An important warning from The Authors Guild:
Wiley's Deceptive Letter to Bloomberg Press Authors: "We are pleased to inform you" that we will be slicing your royalties up to 50%
John Wiley & Sons acquired Bloomberg Press, the books division of Bloomberg, in March. At the end of April, it began sending a letter to hundreds of Bloomberg Press authors purporting to inform them "about a few differences in the accounting systems of Bloomberg and Wiley that it will be helpful for you to know about."
While this sounds innocent enough, it isn't. If signed by an author, the letter is actually a contract amendment that will materially and adversely affect the royalty rates of many Bloomberg Press authors.
Among other things, this contract amendment would:
1. Change royalty rates based on retail list price to rates based on net receipts. We've reviewed several Bloomberg Press contracts. All provide for royalty payments based on the retail list price (although we understand that there may be many based on net receipts). The Wiley letter misleadingly presents this to the author as good news: "We are pleased to inform you that we will be paying your royalties on the net amount received…" This change will, for many authors, effectively slice royalties by up to 50% for some book sales. Wiley's letter fails to disclose that.
2. Empower Wiley to keep an author's book in print with a lowball print on demand royalty of 5% of net receipts. (Bloomberg Press had no print on demand program.) The contract amendment, which provides no threshold level of sales for a work to be considered in print, essentially grants Wiley a perpetual right in an author's book for a pittance. The 5% of net receipts royalty rate for print on demand editions is as low as we've seen.
We've asked an independent royalty auditor to review the affects of these contractual changes on royalty income. The royalty auditor found reductions of 24% to 43% using actual sales figures and applying Wiley's amendments. (The precise affect of the amendments will vary by title, depending on particular categories of sales of the work.)
The Authors Guild strongly urges Bloomberg Press authors to not sign this letter without careful consideration. If you have received this letter, consult your agent or a publishing attorney or contact a lawyer in our legal department so you understand precisely how this amendment would affect your rights and royalties. Important: if you have already signed the letter and returned it to Wiley, contact our legal department immediately. Non-Guild members are welcome to contact us as well. All communications will, of course, be held in confidence.
This is no way to do business. The letter is shocking from a publisher of Wiley's stature. In our view, Wiley should tear up any signed letters it has received and start over, forthrightly explaining to its new authors the contractual changes it is seeking and how this may affect their income and their right to terminate their publishing contracts.
From the Author’s Guild:
Late yesterday afternoon, John Wiley issued a press release disputing some of the assertions in our alert of yesterday morning. In our alert, we called Wiley’s April letter to its Bloomberg Press authors “deceptive” and “misleading” and that it would “materially and adversely affect the royalty rates of many Bloomberg Press authors.”
We stand by every word of our alert, and we again call on Wiley to start over. No sensible Bloomberg author with a contract providing royalties based on the retail list price of their book would have signed Wiley’s amendment if they were fully aware of its effects. Wiley should send Bloomberg authors a new letter, informing the authors that they are disregarding any previous consents to Wiley’s proposed contract changes and clearly explaining how the new terms they’re suggesting differ from the authors’ existing contracts.
Or, as Scott Turow put it on reviewing their response, “Wiley should knock it off and do the right thing.”
In any event, here are our replies to John Wiley’s various assertions:
1. Wiley’s response says that its April letter to Bloomberg authors “explain[ed] the changes in plain English” and invited authors “to discuss these changes or raise questions.”
Wiley’s April letter is plain enough, but it avoids any hint that its changes will greatly reduce many Bloomberg authors’ royalties. This is fundamental. Wiley’s a sophisticated publisher, well aware of what it’s doing and well aware that most authors aren’t publishing attorneys. It could have spelled out the effects of its proposed contractual changes in equally plain English. If it had done so, then the offer to discuss the changes would have been meaningful.
2. Wiley says that Bloomberg authors’ “response to this new alliance has been positive.”
This doesn’t really respond to our assertions, since it says nothing about the actual letter amendment. To the extent this does refer to the letter amendment to the contract, we note that if one sends a misleading letter, one might successfully get positive responses.
3. Wiley says it “believe[s] former Bloomberg authors will be paid higher royalties in most instances.”
The calculation is pretty simple, really. For Bloomberg authors that were paid royalty rates on the basis of retail list price, as is the case for every Bloomberg contract we’ve reviewed, the author, for example, might receive royalties of 15% of the retail list price on a hardcover priced at $25, or $3.75 per book. If you instead base the royalties on the publisher’s net receipts, and the discount to the retailer is a typical 50% off list price, then the author receives 15% of $12.50, or $1.88 per book.
