The Great Ether Grab

The press release is as surreal as a Philip K. Dick novel: "Author Rejects Random House to Publish Book on Her Own." Repelled by electronic rights clauses in her contract, a first-time author walks away from a deal with the country's largest publisher and opts for self-publication.

While atypical, Melanie Johnston's tale is far from fiction. Last year, on the cusp of a contract with Three Rivers for her book Getting in the Hollywood Writing Game, Johnston decided that a 5% e-royalty and onerous in-print conditions negated the cachet of publishing a book with Random House. She attempted to re-negotiate, but Random representatives told her their position was unalterable. So Johnston took the adventurous way out. With the help of her mother, she formed Burkett-Street Press and published Hollywood. She's still contemplating her e-rights options. "People thought I was crazy to turn down the possibility of being published by a Random House imprint," she says. "But I thought 'someone in this equation needs to make money.' And I also spoke to too many authors who are now battling to get their rights back."

The success of Johnston's gambit remains to be seen, but the obstacles she faced -- and choices she made -- embody the concerns of everyone who works with publishing contracts. Changes regarding in-print clauses and royalty structures, for both e-books and on-demand printing, have occurred with T1-like speed over the last few months. The very term "in print" is becoming increasingly slithery and antiquated.

Defining these issues can be tricky. On the royalty front, the calculations in which parties traffic would frustrate the savviest accountant. Agents, authors and e-book manufacturers say that the costs of electronic conversion don't come near those of printing a paper book. Publishers argue that they've yet to see material cost-savings on e-books, precluding higher royalties. Moreover, say publishers, concessions were made when most houses upgraded royalties from a percentage of net, a small amount because of other parties' take, to a royalty based on list price. These presses treat the e-book as simply another format, and dole out royalties the way they would for, say, a trade paperback. But agents and authors aren't satisfied. They want a 50-50 split, akin to a subsidiary rights or licensing deal. "This is a license in everything but name," says Authors Guild head Paul Aiken. "It's just a matter of semantics that [NuvoMedia CEO] Martin Eberhard calls himself a distributor." The budding technology of on-demand hasn't fared much better. Publishers and agents haggle over whether the higher per-copy cost is worth the elimination of returns. And a quick resolution on the in-print score also seems unattainable. The new Random House contract, for example, reportedly states that as long as a book is displayed for sale, it is not considered out-of-print, preventing the reversion of both electronic and print rights. Upon seeing the Random boilerplate, one agent quipped that "it is one of the wonders of modern civilization."

The last few months have seen a level of rhetoric that makes the war between the Trumps seem civil. To understand how fevered it has become, one need look no further than an internal memo recently distributed by the Random House legal department. Normally a polite, abstract office, Random legal exhorted agents to relax their requests -- or risk losing spoils. "Without immediate cooperation between publishers and agents, the full economic potential of this new format might not be realized." In public and private, publishing officials of all types have begun to sling mud. "If you stick your head in the sand and say the sky is falling, you're going to be left off the gravy train, because this is definitely coming," a high-ranking official at a major trade house told PW. Counters Aiken: "There are a lot of big-name authors who will say: `If one publisher d sn't budge, then another will. So publishers are going to have to become more accommodating." Agents have added their own fuel. "I was disturbed that the first letters on this issue from publishers were addressed directly to the authors, saying, in effect: `This is a wonderful opportunity and we'd like to provide a royalty of net; all you have to do is sign here.' " says Association of Authors' Representatives chair Jean Naggar. Nor has the bombast been limited to traditional publishing types. In May, the Authors Guild and Martin Eberhard traded statements about the e-book company's wealth distribution policies. One digital publisher, when told how large houses were justifying low royalties by citing the costs of conversions, called such contentions "bull----."

While chaos is nothing new to those who peddle intellectual property (the CD-ROM issue a few years ago brought out heavy verbal and legal artillery, including salvos between superagent Robert Gottlieb and then-Random chief Alberto Vitale), the e-rights debate has engendered an unprecedented element of confusion. Even among so-called "new media publishers," royalties can range from 15% to 50%. "We're all so used to publishing contracts that have an industry standard," says agent Irene Goodman. "You don't usually argue about royalty unless you have a mega-author." She pauses wistfully. "I think some of us would prefer if an industry standard would just fall from God."

Parties also seem vexed by a fundamental incompatibility between contracts and electronic publishing. While no one yet knows how wide e-publishing margins can go, contracts establish royalty rates and project them far into the future. Many agents have thus pushed for a term of license of just a few years. Publishers, however, are not always amenable. "If we say we're going to negotiate and re-negotiate, then when the time comes, everyone expects a bigger piece of the pie," says John Sargent, president of Von Holtzbrinck's American operations. "And I don't know if there will be enough savings to allow that to happen."

Time for Action

If the last few months have brought bellowing from nearly every quarter, they have also given rise to a kind of furious action, of which Johnston's act -- or non-act -- has been just one small example. Large publishers across the country are working to reformulate contract language. The new phrasings reflect a kind of ambitious hedging: ambitious because their very existence demonstrates publishers belief in the new media; hedging because they tend to make few specific commitments. At Random, for instance, the internal memo states, "It is the policy of Random House, that as long as the book is for sale in the U.S. in a full length text edition, it is `in print' and we will retain all publication rights we are entitled to under our contract." The concept of "for sale" leaves plenty to the imagination.

