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.
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Out of fairness to Wiley, I feel that I ought to add the email from Authors' Guild that come today (Friday June 11th 2010). Again, I quote with Authors' Guild's blanket written permission.
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.
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