The Future of Publishing: Know Your eBook Rights

 

Do publishers control eBook right to their legacy titles?

"Arguably, yes, but not for much longer."
-- Lloyd Jassin

 

 On September 28, 2010, Publishers Weekly and the Book Industry Study Group held a seminar at the Random House building entitled The Future of Publishing: Know Your eBook Rights.   It was moderated by Jim Milliot of PW.  I was honored to be on the dais with Paul Aiken, Exec. Dir., Authors Guild; Neil de Young, Exec. Dir, Hachette Digital; and  Scott Waxman, Waxman Literary Agency.  The following concerns future technology rights and the threat copyright termination -- and Andrew Wylie -- pose to legacy publishers.

JIM MILLIOT (PW): Great. Thanks very much. Lloyd?

LLOYD JASSIN: If Paul (Aiken) is a glass half full kind of guy, then you’ll slit your wrists after I’m done speaking. (laughter) I’m Lloyd Jassin and I want to thank Publishers Weekly and the Book Industry Study Group for inviting all of us here. Because I’m an attorney, I evoke a lot of hostility so let me lay a little foundation.  

While I am an attorney I also consider myself a part of this industry. I started out in book publishing 25 years ago, originally at St. Martin’s Press, and then Simon & Schuster. I was a director of publicity for a division of S&S that published long-shelf-life branded nonfiction, which was a good idea then and is even a better idea now for a variety of reasons dealing with electronic publishing. So I’m an exile from publishing. I then went to law school and worked in television and syndication distribution, doing a lot of trademark licensing. I’m also an author. I currently have a boutique law firm, and I represent franchise authors, midlist authors, some literary agencies, midsized book publishers, and the like. So I don’t see things just through the eyes of an attorney/advocate, or a publisher/author. I think I see things a little differently. Plus I have a lot of friends in the music business and we all know what’s happened to them.

So if somebody asked me about the future of book publishing, which I think is the subtext of this morning’s discussion, I’d say, to paraphrase one of my music business friends, “the future of publishing is bright, but the future of the ‘Big 6’ publishing industry is cloudy.” I think publishing has always been in disaster mode, and it will reassess and reform and maybe get smaller, but it’ll adjust to the changes. So big publishing is in peril; you don’t need me to tell you that. But I don’t think it’s just the recession, I don’t think it’s just disintermediation. It’s the fact that, in large part, older contracts didn’t contemplate the digital future. That is an error that you can lay at the feet of the publishers, because they drafted those contracts, and future technology clauses have existed for at least a hundred years. I handed something to Paul that he probably is familiar with, which is Mark Twain’s contract, in his handwriting, which talks about future technologies. So it wasn’t that they didn’t know about future technologies. It’s just that the lawyers were asleep at the wheel, in my opinion.

So respectfully, and it’s very respectful because I’m here at Random House, I disagree with Marcus Dohle, Random House’s CEO’s statement that the vast majority of backlist contracts granted Random House e-book rights. I believe he wasn’t speaking just for Random House but for the industry.  Those contracts need to be reviewed on  a case-by-case basis. Some contracts  granted them e-book rights; a lot of them certainly didn’t. But I think whether they did or didn’t may  actually moot, and what I mean by that is, evenif they did grant Random House and Simon & Schuster and their brethren electronic book rights, they have them only for the short term, not the long term. The Copyright Act giveth and it taketh away, and already, and with greater velocity in two years, authors will be able to exercise their statutory termination rights. These are rights found in the Copyright Act that allow authors who didn’t know their worth when they negotiated their publishing contracts 35, 56, 75 years ago, the right to go back and negotiate  a better deal. Is it fair to publishers? It’s really not a question of fairness; it’s the law. And wherever you come out on this issue, the copyright termination provisions of the Copyright Act are going to allow authors to reboot their pre-Internet contracts, and clear up any of the ambiguities regarding e-book in the author’s favor.  So, if the question is, do publishers control e-book rights to their legacy titles?  Arguably they do, but not for much longer.