So we’re not quite sure where this is coming from, but we note that Wiley doesn’t say that it will be paying higher royalty rates, nor does it say that it will pay higher royalty amounts per book sold. It may be assuming that its marketing will be better than Bloomberg’s was, so sales will be higher, and the author will benefit, even with reduced royalties per book. That could be, but increased sales are no reason to reduce the contractually agreed royalty rate.
Or, it could be that most Bloomberg authors were already paid on the basis of net receipts, so the effects of the Wiley amendments might be minor. Perhaps there are many such contracts, and perhaps the effects would then be minor. Beats us: we haven’t seen an example of a net receipts Bloomberg contract yet.
4. Wiley says that “the limited number of contract amendments the AG apparently chose to select are not therefore representative; nor are their ‘calculations’ accurate.”
While it’s true we didn’t discuss all of the amendments, things don’t look much better if we expand our review. For example, here’s one of the amendments we didn’t discuss: “For any sales made at a discount of fifty six percent or more, your royalties will be calculated at 7.5% of net receipts and there will be no deductions for manufacturing costs.” But the Bloomberg Press contracts we’ve seen pay authors more than 7.5% of net receipts for those deeply discounted sales. Again, an author who doesn’t happen to be a publishing lawyer might not get that. That there will be no deductions for manufacturing costs sounds like a good thing, but the Bloomberg contracts we’ve seen only deducted those costs for what are essentially remainder sales, books sold at discounts of 75% or more. Royalties on remainders have always been trivial.
We stand by our calculations, which were done using real sales figures by an independent royalty auditor. Wiley can’t possibly know if our calculations are inaccurate, since they don’t know which books were in our sample.
5. Wiley says we issued our alert “without speaking with Wiley concerning its specific assertions.”
Actually, we raised these specific concerns with Wiley in an e-mail on Friday, May 7th: “[T]hese letters strike us as a deceptive way to make substantial, material changes to a book contract. We think any signed letters you received in response should be ripped up and this whole thing redone. When it is redone, we don’t think there’s any good reason to change the royalty structure or the termination rights of the Bloomberg authors.” We then spoke to Wiley. Wiley told us that the net effect of the changes was complicated and that authors would do better overall. We weren’t persuaded, but we hired a royalty auditor to be doubly sure that we were reading the changes correctly.
Our job, in any event, is to play the role of watchdog. While in this instance we raised our issues with Wiley, we don’t believe we’re obligated to speak to a publisher when we see egregious behavior before we alert our members.
Do not sign Wiley’s misleading letter and send it back to them. First consult us or your agent or your attorney. If you have signed the letter, we urge you to contact us immediately.
Wiley asked us to send you their response. It follows.
Wiley Responds to Authors Guild
Hoboken, NJ, June 10, 2010—Since Wiley acquired the rights to all formerly Bloomberg book titles on March 11, we have been working to provide a wider audience and more sales for these authors. On April 29, Wiley sent letters to the affected authors explaining the changes – in plain English, which we felt would be most helpful and informative for our authors. Wiley invited authors to speak directly with a specific (and named) publishing officer if they wished to discuss these changes or raise questions. Their response to the new alliance has been positive.
This morning – without speaking with Wiley concerning its specific assertions – the Authors Guild issued an “alert” to its authors, claiming that the Wiley letter is deceptive and inferring that the Wiley changes it effects will reduce royalties for all or most former Bloomberg authors. This is simply not the case. We believe former Bloomberg authors will be paid higher royalties in most instances. The limited number of contract amendments the AG apparently chose to select are not therefore representative; nor are their “calculations” accurate. In any event, Wiley stands by its offer to discuss their individual contracts with all affected authors. We are happy to address any questions and concerns they may have about their individual contracts. Wiley is committed to the Bloomberg authors and is confident we will provide the best possible working relationships for them.
Thanks, Lee, for your in-depth explanation of this development. I’ve browsed a couple of books on movie contracts and it was enough to make me very leery of the phrase “net profits” or “net receipts.” What occurs is that the hiring entity, the publisher or the studio, can charge all sorts of expenses, listed in the contract, against the writer’s income and the writer has no legal recourse. Absolutely, writer’s royalties have to be based on an objective figure such as the selling price of the book or the publisher will charge all sorts of fees which will reduce the writer’s income.
