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June 2015
A Message from Kristin Nelson

AAR Panel Recap: Are Subscription Services Good for Authors?

Kristin Nelson

On Wednesday, May 20, I was delighted to be in town for one of the Association of Authors’ Representatives‘ (AAR) monthly educational meetings, which are designed specifically for literary agents. Such a rare treat, since I’m not based in New York. May’s topic was subscription services (i.e. Scribd and Oyster) and whether such programs were good for authors.

I’m going to go out on a limb here and say yes, I do think subscription services are okay for authors—although I’m going to stop short of calling them “good” since these services are still too new, so the verdict is still out. I’ll tell you why, but first let me sum up the evening.

On the panel were four gentleman: Brian Murray (CEO of HarperCollins), Andrew Weinstein (Scribd), Mathew Shatz (Oyster), and Marc Ribot (Content Creators Coalition – Music Industry).

The panel tackled how the model works and why HarperCollins decided to come on board and make their catalog available in these services. And the reason? Because both Scribd and Oyster are paying a full book sale royalty to the Publisher (and then the Publisher pays the author his/her percentage) if a customer reads 20% or more of the actual book via the subscriber platform.

All of this info has already been covered in multiple Publishers Weekly and Publishers Lunch articles, so in essence, the evening didn’t necessarily present new information. Not to mention, since Oyster and Scribd are competitors, neither representative could be completely candid because of proprietary business practices. That, understandably, is going to limit the discussion.

Although I’m not sure the evening actually answered the question posed in the program heading, I did learn two valuable new things:

1) As Marc Ribot noted, this was not how subscriber services worked in the music industry, and had such a royalty set-up existed for this industry, things would be a lot different/better for musicians.

2) Neither Scribd or Oyster is designed for new, frontlist titles. If a new release was featured on the platforms, their systems would be overwhelmed by subscribers’ demands for the new release, and their budgets would be overwhelmed by their agreements to pay out full royalties.

The strength of the platforms is improving the discoverability of a backlist title (defined as having been published and out in the world for at least six months). In other words, demand for the title has leveled off, yet the title could still be discovered by a subscriber at no risk (as they pay a monthly flat fee for all-they-can-read).

That nugget of information finally made subscriber services and their value for authors click for me (along with Scribd addressing the issue of piracy via a robust spider-bot system that searches for illegally uploaded content).

For authors with a long career and extensive library of titles, this is just one more way to reach a reader—and get paid a full royalty, even if the reader does not finish the book.

Pub Rants University

Royalty Statements Auditing Workshop – 2015-07-30

Thursday, July 30 at 6:00 PM - 8:30 PM MT

Chances are, your agent is not auditing your royalty statements. And chances are, accounting mistakes are being made. So if you’re not auditing your royalty statements, you could be missing out on significant income!

Class Limit: 20

Requirement: Although primarily intended as an intensive presentation, attendees wishing to speak during the Webinar must use a phone for audio to call in and actively participate.

What You’ll Learn:

In this Webinar, Nelson Literary Agency’s contracts and royalties manager, Angie Hodapp, will walk you through the basics of royalties reporting and teach you how to read and audit your own royalty statements. Using statements from several big and mid-sized publishers as examples, Angie will explain how various publishers express returns, reserves, royalty-rate escalators, subrights income, bonus income, and more, and illustrate how everything adds up to affect your bottom line.

Finally, Angie will walk you through how to set up an Excel spreadsheet you can use each reporting period to track cumulative units sold and total earnings for each book you’ve had published. This valuable tool will also help you track your payments and find accounting errors!

Extras:

  • Attendees are welcome to ask questions during the presentation.
  • Attendees will have access to the recorded video of the presentation for six months.

Even if you are not yet published or receiving royalty statements, this Webinar will present valuable information about the inner workings of the publishing industry’s numbers game. Join us!

