Bankrate.com Financial Info [UPDATE]

I came across the latest Bankrate.com financial announcement, as it is a publicly-held company, and so freelancers can get a pretty good idea of how the business is doing. Here's the short view:

• This was for the second quarter of 2009.


• Overall revenue was down 23 percent, from $40.2 million to $31.0 million. Online revenue was down 23 percent to $29.0 million, which also shows that the bulk of its money -- 93.5 percent -- comes from online.


• Net income was down even more sharply, from $4.1 million to $1.9 million, or roughly 53.7 percent.


• Company CEO Thomas Evans blamed it on "macroeconomic conditions." Translated, it means that financial advertising, particularly in the banking, mortgage, and credit card channels, is still way off of normal. The question is whether this is the new normal.


• There is cash or cash equivalents of over $55 million and quarterly expenses run around $15 million. Normally you'd want to see a much bigger amount of money tucked away so the company could ride out longer than, say, a year, but there is still plenty of cash to pay people, so seeing delays in payment wouldn't be reasonable. (And to be clear, I'm not suggesting that anyone is reporting delayed payment. But it's good information to keep in your back pocket in any negotiation.)

One other big piece of news: the company is going to be acquired by Apax Partners, a private equity group. Given how most private equity firms work, you can probably expect in the near future a big downward push on rates and terms.

The acquisition also shows the value of intellectual property (IP) like copyright and why companies push so hard to own it. The IP because a major asset that is worth money. In this case, the Bankrate.com shareholders are going to get $28.50 a share in cash, or $571 million it total. Companies know damned well what they're asking for when they want articles under a WMFH basis. They're taking the value out of your pocket so they can put it in theirs. Don't forget that when you're negotiating price.

[Update: Check the comments on this post. One reader pointed out that according to the SEC documents about the deal, much of the cash on hand will go to fees incurred to conduct the deal. That would have some predictable ramifications for the time it will take to get paid.]

Another Writer Mill: Atlantic Publishing Co. (APC)

I seem to be on a kick of discussing professional wastes of time, which I'm calling writer mills. These organizations bring in writers, grind them for whatever word juice is available, and pay a pittance. Now there's another to add to the list: Atlantic Publishing Company (APC).

Recently I've mentioned Helium and Demand Studios. Both share some telling characteristics and give insight into the institution of the writer mill:

• The pay makes burger flipping seem like glamorous high-rolling.
• The only way to really make money is to let quality fly to the winds, because you almost need to end the assignments before they start to make a reasonable dollar per hour figure.
• They constantly advertise for new writers, suggesting the deal is so bad that they cannot keep people around for long.
• (Bonus Characteristic) They have executives scouring the web, looking for potential criticism and trying to counter it.

On the first three points, APC seems to be lining up as a classic writer mill. The company advertises fairly frequently. Here's the copy of an ad on JournalismJobs.com (though the ad is set to expire on July 29:

Atlantic Publishing is looking for writers in various fields to write books on subjects such as: Building, Cooking, Farming/Animals, Gardening, Arts/Crafts, Recycling, Internet/Technology, Business/Investing, Real Estate, Finance, Parenting, Pets, Publishing, Education, and Self-Help. This position is a freelance opportunity. The payment varies from project to project. Writers are not required to reside in Ocala, FL, work may be done anywhere in the United States. If you are interested please contact Amanda Miller at amiller@atlantic-pub.com with your resume and writing sample.

I was curious at one point this year and replied to one of the ads. Here's what they said in an email about their projects:

Because we have many manuscripts that need to be rewritten, and each are in different stages of writing, the amount of work that needs to be done will vary. Some of the material in the manuscript may be useable [sic] or the book may need to be rewritten completely. Some sections may just require you to revise information to make the material up-to-date or reorganize. We would like to hear your comments on the manuscript, how much work you feel needs to be done, and how you can contribute to the book.

On the low end it's supposed to be copy editing, and the upper bound is full rewrite. Given that range of scope, what do you think they might pay? Here's the answer:

Upon acceptance of your bid we will e-mail you our freelance author agreement ( work for hire), and research material to complete the work. Typical time frames run from 30 days to 90 days for completion, we pay upon acceptable stages of completion, we check all manuscripts against proprietary plagiarism software, and we typically pay from $500.00 - $1,600.00 depending on the scope of the work involved. Many of our authors have completed several manuscripts for us. We give you full credit on the cover, in online databases such as R.R. Bowker, Amazon.com, B&N.com, and recorded CIP data in the library of congress.

Oh, goody -- credit. And a full typical $1,600 to completely rewrite a flipping book on a work for hire basis (though technically books don't quality for work made for hire under U.S. copyright law). That even makes a publisher like Adams Media, known in the industry for its relatively low fees, seem like a spendthrift. No wonder they check manuscripts with plagiarism software, because they're barely paying enough for a chapter. Why does any writer mill think that people will slave away for laughable sums? Because they get enough inexperienced ones to do so and know when they leave, dejected and squeezed, there will be others whose credulity and eagerness to "get into the business" will leave them vulnerable.

The only point I couldn't verify was the bonus characteristic of whether their executives also troll online, looking for anyone that might question their practices. I'm sure we'll find out soon enough.

Contract Review: Cyberhomes

Someone sent a copy of a Cyberhomes.com contract to me for review. As always, remember that I'm not a lawyer and that this isn't legal advice. Also, please remember that contracts change, so if you're looking back at this from some future date, it might not completely apply. Also, I'm only mentioning the clauses that I think either raise questions or might need explanation.

• 1. Engagement of Services - This is a contract for ongoing work over a one year period, so if you sign, don't think that you'll be negotiating better terms on a second piece.


• 2. Compensation - It's payment on acceptance, which later in the contract appears to need to come in writing, either email or mail. So you'd need to be sure you get an editor to explicitly say this. Only then can you invoice. Payment is 45 days after invoice.