What happens when the right to reprint classic titles is threatened  is the subject of another evening, but what it comes down to is, agents and publishers disagree on two key issues.  Who controls e-book rights? I think the question’s been answered, whether it’s the Rosetta books decision which Random House lost, or the reversion of rights in favor of  heritage or legacy authors. The historical irony is that 301 years ago, the Copyright Act gave authors the exclusive right to control their writings and other intellectual property and authors in turn gave publishers an exclusive monopoly over their works. The reason authors needed publishers was that publishers controlled the printing presses.  That’s what came between readers e and the writers of the time. Now that the printing press is less important and authors can control their own printing presses, I think we’re going to see a dislocation, a disruption, in the way business has been done for a lot of years.

I did the math and 2013, which is first date rights can be recaptured, is two years, 95 days, and approximately 16 hours from now. That’s when the copyright termination or “contract bumping recapture” first time bomb goes off.  It will threaten publishing’s backlist and all of the books on the backlist that begin with the words “Vintage,” “Classic,” ”Heritage”; titles published 35, 56 and 75 years ago are at risk. When a publisher’s backlist has to be renegotiated, it has profound implications for the industry, and makes authors and publishers reassess their relationship. I think what will happen is old contracts will be renegotiated – publishers will  compromise rather than lose authors. And, it’s generally a good idea to leave the dance with the party you came to the dance with, so while authors have the ability to put a knife to the throat of publishers—it’s the Copyright Act that allows them to do that—I think there’ll be accommodations. If you synthesize  this, agent Andrew Wylie, by settling for a 40 percent royalty on backlist titles for his legacy authors, makes me question his negotiation skill. It could be that Random House had pictures of him in a compromising position in Frankfurt. I don’t know.  Perhaps, he didn’t consult his  attorney before accepting Random House’s offer.  Why?   In in two, three, four years, all the rights he bargained away are going to revert to his authors.  Before long, it’s going to be a 50 percent – or better – deal that authors and agents will be striking.  Maybe Mr. Wylie  got large advances in exchange, and it’s a short-term license, so there are lots of ways that you can work things out. Forty percent wouldn’t look so bad to me if I got several million dollars up front. Money today versus money tomorrow. 

[The full interview will run in the Spring issue of The Authors Guild Bulletin]


Resources

The Copyright Termination Time Bomb

The Electronic Rights Dilemna

What Jerry Garcia & Ted Turner Can Teach the Publishing Industry

A Legal Footnote to the Andrew Wylie E-Book Controversy

Penguin R

andom House has its own self to blame for the electronic pickle they find
themselves in today. When drafting the original, pre-internet, publishing contracts for Cheever, Nabokov and Updike, they left out the future technology clauses.  To be clear, it's not that they didn't know how to draft future technology clauses.  They left them out.   As such, they just weren't thinking much about the future.  Likely, they were doing what was expedient, i.e., signing up books in "book form."  

What Was Random House (Not) Thinking?

As early as 1909, publishing attorneys have been thinking about e-books.  In 1909, they even included a "future technologies" clause in Mark Twain's publishing contract for his soon-to-be published (as in 2010) autobiography.  The "future technologies” clause, which acts as a catch-all for technologies and media not yet invented, has been around for a long while.  Narrowly drafted (out of respect for the author's rights and the publisher's legitimate interests), such a clause would have snagged verbatim e-book reading rights.

What the Publishing Industry Can Learn from Captain Trips & Captain Outrageous

What once seemed trivial (i.e., drafting a contract clause), is now upsetting the balance of power in the publishing industry.  It's a classic case of an ounce of prevention.   Happily, America has a long history of entrepreneurs taking undervalued opportunities (e.g., Turner's purchase of the old -- much undervalued -- MGM/UA film library in 1986) and leveraging them to create great value.

There's a Jerry Garcia/Phil Lesh/Robert Hunter lyric that neatly sums it up:  "One man gathers what another man spills” That was Turner's modus operandi, when he acquired the pre-1986 MGM, and pre-1950 Warner movie libraries.  He dusted them off, colorized them, and started profitable new media ventures.   He looked for and found undervalued opportunities and created great value. That's the American way.  Is Andrew Wylie a latter day Ted Turner?  Is he creating value or merely nibbling away -- unfairly -- at Random's backlist?  You be the judge.

