Random House Digital Imprints | It’s a duck!

If it looks like a duck, quacks like a duck and walks like a duck, it’s a duck.
 

Late last year, Random House, one of the big six publishing houses (now five following the US Department of Justice’s approval of the merger deal with Penguin), launched three digital-only publishing imprints alongside its already existing digital imprint, Loveswept. On face-value, news of the launches of Hydra, Alibi and Flirt from Random House did not even make the main page of The Independent Publishing Magazine. We did link to the original press releaseon our Facebook page. Frankly, in this digital age of publishing, publishing houses large and small are launching new digital-only imprints every other week. For example, Little, Brown UK has just launched Blackfriars, a literary fiction imprint.  If I had a dollar for every time a digital imprint was launched and mentioned in TIPM, I would be relaxing on a beach in the Caribbean this Christmas.
Random House has a tendency to deliberately set itself apart from the other major publishers. We saw an example of this during the negotiations on the agency agreement with Amazon a few years ago.  I sometimes think if other publishers described the colour of a wall as white, Random House would insist it was black.  Unlike several other big publishers, up until now, Random House has avoided directly entering the self-publishing arena, though, for several years, it did have a 49% part ownership of Xlibris Publishing before selling its stake to Author Solutions in 2009.
As Alibi, Hydra, Flirt and Loveswept are digital imprints of Random House as a trade publisher, it can be a great deal more difficult to obtain the finer details of the contracts and terms on offer to authors signing with these imprints than, say, many of the self-publishing service providers reviewed here on The Independent Publishing Magazine. If anything, self-publishing service providers have been a lot more open to disclosing their standard terms of service and contracts online, and non-disclosure is often the first of several red flags against a company. In the trade world of book publishing, contracts are often subject to stiff negotiation between agent and publisher in areas like advances, primary and subsidiary rights. It has taken some months for the details of the contracts on offer from Random House’s new digital imprints to come to light, but what we are discovering pretty much blows the lid on Random House being above the vagaries and transgressions of some of the worst players in the self-publishing world over the past few years.
So much so, John Scalzi, author and president of the Science Fiction and Fantasy Writers of America issued the following directive in the form of a letter to members of the organisation this week.

“Dear SFWA Member:
SFWA has determined that works published by Random House’s electronic imprint Hydra can not be use as credentials for SFWA membership, and that Hydra is not an approved market. Hydra fails to pay authors an advance against royalties, as SFWA requires, and has contract terms that are onerous and unconscionable.
Hydra contracts also require authors to pay – through deductions from royalties due the authors – for the normal costs of doing business that should be borne by the publisher.
Hydra contracts are also for the life-of-copyright and include both primary and subsidiary rights. Such provisions are unacceptable.
At this time, Random House’s other imprints continue to be qualified markets.”

Scalzi has written extensively about the terms contained in a contract issued to an author signing with Hydra, and another contract issued by Alibi, and also shared and reviewed by Scalzi. Both contracts bear remarkable similarities and suggest that these may be the standard terms of contract across all of Random House’s new digital imprints. I’m not going to list the detail of the contracts here as Scalzi has completed a pretty thorough job in the links I have provided. The pitch included in the launch of Random House’s digital imprints also bears remarkable similarities with pitches from the websites and brochures of many self-publishing service providers:







“Under this program, authors will have a complete and unique publishing package. Every book will be assigned to an accomplished Random House editor and a dedicated publicist. They will also have the invaluable support of Random House’s experienced marketing and digital sales teams, who know how to reach out to and expand each book’s dedicated readership. Not only will authors benefit from working with the finest cover designers to ensure irresistibly eye-catching books, but they will also be offered the unique advantage of social media tools and training that will allow them to connect directly with their readers. To reach the widest possible readership, every title will be available for purchase at major e-retailers and will be compatible with all reading devices.”


