ROYALTY MANAGERS

A Fraught Relationship

In these columns I’ve profiled a number of publishing executive types and can proudly state that, except for occasional but readily healed squabbles, I have always enjoyed cordial relations with them. I wish I could say the same for my association with royalty managers but I’m afraid that for some time the appearance of my name on a callback memo was not cause for jubilation. I hasten to admit it was all my own fault, for I made a colossal pest of myself.

The reason was my incessant challenges to royalty accounting practices that left me baffled and frustrated. It was bad enough that they were utterly illogical, but in some cases I suspected they were fraudulent. I pushed hard for answers, and though I was warned not to bite the hand that fed my authors, I couldn’t rest until my inquiries were addressed. I’m proud to say that as a result of relentless prodding by me and my agent colleagues, almost all of the issues have been resolved. Statements today are far more transparent and comprehensible, and my relationships with royalty managers more congenial. That’s “far more transparent” with an asterisk, as we shall see.

The fundamental problem stemmed from the fact that print books are sold to stores on a consignment basis; that is, they are returnable for full or nearly full credit. This uncommon commercial practice goes back to the early and more civilized days of bookselling, when shop owners were more prudent about the books they ordered from publishers, and customers more discerning about their purchases, so that returns were modest. By the time I came into the business, however, return percentages had begun to climb, and by the end of the twentieth century they were out of control, in some cases as high as fifty or sixty percent thanks to the blockbuster mentality and the addictive overbuying habits of chain and big box stores.

What has this got to do with royalty accounting? Well, everything! The returnability of books posed a huge headache for publishers because some of the money they collected from stores had to be refunded when those stores returned unsold copies. Therefore, publishers held back royalties from authors until returns were finalized – years (and years and years) after publication.

You can easily grasp the potential for mischief in this system; publishers could withhold (the official term was “reserve”) a lot of royalties and withhold them for a long time if they were so inclined. Many of them were so inclined, and a few larcenously so. Authors and agents received royalty statements that in effect said “We sold this many copies and here is your money.” No mention of the calculations they used to arrive at the number. I likened the process to trying to telling you your batting average without telling you the number of at-bats or hits. Many publishers gave up trying to explain the inexplicable; if you didn’t know how many copies of a book were going to be returned, how could you know how much money it was safe to release to the author?

It took me a long time to figure out that that author royalties are not based on copies sold, but rather copies not returned. When we had a better understanding of how it worked, I and my fellow agents demanded more transparency. Thanks to this pressure, publishers began to explain to authors the formulas they used to release or withhold royalties. Most important, their formulas stipulated a final release date for all withheld royalties.

Perhaps you can now understand why my persona was not exactly grata in royalty departments. The good news is that the process is less stressful, and the players on both sides of the table less stressed. Release schedules for royalties are now expressly stated. Furthermore, because e-books are usually not returnable, publishers don’t withhold royalties on them at all. Unfortunately - and here’s that asterisk - print books are still sold on consignment, requiring royalty managers to don their green eye shades and perform calculations that could be performed by a schoolchild with pencil and paper if that odious practice were abandoned.

*****************

If you enjoyed this post, Restack it.

Richard Curtis’s latest book, Digital Inc., Inside the Transformation of Publishing from Print to E-Books, now on sale.