Register Now

eSpecial Price

99¢ June 3 - at least June 19

           
Recent News
Think Like an Agent

Article 5: Good Agents Audit Royalty Statements

By

Over the last decade, I really wish I had tracked how much money NLA has recovered by carefully auditing our royalty statements every accounting period. Because of some big errors found a couple of years ago, it’s probably to the tune of over $600,000 recovered at this point, and it wouldn’t surprise me if that total was actually more. Even now, nary an accounting period goes by that we don’t recover at least $500 to $3,000 owed to a client.

On rare occasions, we have even found errors in the Publisher’s favor—and yes, we do notify them to highlight the correction. Luckily, those have only amounted to several hundred dollars at any given time. And to be clear, Publishers aren’t being nefarious or deliberately cheating the author (with the exception of a few publishers, which will remain unnamed).

Most errors we catch are human errors. In other words, the Publisher’s in-house royalty management staff simply keyed incorrect information into their accounting system. Also, “accounting departments” at some mid-sized publishers and small presses are staffed by English majors. Mistakes will be made.

These mistakes need to be found and corrected and the monies paid to the author client. Here is the jaw-dropping fact: A good percentage of agents do not audit their clients’ royalty statements.

Let me repeat that. Even though authors hire literary agents to guide their careers and most importantly, manage their business publishing interests (royalties being a huge component of this), many agents do not actively audit or even read client royalty statements. This leaves authors to fend for themselves regarding reading and understanding their statements.

So for me, good literary agents audit royalty statements. When I was newer to this business, I did the time-consuming auditing and analysis myself, every accounting period, and shared my comments with my client. Every accounting period. I even hired a professional book royalty auditor to mentor and read behind me to assess my competence and capability. Then I hired and trained our amazing Contracts & Royalties Manager Angie Hodapp to handle this at NLA.

And Angie took it to a level that leaves me in awe every accounting period. I imagine our clients are often in awe as well when every six months, she sends a detailed letter with my comments as well as her analysis of the statement and what questions we had to track down and if extra monies are owed.

A lot of the larger agencies will have staff in-house to handle this (or I hope they do….I don’t actually know as I’ve not worked in a big agency), but I’m willing to guess that most of the smaller, boutique agencies don’t. This means that the author relies on his/her agent to analyze the statements.

So ask yourself. Is your agent doing this? If you don’t know, ask. It’s part of the agenting job. Recently, Angie has been giving workshops at local writing conferences to teach authors how to audit their own royalty statements. Even if your agent does this on your behalf, it’s not a bad idea to also be checking them. Human errors can happen on our end as well!

So with her permission, and worth its weight in gold, a handy list.

How to Audit Your Own Royalty Statements by Angie Hodapp

Keep an excel spreadsheet for each title, and add the following when each statement arrives:

Track copies sold and royalty rates applied to each edition. Do the percentages match the contract?

If you have a royalty escalator, make sure you’re watching units sold so you can see if the escalator is triggered at the right time.

Track royalty earnings for each edition. Add them all up and subtract them from the advance. Make sure your math matches the math on the statement.

Check for continuity from the last statement’s bottom line (ending balance) to the current statement’s starting balance.

If the royalty is based on net receipts, then make sure the net amount received by Publisher is reported on the statement, along with number of copies sold. Do the division. How much is the publisher claiming to have received for each unit? Is it a reasonable amount based on the retail price?

Look at the number of copies reported sold as “high discount” or “over discount” or “special sales.” Publishers love to sell most copies under these terms, which means smaller royalties for you. Make sure your contract limits the number of copies publishers can sell under these terms!

Watch reserves. Your contract should specify how much the publisher can hold in reserves, and for how many accounting periods after initial publication. You can ask the publisher to release reserves once returns taper off. That’s more money passing through to you, or applying toward your advance.

Watch returns. Publishers adjust reserves up and down from period to period based on actual and projected returns.

• Watch subrights licenses. Know the terms of all subrights deals, which may include audio, large print, book club (either a stock-buy or a special printing), or other special editions.

Watch and track foreign right deals. If your publisher holds world rights and is actively selling your work into foreign territories, ask them each accounting period to give you:

—Details of any new foreign-rights deals, including: advance, royalties split, term of license, publication date or planned publication date, and reporting schedule. (Note that most, but not all, foreign publishers report annually, not bi-annually.)