More from the Author’s Guild…
John Wiley issued a new press release Friday afternoon regarding the contractual modifications it’s seeking from its Bloomberg Press authors. In that release, Wiley says that one in five the Bloomberg contracts provided royalties based on retail list price. As we’ve previously noted, Wiley’s proposed amendment would slash royalties for those authors by up to 50%. (Our earlier alerts on this matter are here and here.)
Wiley commits to reach out to Bloomberg authors. Reaching out will only help, however, if the authors are provided with accurate information. Based on Wiley’s latest release (below, following our alert), we’re not optimistic.
1. Wiley says that in Bloomberg “list price” agreements, royalty rates were lowered when discounts exceed 50%, that the average discount rate for the books was greater than 50%, and that therefore “we believe the authors will benefit with the proposed, simplified Wiley terms.”
This belief doesn’t stand up to an examination of the Bloomberg contracts. While it’s true that Bloomberg contracts often provide that royalty rates are reduced when sales discounts reach certain thresholds, Wiley’s suggestion that these reductions uniformly apply once discounts exceed 50% is wrong. The royalty reductions kick in at various levels, depending on the contract. Sometimes royalty rates are reduced when books are sold at 51% discounts to retailers and sometimes at 53% or 55% discounts. But here’s the thing: even taking that into account, authors do far better under the original Bloomberg contracts than under the Wiley amendment. We’ve tested this under a number of contracts and at a series of discount rates.* Authors would, at some discount rates, do as well with the Wiley amendments, but they wouldn’t do better.** When deeper discounts kick in, at 56% or greater, Wiley’s amendment would reduce the author’s royalty rates for every contract we’ve seen by 25%.
2. Wiley suggests that for Bloomberg authors with “net receipts royalties” all is well.
We don’t know that this is the case. We suspect that those authors are seeing substantial royalty reductions when books are discounted 56% or more, but we haven’t seen these contracts, so we don’t know for sure.
3. Wiley’s ignoring the matter of termination rights.
Bloomberg had no print on demand program. Authors would reasonably expect that if their books didn’t sell enough to justify replenishing stock with a traditional print run, then the rights in the books would be revertible. Wiley’s letter seeks not only to allow it to use print-on-demand technology to keep a work in print without negotiating a minimum sales threshold for a work to be deemed in print (as all literary agents and knowledgeable authors insist on), but it also seeks to do this at a royalty rate of 5% of net, the lowest such rate we’ve ever seen.
We plan on making a simple proposal to Wiley today which we hope will resolve this matter in a fair way for Wiley and its Bloomberg authors.
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*Here’s the math. At a 54% discount, in one typical example, the author’s royalty rate would be reduced under the original Bloomberg contract from 12.5% of the cover price to 8.5% of the cover price. For a $25 book, the author would get a royalty of $2.13 per book under that Bloomberg agreement. The Wiley amendment would cut that royalty by 33%, since Wiley would (under the most generous reading of its amendment) pay the author 12.5% of net receipts. At a 54% discount, the net receipts on a $25 book are $11.50; 12.5% of $11.50 is $1.43.
**Except, as we’ve previously mentioned, when discounts are 75% or greater. These are essentially remainder sales, which have never been a significant money-maker for authors. We’ve also found a theoretical anomaly when (for at least one book contract) a book is sold to a retailer at a discount of precisely 55%. In that case (again, under the most generous reading of Wiley’s amendment) the royalty per book under the Wiley amendment would exceed that of the original Bloomberg contract. However, we found no actual sales at a 55% discount in the royalty statements we reviewed. Moreover, that theoretical advantage disappears at a 56% discount, since the Wiley amendment cuts royalty rates sharply to 7.5% of net for such sales. Wiley in fact does better by selling books at a 56% discount than it does at a 55% discount, because of the sharp drop in the royalty rate. We’d be surprised, in such a situation, to ever find books sold at a 55% discount.
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JOHN WILEY PRESS RELEASE
June 12, 2010
Wiley Commits to Reaching Out to Bloomberg Authors Hoboken, NJ
On April 29th, Wiley sent out letters to one-hundred-and-seventeen (117) authors. Of those, a small subset (24)involved any type of “list price” royalty. The overwhelmingly majority(93) involved “net receipts” royalty terms.
Of the ninety-three authors with “net receipts royalties” who have responded to Wiley’s contract modifications to date, all have accepted them. Why? Because precisely as Wiley’s letter accurately depicted, the royalty calculations will be simplified and royalty payments overall are likely to increase, not decrease, due to factors plainly described in Wiley’s letter to our authors.
