Show us the money
The Author past issue
Authors are angry. In fact they are militant. Why? Because contractual clauses that reduce royalties when retailers receive high discounts have, they say, steadily eroded their income. The clauses kick in when retailers receive discount from publishers in excess of 50%, and mean a 20% drop in royalty paid on cover price. As much as 90% of some authors’ royalty income because high discounts are now the norm rather than the exception for high street chains and non-traditional booksellers who account for the largest chunk of sales.
But if authors are angry about high discount clauses, they are furious about the paltry royalty paid on books sold through the burgeoning direct sales sector and book clubs. These booksellers receive discounts of up to 80% from publishers for firm sale orders and royalties are paid as a percentage of net receipts not cover price. As a result some authors receive less than 10p a copy for their work. No wonder authors feel it is time for publishers to say no to retailers’ demands for high margin.
“I know people who are 50% down in terms of income,” children’s author Tony Bradman says. As chair of the Society of Authors Children’s Group, Bradman is well placed to gauge opinion. “I have talked to a lot of children’s authors and they are worried. I don’t know any who look at the situation now and feel it is fine.”
Many adult authors feel they are funding the battle for market share taking place on the high street and in cyberspace. It brings uncomfortable comparisons to mind. “Authors are being treated very much in the same way that farmers are treated by the supermarkets,” Amanda Craig observes. As a result, an increasing number of authors are considering abandoning their PCs in favour of more lucrative employment.
The resentment is threatening to split the trade asunder, especially as many authors and agents look at the decline in royalties against the backdrop of rising profits at large publishers and retailers. “Publishers profits are getting bigger and the big retailers are making more money, all as authors’ royalties have got lower, so something isn’t adding up somewhere,” says one agent unwilling to be named.
Signs of change?
Could the decline in royalties be a sign that the trade needs to redefine the way in which authors are remunerated? But publishers beware, authors will resist any attempt to abolish or further diminish royalties. Philip Pullman, who served a long apprenticeship writing moderately successful children’s books before his recent stellar success, sees it as a moral issue: “In a profession where it is very hard to make a living and many authors have to subsidise their work by taking a full or part time job or accepting dreadful living conditions to finish something, it seems just wrong to reduce our royalties further,” he says.
Few would deny that high discount clauses as they stand are anachronistic. They have failed to reflect the substantial change in the market since they were first negotiated in the twilight years of the Net Book Agreement. Back then margin over 50% was an exception now it is the norm, as Jonathan Lloyd, m.d. of literary agency Curtis Brown, concedes: “The clause was specifically designed not to take in W H Smith. It applied only to wholesalers who were getting 55% and supermarkets, who were not a major part of the business.”
Lloyd is well placed to comment on the issue: as m.d. of HarperCollins Trade in the early 1990s, he was involved in the negotiations that established the industry standard for high discount clauses. Under the standard agreement still used by most publishers and agents, when discount to retailers reaches 50% to 52.5% royalties due reduce to four fifths of the full royalty.
At the time it was set, the standard W H Smith discount was 48% and supermarkets were still small fish in the publishing pond, though they could shift substantial quantities of selected titles. No wonder agent Clare Alexander of Gillon Aitken Associates observes: “Publishers contracts have become archaeological documents because they are tied to a notion of how publishers did business that is no longer the norm.”
In the eight years since the NBA fell the configuration of the market has changed considerably. Traditional booksellers have lost market share to newcomers from Amazon to Asda, and supermarkets have become key players. These non-traditionals have also extended their reach into the hardback and trade paperback market as well, affecting authors’ earning across the board.
In recent years Pan Macmillan and Penguin General acknowledged this and raised their high discount threshold to 52.5%. But even that may be too low, as publishers fail to resist escalating demands for extra margin from retailers. There is little hope among the author and agenting community that publishers will take a firmer stand. “Publishers are such shits,” is the robust assessment of one angry agent.” They are all at each other’s throats and if one doesn’t provide high discount, then another will.”
Of course it would be simplistic to blame the decline in royalties solely on high discounts. The decline in backlist sales, the high output and even government spending on literacy have all had an impact, but the rise in discounts has undoubtedly shaped the literary landscape and put agents under pressure to protect clients’ income in other ways.
The risk associated with royalties has been one of the factors driving advances. In fact, post-NBA contractual clauses about royalties are largely academic, as agents and publishers readily acknowledge. “The majority of authors are paid advances that will never earn out, even if they had full royalties on high discounted sales,” says one publisher. In effect authors are paid an advance that is non-refundable, “a ridiculous system”, according to the publisher, which few other industries would understand or tolerate.
Another Get Out of Jail Free card used by agents to protect author income are escalators. Authors whose advances reflect high expectations among publishers usually have escalators in their contracts with breaks of two to five percent for specified sales targets. As a result, the royalty on a massive bestseller is likely to reduce to 10% to 12.5% of cover price on a hardback, not 8%. Bestselling authors also benefit from substantial marketing campaigns and the high volume turnover guaranteed by supermarket or chain promotions.
“The rare authors who do benefit from royalties are the ones who benefit from the fact that high discount means higher sales, so instead of making £2,000 at £1 each on 2,000 copies, they make £3,000 on 6,000 copies at 50p a copy,” explains an editorial director who is convinced that the extra 4,000 copies would not be sold without the promotion given in return for high discount by retailers.
