeed, he would have to search far and wide to find books dumb enough to make into today’s hit movies.
Interestingly, the one area in the entertainment industry where books are still welcome, and in fact welcome as never before, is television, and the immense appetite of the networks and cable companies does not threaten to diminish in the foreseeable future. Publishers’ lists are combed furiously by producers seeking movie-of-the-week or miniseries candidates, and because of network commitments to air scores of these films annually, the search has become intensely competitive. Many of the properties optioned or acquired are novels, but television producers, unlike theatrical film producers, plunder short stories, articles, and nonfiction books as well as novels in their quest for adaptable material.
Ironically, the quality of television movies now often exceeds that of many theatrical films. Once characterized as a vast wasteland, television has discovered ideas and begun to develop them into vehicles that are often intelligent, sensitive, moving, and controversial, touching on themes that the movies used to portray but seldom do any more. Out-of-wedlock children, incest, senility, spouse or child abuse, drug addiction, kidnapping, and physical disability are some of the themes that have been woven into recent original television movies, and few who have watched them can claim that they are inferior to most theatrical films made today or that they are not the equal of many made in the past.
From the viewpoint of the author with a book to sell, this change is of major importance, for it no longer is smart to disdain television deals while holding out for a theatrical one. It is likelier that an option will be exercised for a TV movie than for a theatrical one, and the price gap between the two media has begun to close. And, from the viewpoint of pride of authorship, the chances are better than ever that an author’s vision will be preserved intact in a television adaptation. For all these reasons I recommend that if you or your agent are approached by producers interested in adapting your work for television, and the terms are comparable to what you might get from a movie-movie producer, don’t hesitate to make that deal.
Here are some other suggestions for improving your chances of making a movie or television sale in today’s market.
• Prepare an extremely brief—no more than two pages—synopsis of your book to show to interested producers. It should be a highly compressed summary of the theme, story, and characters, and should read like a jacket blurb except that the emphasis should be on the cinematic values rather than the literary ones. Potential buyers will want to see the manuscript, proof, or printed copy anyway, but if they have time to read nothing else they will read your summary, and a well-written one will enable them to visualize the film the way you yourself visualize it.
• Give no free options, even of a few weeks’ duration. Inevitably you will be approached by would-be producers claiming they know exactly the right studio or network executive who will buy your book, and all they need is a couple of weeks to make a deal, and could you let them have just this one shot free of charge because by the time the papers are drawn up it will be too late, etc. Most agents who have dealt with movie and television people have heard this line before and shut the door on it; they’ve learned that people don’t respect properties they get for nothing. An investment in an option guarantees a certain amount of commitment and responsibility. You don’t have to draw up a complete movie contract for such a modest deal, but a deal memorandum synopsizing the highlights of the negotiation, such as option price, purchase price, profit percentages if any, duration of option and renewals, reserved rights, credits, and so forth, is a must.
As for that claim that the producer needs only a few weeks, don’t believe it. Everything in the movie business takes six times longer than you would imagine it should. I have seldom seen a movie option exercised after six months, and indeed have seen producers dig themselves into an awful hole by paying too much money for too brief an option, necessitating their renewing the option for too much money again for yet another brief option. The author who finds himself in the position of dealing with such a producer enjoys the rare pleasure of being in the driver’s seat, so if someone wants a short option, give it to him, but make him pay for it.
• Renewals of a producer’s option on your work should be more expensive than the original option and should not be deductible from the purchase price of the rights. The initial option is usually applicable against the purchase price, but thereafter the producer is in effect paying rent on your property. If you allow him to deduct renewal fees from the purchase price, he is in effect not renting your property but buying it from you in installments, and relatively painless installments at that. You’ll want that lump sum due upon exercise of the option to hang over the producer’s head like some ominous cloud. And, by making renewals more expensive than the original option, you are telling the producer that tying your property up for such a long time is an inconvenience, and one that is not mitigated by the money he’s paying you to extend your option. If you option your book before publication, try to negotiate the deal in such a way that the option expires around your publication date and is not renewable beyond that date. Your property will probably never be hotter to movie people than before it’s published, when it will not have been exposed to the entire industry or shopped all over town. Thus anyone taking an option before publication is getting your work at its ripest moment. If, by the time the book is published, your producer has not been able to make a deal, his option should expire, and expire without hope of renewal. If your book then goes on to get good reviews and/or hits the best-seller list, you have a second lease on life.