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A blog wherein a literary agent will sometimes discuss his business, sometimes discuss the movies he sees, the tennis he watches, or the world around him. In which he will often wish he could say more, but will be obliged by business necessity and basic politeness and simple civility to hold his tongue. Rankings are done on a scale of one to five Slithy Toads, where a 0 is a complete waste of time, a 2 is a completely innocuous way to spend your time, and a 4 is intended as a geas compelling you to make the time.

Thursday, April 4, 2013

The Night Shade Writers of America

Usually I try and refrain from posts that will ruffle too many feathers, but I can't tell everyone else we should be talking about the dissolution of Night Shade in public and then not do so myself.

For those of you who don't know, Night Shade Books is a highly regarded -- well, artistically highly regarded -- publishing company specializing in sf, fantasy and horror.  It has published many excellent authors, with beautifully packaged books, published with great love.  It was a company that I wanted to be in business with very, very much.

Unfortunately, the company was poorly run. In 2010, this became public knowledge.  There were issues with late royalties, and with e-books being published by Night Shade when their contracts did not give them e-book rights.  We were aware of those issues already, and we had stopped submitting to Night Shade.  It wasn't just that they were so often late, but that we never felt entirely comfortable with the excuses or forthrightness of the people who ran the company.  But we hadn't gone public.  Authors don't like to admit they aren't being paid, and what high-powered literary agency talks about not being paid?  You wonder: Do they just not want to pay us?  We don't have the clout and everyone else is getting paid?  

In fits and starts over the past few years Night Shade would occasionally make some payments and seem to be making progress, but never went a few royalty periods in a row without having problems.

And now, Night Shade has sent out a letter, the opening paragraphs of which can be found here.  They can't continue as a going concern.  Saviors have been found in Skyhorse Publishing and Start Publishing LLC.  Not to actually purchase the company, but to maybe buy assets if enough people agree to sell them.

So the first thing to notice is that the letter starts with a sentence that, um, nightshades the truth:  "Night Shade Books has had a difficult time after the demise of Borders."

Let's be clear.  For all the artistic contributions Night Shade has made to sf literature, it's had problems paying royalties that go back five years.  For those five years, they have repeatedly promised better things, adding new staff or new systems.  I can't call this opening sentence a lie, because Night Shade has certainly had a difficult time after the demise of Borders.  But since Night Shade's authors have have problems with royalties that long predate the final days of Borders, it is disingenuous.

Even though the e-mail which sent me this letter and the letter itself don't contain any confidentiality language, everyone is acting like it's a secret.  They shouldn't, and these are highlights of the terms and conditions (Scribd is hosting a copy of the letter.):

Your print royalty will become 10% of net proceeds.  This means an effective royalty rate that is likely at or a little under 5% of cover price.  This is not an unusual royalty rate for publishers outside of the orbit of the major NYC publishing companies.  But it is for many Night Shade authors half or less the royalty rate on their current contracts.  It is also an across-the-board rate for all formats.  All publishers usually offer higher royalties on hardcovers than paperbacks.  I can't imagine there are many Night Shade authors that are better off with this royalty rate.  Most are worse off; how much worse depends on publication formats and specific details of current contracts.  Skyhorse handles your print books.

If Night Shade has e-book rights (for some books, it does not), those go to Start Publishing.  The royalty rate is given as the current industry standard of 25% of net receipts.  I am told but have no first-hand knowledge that some Night Shade contracts had offered more.  I'll go off the agent's reservation here, and say no one can complain about this provision by itself.  Authors and agents have often insisted on having re-visit provisions if e-book royalties go up, and if here someone has to reduce a royalty that is above the current industry standard, how upset should you be?