This view finds unexpected support from chick lit author Jenny Colgan. “Sure royalty income is being affected for some of us, but those of us affected are the ones who are also benefiting from inflated advances. If you are lucky enough to be the kind of book that gets into supermarkets and gets discounted in promotions, the chances are you are also probably lucky enough to have a large advance as well.”
As Colgan implicitly acknowledges, high advances and escalator clauses may protect authors’ incomes but they are only available to the biggest names. They are unlikely to help midlist authors whose advances are paltry and whose income from backlist is in decline thanks to the frontlist driven nature of the modern book market.
Don’t give up the day job
The attention paid to high advances in the national press hides the harsh truth that for most authors advances do not reach the six figure sums reported. In fact, most fail to get beyond moderate five figures.
For fiction, which receives the most publicity for high roller advances, the deals are usually based on two books, so when the money is spread over the time taken to write both the advance does not look quite so exciting. It could be argued that authors’ discontent about declining royalties is symptomatic of a deep-rooted concern that the value of books – and their work upon them – is being undermined by deep discounting on the high street, cyberspace and in catalogues.
“Book prices confuse the public,” says chick lit author Jessica Adams. “They find it hard to know what a book is worth. You can get my book I’m A Believer at £6.99, £4.99 and even nothing on the BookCrossing book exchange. How is an author meant to live when we have that level of confusion?” Adams, who worked on the Australian TV drama “The Secret Lives of Us”, does not rule out a return to television, where writers receive more recognition and are better rewarded.
Authors’ ire about book prices is most pronounced when the subject of book clubs and direct sales operations arises. The discount available to book clubs and direct sales operations is 80%, and the royalty paid authors is based on net receipts. This means that a hardback with a £20 cover price is available to the likes of the Book People and BCA for £4. The royalty drops from £2 a copy on high street sales to 40p a copy.
Bestselling historian Antony Beevor is so incensed by the disparity between high street royalties and those from book clubs and direct sales operations he has banned his publisher Viking Penguin from deals with book clubs or direct sales operators. “I refuse point blank to have any book club deals in my contracts because I am sure that book clubs are eating into my retail sales,” he says.
Beevor’s boycott is based on what happened to Stalingrad when it was sold through a book club. “I agreed with a certain amount of scepticism that they could sell book club rights in Stalingard, but I was appalled to see the book club do so well with it that they shifted 35,000 copies. I really believe that those who bought the book club edition would have certainly have bought, if not the hardback edition, then the paperback edition. On average I was getting less than 30p a copy for those sales.”
Book clubs and direct sales operations argue that their books reach a new audience, a belief that has widespread support from publishers. “We do no formal market research, but we have plenty of evidence to support this claim,” argues Seni Glaister, c.e.o. of the Book People. “Our sales are significantly better in rural areas. There is a strong correlation between the lack of access to bookshops and an increase in our sales. In fact, our sales are negligible in London and other major cities.”
But the number of cheap editions brought to signings fuels authors’ suspicions. “I’m not convinced that it is true that these are incremental sales,” one well-known literary author says. “I’ve had so many readers come to my events and offer for signing book club editions. These are straight down the line hardback readers, not people who would feel uncomfortable in a bookshop.”
Publishers argue that instead of looking at the percentage received, authors should regard their earnings as composite deals that reflect maximum exposure through different channels. They argue that the volumes delivered by book clubs and direct sales operators are far greater than through individual high street chains, even on special promotions.
One publisher explains it thus: “On a £10 book W H Smith will expect margin of at least 55%, compared to 80% at the Book People. If the book sells well in Smiths it might sell 5,000 copies, which will earn the author £5,000. In comparison, Ted Smart will probably sell 25,000 copies, which will earn the author 20p a copy or £5,000. You would not get that volume through a high street bookshop.” It is not either or, she argues, but both.
Book clubs and direct sales operators have a marketing role, their support for backlist, feeds frontlist sales, claim publishers. “I am sure not that there is anyone that buys as much backlist as we do,” says the Book People’s Seni Glaister. “Maeve Binchy, an author you would think was known universally, once told us that she hears from many fans who first discovered her through one of our fiction packs.”
Binchy’s backlist boost came through the Book People’s direct sales operation, which targets workplaces, rather than its catalogue operation, which many regard as more of a threat to high street sales. There is tacit acknowledgement of this among those publishers who refuse catalogue deals on big names.
Mutually Assured Construction
It could be argued that as few authors earn back their advances, debate about high discounts and special sales royalties is academic. Authors should not expect to earn a living from writing, some would say, even Dickens did not rely on his book sales for his entire income. Why should modern authors be any different?
But the issue of authors’ declining royalties has long term cultural implications not so different from those raised by deep discounting in bookshops, as Tony Bradman and Helen Dunmore point out. “Children’s publishing is the jewel in the crown of British publishing,” Bradman observes. “Because writers have been able to make a living out of writing and bide their time to do their best work it has created this great pool of talent. Philip Pullman and Jacqueline Wilson have both been writing for a long time. In 30 years will writers of that quality have been able to serve the same sort of apprenticeship? Not unless they can make enough money to live.”
As with the composition of the rest of the book trade, Helen Dunmore points out, a fine balance needs to be kept that will ensure talent is enabled to develop and that everyone in the supply chain of books, from author to bookseller, benefits. “We live in a society where we talk about the market place as if it is the only place, but we are all dependent upon each other and if we deform that relationship by disadvantaging one or two parties, the whole thing will not work in the long term. It is in everybody’s interest to remain diverse and not to favour one party.”