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They’re Doing What?

That’s the first question that popped in my head the other day when reading Dean Wesley Smith’s post about agencies starting their own in-house publishing companies.  The second question was, “Are they crazy?  Don’t they realize what a conflict of interest that becomes?”

A little background.  For some time now, certain literary agencies have explored and started their own in-house publishing companies.  These have been few and far between.  But this past week, several agencies — well-known agencies — announced they were following the trend.  According to GalleyCat, “. . . two agencies have decided to follow in Ed Victor‘s footsteps: Curtis Brown, Ltd. and Blake Friedmann Literary, TV, and Film Agency.”  This is the sort of news that sets off all my internal alarms and has me wondering if I was somehow transported to the Twilight Zone during the night.

My problem with this sort of arrangement is that it sets itself up as a classic conflict of interest.  An agent is supposed to be an author’s advocate.  The agent’s job is to find a publisher and secure the best monetary arrangement possible for his client, the writer.  Yes, this is a simplified definition, but it is the heart of the agent-writer relationship.  When the agent suddenly becomes the prospective publisher and, therefore, has a financial stake in the process that goes beyond negotiated the best terms for the writer, there’s a conflict of interest.

Wanting to see what others had to say about the news, I quickly made my way to Dean Wesley Smith’s blog and wasn’t disappointed.  He has a series of posts about this and I highly recommend you take the time to read them all.  But what he says here pretty much sums up how I feel:  An agent, for any percentage, who crosses the line and becomes a publisher, is pulling a scam. An unethical one. And one that cannot work for the sheer accounting and work-load problems.  Avoid at all costs.

Let’s add into this the following information from The Bookseller:  (while this information is specific to Ed Victor, my guess is the other agencies will follow suit)

  • First, Victor will follow the Agency model of pricing.  That means no competitive pricing among outlets.  It also doesn’t bode well for prices being in the range that most e-book readers are comfortable paying.
  • By using Agency pricing, they will give up 30% of cover price, iirc AND they will then be paying out another percentage to the company they are contracting with to create and distribute the digital content.
  • They will then split the net receipts 50/50 with the authors ” once production costs have been recouped out of the first receipts”.

WHAT?!?

Victor claims this will result in their authors receiving more than the 25% they get from traditional publishers.

I repeat, “WHAT?!?”

Maybe Victor is going to limit their offerings to their authors’ backlists that have gone out of print.  Still, compare 50% net after unspecified production costs — production costs that include lining at least three entities’ pockets — to the 70% royalty the author can get by publishing directly to Kindle, the 65% from Barnes & Noble and similar percentages from Smashwords.

Let’s take an e-book priced at $9.99.  If an author publishes directly to Amazon using the KDP program, he will receive royalty payments of $6.99 per sale.  He’d receive $6.49 from Barnes & Noble.  Out of pocket expenses would include approximately $10 for an isbn, although you don’t have to have one for either platform, cover art (which can be found for free if you have the ability to do the editing and graphics yourself) and editing costs if you hire a professional editor.

That same $9.99 book from Victor would break down this way.  30% or $3 is taken off the top for the Agency model payment to the outlet.  So we are now down to $6.99.  From that production costs would be taken.  Let’s say, just for the sake of argument, that means an additional 10% (it very well could be more or less).  So another dollar is gone from the cover price, leaving $5.99.  What isn’t addressed in the Bookseller article is where editing fits into all this.  Even a backlist book will need editing and proofing during the conversion process.  So that may be an additional cost.  And remember, there’s a contract somewhere in the past stating that the agent will get a percentage of sales of the book.  No where have I seen where that clause will be waived and that is the crux of my concern about such ventures…but let’s put that aside for the moment.  So, at best, there is $5.99 left of the cover price.  Half of that is approximately $3.00.  That is less than half of what the author would receive if publishing the title himself. (It is also less than he’d get if he published that same title through an e-publisher like Naked Reader Press, but I won’t go there either as that is getting too close to the conflict of interest line for my comfort.)

The whole issue, to me, comes down to this:  Agents are supposed to act in the best interest of their clients.  If the agency becomes a publisher, it suddenly is in competition with the publishers it is supposed to be pitching a manuscript to.  Unless there are some very specific safeguards in place, the only winner in this will be the agency.  Check out this post from an attorney for what these safeguards need to be.

