Agents: 'scrap high discount clauses'

Agents: 'scrap high discount clauses'

Leading authors' representatives have called for high discount clauses in publishing contracts to be scrapped in favour of "a whole new system" of royalties, with some publishers saying they would support a shift to a net receipts system.

High discount clauses see authors receive a diminished proportion of the headline royalty and kick in typically when a level of 50%–60% discount has been agreed with the retailer. Agents say that due to increased pressure from retailers, high discount rate now covers the majority of sales, squeezing authors' incomes.

Peters, Fraser & Dunlop c.e.o. Caroline Michel said: "I think it is time for a whole new model. We can see what's happening with Amazon and on the high street, and also the upside of digital. If publishers are going to insist on [a royalty rate of] 25% for digital in a growing market, they can't expect to pay authors less and less on the print side. It's not fair to increasingly put higher discounts on books so royalties are lower and lower, and at the same time insist on a set royalty in a growing market."

The Society of Authors supported the call for change, with general secretary Nicola Solomon saying: "We are completely against high discount clauses. In this world [of more common high discounts] it isn't something that should exist. It certainly has a huge impact on authors' incomes." 

SoA deputy secretary general Kate Pool added: "The royalty that will be generated on the majority of sales is not the same as the one trumpeted as the headline royalty by publishers. I understand discounts are often dictated by retailers, and so the squeeze goes through the system, but at least I would ask for [publishers] to be clear as to the royalty that will be most widely paid, otherwise it feels like sleight of hand."

Agent Peter Cox said he would prefer royalties to be calculated as a percentage of net receipts. He said: "The balance has changed. The high discount clause now covers more sales than it was intended to." Another leading London agent, who would not be named, also supported net receipts, saying talk of just amending the high discount clause was "like rearranging furniture on the 'Titanic'," as "there has been such a seismic shift in the business".

However, Pan Macmillan m.d. Anthony Forbes Watson said now was not the time to negotiate a new royalty structure. He said: "The future shape of the industry remains unclear and is presently in turmoil, and that is the worst time to negotiate a new terms structure. When such things are negotiated in haste, the benefits of such changes are uneven and the weaker get a bad deal. Much better to wait until the industry is in a more stable situation."

Atlantic c.e.o. and publisher Toby Mundy said: "My view is that it is tough for authors at the moment, it is tough for publishers too. We have to operate a fully tooled-up manufacturing business along with a digital business, at a time when print runs are falling. So in order to protect our gross margins, I can't see any case for a wholesale revision of structure of terms. But I can see a case for a more transparent structure based on receipts—not cover price, but what is actually received."  

Bloomsbury executive director Richard Charkin said: "The problems are ones which could be solved by wholesale adoption of a net receipts regime."