Trade publishers contacted by the Society of Authors over the issue of e-book lending are using a disparate mix of contracts and models of payment for author royalties on digital loans, with the SoA writing to publishers Random House and Bloomsbury to challenge them over their "incorrect" accounting methods.
The Society of Authors yesterday [11th June] warned that authors may be losing out twice over on e-book loans, stating that some publishers may be mistakenly underpaying authors on library loans of e-books by treating receipts as sales rather than licences. Authors also do not currently receive a PLR payment on digital loans. In its findings, the SoA said it was "increasingly concerned that the rhetoric of publishers (and sometimes government) about renumeration for authors from e-lending is not matched by practice".
If a publisher works with an aggregator to distribute e-books to libraries for loaning, they must grant a subsidiary licence to the aggregator. This entitles the author to receive a different royalty rate; typically 50% of net receipts, according to the SoA.
The Society of Authors contacted around 50 trade publishers to request example e-book lending contracts, with some responding that they pay the same net receipts percentage on sales and licences. Others responded to say that they did not use aggregators, such as Overdrive, for library loans or have not yet finalised models for payment. Others have not yet replied.
However, both Bloomsbury and Random House responded saying that they treat e-books lent through libraries as sales, prompting the SoA to send letters to both publishers. Solomon wrote to Random House c.e.o. Gail Rebuck and Bloomsbury executive director Richard Charkin yesterday, calling for future publishing contracts to state clearly what rights were being granted and what rate was to be applied to licences for e-book lending, and that any models for e-lending should renumerate authors per loan as well as for the initial licensing of the e-book. Both letters state: "With respect, it seems to me that it is incorrect to categorise as sales your arrangements with Overdrive and other aggregators for library lending." In the letter Solomon asks the two publishers to "check all payments which have been made to authors ensuring that they have been remunerated at the correct rate (i.e. the rate payable on a subsidiary licence) and reimbursing them in full, with interest, if any royalty rates have been applied incorrectly".
Bloomsbury's Charkin declined to comment, as did Random House.
In its report the SoA pointed to OverDrive’s submission to the Sieghart review that in the ten months to November 2012 it made 576,125 loans of ebooks through British libraries, contending that its members could not see how these loans were being accounted for in their royalty statements: "The feedback we are receiving from our members (in all genres) is that they are finding it difficult to identify any income from that source in their royalty statements."
However, Solomon said her correspondence over contracts with publishers was “a very small part and possibly a time limited part of an overall much bigger picture of working together”.
She said: "I do not wish to single out particular publishers, particularly not Bloomsbury and Random, who were quick and helpful in giving responses, nor to focus just on one aspect. The Society prepared the paper showing how authors are currently paid for e-book lending to inform the current debates around ebook lending. The findings show that current models are unsatisfactory and do not sufficiently remunerate authors."
She added: "The Society of Authors is committed to working together with Government, publishers, libraries and booksellers to develop models for ebook lending and other digital exploitation which sufficiently reward all parties, including authors. The Society very much welcomes the pilots being set up as part of the Sieghart review as part of this process."
Solomon described the possible underpayments by publishers as "one aspect of a much larger problem . . . I think it is really important that authors and publishers work together to get models that work for everyone . . . It's important that authors have a voice. It may be that nobody had the whole picture in the past, and we wanted to show that authors are losing money from all sources.”
Meanwhile, Library Campaign chair Laura Swaffield called on publishers to "sort themselves out" over the issue of e-lending, and said she hoped the pilot schemes that will follow this spring's Sieghart Review will tackle the problem of royalties. She said: "There are a lot of thorny problems to overcome with e-lending . . . The Sieghart Review is a good start. I hope some of the pilots at the end of the year will tackle issues like this." She added: "Sieghart has said 'let's do this, and let's do that', but nobody has got the publishers to sign up to it and agree to it, and that is the problem."
The Sieghart Review, the government-commissioned report into library e-lending, was published at the end of March.
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