—Copies of the licensing agreements. Even if they’re in languages you don’t understand, it’s within your best interests to have such things in your physical records.

—Note that foreign monies can take from a year to 18 months to pass through the publisher’s subrights department and show up on your statements.

If you want a more in-depth royalty statement auditing experience, join Angie for her upcoming Royalty Statements Auditing Workshop, scheduled for July 30, 2015.  This Webinar is open to the first twenty attendees to sign up.

*********

The genesis: In January 2015, Backspace co-founder Karen Dionne and I had a conversation in which she mentioned that writers sometimes want representation so badly they are willing to sign with an average or even a below-average agent. Trust me, not all agents are equal. I replied, “Well, writers don’t know what they don’t know.”

In that moment, a lightbulb went on for both of us. Writers don’t know what a good agent does. How could you if (1) you’ve never experienced it and (2) you’ve only ever had one agent and no way to assess just how strong he or she might be at the job?

Thus, this series of articles was born.

Kristin's Book Club

First time for Book Club: Reading A Collection of Essays

Even though our Sunday Book Club has been together for 17+ years (OMG! How can that be?), I don’t think we’ve ever tackled a collection of essays. I have to go back through hundreds of titles to verify, though. So I’m psyched that this is our next pick. Although I have heard mixed responses to this book, for me, those are the best. If the book is causing discussion and strong feelings, that usually means there’s a kernel of truth at its core.

Still, I haven’t started reading yet so I’ll reserve judgement until after I dig in!

From the Publisher’s jacket copy:

A collection of essays spanning politics, criticism, and feminism from one of the most-watched young cultural observers of her generation, Roxane Gay.

Pink is my favorite color. I used to say my favorite color was black to be cool, but it is pink—all shades of pink. If I have an accessory, it is probably pink. I read Vogue, and I’m not doing it ironically, though it might seem that way. I once live-tweeted the September issue.”

In these funny and insightful essays, Roxane Gay takes us through the journey of her evolution as a woman (Sweet Valley High) of color (The Help) while also taking readers on a ride through culture of the last few years (Girls, Django in Chains) and commenting on the state of feminism today (abortion, Chris Brown). The portrait that emerges is not only one of an incredibly insightful woman continually growing to understand herself and our society, but also one of our culture.

Bad Feminist is a sharp, funny, and spot-on look at the ways in which the culture we consume becomes who we are, and an inspiring call-to-arms of all the ways we still need to do better.

Guest Article

Royalty Statements: Authors – Are You Auditing Yours?

Karen Dionne

Karen Dionne is an internationally published thriller author, co-founder of the online writers discussion forum Backspace, and organizer of the Salt Cay Writers Retreat and the Neverending Online Backspace Writers Conference.

After I read Kristin’s June article in her “What Makes a Good Agent” series and learned that publishers’ royalty statements sometimes contain significant errors, I took an informal survey. I wanted to know how many of my author friends’ agents audit their statements, and how many of these authors also audit their own.

The authors are split between midlist authors and bestsellers. Almost all said they read their royalty statements carefully. But nearly half don’t audit their statements—mainly because they don’t know how.

Two of the 15 authors were reasonably certain their agents audited their royalty statements before sending them on, while only 3 of the 15 reported their agent took the initiative to help them understand them—suggesting this is a conversation agents and authors should be having more frequently.

Here are the questions and results:

  1. Does your agent actively audit royalty statements?

YES – 2

I THINK SO – 5

NO – 8

 

  1. Do you audit and/or read your own statements?

YES – 6

READ ONLY – 7

NO – 2

 

  1. Do you know how?

YES – 6

SOMEWHAT – 3

NO – 6

 

  1. Has your agent ever walked you through a statement?

YES – 3

ON REQUEST – 2

NO – 10

Royalty statements are difficult to understand. Some of the authors who responded admit they “never learned how to read a royalty statement,”or they “read them, but have a hard time understanding what everything means.”