Regardless of what your contract currently says, you have to give Skyhorse and Start the audio rights and second serial rights to your Night Shade book, unless you have sold or are about to sell those rights yourself.  This is significant, because these rights have value.  Even if the underlying print book is caught up in a bankruptcy proceeding, these rights may still have value.  Any author who gives up these rights has to weigh that value against the value of royalties to be paid when signing this letter, and that has to be part of the overall evaluation of the proposed assignment.  The meaning of audio rights is very clear, but I'm not clear if "second serial" is intended to include only "serial" rights as narrowly defined, selling to magazines, or related rights, like selling an excerpt from your novel or a short story from your collection to an anthology or for use on a reading comprehension test.  Without knowing that, it's hard to say if a client with a short story collection is giving up a lot or a little in potential future revenue. Revenue from these relinquished rights would be split 50/50.  The standard practice is that the author's share will be applied against any unearned advances, and because of the lower royalty rates, your advance will earn out more slowly.

If you agree to this, and if enough other authors agree to this, you get paid your current royalties owed. Which is a good thing, but one that has to be weighed against what you relinquish in future royalty rates and other rights granted.

Author Michael Stackpole has an excellent post going through the above provisions and others in very good detail; keep in mind that he is opposed to the agreement, and as he says in his post, he can afford to be.

The alternatives:

If not enough authors agree, Night Shade goes into (probably Chapter 7) bankruptcy.  The contracted rights for your book are tied up in the bankruptcy.  Who knows when or if you get paid royalties and advances currently owed, or how long it will take to resolve.

If enough authors agree, the authors who agree are now with their new publishing companies and get royalties currently owed in exchange for granting new rights and for accepting a (most likely) substantially reduced royalty on future sales.

If enough authors agree but you do not, the rights to your book remain with the partners in Night Shade.  Will they subsequently liquidate/go bankrupt?  Who knows?  None of us are being told how much is being allocated to pay off other creditors, and we have no way to determine whether books left behind will be tied up, or reverted, or in purgatory.

Author by author,  it isn't for me to say if this is a good deal or a bad deal.

For one of my clients it's clearly a bad deal.  The audio and second serial rights to be given up have more prospective value than the present value of anticipated royalties.  For another author, maybe you've already sold audio rights so that doesn't weigh down on the equation, or maybe your unpaid royalties for 2011 are so much bigger than likely future royalties that it is more important to get full payment for the past than to worry about the reduced royalties in the future.

But even if I had a client who might benefit from the deal, I'd have a long hard talk with myself and with my client if any of my clients should sign off on this.

Most important, the deal is structured in such a way that authors who might benefit have to start arm-twisting to get authors who shouldn't sign to sign anyway, to be sure the mysterious unknown threshold of authors is met.  This isn't a hypothetical.  I am told but haven't seen for myself that this is already happening, with authors who want this getting on other authors who do not.

To put this another way, the deal is structured to encourage authors to band together to take what is for some of them clearly a bad deal, rather than to band together to get a better deal for all.

Also implicit in the structure of the deal:  Night Shade authors get to spend the rest of their lives looking at one another, wondering who's gotten the better deal in this process.  There's a mysterious process by which there is this rumor that some authors are going to Skyhorse and negotiating changes, but is anyone willing to tell us whom they've spoken to and what changes have been agreed to?  Tony Lyons isn't responding to my e-mails yet.  Is he too busy?  Is the book I want to talk about not important?  Will the company be willing to offer global changes based on comments it is hearing in these side negotiations?

Authors are being enlisted to fight against one another, but without knowing what constitutes a win. Is the acceptable number of assignments received based on number of authors, number of books, percentage of Night Shade's sales billing?  A book like Paolo Bacigalupi's The Windup Girl, which won every award in the field and sells well, is clearly worth more in this process than any Night Shade book by a JABberwocky client, but I don't know if or how that is reflected in determining if the deal goes through.

The "or else" to the process: The alternative is a bankruptcy proceeding where authors might get pennies on the dollar and have their work tied up for years.

This is quite true.  Authors are unsecured creditors, and are at or toward the back of the line in a bankruptcy proceeding.  Some publishing bankruptcies have dragged on for years and had unpleasant outcomes.  Here is an article from a while back about an author caught up in the Stein and Day bankruptcy that inspired a jeremiad about the process from one of the owners.  This was a poster child for a bad publishing bankruptcy in my early years in the business.