• Grant of Rights - Clause 3.1 states that they get "the worldwide, non-transferable, perpetual right and license to publish, display and distribute any Works (in full or any portion thereof) submitted by Contractor under this Agreement in all forms of media (including, but not limited to, all electronic media, whether now known or hereafter created and whether owned and operated by Client or not)." But notice that it does not say exclusive rights. I read this as saying that it's implicitly non-exclusive. Also, you see that they include the ability to let others "display on third party websites and third party printed publications." So they can either resell your work or even let others use it without pay, whether on the web or in print. That means you can't offer any sort of exclusive rights licensing to any other client of the same material. They can also use the material as promotion for the site, using your name, bio, and image "provided such promotional materials present Contractor in a fair and professional manner." I'm wondering if they could portray you as a "site writer," creating more of a sense of affiliation than there may be.
  
  They have the right to edit your work - a pretty normal thing, except that it opens a back door to paying even later. "In such cases, payment will not be processed until such revisions have been submitted by Contractor and approved by Client." So, even though it says pay 45 days after you invoice and you can invoice after you have something that's approved, it's essentially not approved if there are edits, and who knows how long those could take to get to you?
  
  Finally, for this clause at least, they acknowledge that you own all other rights - of course, because you didn't sign them away - but they want you to credit Cyberhomes.com any time someone else reuses the work. This has become an often-seen practice that is ridiculous. What if the other publication doesn't want to do it. If you can't get this struck, which is by far the better thing to do, because you shouldn't have such conditions on your own intellectual property, then add that you will use "best efforts" to include it. That way, if another client says no, you haven't lost the sale.


• 4. Representations and Warranties; Indemnification - The warranties section is actually one of the most reasonably constructed that I've seen, and I don't think you'd need to change a word. There is a problem in the indemnification: "arising in whole or in part from any breach of Contractor’s representations or warranties hereunder." If a problem comes only in part from a breach of the warranties, why should the writer take on all of the financial burden? So strike "or in part".


• 5. Independent Contractor Relationship - It's fine to say that you are responsible for your own taxes, but not to make the time table on which you file taxes part of this contractual arrangement. What if there was some form you forgot to file? (It takes federal, state, and local into account.) So scratch that part.


• 6. Confidential Information - I'd want the following language stricken: "Breach of any of such obligations under this section will result in irreparable and continuing damage to Client for which there will be no adequate remedy at law; and, in the event of such breach, Client will be entitled to injunctive relief and/or a decree for specific performance, and such other and further relief as may be proper (including monetary damages if appropriate)." You don't want someone to have the automatic ability to get an injunction, as this is a pretty extraordinary type of remedy. Let them convince a judge.


• 10. Governing Law - For a long time I've advised against wording that allows automatic recovery of legal fees for the prevailing party of a legal dispute. Some recent experience on my part and discussion with a lawyer now has me thinking quite the opposite. It's far more likely that you'll be the one suing, and so you want to make sure that you get your costs covered. However, there is the danger that if you brought an action and lost, you'd then be liable for their costs.


• Exhibit A - Under the "Deadlines and Submissions" section is a requirement to provide source contact info with an article. That would be fine, except they say they'll keep it in a database of source contact info and make it available to anyone they have writing for them. So, if you value your source relationships and arne't interested in making them available for potentially multiple contacts from the publication that might get annoying, you might think twice about doing anything for this site.

Author Reveals Kindle Book Sales

People have been wondering about actual sales of e-books on the Kindle. JA Konrath was kind enough to do this in significant detail. A few things jump out:

• His publisher released a couple of novels. One was at $1.99 each and sold over 10,000 copies in a month. But publishers get 35% of the sale, which would be around $7000. So you can figure that the author's take would be between roughly $700 and $1000. Another title was listed for free. As Konrath is releasing some out-of-print books at very low prices to encourage more readers and is focusing on copies moved, not profit, it sounds as though the publisher did the same.


• The publisher actually promoted the books on Amazon, which means that the net for it is likely next to nothing, reinforcing the "get audience members" view.


• As previously mentioned, Konrath is selling some of his out-of-print titles, earning $2781.35 in just over two months.


• From the little price testing that he's done, at least on the low end there doesn't seem to be a lot of sensitivity, and I get the sense that charing a few dollars per title might work.


• With the way things work, for self-sold work, authors set the price and Amazon pays 35% of that, and then might further discount. So raising the price increases your take per copy, and even then Amazon might sell at a lower price to move more units. Effectively, you end up getting a bigger chunk of what the company actually takes in.


• Genre seems to trump the strength of the work's listed description, which to me makes sense. To specify genre is to effectively describe the size of the potential audience. Even a killer description of a book of poetry is going to be limited to attracting people who would buy poetry.


• Some authors who have never traditionally published are doing as well or better than Konrath, who has had seven book in print.


• Publisher releases "vastly" outsell author releases, because the publisher can get better placement from Amazon.


• Being active in the Kindle and Amazon social network features and in newsletters seems to be important to success.

If you're a book author, don't depend on this summary and do read his blog entry, becuase there are other things to learn from it.

Check Google Books for Your Out of Print Titles

As you probably remember, Google settled the lawsuit brought by the Authors Guild and some publishers over Google Books, which displays up to 20% of the contents of out of print books online. Now you can sign up. Some notes:

• To be eligible, your work must be in their system.


• A full book gets you $60 plus the majority of revenue from ads placed around the display of the book.


• An "insert" gets paid only part of a fee. The definition of an insert is "any text and other material, such as forewords, essays, poems, quotations, letters, song lyrics, children’s Book illustrations, sheet music, charts, and graphs, if independently protected by U.S. copyright, contained in a Book, a government work or a public domain book published on or before January 5, 2009 and, if U.S. works, registered (alone or as part of another work) with the U.S. Copyright Office. Inserts do not include pictorial content (except for children’s Book illustrations), or any public domain or government works."


