Business Musings: The Growing Importance of Intellectual Property (Planning For 2019 Part 6)
I need to be clear as I start this post. We writers create intellectual property. We license our copyrights. We do not sell stories. In fact, the stories we tell, along with their titles, are often not copyrightable. The form in which we tell that story—the order of the events, the order of the words we use,—those things are copyrightable, but the basic boy meets girl, boy loses girl, girl discovers she’s fine on her own storyline can and does fuel a thousand books and movies. (That’s why so many memes over the holiday season made fun of the romance movies on Hallmark. Because the movies—all copyrighted in their own right, all different in the copyright sense—share a lot in common.)
If you don’t understand copyright and you consider yourself a professional writer, then you do not understand the business you are in. If you have published a novel, traditionally or indie, and you do not understand copyright, you are volunteering to get screwed over and over and over again. I say this often, and I’m saying it loudly again, because the trend for 2019 and beyond is that every organization you do business with will try to take a piece (if not all) of your copyright on each and every one of your projects.
Your job is to protect that copyright. Your first step, if this is news to you, is to pick up Nolo Press’s The Copyright Handbook. Your second step is to read the damn thing. Your third step is to read it over and over and over again until you understand it.
I’ve been teasing you about this post throughout this series because almost everything I’ve written about points to this topic. I’ve separated it out because it’s that important.
And one of the reasons it’s becoming more important is that place we are in the disruption of publishing and where we will end up. Please see the first post in this series about that disruption because I’m not going to repeat myself much here.
I am, however, going to (again) share the chart that Dean drew for me (I’m art-challenged) which shows where we’ve been and where we’re headed. The old S-curve refers to traditional publishing; the new S-curve refers to indie publishing.
We are at the point in the disruption where the two S-curves cross. Note that the traditional publishing S-curve plateaus and then drops off on this drawing. That’s what happens if the old business in a disruption cycle can’t figure out how to handle the disruption.
That’s what’s going on in a lot of traditional publishers right now. That’s why we’re seeing a lot of mergers and closings and trimming of various imprints. I wrote about that trend in the previous post. That’s why so many traditionally published writers wake up one morning to discover their publisher is either going out of business or dropping the book line that has their books in it.
It has gotten so bad that Forbes actually published an article in fall of 2018 titled “What Authors Should Do When Their Publisher Closes.” You can click over there if you want. The advice isn’t good, because as someone in the article says, what an author should do varies based on the author’s contract. And if the author has an agent, then they’re probably screwed. If the author doesn’t understand copyright, then they’re definitely screwed.
Because they signed something bad years ago that is now going to bite them in the ass.
Surviving that chomp to the buttocks is going to take resilience and a willingness to forgive yourself. Most writers jump right back into traditional publishing after this, having learned nothing. Don’t be one of them. Learn copyright and contracts. This short post of mine should get you started on that learning.
I recommend publishing indie, because that’s the best way to protect yourself and your writing income. You’ll have a career if you do that. Your career might vanish on you if you try to remain traditional. Or, rather, you will write as a “hobby” while you make your living doing something else.
Yes, I’m being harsh, but that’s because the intellectual property apocalypse that I’ve been warning you about is upon us. The trends are there, and the signs that traditional publishing (and all of the other big entertainment organizations) know about the value of intellectual property are becoming clearer and clearer.
For the sake of my little fingers, I’m going to use the acronym that everyone else uses for intellectual property from now on. IP. Got that? And for those of you who are new to this blog, I use the phrase “indie writer” or “indie publisher” to refer to what you probably call self-publishing. True self-publishing isn’t being done much anymore. Writers are hiring people to help with covers and copy edits and other things. Better to acknowledge that the writers are running a small business with contractors helping along the way. Hence, indie. Got that?
Here we go again.
Signs? What Signs?
