E-books, whose rights?

As e-book programmes get under way, a gap is beginning to widen between authors/grantors' expectations and publishers' perceptions of electronic rights and royalties. Hilary Macaskill investigates</p><p>
Last month, Random House became the first UK trade publisher to offer an e-book programme, with a list of more than 100 titles and authors, "as soon as significant e-book delivery opportunities become available in the New Year". Penguin's electronic plans have also advanced, though, says Andrew Rosenheim, managing director of Penguin Press, "we are reluctant to announce them with great fanfare until the technology is in place".</p><p>
Faber's plans are well on the way, too. "We've agreed on the standard wording of contracts, that e-book rights are a standard part of new book contracts, and are approaching our authors individually. We are also reasonably far down the line with Gemstar, maker of Rocket eBooks," says Toby Faber, managing director of Faber.</p><p>
Taylor &amp; Francis' engagement with the online world, however, is already in full swing. In July the company, which includes imprints such as Routledge, Falmer Press and UCL Press, announced a complete digitisation programme in conjunction with Versaware: all its titles, including 17,000 on the backlist, by the end of 2001.</p><p>
And last month Taylor &amp; Francis took its first steps in sorting out contracts and consent for its e-books with its authors. "With your consent," reads the letter to its 11,000 authors, attached to two pages of questions and answers, "the works we publish for you will be available to a new community of readers in new formats and you will be part of an initiative that is at the forefront of academic publishing. We plan to digitise our complete backlist and all of our new publications (wherever we have rights to do so), storing and managing our e-books in a secure digital warehouse."</p><p>
There is an urgency about all this activity because of the perception among UK publishers that publishers in the US have already got their act together, not something that everyone in the US (the National Writers Union, for example) would agree with. The Americans are, however, certainly further forward, leading to the fear that they might snap up rights. "We need a good list of e-books lined up for when e-book readers become available," says Toby Faber. "We can't ignore it, or the US will take the market."</p><p>
"Some US publishers," said the Publishers Association earlier this year, "take the view that they are in the best position to exploit electronic rights worldwide, and therefore that they should gain at least non-exclusive world electronic rights, even when their other rights are restricted to US/Canada etc. The PA does not subscribe to this view."</p><p>
The impact of electronic publishing on rights and royalties has yet to be quantified, but it will undoubtedly be considerable. Apart from developments at primarily terrestrial publishers, there is a great deal going on in cyberspace. In October, the Rightscenter.com Website celebrated its first birthday with new figures on its usage: 8,000 registered users in 60 countries, with versions in French, Spanish, German, Chinese and Japanese, and new offices in Barcelona, London and Beijing.</p><p>
Also vying for the same trade is Rightsworld.com, a well laid-out Website that offers a "year-round, 24-hour auction marketplace for exchange of intellectual property in the publishing industry". Kip Parent, chief executive of Rightscenter.com, which boasts of 20,000 activated titles (not a lot in the overall scheme of publishing, but no doubt the potential is huge), was quoted recently in the Financial Times as saying that it "already has strong relationships with publishing industry players around the world".</p><p>
Rightsworld.com, on the other hand, has just (23rd October) forged a strategic partnership with the National Writers Union in the US, enabling the entire NWU membership to trade rights to their creative works on Rightsworld.com and take part in an area from which they have traditionally been excluded.</p><p>
"This deal will give more power to writers in the economic marketplace," says Jonathan Tasini, president of the NWU. "As the leading authors' organisation [in the US] fighting for writers' rights in the new technological world, we see our role as relentlessly protecting authors' rights and exploiting new opportunities that will put more money in authors' pockets."</p><p>
Other signs of the rapidity of developments include the expansion of Lightning Source's print-on-demand service, which is now advertising for staff to open a UK office; and the proliferation of dedicated online publishers. A chart drawn up for the autumn issue of the Author, the journal of the Society of Authors, by Jane Dorner (author of The Internet: A Writer's Guide, A &amp; C Black, &pound;9.99, 071365192X) has information, or as much as she can glean, on royalty rates and submission procedures for 52 online publishers. And online publisher iUniverse has entered an agreement with IDG Books, publisher of Frommer's travel guides, to issue, on demand, customer-tailored books: a chapter here, a page there. All very appealing to the consumer, but with worrying implications for authors' rights and royalties.</p><p>