• If you want, you can also opt out of the settlement or file an objection or indicate that you plan to be at the fairness hearing, but you'd have to do it by May 5, 2009.


• Claims have to be filed by January 5, 2010.

Time to go check for your name and what might be up on the system. I just found out that the ASJA Guide to Freelance Writing, for which I suuppled the business planning chapter when I was still a member of the organization, is on there, so I'll be filing my claim, after thoroughly reviewing the settlement itself.

But if you do plan to get your little chunk of change, check the dates - if interested parties can file objections by May 5, there is the possibility that the settlement could be challenged. In any case, clearly no one is going to see any money until some time next year at the soonest.

Why No One Should Write for HuffPo

There is nothing wrong with building a business. Every freelance creative does exactly that -- developing a name, attracting clients, improving operations, and increasing the value for customers, be they publishers, corporations, or the public. There is something wrong with a publisher building a business on the backs of unpaid workers. Sometimes these are writers urged to look for "exposure." Sometimes it is unpaid interns (and even that might be understandable if they are in school and in desperate need of a little practical experience).

There are people trying to start companies on a shoestring and who aer looking for the time equivalent of investors who want nothing in return. The problem with wanting something for nothing is that generally you get exactly what you pay for. And then there are people like Arianna Huffington. The Huffington Post has just raised a third round of investment money: $15 million. That brings the total to ... $40 million.

As the Wired piece notes, a major challenge is "to sustain or increase its traffic numbers under a friendly administration." But there is another challenge. How can a publisher claim a "progressive" market position and the moral high ground, attacking "selfish" special interests when it wants to build a commercial enterprise using mostly unpaid help?

Though most of HuffPo's 2.5 million contributors are unpaid, the site still has a good deal of overheard (especially compared to the 1.5 man operation at The Drudge Report). Most of the money raised to date has been reinvested to hire editors, reporters and advertising representatives, according to The New York Times.

Look at that number again: 2.5 million contributors. Of course there is overhead. Web hosting companies cannot afford to write for free. Utilities cannot provide free power. Owners of buildings must charge rent to justify their investment.

Most of the money has been "reinvested?" It's called paying the necessary bills. Hiring reporters and editors? Maybe a handful, but how many? Five? Ten? Twenty? Even if it were 50, that would still mean that not "most" but "virtually all" contributors worked for nothing. So why does HuffPo think that contributors to the site, the very people that help make it possible, should be greatful for the chance to be read?

Huffington wants to grow the site and plans to use the funding to expand its local coverage and investigative reporting — two areas that may be hard to monetize. Scaling local content in a shrinking ad market will be tough, and hunting down scoops can be a costly pursuit, especially for a site that specializes in commentary rather than breaking news.

Ah, so the company - it is a company, not an individual, not a movement - wants local coverage. Undoubtedly for free, and probably hoping to take audience from local newspapers in the process.

Even notedly impoverished advocacy publications like The Nation manage to scrape up something to pay contributors. (Calvin Trillin has spoken of being paid in the "high two figures.") Couldn't Huffington manage even a Starbucks card with the cost of a latte on it? For those who tell themselves they are getting great exposure, remember that it is exposure suggesting that you can be had for nothing. (Or should that sentence have ended "you can be had?") Once a company sets its practices early on, it is very unlikely to significantly change the model, for those holding out hope that one day HuffPo will pay. But why should it? There is no reason to change your ways if the people on whose backs you ride don't stand upright and say, "No."

Random House Changes E-book Royalty Scheme for Worse

Any time a publisher talks about shifting from royalties based on cover price to royalties based on money they actually see, look out. You are about to lose income. That's what is happened over at Random House regarding e-books. Starting December 1, the royalty rate will be 25 percent of the amount Random receives.

A recent Random House contract states that on all copies of a work sold as an electronic book, the royalty will be 25% of the US suggested retail price until the book's advance has earned out, and 15% of the list price thereafter. Under the current (pre-change) royalty structure, on a book retailing for, say, $10.00, the e-book royalty would be $2.50 per download at 25%, then $1.50 per download when the royalty rate shifts to 15%.

By contrast, the new royalty of 25% of the net receipts comes to something like $1.25 per sale on a $10.00 book (25% of 50%). So, Random House's change is definitely a reduction of e-book income for authors.

Well, there's a surprise - a publisher trying to take even more of the money pool. Here's the other shoe that the article doesn't mention: that leaves the publisher open to striking better deals with the retailers because they have more room to give in some as a bargaining chip for, say, better placement on a web page (called marketing dollars) while still maintaining the previously realized margin. It's the writer who does the subsidizing.

Figure that if you deal with Random House this will affect you, according to the letter that has been floating about:

With the widespread use by consumers of electronic devices such as the iPod, the Amazon Kindle, and the Sony Reader, a significant market for ebooks and digitally delivered audio content is finally ready to emerge. In response, Random House is making major investments in our digital infrastructure and is creating digital files of active titles so that they are available for sales as ebooks, as downloadable audio, and for Internet search and discovery."

Might as well have all the authors chip in for Random's profit goals.

Boondoggle in Google Rights Win? (Warning, Rant)

Google has finally settled a two-year-old law suit filed by the Authors Guild and five publishers. The topic? Infringed rights, of course, coming out of the company's scanning millions of library books and making them available for search. The plaintiff argument was that this was a new use of entire copyrighted works without permission.

Google is paying $125 million (making the settlement over unregistered magazine works seem like petty cash). Someone or other is supposed to establish a books rights registry, allowing people to view books in whole or in part and then enabling payment, whether from Google or the readers is unclear to me at the moment, to the rights holders. However, I'm a bit suspicious because $30 million of this settlement is going to setting up this registry.