My advice is two-fold for any author faced with this situation.  First, ask yourself if you want to risk being aligned with this particular agency/agent forever because, whether you realize it or not, agents are starting to demand the same sort of long-term contracts that many publishers are.  Second, always remember the rule that money is supposed to flow to the author and this agency as publisher puts several dams in the way.  Just because the lines between agency and publisher are blurring, that doesn’t mean we, as writers, have to agree to it.  Remember that we supply the product and, without that product, there is no need for agents and no need for publishers.

So, be smart.  Read your contracts line by line.  Know what you are giving up before signing.  Keep track of your royalty payments and compare them to your bookscan numbers (if you haven’t signed up for your Author Central account at Amazon, do so.  The benefit is being able to see your bookscan numbers for free).  It is time for us to be proactive and not fall back on old relationships in an industry that is changing faster than we realize.  Most of all, explore all the possibilities and don’t be afraid to try something new — as long as money flows to you, the author, and not away from you.

11 Comments
  1. Surely the “agent” should be taking 15%(or whatever the agent/author percentage is). Wouldn’t it be breaking their contract with the writer to take anything more?

    May 15, 2011
  2. Brendan,

    That 15% is for representation…for sending the manuscripts out to publishers and acting as negotiator and coordinator. But when the agent then becomes publisher, there are all sorts of other fees and costs that can — and will — be passed onto the authors as evidenced by the 30% coming out due to agency model pricing (this goes to the outlet) and then the setup and conversion fee to the company “making” the e-book. Somewhere along the line, I’ll lay odds there are editing/proofreading fees, etc. All of which takes money from the author’s pocket.
    But that’s fine, as long as the author understands that their agent may be walking a very fine line between representation and publication status. In law school many years ago, we were taught about the “Chinese Wall” which basically meant you had to insulate yourself or your client from anything that might result — or even appear — to be a conflict of interest. You have to disclose any potential issues. The client needs to understand what the ramifications of their actions are, etc. Basically, all the safeguards the attorney I linked to laid out.
    I guess what really bothers me is the casual way some agents are viewing this so-called blurring of the lines. The lines are blurring only because of their actions. Now it is up to writers to make sure things don’t blur so much that we get shafted before we even get out of the starting gate.

    May 15, 2011
  3. I’ve often said, and I meant it, that the big agencies would be best positioned to become the publishers of the future. Notice where I said “become” which means they wouldn’t be agents anymore.

    Also along those lines, I’d expect the contract to be more along the lines of NRP’s or even the medium size publisher I just signed with “fifty percent of receipts” period. Because if publishers also stand to gain from the publishing of the book — which, duh, they do — then they shouldn’t take upfront costs. The writer is contributing the book, they’re contributing the other expenses. This is the only way to ensure the selection process remains meaningful. Because, if the author bears the brunt of the costs, and the “publisher”/agent only gains, why not publish EVERYTHING that comes in? Why not be Publish America? And in that case the ONLY prospective plus of publishing thorugh someone — that someone other than your mother, someone with a vested interest in the success of the book , likes it enough to invest in it — is lost.

    IOW this is not what I meant. I don’t think my agent or her agency are even considering this, but if they are, this is a definite “not only no, but hell no.”

    May 15, 2011
    • Sarah, I agree. The big agencies are in the best position to become publishers. But, if they do, they need to NOT be agents. It bothers me when an agent can so casually talk about blurring the lines. Those lines are there for a reason and should be strengthened, not blurred. I see a lot of ill feelings coming out of this on both sides before it finally shakes out.

      May 15, 2011
  4. I’ve heard whispers of this, here in Australia and my first thought was that the agent could not take their 15% commission, since they didn’t ‘sell’ the book, the published it.

    But there are so many more ethical questions it reminds me of when Harlequin Mills & Boon started their self publishing arm and were directing authors who got rejections from their traditional publhsing lines, to the self publishing arm. This is just wrong. (They have since distanced themselves from this).

    Am I living in a Terry Pratchett book????

    May 15, 2011
    • Rowena, Harlequin did the same thing here and it finally morphed into Carina Press. I know RWA and MWA are still keeping a close eye on it.

      In some ways, agents acting as publishers is worse because these agents are supposed to be protecting our interests, not looking for ways to cut into our monies. Hopefully, the major writers organizations are keeping a close eye on it. They have the clout that we, as individual writers, lack.

      May 15, 2011
  5. Kate Paulk #

    I only wish we were living in a Terry Pratchett book. I’m afraid we’ve gone past the Crazy Years and are well into the Strait Jacket and Padded Cell years.

    May 15, 2011
    • Kate, I’m afraid you’re right…I just want to be on the outside of the cell and not the inside. Unless, of course, all my friends are on the inside. 😉

      May 15, 2011

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