Business Musings: Copyright Savvy

Gloria and Emilio Estefan have an estimated net worth of 700 million dollars. Jimmy Buffett has an estimated net worth of 550 million dollars.

What do those artists have in common? They kept control of the copyrights to their songs. They maintained control of those copyrights starting in the 1970s, when other musicians signed away those rights because they were told that to keep those rights was a deal breaker.

Both Buffett and the Estefans walked from deals that wouldn’t allow them control. They understood the value of hanging onto the work they created—and they eventually learned how to leverage those works into a variety of other businesses. (Dean calls this “The Magic Bakery.” Look here for more.)

For example, Buffett maintained the rights to “Margaritaville,” which was such a major hit in 1977 that it seemed to be on the radio 24/7. Songs that sold better in 1977 aren’t even played much anymore, including “Undercover Angel” (yeah, that song), and “Best of My Love.” Yet “Margaritaville” has spawned restaurants, hotels, and casinos, as well as a tequila brand, beach wear, and shoes, among other things.

And Buffett didn’t just expand his empire with that one song. For example, he now has a bunch of bars named for a hit song he had with Alan Jackson called “It’s Five O’Clock Somewhere.”

The licensing and business opportunities don’t keep Buffett from pursuing his art. He still writes songs, and tours, playing music and managing his empire (which has more than 5,000 employees).

All because he was both savvy enough and desperate enough to hang onto his copyrights.

Fiction writers who are traditionally published rarely hang onto their copyrights these days. It’s almost impossible to do so and sell a book into traditional publishing. The contracts have changed so much from the 20^th century that writers are essentially signing their rights away just to get $5000 and the chance to see their books “in print.”

I put the “in print” in quotes because, by going indie and doing the work themselves, writers can get their work into print now and have it sell wider than it ever would through a traditional publisher.

Traditional writers don’t get this. They want to “see their work in bookstores.” In the previous post, I wrote about the changes at Barnes & Noble, and the fact that B&N only accounts for one-fifth of the print book sales in the U.S. while Amazon accounts for more than half. Writers are selling their copyrights to traditional publishing companies that promise them the world and deliver next to nothing.

It is the very definition of a scam. However, it wasn’t a scam twenty years ago. It was the only way to do things.

So these writers are stuck in the past. It doesn’t matter how much evidence they get that their pursuit of the old ways is bad for them and for their career. They continue to do so. I’m beginning to think they’re irredeemable.

When writers sell to traditional publishers, they get ego boo, and very little else.

But with the disappearance of major bookstore chains, and the decreased distribution of paper books, as well as the downward sales trend of overpriced ebooks, you’d think that traditional publishers would go the way of the Dodo, but they’re not.

And why not?

Because their business model is changing.

The major traditional publishers, the ones we call the Big Five or Big Four or Big whatevers, are part of international conglomerates. And those conglomerates have become rapacious—not for works they can publish effectively—but for intellectual property.

Since the rise of Silicon Valley and the growth of venture capital in the past decade or so, intellectual property has become a valuable commodity. Technically, it was always a valuable commodity, but convincing courts and financiers of that used to be difficult as hell.

Not any longer.

In fact, the growth in IP (intellectual property) valuation—figuring out (guessing) how much a particular intellectual property will increase in value over the 70 years after the author dies—has become a business in and of itself.

I discussed some of this in a blog titled “Stealing Intellectual Property” from last year. Take a look in particular at the information in that post about IP Valuation.

I wrote about stealing intellectual property in terms of movies and TV. Those thefts are often hidden—and are outright deceptions. Some companies actively squat on copyright registrations, making writers prove that the copyright registration they’ve filed is the accurate one. This will take years of litigation, and sometimes the writers lose. (I’m not going to explain this in great detail except to say never ever give out your registration number.)

What the large traditional publishers are doing, though, isn’t copyright theft at all. They’re taking advantage of writers’ ignorance. They’re legitimately buying all of the licensing rights in a copyright, and hanging onto those rights for the term of the copyright. They are transferring value from the writer into their own traditional publishing company.

Publishers aren’t the only ones doing this. Major literary agencies are doing the same thing. Their contracts with writers call for a shared piece of the copyright of anything they represent, usually 15% of that copyright.

Fifteen percent of Jimmy Buffett’s net worth is 82.5 million dollars. And that’s in 2016 numbers. Who knows what 15% of his empire is worth in 2018 dollars.

Yeah, you say, my work will never earn that kind of money and you might be right. But what if you aren’t right? What if something of yours takes off, the way that George R.R. Martin’s Game of Thrones series (which in book form is not called the Game of Thrones series) did. Or Diana Gabaldon’s Outlander. Or J.K. Rowling’s Harry Potter series?

Sometimes the worst thing that can happen to a writer is success. Because what if you signed away all those rights to your books, and those books take off? Who will make the money? Why, your agents and publishers, of course.

Traditionally published writers typically make as little as 8% of the money on their novels. Even less now, with all the discount schedules and the “percent of net” that’s in most publishing contract.