I thought that there were at least two existing registries, one set up by the NWU and another by some combination of the Authors Guild, ASJA, and possibly others. And even if there weren't, $30 million to set this up? You could fairly comfortably fund a start-up high tech company for that period of time and get it running. This is very serious money. What the hell is it being spent on? This isn't someone else's money, folks. It's probably partly your money, if you write books. What transparency will there be in this new registry? Where is all the money going? Is Google doing all the tech work? (In which case, the $30 million becomes normal cost of doing business and hardly a win for anyone other than Google.)

By the way, this was also clearly a strategic win ... for Google. Going forward, people will buy books they want online and libraries will pay for access. Who gets 37 percent of the revenue? Google. Plus, there's advertising revenue and Google gets the same percentage of that. So for $125 million, it's probably nailed down many, many times more future revenue. This will turn out to be a pretty cheap business acquisition for them. That means the publishers and the AG have, through this negotiation, validated in a practical sense the business model of taking intellectual property of writers, making money off it, and then, if enough writers and publishers scream loudly enough, giving in just enough to keep what you established. Why should a company go this route? Because the publishers and writers are so determined to keep anyone from prying rights out of their hands that they aren't actively considering and pushing for new business models. In that view, this "victory" is completely Pyrrhic.

A Must Read for Book Authors

I literally just finished going through the Businessweek article, The Online Fan World of the Twilight Vampire Books, and cannot reccomend it strongly enough to anyone writing fiction or nonfiction books. This is a story of a woman who used online intelligently and imaginatively:

Meyers success isnt due simply to her vivid imagination for vampire romance. She also figured out before almost anyone in the book industry how to connect with readers over the Internet and inspire them to build on her work. Since Meyer published the first Twilight book in 2005, she has reached out to readers on social networking sites, such as MySpace (NWS), and participated in online discussion groups. Fired-up fans have championed her books on Amazon.com (AMZN) and set up their own sites, such as Twilight Lexicon and TwilightMOMS. That has helped propel sales of the series to 7.5 million books. "Other authors have pockets of fans online, but nothing to this extent," says Trevor Dayton, a vice-president at Indigo, Canada's leading bookseller. "Stephenie Meyers Twilight series is the first social networking best seller."

To be fair, her publisher, Little Brown, saw the possibilities and got behind her first novel, as it paid $750,000 for a three-book deal. But that could have flopped. And it's not as though she was a trained marketeer. Instead, Meyer started taking up opportunities that presented themselves. Will every book pushed online do this type of business? Absolutely not. Run quickly from any "silver bullet" solution to your marketing needs. However, the example shows how it is possible to go beyond what the publisher alone can or will do.

Random House Pushes Out of Print Definition

A reader forwarded an email she got about new problems with Random House contracts:

Society of Authors deputy general secretary Kate Pool said her major concern with RHG's new boilerplate was an out-of-print clause allowing rights reversion only if the publisher cannot supply a physical or electronic copy of a book within a month, or if there have been no royalty earnings for a year. The author body plans to raise the issue with RHG.

Pool said: "Random House could long since have given up actively publishing your book, it could have sold one copy a year for the past three years, and take three weeks to produce a print-on-demand copy, but you can't terminate the contract. We can see e-books are another way of reaching readers, and that print on demand for old titles has advantages, but this is a way that publishers can sit on rights for years on end."

As the information was from an article in the Bookseller, it referred to English authors. However, that doesn't mean that Random House isn't doing the same in the US. The publisher is apparently also pushing for more aggressive "high discount" provisions. Although there aren't enough details to tell, my guess is that the company is trying to set high discount provisions, which are a trigger for significantly lower royalties to authors, at levels that would be far more easily hit.

I'm not a member of the Authors' Guild (though I keep meaning to join) - anyone hear anything similar from AG about Random House in the US?

Authors Guild Warns About Simon & Schuster E-Book Letter

The Authors Guild has sent a message to its members, warning that Simon & Schuster is trying to get many of its authors to sign an e-book royalty rate amendment to their contracts. They're trying to "set those rates at 15% of the 'catalog retail price' of the e-book." The organization suggests caution:

1. Discuss the amendment with your agent or attorney, if you have one.

2. Depending on your existing contract with Simon & Schuster, the amendment may grant the publisher rights that you've otherwise retained.

3. Be aware that the amendment may affect your ability to obtain a reversion of rights.

Furthermore, the Authors Guild thinks that 15 percent of retail price will be "the low-water mark for e-book royalties." The reason is that the publishers virtually no costs in warehousing, printing, shipping, or handling. My guess is that e-books probably strip a good $2 to $3 from the actual cost of a given title. (And if any publishers read this and disagree with my estimation, I'd be glad to hear the arguments on how it should change and why.)

However, I think we all have to keep aware of the broader economic issues that are happening. Yes, costs for publishers drop, but if Amazon has its way, so will the money that the publishers get in the first place. And by no means am I suggesting that S&S has got the best interests of the authors in mind. If they are trying to set the amount at 15 percent, I suspect they are trying to offer something that sounds generous compared to print royalties, but that leaves more money in their pocket. If you figure a $20 cost for a trade paperback and 50 percent discount, that means the publisher is saving maybe $2 on income of $10, which is an additional 20 percent in available profit. Instead of 15 percent, an author might reasonably get 20 or 25 percent of the sale price.

But read about the prices Amazon is charging for big titles. It's very little compared to print prices - even though Amazon itself is also saving lots in the new format - and the company is taking aggressive portions of the money that comes in. That's why they're pushing on the Kindle so hard. Should other e-book readers come out and become popular as well, there might be multiple formats and outlets, meaning far less ability to twist arms. If the publishers are forced into taking $5 to $7 for a title, there's a whole lot less money now available for all of us.

Where Have All the Book Editors Gone?

I came across a Stuart Evers blog entry in the Guardian about the new role of editors at book publishers:

These days, experience of shaping, honing and bringing out the best in an author is unnecessary to land a high profile role: all you need to be able to do is identify the product.

