Between the extremes of what is offered by the publishing and record industries, it must surely be possible to arrive at an equitable contract? Trevor Dolby thinks it's time This bought me up short the other day: The dirty secret of the book business is that publishers have issued advances a guarantee against future royalties that is like a bond the way banks pumped out mortgage-backed securities and CDOs Collateralized dept obligations . They did it recklessly and with abandon, hardly doing any meaningful research. Author advances are the original no-doc mortgages. They base their lending decision on nothing more than a feeling that the author is good for the money. Advances are a bit like credit default swaps too in that they involve one party taking on outsized risk while the other party is protected both ways. With those advances, the publisher assumes all of the risk for the author. The publisher is leveraging the perceived future revenues with present cash flow. In the layers beneath the multi-million dollar advance, there are scores of these risk grenades they re certain to do ugly damage weighing down the book companies balance sheets. (Marion Maneker )
I remember years ago doing a deal with a big video company. They wanted to use the name and the content of a book called Making Love and turn it into an educational video, the book connection supposedly giving it some credibility. Anyway, there I was over at EMI's boardroom in Hammersmith. They explained that their deal with artists was simple. They paid them an advance and a dealer price royalty of anything from 20% to 25% and then all expenses , from studio fees to flowers, hotel rooms and cars, would be deducted before any royalties began to accrue. All these deductions, apparently, were defined in the contract.
They started quizzing me about how publishing author agreements worked. We pay them an advance and they receive a royalty based on the published price, I replied confidently. So who sets the published price? We do, the publisher. And the agent and author have no say? Well not much. There's kind of tacitly agreed price points which are really dictated by the retailers. By the retailers? Well sort of.
Their brows furrowed, but we moved on. So royalties accrue once your plant costs have been paid back? No they get royalties from copy one. Furrowed brow melted into big smile. What, so you carry all the plant cost? Yes, and the marketing costs. In fact everything, we carry all the costs. By this time they were giggling. So you pay them a non-returnable advance, pay royalties from copy one and pay all the expenses and plant costs? Yup!
Do you remember the Cadburys Smash aliens? You get the picture.
Later, still laughing, they slapped me on the back as I left having agreed a dealer price deal with a cap on expenses.
Please don t think that I m saying that the record industry's financial model was better than publishing s. Indeed, I think they were probably at opposite extremes. The music industry screwed their talent so much that when the technology changed and it all fell apart there were no allegiances anywhere. That said, what I do think in common with most of publishing is that the whole system of publishing advances is threadbare. It's like the Windows operating system: the programme has been stretched and overwritten so much it is cumbersome and worn out. The fact that it just about does the job is why it's still used.
So if we could get agreement around a table that this was the case, could we get accord of what new model we should replace it with?
Over the last few years, publishers have been carving out a better and more productive relationship with authors and their agents. I hope these troubled times will bring a new consensus. We will need a big character to bring the parties together, perhaps not exactly a Maynard Keynes but someone who understands art and finance and who is respected by all sides. We need to bring writers with us. We need to make agents our collaborators. We need to all come together in adversity.
It's time to become serious. Let us use these troubled times to create a legacy. Let us come out of this period with a new operating system that is unencumbered by the artifacts of centuries. Let us create a new remuneration model that in a hundred years time, no matter on what device we read, the Wikipedia of the day will say they used this watershed to transform the economics of publishing so that it survived and prospered.
Trevor Dolby is Publisher of Preface