Victoria Strauss recently noted the crucial points of the contract with Hydra, Random House’s sci-fi and fantasy digital imprint, describing it as a second-class contract and remarking, ‘Even so, I can’t help feeling that, with digital-only or digital-mostly imprints, print-based publishers are offering a kind of second-class publication.’ She’s right. Once again this is a perfect example of traditional publishers never seeing beyond what is on the end of their noses. Digital publishing is not a secondary or poor extension of print publishing, nor is it an avenue to dumb down or compromise the core terms of a traditional publishing contract. Strauss highlights some of the deficiencies of the Hydra contract from Random House.

“- It’s a life-of-copyright contract that includes both primary and subsidiary rights. 
– There’s no advance. Net proceeds (defined as net income plus subrights income less the deductions detailed below) are split 50/50 between author and publisher.
– Deductions for ebook edition: “one-time out of pocket title set up costs” (editing, cover art, design, etc.), plus a “sales, marketing, and publicity fee” of 10% of net sales revenue.
– Deductions for print edition, if there is one: “actual direct out-of-pocket paper, printing and binding costs,” plus 6% of gross sales revenue to cover freight and warehousing costs.”

I’ve argued for a long time that no kind of publishing comes without some kind of cost or concession for the author—even if this is the concession of rights and lower royalties against an upfront paid-publishing fee. I’m going to say something here John Scalzi and many others from the traditional world of publishing may strongly disagree with. But I believe it and I’ll stand by it, Yog’s Law or no Yog’s Law.

Traditional publishing (without an advance on royalties) IS backend paid-publishing! Period, no arguments!

By removing the option of an advance to an author, the publisher is removing much of theirrisk and offsetting their financial investment against a reduced royalty rate AFTER deductions. In the case of digital imprints by Random House, the author IS paying for editing, design, printing and marketing, per book sale, rather than through an upfront fee as in self-publishing. These are all the things a traditional publisher should be doing on behalf of the author and without the costs of it impinging on the earnings of the author. While authors may not be paying direct from pocket, many may never see a cent from the sale of their books with contracts like the ones from Random House’s digital imprints. While I believe authors need to accept that the future landscape of publishing, particularly on digital-only deals, might be one where few see much of an upfront advance beyond a select few bestselling authors, there must be a trade-off on improved royalties, subsidiary rights and get-out clauses.

Scalzi described the terms of Random House’s digital imprint, Hydra, as egregious. He is spot on, but I would go further. It’s also exploitive and cynical and a devious way to use digital publishing as a backdoor entry into the self-publishing author market. No author’s agent with a grip on reality would recommend an author jumping into bed with Random House under those terms when we already have far better options like Amazon Kindle and Smashwords. At least authors are assured of better terms and control of their work. Even Author Solutions’ Booktango is better than this. In fact, the terms of Random House’s digital imprints make Author Solutions look like a company run by a bunch of Catholic altar boys!

But what really pisses me off about all this is the amount of hours expended by pundits, experts and online commentators, with their heads stuck under the hood of self-publishing, happy to throw virtual shapes, pontificate and moralise on the cracks and leaks and woes of every self-publishing service provider. When in reality, over the last couple of years, some of the most egregious and contemptible entries into the world of self-publishing have actually come direct from—or under the guise and umbrella of—traditional publishers.

It is no wonder so many new authors want to completely bypass the traditional route of publishing when faced with the horrible deal on the table from Random House? As far as The Independent Publishing Magazine is concerned, Random House is now fully in the self-publishing arena in all but name.
Like I said at the beginning of this article; if it looks like a duck, quacks like a duck and walks like a duck, it’s a fucking duck, and no backend costs incurred by an author over upfront costs is going to change that.

Late today, Allison Dobson, VP Digital Publishing Director responded to the criticisms from SFWA president, John Salzi in a letter to the organisation (letter via PW):

Dear John, Victoria, Jaym and SFWA Members,

We read with interest your posts today about the new Random House digital imprints and our business model. While we respect your position, you’ll not be surprised to learn that we strongly disagree with it, and wish you had contacted us before you published your posts. We would appreciate you giving us an opportunity to share why we believe Hydra is an excellent publishing opportunity for the science fiction community by posting ours below to them.