It's a sad observation, but has a lot of truth. I know editors who get frustrated with the entire process because they don't get to edit. All they can do is hope that the book comes in well enough constructed that they can free up some time for the market analyses and major manuscript resuscitations that are necessary. So here's my question: if editors don't get time to really edit and the authors have to do a lot of the marketing, then what is it that publishers really do?

Is Media That Delivers a Market That Isn't?

I often hear about freelance woes with various publications, and on rare occassions I do some investigation into them. That just happened today when Lynne Meredith Schreiber posted on a writers' board about a problem she was having with getting a payment from Estates West, which is published by Media That Delivers. She is not the only writer alleging problems with the company, and back in February WritersWeekly had a something about the company owing a writer $2000. Lynne has given me permission to use her name and mention the details. Here is an outline of the saga as she relates it:

1. Lynne wrote a "huge story" and submitted it on January 2. "[T]he editor loved it. They had said they paid on publication and the story was worth $975 - but the editor said she'd try to issue payment early."


2. In March she got a PDF of the story but no check. By April she began to email the editor "incessently" and was referred to the publisher, whom she quotes as saying, "It's a bad economy. A lot of our creditors are not paying us so we can't pay you just yet." She says that the publisher, Mike Dee, offered to send "less than half up front and then the rest when he could. He did not."


3. She had a lawyer contact the company, which sent a check for $100. The lawyer returned the check as inadequate and was told it was all the company could afford for now and that it wanted to set up a payment plan.

I wrote Mike Dee the following:

I write a reasonably well-read blog on the freelance business. I've been hearing that writers are being asked to wait very long periods for payment from your company, and so wanted to ask you about this before I put something on my blog.

I got a response today, as well, from Hayley Gudat, "Director of Estates West & Custom Publications Media That Deelivers, Inc." Here is the response:

Thanks for contacting us about your blog before making any comments about Media That Deelivers. While we cannot stop you from posting about us, we of course hope you will not, simply because we have always maintained excellent relationships with our freelancers, and in most cases have been using the same writers, photographers and stylists for years, which we believe is testiment to our reliability as a publisher of magazines. We have been in business over a decade and have probably the best reputation in our state, be it for our editorial content or the way we treat the people we work with.

In some situations, freelance payment can be late, but never, ever has an invoice gone unpaid. We try at all times to pay any freelancer on time, and in most cases we do, though of course there will be occurances of slight backlogs. We always communicate with our writers, should a payment be late, and from my experiences they appreciate the dialog and we have not had any problems to date. I hope this helps you. Please contact me if you have any other concerns or questions.

The related story and the response don't seem reconcilable to me, but perhaps there is something that I am not getting. At least what I'm missing is not a check, which is an unreasonable situation for any freelance writer to be in.

More on HarperCollins Move Away from Advances

Last week I mentioned that a new division of HarperCollins was looking to move to profit-sharing rather than book advances and to change the crippling practice of liberal return policies for bookstores. I've read some additional reporting by Jeffrey Trachtenberg in the Wall Street Journal (requires paid subscription):

To be headed by veteran publishing executive Robert S. Miller, the imprint also likely won't pay for more desirable display space in the front of bookstores, a common practice. Instead, the as-yet-unnamed unit will share its profit with writers and focus much of its sales efforts on the Internet, where a growing portion of book sales are shifting.

There's been some discussion in the writing community about whether the huge advances to a few end up causing the problem - and they may trigger it. But most publishers try to gauge advances by expected sales in the first year or two and the attending royalty payments to authors. If a book doesn't earn out its advance - and most don't - then perhaps it's not even selling enough to pay for the advance. Assuming that, then is splitting profits going to be better for authors? ON reflection, I just don't see it. This is part of a cost-savings measure designed to lower risk, so why would the publisher do this if it were going to pay out more money on the average? I suspect that most authors would end up with even less than usual under the arrangement.

Now consider that the publisher is going to focus on Internet sales, and not sales from stores. Oh? As in, let's depend on all our sales from Amazon, B&N, and Borders online? Sure, it's an important channel, but, alone, not enough. Amd then they'd also be changing the return policy to those resellers as well, so figure that they might have the same reluctance to do business that way.

Trachtenberg also points out that Harcourt Brace Jovanovich tried eliminating returns in 1980, offering higher discounts instead: "Orders fell off, however, and the publisher reversed itself." Then again, he notes that B&N CEO Steve Riggio said several years ago that he'd rather be able to mark down books than return them - whatever that means. Retaiers in other industries do that, like clothing, but they also get much higher discounts on products and, so, have more room to discount without an absolute loss.

All this will depend on the economic market in the book industry, and where that comes out isn't completely clear, even though the Journal article tried to paint an overall negative picture. On one hand, Borders has put itself up for sale, and the WSJ noted that Hyperion's operating income (pre-tax profits) is down a bit. B&N saw a 9 percent drop in its earnings in its fourth quarter in comparison with the previous year, but that's only half the story, as it earned more and paid out more dividends to investors than analysts expected and also said that its first quarter this year would be profitable, rather than the loss that analysts had predicted. Then again, many on Wall Street are ambivalent on Amazon. In short, there is too much going on that could be written off to a shaky general economy, I think, to get resellers to embrace big change in the way they operate, which means that the new Hyperion group could find that sales will be largely limited to the Internet. In short, even if dropping an open return policy could cut by 30 to 40 percent the number of book copies they have to print, I'm betting that the overall hit on sales would more than make up for that, meaning that the prospects for authors just don't seem that hot.