The Internet effect
It is not surprising, in the light of these events, that the Society of Authors' recent a.g.m. was given over to the subject of "Writers and the Internet", with speakers Gabriella Capozzi, marketing director of Gemstar (owner of Rocket eBooks), and Phil Rance, managing director of Online Originals (which hit the headlines recently because Frederick Forsyth is writing a quintet of short stories exclusively for the electronic publisher). Rance made a considerable impact on his audience with his insistence that copyright was vested with the author and royalties should be 50%, though it was also recognised that sales online are only in the hundreds.</p><p>
"There were about 200 in the audience," says Mark Le Fanu, general secretary of the Society of Authors, "but I don't think the writers present saw it as a particularly attractive market, or one that would grow huge in the short term. Of course many of them were trade writers. Academic and technical writers are more likely to be affected."</p><p>
Confronting the rights and royalties issue
It is against this rather turbulent background that cautious steps are being taken to reach some consensus on electronic rights and royalties in the UK. When the Rocket becomes widely available next year, it is just possible that e-book hardware may become the new "must-have" item, like the mobile phone. So the issue of ownership of electronic rights is of paramount importance.</p><p>
The starting point of a background paper on "Electronic Verbatim Text Rights", sent out in March by the PA to all its members, was that "Volume rights author/grantor contracts include all verbatim text rights exclusively for all media, except where specifically excluded, for the territory covered by the contracts concerned."</p><p>
Predictably, the Society of Authors and the Association of Authors' Agents (AAA) could not support this, and the agreed minutes of a meeting held on 13th July between the PA and the AAA show that the PA has shifted its ground, marginally. "The publishers present accepted that they could not exploit the rights until royalties had been agreed." And, in a slight but significant change of emphasis from the PA's position in March, the minutes stressed that "many publishers would explicitly seek electronic verbatim text rights", rather than assuming that they formed part of the volume rights, and advised publishers to "clarify" that they were acquiring electronic rights.</p><p>
"A framework has been set up by the meeting," says Jonathan Lloyd, chairman of the AAA. "We wanted to agree some broad principles, setting out ground rules. It's up to each individual agency to negotiate. That's starting to happen."</p><p>
But the trend emerging, nevertheless, is for the author to be asked for electronic rights as a matter of course with the issue of a new contract. And this is causing concern in some areas.</p><p>
"We are very concerned about Internet publication being used as an excuse by publishers to impose all-rights contracts in some areas of legal and STM publishing," says Paul Hardy, national executive member for the National Union of Journalists' book sector. "Many of our members who work in commissioning are upset by the draconian contracts which they are forced to put to authors and contributors. It would be a big mistake for the big trade publishers, who control so much of our cultural life, to go down this road."</p><p>
"We are automatically asking for electronic/digital rights," Andrew Rosenheim of Penguin confirms, although he recognises that it is not as simple as all that. Not all agents want to yield them, and some contracts with major publishers have been held up as a result of protracted negotiation on this point.</p><p>
Mr Rosenheim puts this reluctance down largely to "the whole busted flush of consumer CD-ROMs. CD-ROMs were an enormous flop in consumer terms, though not in the specialised reference sector. Agents are not now automatically granting rights because of concern that the publishers will do nothing with them. But I'm confident that, provided publishers have coherent specific plans, they will be able to procure the necessary electronic rights."</p><p>
Who gets the rights
This raises the issue of rights sales to a secondary publisher. "We would prefer to work with the original publisher," says Jonathan Lloyd of the AAA, "but it may not always be the best option. We don't want to rush into anything with non-originating publishers until we see how serious they are, how active the marketing is. On the other hand, the head of a major publishing house, whose name I'd better not give you, said to me: `I don't give a damn about e-book rights', he's not going to invest in them. Presumably it would then be up to the agent to sell them on to a specialist electronic publisher."</p><p>
