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Welcome to the Text and Academic Authors Association Podcast Series. My name is Kim Pawlak and today I am interviewing Michael Lennie, an attorney and literary agent with Lennie Literary and Author's Attorney, about "How Recent and Future Changes in the Textbook Publishing Industry Could Affect Authors." Michael Lennie has negotiated hundreds of major contracts of all the established and first time authors of text and trade books. He regularly speaks at workshops and conferences around the country about current legal issues in publishing. Michael also served many years on the TAA Council and has been an active member of TAA since its inception in 1987. He has made presentations, given workshops and appeared on panels at TAA's annual conferences and has served as a legal adviser to TAA. According to Publishers Weekly magazine, Michael has negotiated one of the largest settlements recorded on behalf of textbook authors and he has successfully litigated a number of other major author-publisher court actions. Hello Michael, thank you for joining us today.
Hello. Thank you for inviting me to participate.
Okay, so to start off today, can you give us a few comments about what you see changing recently, and perhaps over the next year or two, in textbook publishing?
Sure. Everything would be the easy answer, perhaps. It seems that way, if you keep up on the blogs and the trade magazines and that sort of thing, but digital is the 700-pound gorilla which has to do primarily with royalty rates as far as the textbook author is concerned. It's very clever from the publisher's standpoint. It avoids the used-book problem which has been huge over the years. Ever since TAA got started, that's been an issue that we have not been able to successfully deal with. So from that standpoint, it benefits the author as well as the publisher. There are more and more ways by which the publisher keeps more money. If we have time we can deal with that but basically, it is that certain traditional publisher roles are being taken out of the pot. CourseSmart, for example. The sales are conducted by CourseSmart and the author receives his royalty against the money that comes in after profit is taken by the publisher. So, it's - your percentages apply to a smaller amount. Rentals should not work any problem for the author. Once again, it's smart by the publisher because it avoids the
first-sale doctrine. I read the column in The Academic Author, or just re-read it recently, the most recent one, and there is a passage in there about five paragraphs down, that says authors get royalties from the publisher regardless of whether the book is sold or rented but only on the initial sale not the subsequent rentals. That would be absolutely wrong and that would - it would not do away with the first-sale doctrine for the authors but it would for the publishers. So I think there must be a misprint on that. Generally, whether it is rented or it is sold, the author should get his percent applied to the amount of money that comes to the publisher. What else? Well, that is a pretty good start I think.
Okay. Well, I have been very...
Oh, one other I wanted to mention. Something that bothered me quite a bit in a trade journal recently was that some of the electronic copies, the publisher would be letting the purchaser - purchaser being defined in this case as the professors teaching course - to make changes. So we have a control of content issue here, a lot of copyright issues and I think those need to be worked out but it is - we do not know enough about that yet to know what needs to be done.
Alright, thank you. I have been hearing a lot about the agency model over the last month or so. Can you tell us what that is and if so, how it will affect textbook authors?
Yes. Briefly, as it stands, the predictions are that it will not affect textbook authors because it does not apply to textbooks, it applies only to the trade books that are sold online, through online retailers, but basically, I am not convinced that it is not going to come into play with textbooks also, so let us just spend a minute or two on it. The agency model uses online retailers, like Amazon for example, to sell the publisher's e-books in exchange for a set 30% commission. So, both parties know how much money is going to come out for the sales portion, and then, if in fact, it is not going to apply to textbooks we do not have to worry about it, but as I say - and I am not sure of that - it would seem that some of the same benefits for textbook publishers exist as for trade book publishers. It would increase the distribution outlets that allow publishers to maintain control over the sales price, the cost of sales and the date of release in relation to the sale of a hard cover edition. They have fairly good control of all of that now on the textbooks side as opposed to the trade book side but we will continue to monitor that.
Alright, so what do you see as some of the most important clauses for a textbook author to negotiate, even if it requires them to push hard against their publishers pat position?
Well, as we said a moment ago, the digital clause royalty rates are certainly the 700-pound gorilla on that. The reporting of how important electronic works are, I think is over reported and over hyped. If you look at publishing in general, even though they are reporting like 175% increase in e-book sales, the e-book sales revenue totals about 3%, possibly 4% of the overall revenue for publishing companies. So, is that a big expansion? Is that a trend? It certainly is. It is certainly something that we have to watch closely but it is not going to do away with the printed book just yet. So, let us talk about the rates on that a bit. The publisher says - all of you who have negotiated a contract over the last three or four years know that the publishers are more and more aggressive in pursuing digital rights from authors while continuing to play relative hardball in so far as the royalty rates that they are willing to pay. Recently, there has been some softening of this position. I have been able to negotiate some very good rates recently. There are several strategies the author may consider, none of which is easy to obtain so the way you pose the question, Kim, is good. Even though it's not easy to obtain, should this be something that you are pushing for? And it is, certainly it is. So, the opening premise is that your e-royalty rate should be higher than your base royalty rate that applies to the print versions. It is not usually offered that way, so what can you do? One possibility would be to grant the e-rights but to put off negotiation of the rate and tell the publisher propose as use. Now that might be immediate, with the provision that the author and the publisher, when negotiating in good faith for a reasonable royalty rate, looking to industry norms for a similarly situated author, but this strategy, both the author and the publisher are both under pressure to reach agreement because neither can exploit the electronic rights without reaching an agreement. A variation on that would be to grant e-rights but for a limited period of time, say three years, maybe two years. Negotiate it at the best rate you can - we can discuss that a little bit - and you would negotiate it with a mutual option by which either party may require renegotiation of the royalty rate to meet the then current industry standards in the textbook industry for negotiating contracts but negotiate it there is important because most authors sign these things like they're signing a rental agreement, a lease of a car or something, they don't really - they don't negotiate these things, so if you took an average of all the rates they're going to horrible. Some of them will be a third of what the base rate is for electronics. So that would be a second possibility and I kind of like that possibility as it would be allowing the publisher to pay a lower rate while absorbing the development cost of a digital project product, but for a second edition or after two or three years after that's been done then something marked into - or something that represents the fact that it's so much cheaper for the publisher to publish an electronic edition could be negotiated.
Okay, well we only have about 30 seconds left in our call today, Michael, so I will have to follow up with you and get some more information about this topic. Thank you so much for talking with me today.
Oh thanks for inviting me, I've enjoyed it.
Okay. Well, Michael will be presenting a session entitled
"The Publishing Industry: Exploding or Imploding?" at the 2010 TAA Conference in Minneapolis, Minnesota on June 26. Michael Lennie's agency is based in San Diego, California. You can reach him at (858) 272-2248 or email@example.com. Thank you for listening to today's podcast. This is Kim Pawlak with the TAA Podcast Series.
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It's good to talk.