In addition to changes at Random, Viacom has recently undertaken the synchronization of in-print language among all imprints and divisions. Von Holtzbrinck houses now require that 50 copies be sold in each of four consecutive accounting periods (a total of two years), in any combination of formats, to prevent reversion of all rights. Penguin Putnam has set a higher number of 300 copies per year. Many publishers have also taken to adopting first and second positions; their boilerplate language will assume the vagueness of the Random paper, but upon further request, more specific language will be provided, though this isn't guaranteed. "Often it's not so much about the blanket policy of a house, but about the leverage of the individual agent and author," says agent Christy Fletcher. But even those who extract higher minimums may be getting shortchanged. "It used to be that the check on the whole system was that it costs money to keep the book in print, so the publishers will make an effort to sell the book," Aiken says. "Now, with the new technology, they're trying to argue that it's still in print, even though that financial commitment is gone." For their part, publishers stand resolute in their desire to define it this way. They also note a perverse irony in authors' reasoning. "I remember when authors used to complain that their books weren't available," says John Schline, director of contracts for Penguin-Putnam. "Now they're running around saying: 'My publisher is scheming to keep my book in print.' "

On the agent side, longtime author rep Richard Curtis has been devising his own solutions. Several months ago, Curtis founded e-rights.com, a contract vetting service for authors. This summer he will launch e-reads.com, a program perfectly suited to these millennial times. According to his plan, agents and authors will be turned into booksellers when he enables them to sell downloadable electronic books off an independent Web site that he hopes will "pick up where Amazon.com leaves off." About 500 titles have already been signed up, and though he will begin with out-of-print titles, he hopes to move quickly to in-print books. He's also come to an arrangement with Lightning Print for on-demand titles. "I'm putting my money where my mouth is," he says. "I feel like publishers should split all revenues 50-50 [which he will do, after recouping conversion costs]. I feel that there should be a specific term limit for e-rights." Authors, he says, are thrilled, because "they see this as a new lease on life." But where some see joy, others might detect problems, at least as far as in-print books go. "You can't separate e-rights from print book rights, because what can result are two formats that are absolutely in competition with one another," says Bob Levine, a lawyer and agent conversant in publishing law.. "I don't think that's good for anybody." As Sargent puts it: "You can have a situation where a title that #16 on the New York Times' list d s not make it onto the list because the books have two different ISBNs." Despite the dangers, a few publishers have negotiated specific contracts that set higher minimums for print rights (making it easier to reclaim these rights), possibly because they realize that it would be difficult for the author to sell print rights to another trade publisher.

Writers can also make use of the Authors Guild site, which has struck a partnership with the on-demand publisher t xcel. And agents have begun talking about new ways to make an end run around publishers. One approach? Sign e-only contracts with digital publishers before starting negotiations with print publishers. "We can just tell publishers it's a moot point, and that will stop the argument in its tracks," says agent Jimmy Vines. Such a move might eventually force print publishers to soften their terms, though given stipulations like the one in the Random memo stating that "all future Random House Inc. book contracts must contain a provision for e-book publication rights and a royalty rate for exploitation of these rights," the degree to which they will abide this circumvention remains murky.

Yet Johnston's story highlights a concern more fundamental than any dispute of royalty percentages or in-print standards, namely: publishers' fear that electronic publishing will dilute the traditional house. Though most of these cyberhouses offer little or no advance, they are, with few exceptions, more generous on royalties. Even if authors opt for a bundled contract with a traditional house, the proliferation of digital publishers can exert a subtler effect. Mary Wolf of the digital press Hard Shell Word Factory notes, "Our very existence gives authors a little more of a strength position to say, `This is ridiculous. I know what so-and-so is paying.' " But, as any author who's had to pay for his own tour knows, smaller houses (as the digital presses uniformly are) have their own drawbacks. "Anyone can pay the cost of digitizing the content," says S&S CEO Jack Romanos, "but at the end of the day, the book still has to be edited by professional editors, marketed by professional marketers and publicized by professional publicists." Authors like Johnston might also be shooting themselves in the foot for no good reason. Says Schline: "Authors always worry: `What if someone else wants to republish the book and promote it? Frankly, that's the one-in-10,000 case for an old book. There are complaints that publishers don't want to spend money on new books; why would they want to spend money on old books?" As Romanos sees it, books go out of print for a reason: "If a book had enough sales to pay its way, no publisher in his right mind would put the book out of print."

Brother, Can You Paradigm?

For both e-book and on-demand technologies, the penchant to analogize runs deep. Legally, of course, the debate centers on whether these are separate licenses, à la a film or TV series, or simply another edition, such as a trade paperback. But another kind of discussion, a more philosophical one, has emerged. Often observers will invoke CD-ROMs, especially when debating viability. Others mention audiobooks as a more relevant model. Still others have compared electronic technologies' democratizing effect to the mass-market revolution, changing author and reader habits in one quick stroke.

Indeed, it is midlist and unpublished authors, whose books are likely to go out-of-print sooner, who stand to benefit most. This results in a Catch-22: to benefit most from the new technology, you need the clout to exploit it, but authors like these tend not to have power in great abundance. "I think that we really need a writer with clout, like a Stephen King or Tom Clancy, to be more strident," Johnston says. On the other hand, publishers might not be willing to model an average contract after these anomalous authors.

The fight, too, earns its share of metaphors. California gold-mining or the Oklahoma land rush are employed most frequently. Agent Goodman tartly calls the situation "a sales day at Filene's Basement." But perhaps Naggar has come up with the most apt comparison: "It's like wandering in the dark," she says, "trying not to step on a land mine."