So while writers are earning pennies on the dollar for their creations, the people in the middle—publishers, agents, studios, conglomerates—are earning more than 90% of the revenue.

Those traditional publishing companies are gambling on the ignorance of the writers. The companies, remember, are small cogs in the gigantic wheel of a conglomerate. And those conglomerates aren’t just random compilations of unrelated businesses. Most of them are multimedia companies. They own gaming companies, TV networks, movie studios, and all kinds of other media companies that will allow them to easily activate parts of the copyright to a book that writers would normally sell separately.

These conglomerates want properties they can then turn into franchises. Right now, the book publishing arms are terrible at knowing what kind of IP they actually have. For example, if there is suddenly a poodle craze across the U.S., most publishers have no idea if they have novels featuring poodles.

But give the companies a decade or so. I’ve already heard of employees coming into the companies to go through the IP and list the keywords about each property. At some point in the not-so-distant future, someone at a traditional publisher might hear about a poodle craze, and have an employee compile a list of all of the poodle IP in stock. Those books might be reissued or licensed for film or become graphic novels or t-shirts or stuffed animal poodles—and the authors might not see a dime from any of it, because of the contracts they’ve signed.

In the meantime, these traditional publishing companies are sitting on IP as if it were a gigantic pile of cash. They’re all using IP valuation techniques that give a minimal amount of current (and future) value to each book they contract. If they pay $5000 as an advance on that book, they might gain ten times that in IP valuation. Or twenty or one hundred times or one-thousand times.

So for the measly price of $5,000, that company might gain a property worth (on paper at least) as little as $50,000 and as much as $5 million. Then multiply that by all of the books contracted for in 2018 by that company, and you suddenly understand what these publishers are doing.

They’re not publishing anything anymore. They acquiring assets, and bulking up their net worth.

They’re doing it legally, taking advantage of the ignorance of others. These publishers take the original work of writers, and essentially make it property of the publishing house.

The movie industry has done that for years. In fact, a producer I worked with years ago shopped around a property of mine, and there were companies that wouldn’t even talk to him unless he signed an agreement that gave them the rights to the property he was pitching. He didn’t have those rights (I did), but he wouldn’t have done that anyway. He was appalled at the rapaciousness, even though he’d worked in the industry for forty years.

As IP becomes more and more valuable without exploiting the property, you’ll see more behavior like these publishing companies. I’ve encountered it in the gaming industry, and I also encountered it just recently from an ad firm that wanted a piece of a property that they were supposed to design ads for. (Not kidding.)

I doubt this is a phase. I think it’s the face of the future.

Writers now need more protection from this kind of behavior. You have to learn the ins and outs of copyright. You’ll have to understand every contract you sign before you sign it.

To understand copyright, start with The Copyright Handbook from Nolo Press.

To understand contracts, you’ll need the help of an attorney on the more complex ones. Agents can’t help you. They don’t have law degrees. They’re English majors. And worse, they often want a piece of your copyright for themselves.

I know many of you indies think you’re safe from all of this, but you’re not. Terms of Service sometimes give the weirdest companies pieces of IP. If you do a movie deal or end up working with someone on YouTube, you could lose the ownership of your copyright to the novel that’s the subject of the deal and all of your future work. It’s so easy to sign that stuff away.

Scared yet?

You should be.

Learn the most important part of your writing career. Learn business and copyright licensing.

If you do, that’ll give you a chance to be the Jimmy Buffett of your generation instead of The Emotions, who may have been one of the most influential girl groups of all time, but that recognition has not translated into millions of dollars.

So…while writers and editors are lamenting the possible demise of Barnes & Noble, and are actively wondering what will happen next to these “endangered” traditional publishers, the conglomerates that own those publishers are increasing in value with each book contract signed.

Traditional publishing as we knew it in the 20^th century is long dead. The possible demise of Barnes & Noble is just a last gasp of the old order disappearing.

Traditional publishing in the 21^st century shouldn’t even have the word “publishing” attached to its name. The publishing part is skimped over, so that the asset gets activated. Then it becomes part of the company’s portfolio.

Personally, I’d rather keep my own copyrights and control of my own work. I’ve lost some of it due to bad interpretations of old contracts, and I’m struggling to get those back. But you don’t have to lose any of it.

Avoid traditional publishers. Have help when you examine contracts from any company that you license your subrights to. And be willing to walk away from any deal—including those that seem like a lot of money. Remember that a lot of money to you (measured in six figures) is probably pocket money to the companies you’re negotiating with. Act accordingly.

Be confident.

Remember, you’re the one with the IP that they want.

You don’t have to sell it to them.

If you do want to work with them, partner with them instead. That will take a lot more savvy on your part, so if you don’t understand contracts, copyright, and negotiation, then you had better learn them. And don’t make any deals until you do know those things.

Good luck.

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“Business Musings: All Romance Ebooks & Visions of the Future Part One,” copyright © 2018 by Kristine Kathryn Rusch. Image at the top of the blog copyright © Can Stock Photo / nastia1983.