Authors Guild: Amazon Tightens Grip on Long Tail; Info Requested

I've mentioned Amazon's egregious and unprincipled decision to demand that any book publisher that wanted to use print on demand services use Amazon's own BookSurge service. The Authors Guild has a note with yet another angle - the desire to control this area of publishing. Here's the AG's view in its entirety, by their permission:

Last week Amazon announced that it would be requiring that all books that it sells that are produced through on-demand means be printed by BookSurge, their in-house on-demand printer/publisher. Amazon pitched this as a customer service matter, a means for more speedily delivering print-on-demand books and allowing for the bundling of shipments with other items purchased at the same time from Amazon. It also put a bit of an environmental spin on the move -- claiming less transportation fuel is used (this is unlikely, but that's another story) when all items are shipped directly from Amazon.

We, and many others, think something else is afoot. Ingram Industries' Lightning Source is currently the dominant printer for on-demand titles, and they appear to be quite efficient at their task. They ship on-demand titles shortly after they are ordered through Amazon directly to the customer. It's a nice business for Ingram, since they get a percentage of the sales and a printing fee for every on-demand book they ship. Amazon would be foolish not to covet that business.

What's the rub? Once Amazon owns the supply chain, it has effective control of much of the "long tail" of publishing -- the enormous number of titles that sell in low volumes but which, in aggregate, make a lot of money for the aggregator. Since Amazon has a firm grip on the retailing of these books (it's uneconomic for physical book stores to stock many of these titles), owning the supply chain would allow it to easily increase its profit margins on these books: it need only insist on buying at a deeper discount -- or it can choose to charge more for its printing of the books -- to increase its profits. Most publishers could do little but grumble and comply.

We suspect this maneuver by Amazon is far more about profit margin than it is about customer service or fossil fuels. The potential big losers (other than Ingram) if Amazon does impose greater discounts on the industry, are authors -- since many are paid for on-demand sales based on the publisher's gross revenues -- and publishers.

We're reviewing the antitrust and other legal implications of Amazon's bold move. If you have any information on this matter that you think could be helpful to us, please call us at (212) 563-5904 and ask for the legal services department, or send an e-mail to staff@authorsguild.org.

Feel free to post or forward this message in its entirety.

Ziff Davis Media Files for Bankruptcy

The Associated Press reports that technology publisher Ziff Davis Media filed for bankruptcy yesterday. It's a sign of where some areas of publishing are headed - into the financial toilet. ZD has shown shaky finances over the last few years, and pay has been getting tighter. Obviously, it was for a reason:

New York-based Ziff Davis said in a court filing that it had about $500 million in liabilities and $313 million worth of assets, as of the end of December. It filed for Chapter 11 protection to restructure debt that had become burdensome.

Senior creditors - in other words, people other than writers, photographers, and photographers - are writing off a big chunk of the $225 million they are owed and getting at least 88.8 percent of the company's common stock as a result.

As for the more junior creditors owed a collective $275 million, the company will use the courts to resolve what they owe, and the courts have set aside $24.5 million to fund ongoing operations during the case and after it concludes.

Condolences to anyone who's been doing business with them. If you have invoices outstanding, I'd *strongly* suggest that you read up on bankruptcy, find out where they've filed, and start the necessary paperwork right away. If you are expecting pay, know that the courts will keep them from sending checks to anyone. Going forward, while the court has set aside operating capital, be sure that you can and will be paid, and know that there may be some supervisory authority that will have to review and authorize payments.

You can get burnt badly under the right (or wrong) circumstances, so if ZD is a big client, it would be wise to diversify immediately.

Update

I've heard through the grapevine that Ziff Davis Enterprise is not part of Ziff Davis Publishing and is, instead, owned by a venture capital group. If you're working for ZDE, you're not in the same boat.

Expect Shakeups at Time Warner

Jeff Bewkes, Time Warner's new CEO, is already making noise about cutting costs and restructuring the business, according to the Wall Street Journal. Because that includes Time Inc., you can expect that the changes going on will affect all parts of the company, including any clients you have there. Here are some of the likely actions so far:

• Separate AOL's operations from the rest of the company, for a potential sale.


• Consider reducing the percentage of ownership of Time Warner Cable.


• Possibly merge New Line Cinema with Warner Bros.


• Headquarter cost cuts of 15 percent.


• Focusing on digital opportunities for the television and publishing businesses.

What's driving these changes is stock performance:

Still, investors applauded his approach. In 4 p.m. New York Stock Exchange composite trading, Time Warner shares rose 31 cents, or 2%, to $15.71. Time Warner's shares have sunk this year to levels not seen since 2003, when the company was still reeling from its disastrous AOL merger.

Mediabisto Gives Heads Up Over Ad

About a week ago, Mediabistro ran an advertisement for OverTime Magazine, which was seeking "Excellent Freelance Writers." But according to an article that MB ran today, the publication is in deep hoch:

According to interviews conducted by mediabistro.com with five people who worked on the magazine at various times since 2004, McNeil's company, Maven Media Group, which publishes OverTime, owes money to vendors, freelancers, and former staff. One source with intimate knowledge of its finances -- who is owed more than $8,000 by Maven Media to date -- said the company owes "considerably more than $100,000" to former magazine staff, freelancers and vendors. "[$100,000] wouldn't even cover the loans [McNeil's] taken out," she said.

Of course, that's based on a few sources that may or may not be correct, and the publication claims that everyone has been paid. However, there are enough questions raised in this piece that, personally, I'd steer clear. There are too many problems in the business world. Why walk in a direction with signs proclaiming alligators, quicksand, and stinging flies?

Free Media: Who Pays?

