When Random House and the Wylie Agency released a joint statement last week stating that the two parties had “resolved their differences” regarding the 13 titles by Random House authors included in Odyssey Editions (Andrew Wylie’s publishing venture to sell backlist digital editions of books by authors he represents directly through Amazon), the headlines immediately began touting which party had “won” and “lost” this particular battle. PW and the Times said Random House was the winner. The Wall Street Journal said Amazon, the exclusive retailer of Odyssey titles, was the big loser. But behind the story of winners and losers, what the culmination of the Random House/Wylie dispute brought into the light is the quiet deal making publishers have been conducting with agents for months to develop a standard digital royalty rate for backlist titles where the ownership of digital rights is unclear.
A source confirmed that the biggest of the “big six,” Random House, has adopted an e-book royalty that tops out at 40% for all titles covered by contracts signed before 1994. Sources said that Random is offering a starting royalty of 25% on these titles—which is the de facto standard in the industry on frontlist books—that then rises to 40%. The hike works, as one source put it, like a “sales escalator,” jumping a certain percentage after a specified number of sales. While Random considers the agreement it has with Wylie and other agencies to be a standard, there is room for flexibility in different negotiations. The 40% royalty rate does not apply to digital editions of Random frontlist titles; that royalty remains 25%.
Some industry and media members speculated that the creation of Odyssey Editions was Wylie’s attempt to pressure the major publishers into raising the digital royalty. As it turns out, Random House has been in discussions with the major agencies for months about a new digital royalty structure. And the creation of Odyssey Editions, far from igniting these talks, almost derailed them. One party claimed that when news broke about Odyssey Editions, it created confusion and stalled talks with agencies that had not yet settled with Random House.
Although some agents used adjectives like “fair” and “reasonable” to describe Random House’s new backlist digital royalty, others are looking for more. And, presumably, Wylie settled with Random House for a deal less lucrative for his authors than what they would have gotten with Odyssey Editions. (The estimation is that the authors in Odyssey Editions were primed to get roughly three times more in royalties than with traditional publishers offering 25%.)
Arthur Klebanoff, CEO of Rosetta Books, which notably went to court with Random House over digital rights nearly 10 years ago in a situation similar to the one that bubbled up between the publisher and the Wylie Agency, said, “Fair is in the eye of the beholder,” when asked about this new royalty. He added that, for highly valuable titles, 40% would likely not be acceptable. Noting that Rosetta offers a standard royalty of 50% on e-books, Klebanoff, who is also an agent at Scott Meredith Literary, said, “When we negotiate highly valuable titles, we go higher.”
Agent Richard Curtis, president of Richard Curtis Associates, also questioned the supposed fairness of this new rate. “It’s fairer than 25%, and not as fair as 50%,” he quipped, noting that e-reads, the digital publishing company he also runs, offers, like Rosetta, a 50% royalty.
Although sources did not specify whether a similar backlist digital royalty standard has been adopted by the other big houses, agent Robert Gottlieb, chairman of Trident Media Group, said, “What Random House has done successfully is press the issue and work out a deal with Wylie that will help the other houses come to a similar conclusion.”
Certainly the presumption is that all of the big six are talking to agents about trying to come to terms on digital royalties for titles where e-rights are in question, and that agreements will closely follow the RH-Wylie settlement. The contentious issue over digital royalty rates for frontlist titles, however, remains to be resolved.