Hydra offers a different– but potentially lucrative–publishing model for authors: a profit share. In the more traditional advance- plus-royalty model, the publisher takes all the financial risk up front, and recoups the advance before the author earns any cash royalties. With a profit-share model, there is no advance. Instead, the author and publisher share equally in the profits from each and every sale. In effect, we partner with the author for each book.

As with every business partnership, there are specific costs associated with bringing a book successfully to market, and we state them very straightforwardly and transparently in our author agreements. These costs could be much higher–and certainly be more stressful and labor-intensive to undertake–for an author with a self-publishing model. Profits are generated once those costs are subtracted from the sales revenue. Hydra and the author split those profits equally from the very first sale.

When we acquire a title in the Hydra program, it is an all-encompassing collaboration. Our authors provide the storytelling, and we at Hydra support their creativity with best-in-class services throughout the publishing process: from dedicated editorial, cover design, copy editing and production, to publicity, digital marketing and social media tools, trade sales, academic and library sales, piracy protection, negotiating and selling of subsidiary rights, as well as access to Random House coop and merchandising programs. Together, we deliver the best science fiction, fantasy and horror books to the widest possible readership, thus giving authors maximum earning potential.

As a last point to the SFWA leadership, my colleagues and I would welcome the opportunity to meet with you at your earliest convenience to discuss the advantages of the Hydra business model, describe the program overall, and respond to any of your expressed concerns. Please let me know a good time for us to set up this meeting.

Many thanks and all the best,
Allison Dobson

Allison R. Dobson
V.P., Digital Publishing Director
Random House Publishing Group

… and today, March 8th, the SFWA responded to Allison Dobson’s letter… 
Dear Ms. Dobson:

Thank you for your letter regarding Random House and Hydra, and your interest in speaking with us.
Unfortunately, there is very little to discuss. SFWA has determined to its own satisfaction that Hydra does not meet our minimum standards for a qualifying market, as its contract does not offer an advance. Additionally, your attempt to shift to the author costs customarily borne by the publisher is, simply, outrageous and egregious. The first of these things alone would disqualify Hydra as a qualifying market. It is the second of these things, however, that causes us to believe that Hydra intends to act in a predatory manner towards authors, and in particular toward newer authors who may not have the experience to recognize the extent to which your contract is beyond the pale of standard publishing practices.

You extol your business model as “different”; the more accurate description, we believe, is “exploitative.” We are particularly disappointed to see it arising out of Random House, a well-regarded, long-standing publishing firm. Bluntly put, Random House should know better.

If Hydra is willing to assume the costs long assumed by publishers rather than attempting to shift those costs to authors, and is willing to pay advances in line with SFWA minimum rates at the very least, we will be willing to reconsider it as a qualifying market, and as a suitable home for writers. Until that time, however, we cannot do either, and will warn writers about Hydra.

Additionally: Our president has seen a contract for Alibi, the sibling imprint of Hydra, and has noted that it features the same worrying lack of advances and attempts to set the costs of publication onto the author, to the advantage of the publisher. For that reason, the board has voted to keep Alibi from being considered a qualifying market for SFWA membership. If we learn that the standard contracts for Flirt and Loveswept, Random House’s two other eBook-only imprints, feature similar language and actions, they will also be excluded.

The contracts of these imprints mean that SFWA will now be watching Random House very closely. If the egregious features of Hydra and Alibi’s contracts begin to make their way into the contracts of Random House’s other imprints, particularly Del Rey and Spectra, we will be required to act, up to and including delisting Random House as a whole as a qualifying market for SFWA.

We urge you to reconsider your business model for Hydra and Alibi. It is bad for authors, it is bad for the publishing industry, and it is extraordinarily bad for the reputation of Random House as an equitable partner for writers.
Yours,

The Board of the Science Fiction and Fantasy Writers of America 

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