I am not a bankruptcy attorney and don't know how a Chapter 7 might differ from a Chapter 11 (the kind big public companies, which Night Shade is not, go through, which we read about in the news) or other kinds of bankruptcy.

But any bankruptcy is a public filing, and it goes before a judge.  Creditors are put into classes.  Writers might be unsecured creditors and somewhere back in the line to get paid, but our interests would be represented as a class.  It might also be possible for authors to group together as a class to hire attorneys to represent us as a class.

The current process is a private free-for-all with no supervision, and we are relying on the same people who've had challenges paying us royalties for several years to now do the right thing for all of us in the private sale process.  If you wonder why this concerns me, you can check out Staffers Book Review which has a "what went wrong" about Night Shade business practices.  Where that post overlaps with my personal experiences, I can concur with everything that's said.

We would also know in public how much Night Shade owes to unsecured authors vs. secured creditors, to authors vs. the printer or other non-author creditors, how much it owes in total vs. its assets.   Nobody is volunteering and nobody is asking for any of these important pieces of information to be provided to us in this private process.  These are important questions.  Sometimes a bankruptcy proceeding drags down the benefit to creditors.  In going bankrupt, Borders was able to pay far less to its creditors than suggested by the straight-up asset/liability calculation because the assets were liquidated in going-out-of-business sales at fire sale prices and a lot of expense was incurred just to go through the process.  But it's still helpful to know in evaluating just how deep the hole is.

With the current process, it is very difficult if not impossible for another bidder to emerge.

The Science Fiction and Fantasy Writers of America (SFWA) has been on Night Shade for the past three years, since their issues became public in 2010.  The organization can be a forceful advocate for writers.  Just a few weeks ago, SFWA got a lot of good press for putting public pressure on Random House (each word there is a different link; I want to make it very clear how much well-deserved good press SFWA got here) regarding the contract terms for some new e-imprints that Random House had started up.

If SFWA thinks this is a good deal, it should be willing to be as public in its support and its discussion of the terms being offered as it was in sharing the terms of the Random House e-imprint contract that was provided to it.

But with this Night Shade situation, SFWA is communicating to members or a subset of members known to be published by Night Shade like this:  "The purpose of this report is to answer some of the questions we have been receiving from you. We ask that you not share this report outside the membership."  Their annotated version of the Night Shade assignment letter is hidden in a non-public area of their website.  And most of what they do say is always accurate as far as it goes, but it's what they choose to say or not say that tilts the entire conversation.  All the risks of saying "no" are prominently highlighted, all the risks of saying "yes" are obscured.  SFWA makes it abundantly clear that there are huge risks in bankruptcy and you may get pennies on the dollar and have your book tied up for years, but the best it can do on the print royalties is say (paraphrasing) "maybe it's better, maybe it's worse" when I suspect the typical author will see a considerable reduction.  It tells us that the 50/50 split on audio and second serial rights which you relinquish is industry standard, but it doesn't say with similar clarity that you are giving up control and one-half of potentially valuable rights in order to get your royalties currently owed. SFWA is right to add the "talk to your agent" disclaimers, but why in this instance vs. almost every other instance is SFWA not informing its members regarding the best right questions to ask when having those discussions.

Another example:

The secret SFWA e-mail says "The branch of [Start] involved here is the publishing subsidiary, headed by Jarred Weisfeld. They indicate they are acquiring Night Shade’s assets specifically because the owner of Start has a passion for science-fiction and wants to be in this genre."  Wouldn't it be preferable for SFWA to ask about and actually identify the owner of Start, instead of only telling us about the mystery owner's passion for sf?  Is SFWA aware that Jarred Weisfeld is also a principal in a literary agency, Objective Entertainment, and is this information that SFWA might wish to provide?  As another example, if you look at the books from Start Publishing that are for sale on Kobo, it appears that their current publishing program is public domain work.

With regard to Skyhorse, the sf/fantasy genre isn't currently represented on the company's website.

