The Society of Authors has ignited a public row with publishers over e-book lending terms, after releasing a report saying some were underpaying their authors and accusing two publishers specifically of “incorrectly” accounting for the loans as sales. In response, the Publishers Association said the SoA’s public statements risked a return to “megaphone diplomacy”.
The SoA’s report, released on Tuesday [11th June], warned that authors may be doubly losing out over e-book loans since they do not receive Public Lending Right and stating that some publishers were treating e-book loans as sales rather than as licences. SoA chief executive Nicola Solomon had written to around 50 trade publishers requesting examples of e-book lending contracts. Of the publishers who replied, some declared they were yet to finalise models for payments, and others said they pay the same net receipts percentage on sales and licences.
Bloomsbury and Random House both said they treated e-books lent through libraries as sales, and Solomon made public her letters sent to the two publishers in response. 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”. The SoA also called 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 remunerate authors per loan as well as for the “sale” of the e-book.
The two publishers declined to comment, but the PA questioned the society’s decision to make public the letters. PA c.e.o. Richard Mollet said: “Following the Sieghart Review into e-lending which reported this February, it had been hoped that the period of megaphone diplomacy and policy by press release was behind us.” He added: “The expectation should surely always be that unless specifically agreed by both parties, letters do not find their way to the public domain.” [see full PA response, below].
However, Solomon responded to the criticism by stressing the aim was to “inform the debate around digital payments and library lending”. She said: “I have not breached any confidentiality. No publishers wrote to me on a confidential basis but I did not in any event release their letters, only my own responses . . . the Society of Authors exists to protect the rights and further the interests of authors. It does that in every way possible including talking to publishers, lobbying the government and, most important, informing its members. I am sorry that the PA should be commenting on our methods. The important point is that the whole industry should work together to face the challenges and maximise the opportunities of the new digital world.”
The SoA’s analysis has received strong support from the Association of Authors’ Agents, with president Peter Straus saying it would be discussed by AAA members. Committee member Gordon Wise said agents were “very concerned” about the “lack of transparency of how licensing and royalty payments overall are handled”. Curtis Brown agent Wise said it was an issue that extended beyond e-book lending, since all e-book royalties were “lumped together as one line” in royalty statements, making it unclear as to how publishers have interpreted the contracts. He said: “When e-book charges were negotiated, I think we weren’t entirely clear as to when an e-book sale was a sale or when it was a licence. There’s a catch-up process going on.” He added: “It’s not finger pointing; I think everyone needs to come clean and be honest about how they are interpreting e-book clauses . . . There needs to be some consensus.”
Alexander Ross, partner at media law firm Wiggin, said the music industry had been faced with a similar issue when iTunes first arrived, with the “cannier” artists and managers arguing that the tracks should be treated as being licensed to iTunes, and so subject to a higher royalty fee, rather than considered a sale. However, the record labels had protested, knowing it could have resulted in “very large royalty payments”. Instead, he said: “They very quickly arrived at a new formula. They invented a new system which was based on the sale royalty under the old system but with suitable variations”, to handle the digital files. He said: “It is down to what is actually agreed. Publishers should come up with their own way of doing that and make it clear. It is making a decision and saying that is how we will treat it.”
The PA's response, from chief executive Richard Mollet:
“As a trade body the Publishers Association is rightly precluded from offering opinions on the commercial details of publisher members’ contracts or the terms on which they remunerate authors. So the details of the issue which the Society of Authors have raised in its publicised correspondence must remain the preserve of conversations with publishers. However, I can hopefully proffer the following observations without falling foul of competition law.
Following the Sieghart Review into e-lending which reported this February, it had been hoped that the period of megaphone diplomacy and policy by press release was behind us. Sieghart pointed towards a period of considered conversation when it came to driving towards e-lending solutions. Following the report we have begun along that road, with successful exploratory meetings held between publishers, libraries and the Society of Authors (and of course the anti-trust legal team present). I sincerely hope that we are not, already, seeing a reversion to the previous method of communicating views.
When member companies correspond with anyone, it is generally to be expected that this correspondence remain confidential. The expectation should surely always be that unless specifically agreed by both parties, letters do not find their way into the public domain. In a week in which yet again the privacy of personal data has made global headlines it is ironic that two publisher members find themselves at the centre of this sort of treatment.
The PA and its member companies will continue to engage in debate, dialogue and discussion with all parties as to the best means to ensure e-lending becomes a widespread reality. The sustainability and fairness for authors, libraries, bookshops aggregators and—yes publishers too—will be the central focus of these conversations.
One thing seems clear; if solutions are to be found they are more likely to emerge in an atmosphere of mutual trust, not in one where we are fearful of leaks and spin.”
Richard Mollet is chief executive of the Publishers Association.
To read 'PA responds to Society of Authors' report', click here.