In keeping with getting paid for reuse, let's have a look at an article on MediaPost, via a note from the BoSacks Reporter. This is a must-read for creatives of all disciplines, I think, because it quotes a simple and brilliant summation of the issue of media and their cost. In this formulation by Shelly Palmer, there are only three models for paying for media (with an obvious fourth):

• I pay - in which the creator absorbs the costs of producing and distributing the material


• You pay - in which the reader pays with a subscription or some other type of purchase


• They pay - in which a third party that typically wants to associate itself with the content pays


• Somebody pays - a combination of two or three of the above

The reason this is such an important formulation is that it clears your thinking of all the details - Google ads, per copy pricing, selling through Amazon, and so on - that keep you from understanding the fundamental problem. And when you look at the fundamentals, suddenly some innovations aren't so that different from what we've seen in the past:

Palmer scoffs at the notion that Radiohead's "pay-what-you-want" album sales model is at all a breakthrough. While a third of consumers who downloaded the band's latest album paid something for it, the real point of the model was to get the band's music heard to generate residual sales in the form of concerts and merchandising.

"It's really the Jerry Garcia model," says Palmer, referring to the late lead guitarist of the Grateful Dead, who encouraged deadheads to record the band's live performances and distribute and share the recording for free, because it would generate a broader marketplace for the band's music and concert tours.

When you blog or give away material, you are either underwriting everything to promote yourself or, more likely, you hope to eventually sell something to the people who come by. Again, it's that give it away and make up the promotional activity in another area model.

This reminds me of a conversation I recently had with one of my book editors. She mentioned another writer she had used - polished, capable, understanding material, but unwilling to promote. Therefore, the books didn't do that well and when he wanted another assignment, she said, "You really need to be willing to help promote, otherwise I can't give you anything."

What she said goes right back to the three models. Each part of the publishing industry has the same issue: someone has to pay. The book publisher currently depends on the audience bearing all the costs, and the greater a response, the more readily it can undertake a new book idea. The writer gets paid by the publisher, but might have to do some self-supporting work to help bring the audience to the venture that eventually pays. If there are ads, people must pay enough attention to the ads to make the third party advertisers feel as though they are getting enough for their money. Instead of sweating all the details, take some time to get to the fundamentals and answer these questions:

• What do you offer?


• Who pays for your work?


• What must you do to ensure they get what they need?


• Are tehre classic examples of business models that might work for you?

Book Platform Isn't Expertise

I was part of an online discussion about the Jessica Seinfeld cookbook and all the controversy about whether she or her publisher stole the concept from Missy Chase Lapine. (In case you're late to the controversy party, you can see something about this here and here on my food blog.)

One of the reactions many writers had was that it seemed unfair that the commedian's wife should get a book deal because she wasn't a nutrition or food expert. She had no platform in the topic. She was just married to someone famous. I'd like to take a moment and disabuse many of an erroneous concept. Platform has everything to do with the writer generating sales by the mere connection to a book and nothing to do with expertise, except as that expertise feeds into the sales. I repeat - platform is all about the sales. That's all the publishers care about. I think it's an ultimately short-sighted view of their businesses, as if what the customers wanted didn't matter. But if you're going to deal with the commercial publishing world, you have to understand this.

I see many writers starting blogs, trying to get specialized certifications of knowledge, write articles on a topic, and generally show that they know about a subject. But few actually get somewhere. The publishers don't care if you have a blog or web site, unless it has lots of readers. They don't care if you have Ivy League degrees up and down your arm unless you put yourself into positions where you can promote your book. By the way, part of this can be nothing more than perception of the publishers; they think you're doing things that indicate an audience, and so assume you have one.

Until writers begin to understand this dynamic, they won't build an audience, won't have a platform, and won't get meaningful book deals.

Story of a Blockbuster

The Wall Street Journal had a story last Friday (which may or may not be available depending on when you look at this and if you have a WSJ.com account) about how Viking used a series of calculated moves to turn "Eat, Pray, Love" into a best seller when it finally came out as a paperback from Penguin, another imprint owned, as is Viking, by Pearson.

If you can get a hold of a copy of the article, it's worth reading to get a sense of how publishers are trying to change their marketing, and how they approach the business. Note this bit:

The vast majority of books face a tough reality. New releases that fail to take off in the first couple of weeks -- when publishers often pay to place copies on stores' front tables -- are relegated to the back shelves.

That sentence alone is worth a wow. Up until now, I thought the usual practice had become a month on the shelves and three months of publicity and marketing. Apparently I've been over-generous. The only way this changes is if the publisher thinks the book has break-out potential.

That means a number of things. One is that platform, which has become a heavy stone crushing the chests of many authors, is becoming every more weighty. And the early reception to the book is critical. "Eat, Pray, Love" got an excerpt in O and a cover article in the NYT Book Review. Here's another reality check:

Each month Penguin publishes 15 to 20 fancy "trade" paperbacks -- high-quality editions that are larger in format and easier to read than their cheaper, mass-market cousins. But it only really lends its weight to one or two.

This is like literary Calvinism, only with clear proof of predestination rather than theological speculation. Penguin, in this case, invested in freestanding store displays and ads, and the marketing person in charge asked everyone in sales and marketing to read the book, so they could effectively convey enthusiasm. And now for the "beautiful author" part, as I mentioned in my writing and literature blog:

Selling Ms. Gilbert, the author, was just as crucial. Unlike many writers who don't like touring and are uncomfortable in front of crowds, Ms. Gilbert has a sunny, upbeat personality that plays well on television and in personal appearances. Notes Ms. Court: "When the writer of a book is attractive, generous, and funny, booksellers end up rooting for her."

Then it was touring, getting book club traction, and so on. Here's another tidbit that tells you how sales work these days in moving from hardback to paperback:

"One of the mantras of publishing economics of the 1970s and early 1980s was that mass-market paperbacks could achieve 10 times the sales of a hardcover," says Stuart Applebaum, a spokesman for Bertlesmann AG's Random House Inc. Then retailers started discounting hardcover titles, and the smaller, cheaper paperbacks lost ground.
Laurence Kirshbaum, a book agent who heads up LJK Literary Management in New York, estimates that the current ratio between hardcover and paperback sales is one to one -- mostly because so many hardcover books are so steeply discounted. "These days the bulk of the people who are interested in a book buy it in hardcover; that's what makes titles such as 'Eat, Pray, Love' so exceptional," says Mr. Kirshbaum. "They are throwbacks to the days when paperbacks sold huge multiples of the hardcover."