One of the factors in the current thinking of publishers is anxiety about what they see as the "free-rider approach", where the market could be created by the originating publisher while the electronic publisher reaps the benefit. There's an equal amount of concern on the part of authors that electronic rights may not be fully exploited, or that the author may not get the best deal. In its contracts briefing, "How your contract should cover e-book sales", the Society of Authors recommends that "wherever possible" authors should retain all electronic rights. But the briefing also counsels authors on how to negotiate these rights in a controlled and limited way.</p><p>
Carol Lee, author and copyright consultant to the NUJ, has similar advice. "The NUJ advice to all book writers is, as it is to all journalists, to keep rights including electronic rights, not to automatically sign them away just as the value of them is beginning to be seen. The other aspect is to work out what electronic rights are being talked about. Always ask, `What do you need it for?', and you may be able to come to agreement on that basis."</p><p>
Of course, some authors will be more concerned about the problem than others. Of the authors who have already responded to Taylor &amp; Francis' mailing, most are in favour of the publisher's plans on contract and royalties. "I would say that 98% of the 4,000 or 5,000 responses we have had so far have been positive," says Jeremy North, business development director. "As academic authors they are used to working in an Internet environment, and they are very open to its potential."</p><p>
Taylor &amp; Francis is planning to digitise backlist as well as new titles. This is a dilemma for some publishers. Deciding on a new range is one thing. "The trickier question is the backlist," observes Toby Faber. "There are two points of view: is it worth digitising; and do we have the rights to do it in the first place?"</p><p>
How high the royalty?
The size of royalties is, of course, another bone of contention - or, at least, of extensive discussion. The PA, and many publishers, maintain that the US model should be followed, and that the royalty on a download should be based on the printed version. "In the US publishers are typically basing royalty rights for selling downloads on the principle (with which the PA agrees) that it is exactly analogous to selling printed books," said its March communiqu&eacute;.</p><p>
"Selling downloads is not `exactly analogous' to selling books," wrote Mark Le Fanu in his response. "The whole costing structure of electronic publishing is substantially different from book publishing, and in our view royalty arrangements need to be looked at afresh."</p><p>
But this does not appear to be happening. Many publishers are reluctant to put a figure to the royalties they are considering paying. One publisher responds, in best civil servant style, that he "couldn't possibly comment". Another maintains that the whole issue is "political": "This is a global issue. It's got to be dealt with very carefully."</p><p>
Penguin's policy is a bit more upfront. "We are following the US lead. And we will be basing the royalty of an e-book on the printed list price," says Andrew Rosenheim. "Authors and agents are already accustomed to that, and it reinforces the value of copyright." However, he did add that: "It may in time be seen to restrict flexibility in pricing."</p><p>
"We wouldn't see an e-book as anything else than another version of a book, just as a paperback was, when that came in," says Mark McCallum, deputy group marketing director of Random House, which has announced that the royalty would be 15%, subject to review in three years' time.</p><p>
Taylor &amp; Francis will be paying the same royalty as on the printed edition. "But I want to stress that we are calculating the royalty in exactly the same way, on net receipts," says Jeremy North. "Some other publishers claim to pay higher percentages, but this is only after a whole raft of other charges are made before the royalty is calculated. Like is not being compared with like." He adds that he would expect the arrangement to be reviewed "in a relaxed sort of way. We have a good relationship with our authors. And indeed, indications are that a large percentage of the authors are very happy."</p><p>
Measuring the costs
The question of review - or a limited licence - is one that is fundamental to the thinking of the AAA and the Society of Authors. Another is the actual cost of producing electronic books. Publishers are generally as cagey about this as they are about the level of royalties. At the Society of Authors, Mark Le Fanu points to the costs saved when compared to those of traditional production, printing, warehousing and distribution.</p><p>
Mark McCallum of Random House counters with the argument that "there are significant set-up costs in the process of digitising. There is less cost in delivery to the consumer, compared to a book in a shop, but the cost of getting to that stage is quite substantial. There are other things to consider, too: the investment in encryption standards, for example, so that one can protect against piracy. There is a lot of work being done by Random House on digital rights management to ensure that it is properly maintained. That is expensive. The idea that removing the cost of paper, glue and board makes it cheaper, well, it's not as straightforward as that."</p><p>