What about the small subset of “list price” authors? In the existing agreements, royalty rates under the relatively few “list price” contracts are lowered for discounts greater than 50%. For most of the financial books involved here, the average discount rate is higher than 50%. Therefore, we believe the authors will benefit with the proposed, simplified Wiley terms.
Wiley is well known for excellent relationships with our authors. Given the inaccurate information that has been recently disseminated, we will contact the affected authors again to be sure they are not in any way confused.
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Well, we know that royalties paid “on the net” is the mark of a scammer. We know that from a certain Maryland establishment. Not. a. good. sign.
More developments from the Author’s Guild:
From the start, informed consent has been our primary concern regarding Wiley’s proposed amendments to the Bloomberg authors’ contracts. In our view, Wiley’s initial letter was a spectacular failure, destined perhaps for law school textbooks, in obtaining informed consent to a contract modification. After reviewing several Bloomberg Press contracts, we couldn’t imagine why any well-informed author would agree to the proposed amendments. Wiley has now said, repeatedly, that we have it all wrong, that the proposed amendment is actually good for Bloomberg authors. (Here are our three earlier alerts on this matter: one, two, and three.)
This week, we discussed a proposal with Wiley to help sort things out. In a press release yesterday afternoon (you can find it below), Wiley rejected our proposal, but agreed to disregard any signed contract amendments at the author’s request. While this is progress, and we’re relieved that Bloomberg authors will have this opportunity, we still don’t know whether those authors will be given the clear information they need regarding how the changes will affect their royalties and other material terms of their book contracts.
Our proposal to Wiley, which we agreed not to share with the press without first informing Wiley (Wiley took it upon itself to share part of it with the press), had three parts:
1. After the conclusion of a standard Wiley royalty period, Wiley would allow an independent royalty auditor to review a reasonable sample of actual Wiley/Bloomberg royalty statements under the Wiley system and prepare a report on how the Wiley amendment affected authors’ royalties. The auditor would compute royalties under the Wiley amendment and under the original Bloomberg terms, to arrive at a clear, side-by-side comparison of the two. Wiley would disseminate that auditor’s report to its Bloomberg authors. This report would end the argument between Wiley and the Authors Guild: real data would replace rhetoric.
2. Wiley would then give its Bloomberg authors the chance to decide whether they wanted their original Bloomberg terms or the amended Wiley terms. Armed with the auditor’s report, truly informed consent would be possible.
3. Wiley would voluntarily agree to industry-standard reversion of rights sales thresholds for its Bloomberg authors. Bloomberg had no print-on-demand program, as we’ve previously noted and as Wiley freely admits. Bloomberg authors would have reasonably expected, therefore, that if their books didn’t sell enough to justify replenishing stock with a traditional print run, then the rights in the books would be revertible (otherwise, the definition of “out of stock” in the Bloomberg contract is gibberish). Fortunately, the industry has a well-accepted solution for applying print-on-demand technology to an author’s contract termination rights: minimum sales thresholds. Bloomberg authors are entitled to this routine contract term.
We regret Wiley didn’t take us up on our offer. This dispute, and the Bloomberg authors, need clear, objective information. In our view, a royalty audit was just the ticket.
Note to Bloomberg Authors: Don’t despair! Informed consent/informed rejection can still be yours! Sit tight, and stay tuned. We’ll be offering a free service to all Bloomberg authors that will provide you with a side-by-side comparison of your original Bloomberg contract and Wiley’s proposed amendments.
Want to make sure you don’t miss out? Send us an e-mail at staff@authorsguild.org. Informed Consent/Informed Rejection. You’ll be the first to hear.
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JOHN WILEY PRESS RELEASE
June 15, 2010
Wiley to Contact Bloomberg Authors and Explain Their Choices
Hoboken, NJ — Over the past week, a public dialogue has ensued about Wiley’s communications with the group of 117 authors joining us from Bloomberg. After a useful and productive exchange of ideas, we concluded that the best way to proceed is to call each and every one of these authors to make sure they understand the changes that we have proposed. If any of them are uncomfortable with our proposed changes, they can choose to retain their original Bloomberg contracts.
The Authors Guild recently proposed to Wiley that we wait until the next royalty period to complete a sample comparison of royalty payments to authors under the Wiley proposal and the existing Bloomberg contract. While we recognize the intent of their proposal, we believe our approach is more timely and in the best interests of our authors.
Wiley shares a common objective with the Authors Guild, to treat authors well and fairly. Our Company is well known for excellent relationships with our authors—a reputation we have earned and will work hard to retain.