For years now, the Big 5 traditional publishers have had contracts that essentially transfer the entire copyright of a novel from the author to them. The contracts don’t say that explicitly, but when you read the contract as a complete document (which is how you should read it), you realize that the sum total of what the clauses mean is that the writer retains no part of the copyright, and is only entitled to a tiny percentage of the money that copyright earns.
The reason these contracts changed about a decade ago had nothing to do with publishing and everything to do with mergers. As these publishing companies became part of big international conglomerates, many of them entertainment conglomerates, the legal teams redrafted the contracts to do the copyright grabs.
Most writers had no idea what they were signing, and most of their agents didn’t either. Agents are not trained lawyers. A handful of the big agencies have lawyers on staff, but most of those agencies are concerned with making the agency money, not with making the writer money. So a lot of the contracts are structured to pay and protect the agent, while bilking the writer. (I’ve dealt with this a lot over the years, most recently with the Donadio and Olson mess. Oh, and sidebar! Just before Christmas, that agency declared Chapter 7 bankruptcy, which will probably make it impossible for their writers to recover any of the funds owed to them.)
Up until a year or so ago, most of the Big Five continued to operate like traditional publishing companies have since the 1990s—a focus on publishing a lot of titles, hoping that some will stick and become bestsellers. But that strategy isn’t working, and sales are down precipitously, which I dealt with in the second installment of this series. If you haven’t read that, read it now.
Only one company has had some foresight into maneuvering its way into the 21st century entertainment ecosystem, and that’s Simon & Schuster. A lot of the practices that the other Big 5 are implementing now were part of S&S’s corporate vision as long ago as the year 2000. I know that because I have one contract with them still that I can’t get out of (easily), and it dates from that period of time. They caught me, and I was stupid, and I’m still paying for it. (Mostly.)
S&S has been in a media conglomerate since the 1980s. I’m not going to go through its tortured history, which runs from Paramount to Viacom and beyond, but realize this: It became part of the CBS Corporation officially in 2005. Around then, it became impossible to get book rights reverted, which is one of the tricks that is recommended for writers in the Forbes article I cited above. (How 1995. Sigh.)
S&S has experimented with electronic books since the 1990s. Dean and I personally made a lot of money in the early 2000s when S&S realized they hadn’t licensed e-rights for Star Trek books. (Dean and I wrote a bunch of them in the 1990s). S&S has tried to have a self-publishing arm since 2012, and they’re doing a lot of things that require writers to pay for services that publishers used to provide. (This is taking a leaf out of the playbook of the major music companies.)
S&S is the one traditional publisher that I look on as a bellwether. They did their consolidation and merger stuff during the Great Recession, and now they’re working hand in glove with their corporate masters to acquire as much IP as possible.
Let me back up a bit and talk about acquiring IP. This is a short course.
The economy in the developed world is changing from a manufacturing (and hard asset) base to intellectual property and intangible asset base. According to Forbes list of top IP valuation firms (in 2017):
The world has changed dramatically in the past several decades with more and more of a company’s value attached not to factories, machines, or hard assets but rather the companies’ ideas, processes, and designs – their intellectual property.
The more IP a company acquires, the more its value goes up. Even if they don’t create anything from that IP. Acquiring a novel’s copyright—with all its potential spinoffs, TV shows, toys, comics—increases a company’s value tremendously.
Read that paragraph again, because the information therein is the key to this whole piece.
The more IP a company acquires, the more its value goes up. Your novel is IP. If they acquire it, their bottom line goes up, even if they never do anything with that IP. Got that?
That’s why S&S stopped, in 2000 or so, reverting the rights to the novels they acquired. Those novels equal more earnings potential—and they allow the company to maintain a value that it wouldn’t have otherwise.
I’ve been warning writers about this copyright grab by corporations for some time, but it was easy to ignore me because the Big 5 have not been (for the most part) exploiting (the legal term for developing or making use of) that copyright.
S&S finally is. That’s what Simon & Schuster’s CEO Carolyn Reidy’s heady year-end report was really all about. She called 2018 “the most successful year in Simon & Schuster’s history,” and yet she didn’t cite a single print bestseller as something that caused the success.
