Nightshade Books Unloading Contracts

Via a writers' mailing list I'm on, plus a bunch of blog posts, Nightshade books, a small SF/Fantasy press, has been having financial difficulties for a couple of years now. They've come up with a way to make enough money to pay their writers all the back royalties and late advance money they're due, which sounds like a good thing. Unfortunately, they're doing it by selling their fiction contracts to another small press called Skyhorse, and Skyhorse will require any writer who agrees to have their contract sold (the rights transferred) to sign a new contract, which gives them only 10% of net on paper book sales. Mike Stackpole explains why this is bad:

The agreement requires authors to accept a royalty rate of 10% of Net income. Net is defined as the amount of money the booksellers and distributors pay Skyhorse—usually 50% of cover price. For me this net amount is a 50% reduction in my royalty rate.

More importantly, net income is illusory. Let’s say that Skyhorse, in order to get more of my books into a store, offers a distributor or chain an extra 30% off, on the condition that they buy an extra dozen books. So, 36 copies of a $15 book pays Skyhorse $189, of which I make $18.90 as opposed to the $27 I’d make if all 36 had been sold at a normal price, or the $54 I’d make under the NSB contract. (Extra discounts for promotion happen all the time, and might even rope in my books to promote another author’s work.) Moreover, the accounting to make sure that all the right amounts were paid will be all but impossible without an audit.

Or as Phil Foglio, whose Girl Genius books are with Nighshade, says, "If I was a monkey, I’d be throwing this."

Skyhorse is also reducing e-book royalties from 50% to 25%. Someone in the comments to Mike's post pointed out that 25% of net is industry standard. My response is that 25% of net is a sucktastic standard that the big publishers have all colluded to offer their writers. 50% of net is on the high end of average for a small press. Nightshade's writers were getting a high-average royalty, and are now told they should be satisfied with half that, because after all, it's what the big New York publishers offer.

Just because my neighbor got ripped off by his car dealer doesn't mean I'd volunteer to double the payment I'm making to my own honest dealer.

Skyhorse also wants audio and second serial rights, which Nightshade didn't have, and they're not willing to pay anything in advance for them. That's right, they want two new sets of rights -- and audio in particular is picking up and has the potential to be very lucrative -- and they're not willing to advance a dime to the authors for these rights. Authors will have to wait for a 50/50 split on the back end.

Mike Stackpole again:

This can lead us to an interesting situation for which there is ample precedent in the publishing world. The publisher forms a sister corporation to handle audio book production and sales. They sell a property to the sister corporation for a tiny advance and pitiful royalty. The sister company makes the money actually selling the product, and yet the publisher can say that they’re following the letter of the contract because they’re splitting all income half and half. (Harlequin just had a lawsuit dismissed against them for doing a similar thing with ebooks.)

I’m not saying Skyhorse will do this, but someone who buys them out just might. And, it should be noted, that all digital publishing rights are already assigned, in the agreement, to a sister corporation called Start Publishing, LLC. (Start Publishing LLC is a subsidiary of Start Media, a privately held media company with interests in, among other things, feature film production.) Skyhorse and Smart are not buying books here, they’re buying Intellectual Properties, and at a bargain price.

[The Harlequin thing is a whole other issue, but yes, a court just ruled that subbing the rights to a related company for a pittance and then paying the author their percentage on that pittance, rather than on the cover price or what the actual vendor of the book pays, is perfectly legal, even if said subbing to a related company isn't mentioned in your contract anywhere. Check out whose contract you're signing, and be suspicious. As SF writer Charlie Stross said, "Contract law is essentially a defensive scorched-earth battleground where the constant question is, 'If my business partner was possessed by a brain-eating monster from beyond spacetime tomorrow, what is the worst thing they could do to me?'" Personally, I wouldn't touch Harlequin with a ten foot pole clutched in someone else's severed hand, for this and other attempts to mess over their writers going back decades.]

Read the rest of Stackpole's post. I don't always agree with him, but he explains in great detail why this deal is horrible, and I agree with him completely in this case.

And I see Stackpole just posted a follow-up, where he talks about the lack of numbers in what Nightshade has shared with their authors.

Contract lawyer Passive Guy comments on Mike Stackpole's posts:

Speaking generally, Michael’s essay describes a horror show of terrible contract provisions in publishing contracts.

What is worse, Skyhorse, the would-be new publisher, didn’t make up a lot of new contract clauses, it just used provisions that are common in the publishing contracts of many publishers, including most large ones.