Wylie's E-Book Gambit Changes the Digital Landscape

This week the industry was shaken by Andrew Wylie's announcement that he was entering into an exclusive  relationship with Amazon to sell Kindle versions of  his author's bestselling p-books.  Wylie's move is troubling.  What's troubling is that Amazon becomes the exclusive e-purveyor of  bestselling backlist titles -- and a direct competitor of RH and other print publishers who obtained "book form" rights under legacy agreements.   From the Big-6 publishers' perspective, this disrespects both the letter of their publishing contracts (all of which contain non-competition clauses), and the spirit of them.  It's Rosettta Books all over again, but different, since the digital landscape has changed since the late 90s.  Today, for example, e-books are displacing mass market sales.   

On the one hand, you can't fault Wylie for seeking out new digital revenue streams for his authors (and their heirs).  However, Amazon is no longer just a bridge between publishers and readers.   It is a competitor.  You can't play both sides of the net without being called out for it.  

What to Do?

Traditionally, bookselling was separated from publishing, with booksellers (including Amazon) realizing the benefit of combining the wares of many publishers. Now that Amazon has the ability to perform all of the activities that take place between delivery of an edited manuscript and delivery of finished books to readers, the publishing industry needs to take a long hard look at its business relationships -- and business model.  The Wylie-Amazon alliance is a slippery slope that can easily decrease the diversity of books in the marketplace, as well as access to them.  Like Amazon's BookSurge gambit of two years ago, Amazon is seeking to steer consumers to books that they either produce and/or control.  

Two years ago, Amazon stated that they were not seeking exclusivity to indie published books (i.e., requiring POD titles be printed exclusively through Amazon's BookSurge POD service).   Industry pundits claimed that was exactly what they were trying to do.   Apparently, the pundits were correct.  Today, public disavowels are impossible.   How Amazon will deflect the wrath of the industry remains to be seen.   

In Joseph Esposito's excellent article entitled the "Platform Wars" [IBPA Newsletter], he wrote, "Book publishers have lost control over their own industry, and not because consumers have won.  They haven't -- they will be no better off with defacto platform dominance than anyone else except the company that controls the platform." 

Platforms like Amazon and Google have morphed into celestial publishers.  Amazon did this by design.  Google stumbled into the publishing business by scanning books without permission.  For their punishment they received exclusive control over "Orphan Works" (i.e., in-copyright, but out-of-print books, whose authors have gone missing).  

And so it goes.  Amazon is like the abusive partner one tolerates for the benefit of the kids.  However, the industry is loosing its patience.  While I have a beef with John Sargent (we don't see eye to eye on the GBS), I applaud his muscular response, and RH's, to Wylie's exclusive arrangement with Amazon. 

The digital meteor has hit.  It will be followed by the copyright termination time bomb.  To survive both, publishers need to present content in a variety of digital formats and rethink certain ways of doing business -- and who they wish to partner with.   Large publisher dominance is being eroded.  Change is inevitable. It cannot be stopped nor should it be.  However, it would reduce my paranoia if Amazon, Apple and (especially) Google, were prevented from playing digital favoritism.  Amazon is no longer just a retailer, and Google has never been a public utility.  They are publicly traded companies, prone to favor their own intellectual property over the property of others.     

Mr. Esposito's advice is right on  the money.  "[T]he best strategy is to be present on all the competing platforms, while exercising judgment as to timing and pricing."   Essential parts of that strategy include, making Amazon (and Wylie) stand in the corner and apologize; taking a blue pencil to the Orphan Works provision of the GBS; and, as Joe suggests, exercising good publishing judgment as to timing and pricing.   And, the industry just might want to put the Justice Department's number on speed dial.  If you sleep with a mildly abusive partner, you may wake up someday and find yourself needing an order of protection.   

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