One of my clients anxiously sent me a link to a recent Business Rusch post from Kristine Kathryn Rusch regarding royalty statements. "Is this something I need to worry about?"
Well, let me give some perspective from my end...
In some ways, yes, because e-book royalty reports are particularly susceptible to problems right now.
E-book sales may be somewhat more receptive to problems because
(a) the publishers are reliant on third party royalty reports which are of varying qualitfy. As an example, Amazon's Kindle platform for the general public won't as yet generate an author-sorted royalty report. Why should they, because it's for authors who are putting up their books so they're by that author. Well, not quite. We use this platform, other smaller agents and publishers use this platform. Lack of author sort means we have extra steps as we get more things on Kindle to sort everything by the correct author. Extra work means a temptation to shortcut. What kind of reports and sorts do they provide big publishers, who might have over 10,000 titles they need to properly allocate to the correct royalty account.
(b) the reports lack the audit trail of having physical copies go places. Everything is an electron. If you think it's tough to audit a publisher's records for print sales where they have physical books that can be tracked, imagine if a major publisher tries to audit Amazon's records. The amount of computer forensics that would need to be done is staggering.
(c) the business is still relatively new, and any time you have something new you have kinks to work out. As an example, the Penguin royalty reports and Harper royalty reports are designed to give each ISBN its own royalty statement page, and for the first several years of e-book sales each e-book format had its own ISBN, which meant five or seven pages reporting sales for different e-book formats. That's a staggering amount of paper being generated. Now they are doing "only" three e-book ISBNs instead of five or seven, but anything put into e-book prior to Fall 2009 will still have the several ISBNs assigned. Even for the more recent books, a title that might once have just had a one page royalty statement for a mass market paperback will still have that one page, plus three e-book pages, plus a summary page. Better than eight pages? Yes! Better than one page? Hell's bells no!!
So yes, we've found some major e-book reporting errors. One of our books was somehow assigned the same ISBN for one e-book format as a Dean Koontz book, and our author received credit for thousands of e-book sales that belonged to Dean Koontz. It took us multiple tries to get the problem corrected, to the point where we even asked the author "hey, we told them about this six months ago, they still haven't fixed it, they must be saying it's correct, so do you want to keep $5K of Dean Koontz's money, or having tried to fix this from the publisher side shall we now go and let the Dean Koontz people know about this." Our author was very ethical, and told us to inform the Koontz camp. In another instance, this same publishing conglomerate had two books with the same title by different authors and gave our authors e-book sales to the other book. We had to threaten an audit before they finally got down to brass tacks of looking at it. How did we notice this? Well, when you look at the royalty reports for a series of books and see e-book sales of 7K, 6K, 1K, 6K, and neither I nor the author are getting angry e-mails asking why there isn't an e-book of the third book in the series, you get to thinking maybe there is an e-book, maybe it too sold 6K, and you wonder where those copies are hiding.
At the same time, please keep in mind:
1. There have always been problems with royalty statements. Twice in my life with different publishers distributed by different publishing conglomerates, I noticed that there were no Canadian royalties being reported for two straight royalty periods. Once I will forgive, because maybe there's some lag in the big publisher getting the reports to its distribution clients. Two periods in a row, that's a problem. Or there are games being played with the reserve against returns. Or sub rights money that hasn't shown up. Or the royalty rates have been set up incorrectly.
2. As hard as it can be to find e-book problems because of the paper trail/audit trail issues, they can be found if you look carefully, no different than that it's hard to notice the Canadian money is missing because it isn't there to be noticed. You find that series of books where one book in the series has a number that doesn't belong with the others. You find numbers that don't seem to dovetail with the Kindle Store ranking you've been assiduously checking.
3. Sometimes there are innocent explanations for things that seem impossible. Real world examples, Barnes & Noble put a mixed Tanya Huff "Valor" book floor display into all of their stores last summer ahead of the hardcover release of Truth of Valor, and in Fall 2009 when Charlaine Harris had nine books at once on the NY Times bestseller list stores were taking in stunningly huge quantity of her books for the 2009 holiday season. I could go into stores that sticker books many many months into 2010 and still see large numbers of Charlaine Harris books from October 2009, I can go into B&N stores now that still have 2/3 of the Valor books they got for that special floor riser promotion last summer. Going back twenty years, the Scott Meredith agency represented The Stud by Jackie Collins, and almost like clockwork we'd get one statement when lots of copies went out tied to the release of one of her newer books, and then see negative or small numbers the next time out. So yes, you can have royalty statements that report sales less than your Bookscan number for that period, the first question you need to ask is whether that holds if you look at the full year of reports, instead of just the one six month period.
Some of the examples above were offsetting errors, and sometimes an error is made in the author's favor. That said, the errors do over time trend in the publisher's direction, kind of like how you play the slot machines long enough over time the casino will win.
The message to take from Kris' post isn't that the game has suddenly changed and authors must enter full-blown panic mode because authors are now being cheated like they've never been cheated before. The message to take is that you need to be very confident that you and your agent are looking carefully over your royalty statements. Your literary agent can get several hundred pages worth of royalty reports, some maybe even a few thousand pages or more. You don't want to assume even the best agent can look as closely at those as you can look at the few pages or few dozen that might belong to you.
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