Again, the fact that a contract clause is common, or even industry standard, doesn't mean it's good, or even tolerable.

On io9, Jeremy Lassen, Nightshade's Editor in Chief made a statement about the situation:

In looking for a buyer, our first priority was to find someone who would make sure all of our authors got paid in full. That was my first priority. I have always promised that while we might be late, authors would eventually get all the money that was due to them. Our second priority was to find buyers who could do justice to the diverse and talented stable of writers that we have at Night Shade. And we wanted someone who would ensure that books under contract would come out and be sold and promoted well, and that books already out would continue to be sold and promoted.

...

Let me be clear. Under the terms of this deal, all current and back royalties will be paid at the originally contracted rate. All outstanding advances and sub-rights monies owed will be paid at the originally contracted rate.

Let me also be clear… the buyers need a certain amount of the authors to sign off on the deal, or the deal doesn’t happen. I can’t say exactly what will happen if the deal doesn’t go through, but if it doesn’t, there will long period of uncertainty, for Night Shade, and for our authors.

...

This deal is the last chance I have to keep my promise. This is the last chance I have to make sure that ALL OF MY AUTHORS GET PAID ALL OF THE MONEY THEY ARE OWED. Right now the deal is in the hands of the individual authors, and their agents. I am asking you. Please. Sign off on this deal. Help me make sure all my authors get paid.

Note that if enough authors don't sign off on the deal, Skyhorse will back off and the company -- and all its book contracts -- will most likely end up in bankruptcy court. That's not good for anyone; best case scenario is that the rights are tied up for months while the mess is sorted out. It could be years. It could be forever. And even if someone buys the contracts (or some subset of the contracts) there's no guarantee that the new publisher will be any good at the business, or will have any interest in treating the writers well.

I'm willing to give Lassen the benefit of the doubt and assume that he honestly believes this is best for everyone. His goal is to make sure that all the writers are paid the money they're currently owed, which also gets him and his company out of debt and lets him walk away knowing he did right by everyone. Okay, it's clear why he'd want that.

But for the writers, it's not that simple. All right, it's good that they'll get paid money they're currently owed. Even SFWA thinks this is a good thing -- they've recommended that their members who are caught up in this sign off on the deal. But as Stackpole points out, getting a stack of cash (of whatever size) right now is only part of the situation, and not necessarily the largest part. Is it worth it to get money you're owed now, if it means getting (best case) a fraction of what you expected to make on future sales of these books? Forever, because this new deal is a life-of-copyright contract with easily weaseled reversion language. (See Stackpole's analysis for a discussion of that.)

I suppose if a writer is owed a lot of money on a completed series or a bunch of stand-alone books, and is in dire financial trouble and needs that cash now, this looks like a good deal. And it might even be a good deal, for that writer. But if you're a writer like Stackpole or Foglio, who each has an in-progress series published through Nightshade, this deal could slash your income, or if things go really wrong, prevent you from continuing your series.

Foglio says, "So what’s going to happen? Don’t know. unlike many authors, I actually have an entertainment lawyer look over our contracts before we sign them, so I’m hoping we’re covered, but this is by no means a given."

For anyone who didn't have an entertainment lawyer look over their contract, or for anyone whose contract still has gotchas in it, no matter who went over it before signing, this is a coin toss. If enough writers balk at signing on and the deal falls through, everyone's contracts end up in bankruptcy court and that could be very bad for everyone. But there are writers whose best interests are definitely not served by signing. Unfortunately this means that the writers who shouldn't sign are going to be feeling some pressure not only from Lassen, but also from the other writers whose situations require that the deal go through. No one's told the writers how many of them have to sign on to satisfy Skyhorse, so everyone's guessing and no one knows how many might be enough.

Unless Darkhorse gets a White Knight offer like Triskelion did in 2007, this is pretty much guaranteed to be bad for at least some people, maybe a lot, and quite possibly everyone. And at this point, I doubt anyone's going to step in and make Darkhorse an offer anywhere near the one Triskelion got, since it hasn't happened yet in the years that they've been in trouble.

Whatever happens, I hope as many writers as possible come out of it in decent shape and with their book rights and their on-going income intact. For the rest of us, we can be damn careful whom we sign with, do our due diligence before we sign, and keep in mind Stross's comment about contract law.

Angie

ETA: Comments closed because of ridiculous amounts of spam.