None of these things are, prima facie, bad things.  Perhaps: (a) The mysterious owner of Start has been practicing with public domain waiting for a moment like this to have a strong list of copyrighted titles.  (b) The owners of Skyhorse recognize the sf/f genre is an important one where they need a presence and have a plan for entering the genre successfully.  (c) The objections in the sf/f community to having literary agents as publishers have died down for good reason in the 30 years since SFWA objected to having Scott Meredith run an sf/f program for Baen Books, and Richard Curtis has run eReads for many years now.

But why is SFWA leaving me to do the research?  Why aren't they informing authors of relevant facts so authors can make good decisions in consultation with their agents, representatives and IP attorneys?

Since SFWA was aware of the process, does SFWA know if Night Shade was approached by these two companies, or if Night Shade did a vigorous search for other buyers before concluding that these two companies were the best or only alternative to bankruptcy?  Does SFWA know why Skyhorse and Start are splitting the assets, when Skyhorse can publish the e-books itself?  There might be details that would violate confidentiality, like other potential buyers who kicked the tires on the Night Shade car, but total silence leaves me queasy.  If you've ever read a formal SEC filing from a company asking for merger approval, it includes a history.  Written by management, likely self-serving, but with this kind of information presented.

I'm not a big fan of this deal.  But I have tried in this blog post not just to rail against it.  Rather, I'm trying to suggest questions we deserve answers to, either collectively or to grapple with in making our individual decisions. How rigorous a sale process was there?  If bankruptcy puts us at the back of the line, how long is the line?  What is the value of receiving my current royalties in full vs. the reduction in my future royalties, or the value of my current royalties against having full control of my audio rights?  If such a thing could be found would it be better to have a buyer purchase the whole company instead of select assets, even if it meant secure royalties moving forward but a hit on current royalties owed, rather than getting all royalties owed today in exchange for future concessions?

Last but not least, to what extent should my decision on the deal itself be influenced by the structure of the arrangement, the effect it has on the community of sf/f authors as whole?


Jeremy Lassen, one of the partners in Night Shade, has replied to critics of the deal.  You can find that via Charlie Jane Anders at io9.  Jeremy's main argument is this.  "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."

One comment I will make:  You can't be so fixated on one specific goal in life that you lose track of the big picture.  The goal of Night Shade here is admirable.  Who wouldn't want every Night Shade author to get the royalties they are owed.  But as I've discussed above, every author needs to evaluate the benefits of getting paid what they are owed today against the costs of this tomorrow.


This post by literary agent Andrew Zack fills in, very nicely, some gaps in my own post.  He knows the people at Skyhorse better than I, and asks directly why, when as he puts it:

In a sense, this entire deal seems to me to be:

I recognize that these are terms that both publishers might find offensive, but surely they must understand how offensive this deal is to the authors involved.

the publisher doesn't want to step up to the plate and be proactive in making people feel more comfortable.

And something Jeremy Lassen would disagree with, also in Andrew's post:

The fact that they want to change the contracts and get extra rights seems to me an attempt to ensure they have jobs when this all gets wrapped up, but if authors are going to lose money in the form of lower royalties and new rights granted, shouldn't these guys lose something, too?  Where is their skin in this game?  If this all goes through, they are in a better-than-ever situation, it seems:  free of the burdens of administration, free of debt, employed, and walking tall.  That hardly seems fair, does it?


Jessica Strider said...

I didn't realize Night Shade's problems were so bad until I heard about this. Thanks for your insights on the matter. I guess bookselling's getting harder for everyone.

Johnrgrace said...

One interesting thing I noted was Nightshade still has filed the copyright paperwork on their books, ANY of their books. My lay reading of entertainment bankruptcy is that if they are for forced into bankruptcy before they register their contracts with authors would likely be voided.

Overall the veil of secrecy over this whole affair puzzles me, I don't see how from a legal POV authors shouldn't be able to discuss. The secrecy is ripe for an ugly divide and defeat in detail strategy which I fear that I am seeing. Too much is stated as fact when there is nothing to show that it is fact.