One author I surveyed believes auditing is the agent’s responsibility. “I don’t audit. That’s her job. If I had to, I’d get an accountant to do it. But I figure that’s why I have an agent. She would walk me through it if I wanted, but that’s one less piece of business I have to do.”

Others take a more active role. “I read my statements multiple times. First, just to review them and make sure everything looks right and complete. Then I go through them page by page and compare to the last statement to see if there is something wonky (good or bad), then I write up a memo to my agent with any questions or concerns, or if there is something odd. We then discuss.”

“I noticed in my last statement, there were line items for Returns for a couple of books that had been released years ago. That seemed illogical, so I asked my agent, and she passed the question on to my editor. Also, I know that a number of my books have been released as audio books as much as a year ago, but I have seen no accounting for sales of those. So I asked my agent, and she asked my editor. Nobody has explained it yet, but I have done payment estimates based on the statements, and our calculations match.” Not surprisingly, this last author adds, “Not only do I know how to read the statements, friends often ask me to interpret theirs.”

Sometimes authors who audit their statements find mistakes. “I once found a $700.00 error on my royalty statement from my publisher that I noticed after scouring the numbers. My publisher apologized and said it was obviously an error and quickly corrected it, but would he have noticed if I hadn’t looked carefully?”

“For two consecutive royalty periods, I had statements passed on to me from a publisher that had gone through the agency’s business department and past my agent that had a glaring error on the first page. Each time, it amounted to an error in my favor of mid four figures. One year the amount totaled approximately $11,000. This was not something anyone should have missed, and certainly not twice. The agent/agency did not catch the error, even after it happened the first time. I did, both times.”

“It’s important for authors to know that even if you have a representative you trust, nothing replaces arming yourself with all the knowledge you can,” my author friend Lauren Baratz-Logsted wisely says, who not coincidentally, zealously reads and audits her royalty statements. Thanks to Kristin’s article and her contract manager’s generous how-to, I’ll be doing the same.

She is represented by Jeff Kleinman of Folio Literary Management. This panel discussion along with the full Backspace Writers Conference video archives are available exclusively to Backspace subscribers and online conference registrants. 

New Releases

Rebel Mechanics: All is Fair in Love and Revolution

by Shanna Swendson

A sixteen-year-old governess becomes a spy in this alternative U.S. history where the British control with magic and the colonists rebel by inventing.  It is a steampunk fantasy for young adults of all ages.

It’s 1888, and seventeen-year-old Verity Newton lands a job in New York as a governess to a wealthy leading family–but she quickly learns that the family has big secrets. Magisters have always ruled the colonies, but now an underground society of mechanics and engineers are developing non-magical sources of power via steam engines that they hope will help them gain freedom from British rule.

The family Verity works for is magister–but it seems like the children’s young guardian uncle is sympathetic to the rebel cause. As Verity falls for a charming rebel inventor and agrees to become a spy, she also becomes more and more enmeshed in the magister family’s life. She soon realizes she’s uniquely positioned to advance the cause–but to do so, she’ll have to reveal her own dangerous secret.

Buy It Here:

       

The Forever Watch

by David Ramirez

Now available in trade paperback.

All that is left of humanity is on a thousand-year journey to a new planet aboard one ship, The Noah, which is also carrying a dangerous serial killer…

As a City Planner on the Noah, Hana Dempsey is a gifted psychic, economist, hacker and bureaucrat and is considered “mission critical.” She is non-replaceable, important, essential, but after serving her mandatory Breeding Duty, her life loses purpose as she privately mourns the child she will never be permitted to know.

When Policeman Leonard Barrens enlists her and her hacking skills in the unofficial investigation of his mentor’s violent death, Dempsey finds herself increasingly captivated by both the case and Barrens himself. According to Information Security, the missing man has simply “Retired,” nothing unusual. Together they follow the trail left by the mutilated remains. Their investigation takes them through lost dataspaces and deep into the uninhabited regions of the ship, where they discover that the answer may not be as simple as a serial killer after all.

Buy It Here:

       
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