The Society of Authors and the Association of Authors Agents have a simple answer to that: show them the costs.</p><p>
"Our biggest single concern is that it would be a lot easier if the publishers were frank about the cost of electronic publishing," says Mark Le Fanu. "Their starting point is that royalties in e-books should be similar to those in printed books. But the economics of e-publishing are quite different. The publishers say there are new costs. But they are saving the cost of book production, printing, warehousing and distribution. I think they are pushing their luck: we think royalties should be substantially higher."</p><p>
"We need more transparency in dealing," says Jonathan Lloyd. "There are various royalty rates based on the download price, the print edition, or a percentage of receipts. Until we know the actual sums, it's difficult to work out what is fair. Once it is e-booked, as it were, that is a one-off cost. There may well be a case for an initial lower payment and then an escalating royalty. We are not going to be unreasonable."</p><p>
The American experience
Everywhere, it seems, the US model is held up as the one to follow. Although this is not necessarily the case in the US. The NWU advocates on its Website a 50% royalty for e-books. Jonathan Tasini, president of the NWU, says: "It is true that US publishers are trying to base the royalty for e-books on that for printed books, but the situation is very much in flux. There's evidence that publishers themselves are confused."</p><p>
Don Maass, president of the Association of Authors' Representatives, confirms that: "The five major publishing conglomerates offer an average of 15% of the consumer retail price: this is the model at the moment." However, he adds: "Feelings are running extremely high. The US authors and agents I have heard speak on this are very unhappy at the prevailing state of affairs."</p><p>
At least the majority of authors, except those working for flat fees, such as those, for example, in many children's information titles, have been saved one problem. Copyright is, on the whole, accepted as being the property of the author, and to be negotiated over; so, too, royalties.</p><p>
All the developments in the UK publishing world should be set against a background of considerable activity in related areas of the media. Over the past few years, media corporations have been falling over themselves to set up Websites and electronic versions of their publications. In the course of that, there has been a huge onslaught on copyright. Media conglomerates have been dispatching letters to freelance journalists (who retained their copyright through the 1988 Copyright, Designs and Patents Act), announcing that hereafter, all rights would be deemed to belong to the commissioner.</p><p>
After a campaign by freelances, particularly against the Guardian (recounted in Battling for Copyright, the NUJ, &pound;7.95), it began to be accepted that copyright should remain with the creator, with electronic re-use permitted by licence. However, a report carried out at the University of Amsterdam on "payment for electronic re-use of work", for the Dutch Association of Journalists, itemises behaviour of the publishing bodies in the UK, the US, Canada and many European countries. Such a body of work in respect of books would be extremely useful.</p><p>
Print on demand
Another area of concern for many authors is print-on-demand. There is, they feel, a danger that the publisher might maintain that the book is still in print, even if it is not promoted or sold, and the rights would never revert to the author. Andrew Rosenheim of Penguin does not think this is "a particularly fruitful argument. We can come to a common-sense view on what constitutes `in print'. There are advantages in a little-known book being available for a small but important audience. There are cases where an author will be happy with 150 copies a year being available on a print-on-demand basis, so that eager devotees can get his book. This situation far outstrips in frequency the scenario where the author regains the rights so that they can be sold on again."</p><p>
Taylor &amp; Francis has a similar perception. "We accept the author can request the reversion of rights. It would be commercial suicide not to, academics talk to each other. We are not interested in shackling authors," says Jeremy North. "But for most academics, to have their books available and accessible is better than having the absolute control of rights; though of course there must always be appropriate royalties."</p><p>
Overall, however, the general perception of the potential of e-publishing, and the commonly heard phrase, is that it is "early days". Andrew Rosenheim asserts that "it is a deeply unknown area as yet". It is an opinion that Mark Le Fanu shares: "However, we'd like to be helping to set the agenda rather than reacting to it." What the eventual outcome will be is very uncertain. As Jonathan Lloyd says: "Someone said to me, `There are four horses in the race, and I'm backing them all.'"</p><p>

Hilary Macaskill is a freelance journalist and joint-editor of the NUJ's BATTLING FOR COPYRIGHT.</p><p>