Instead, she touted the rise in audio (which I dealt with in this series a few posts ago) as well as a mention that sent a little shiver through me.
…[backlist sales now] comprise a higher portion of our revenue than at any time in memory…while readers wanting the tried and true is an industry-wide phenomenon, our concerted effort during the last few years to acquire books with the potential for long-term backlist sales has yielded dividends.
This article does not specify what exactly she means by “backlist sales.” Does she mean actual ebook and print sales, or other licensing, such as foreign rights and so on? Clearly S&S is exploiting the audio rights clauses in their contracts.
What is clear, however, is that a big traditional publisher has finally figured out that not only does their backlist have value in raising the company’s worth, but it also has earnings potential that can be exploited in 2019.
Why does this send a chill through me? Because if one traditional publisher learns it, the others will learn it as well. And the ability of writers who have sold their work into traditional publishers to get the rights reverted will go down to almost nil.
Big traditional publishers will finally join their counterparts in the entertainment industry—the movie/TV companies, the music studios, the game companies—in demanding control of every aspect of the copyright from the original author.
Which means that if an author signs one of those agreements, the author will get pennies on the dollar (if that) for any rights—audio, movie, TV—rather than the kind of earnings writers could have gotten as recently as 10 years ago.
You indies are now smiling, thinking this is a traditional published writer problem. It’s not. Any time you license your work—whether it’s for translation or for audio, for games or for the movies or even some electronic and paper—you’re going to have to fight against these copyright grabs.
And those of you who licensed mass market rights a few years ago, thinking you’d get your ebooks into stores, you probably already signed away most of the copyright, particularly if you went with Harlequin or Simon & Schuster.
I don’t blame these mega corporations for grabbing copyright from unsuspecting writers. It’s a great way to increase the value of a company, which is the job many of the negotiators for those mega corporations (and their subsidiaries) are tasked with.
It’s your job to hang onto as much of your IP as possible. Which means that you will have to walk away from some of the deals that you’re offered — even six-figure deals. (At seven and eight figures, you’ll have to figure out if it’s worthwhile to lose the copyright for that amount of money. That’s personal. Dean and I differ as to where we can be bought, as do many other writers, some of whom never sell their work into movies & TV for this very reason.)
A lot of talent and literary agencies demand that you license a portion of your copyright to them before they will consider representing you. Or, if you’re trying to get a movie deal, before they read your book.
This is why I tell writers not to market their works into the movie/TV industry. That industry makes traditional publishers look like the slackers that they are.
Some terms of service for new companies, like ebook distributors, sometimes make copyrights grabs. (Although many got called on it and have backed away.) I’m sure that new companies investing in new tech that I can’t even imagine, stuff that will become essential to our lives ten years from now, will also make the same kind of copyright grabs. App developers did five years ago.
The future has arrived when it comes to copyright grabs. Once traditional publishing has figured it out, then everyone has it figured.
It’s up to you to be as careful as you possibly can. To do that, you need to understand this stuff.
And I haven’t even gotten into the other aspects of IP valuation, such as how it impacts your company’s worth even if you’re not selling a lot of books. It will really have an impact on the worth of your estate. That hasn’t shaken out yet, but might within the next five years.
I call this the most important post of the series, because if you do not understand what I’m talking about here and do not follow my advice on learning all about this, then you will get screwed.
In the past, I would have said you would probably get screwed. But I’m not hedging that bet any longer.
This is the way the business will operate from now on. You need to understand that, and change your behavior accordingly.
Welcome to the future.
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“Business Musings: The Growing Importance of IP (Planning for 2019 Part 6),” copyright © 2019 by Kristine Kathryn Rusch. Graph in the center of the blog copyright © 2018 by Dean Wesley Smith. Image at the top of the blog copyright © Can Stock Photo / andrewgenn.