In case this isn't sinking in, most book authors don't have a snowball's chance in hell of mass market success. That means you have to find a different business model, and fast - one that doesn't rely on big publishers and traditional marketing, and one that doesn't leave you trying to eke out a living from a relatively tiny royalty.

The Fallible Book Excerpt

The New York Times had yet another article on book marketing, this one on whether book excerpts help sell the titles. It's another facet of what I covered in my Book Blockbusters article. It comes down to the subtle and treacherous world of publicity. Contrary to popular opinion, not all press is good. As the article points out, if there is one major revelation to be found in a book and that finds its way into the excerpt, then you've just killed sales. Here are two paragraphs of the article that give a good summary:

Because the excerpt is just one weapon in the publicity arsenal, publishers are hard-put to assess its role in the campaign. Still, they can point to recent successes like "It Ain’t All About the Cookin’" by the restaurateur and Food Network host Paula Deen, which was serialized in Ladies’ Home Journal and hit the New York Times best-seller list immediately after publication.

On the other hand, Time magazine’s excerpt of "I Am a Soldier, Too: The Jessica Lynch Story," by Rick Bragg, put a dent in book sales, according to Mr. Bogaards of Knopf. "The excerpt gave away too much — I think people felt they’d had their fill," he said. "We sold 175,000 in hardcover but had expected to do twice that."

Publishers in the past were motivated to place excerpts because the money for them could hit $100,000 - and that's the equivalent of a lot of copies at one shot without the actual cost of producing them. Yes, writers get a big chunk - sometimes 90% of such serial sales - but that's still a lot of cash for a single book. When the magazine paid big money, they wanted big and juicy parts, sometimes even taking a bit here, some there, and putting them all together, even if they've given away important parts of the book.

Now the fees are less and the benefit less obvious. As the publisher of Hyperion was quoted, "For $1,500, why risk exposure of all the juicy bits if it’s going to hurt sales?" That's pretty short money, which means someone will have to explain why this is all a good idea and just how many copies moved as a result. For authors the point is clear: You have to take significant interest in the marketing of your book, because there are so many ways it can go wrong. So much habit, so little desire to do something new, which only shakes up the status quo and leaves everyone at the publisher feeling less comfortable. Oh, and then the entire marketing department is so overwhelmed with work and titles and lack of resources that all they can do is plod along like automatons. If you're not keeping watch, there's little chance that anyone else will.

Breaking the Book Blockbuster Bane

I have a new article up on getting smarter about book publicity that came from a post I had at ASJA that a number of people found useful. Hope it's useful to you as well. Look under Resources to the left, or click here.

Simon & Schuster Blinks

From what the Association of Authors' Representatives (literary agent organization) and the Authors Guild are saying, Simon & Schuster is backing down on effectively elminating out-of-print rights reversion. The company had tried questioning the Authors Guild in a statement on Publishers Weekly, but apparently that was short-lived. Here's what the AAR had to say after having a few of its crew meet with S&S:

They informed us that S&S is investing a lot of resources in its digital publishing initiative, and their expanded efforts in conventional and newtechnologies will enable them to supply books to consumers in a variety of formats, including Print on Demand, electronic books, digital downloadable audio, online page views, et. al. Their goal is to keep books in print more effectively and to market frontlist and backlist titles more vibrantly.They have confirmed for us that they are agreeable to negotiating with agents a revenue-based threshold to determine the in-print status of a book.

That is certainly good news - and proof that if writers don't roll over, publishers are quite capable of backing down.

Authors Guild Warns of "Simon & Schuster Rights Grab"

I've had a number of writers pass on news of an Authors Guild warning about book publisher Simon & Schuster. You can see the original message, but here's the heart of it:

Until now, Simon & Schuster, like all other major trade publishers, has followed the traditional practice in which rights to a work revert to the author if the book falls out of print or if its sales are low.

The publisher is signaling that it will no longer include minimum sales requirements for a work to be considered in print. Simon & Schuster is apparently seeking nothing less than an exclusive grant of rights in perpetuity. Effectively, the publisher would co-own your copyright.

The new contract would allow Simon & Schuster to consider a book in print, and under its exclusive control, so long as it’s available in any form, including through its own in-house database -- even if no copies are available to be ordered by traditional bookstores.

This may be new for S&S, but this is hardly news. Book publishers have for some years have been redefining "out of print." If you have a recent book contract, look and see if there is wording to the effect that a book is in print so long as at least one version is available. Now see if you granted rights to create e-books or print-on-demand delivery or even more general "electronic" rights that a publisher can use to make a title capable of being searched through an online book seller (think Amazon) or search engine (like Google). If so, and if they've produced such a version, then you, my friend, are stuck - at least until 35 years go by and, under US copyright law, you rescind any previous license.

Reading and understanding contracts is a vital part of having a viable writing business. You can't just look for a checklist that someone provides you. No guidelines that have ever been produced yet can envision every single possible twist and turn that business models and, as a result, contracts will take. Don't rely on what other writers tell you or what agents suggest. Learn enough about publishing contracts to smell when something is fishy, and whenever possible, get a good publishing lawyer to review the document. If you won't go to any trouble to take care of your own affairs, you'll find that no one else will, either.

How Bad Publishers Are at Managing Royalties and Rights

I'm a fairly cynical guy when it comes to trusting what publishers do, but Art Hutchinson, a strategic planning consultant and owner of the Mapping Strategy business blog, managed to surprise me. He had posted an interesting take on a New York Times article about publishers not having a clue as to why some books sell better than others. I responded in a comment and his answer is a must read for book authors, or those who wish to be. Go to this link, scroll down, and see his post about how one major publisher only paid attention to royalties and rights for big-wig authors, and otherwise didn't worry about things.