Since my legal victory in 1990 over Oxford University (Press), and even since the TLS's publication (April 2nd) of my War for Jericho, I have received a number of enquiries from other authors, some anonymised, about questions of publishing law. One (OUP) contract I have recently seen, under Royalties, includes the following clause:
"Editions sold in sheets
On all sheet copies sold 10% (ten per cent) of Net Receipts from such sales."
Alongside, the author has plaintively written "What is this?"
For his benefit and that of all similarly mystified authors, I believe I can answer this question, for during the legal proceedings of 1991-92 to assess my damages, the very subject was aired and explored in some detail.
But first, some history. Way back in the good old days of the 1980s, the generally-quoted (for example by the Writers' and Artists' Yearbook) trade norm royalty for a hardback book was ten percent of its published price. From every sale of a book that retailed at £10, its author would get £1. During the subsequent decade, however, publishers generally started switching from published-price-based to net-receipts-based royalties, that is, to percentages of the book's discounted price, the price paid to the publisher by the book's bulk wholesalers and retailing chains. The reason given for this switch (again quoting the WAY, of 1984) was "because many publishers' accounts are now computerised there is a trend towards paying the royalties on the price received, which can easily be read from a computer printout," and throughout the changeover it was repeatedly stressed that authors' incomes would remain unaffected: "appropriate [upward] adjustments are of course made to the royalty figure and the arrangement is of no disadvantage to the author."
By 1991, the word "disadvantage" in this cheery assurance had become ominously qualified by the word "intrinsic," and no literary agent, given the choice between a published-price and a net-receipts deal, normally opts for the latter. A clue as to why this is so, and perhaps the first recorded admission by a publisher of the modern author's true position, emerged during my damages hearing. My (1985) agreement with OUP's editor had been for me to be paid "a fair royalty" on a book planned to retail at £15, so I assumed this would mean a straightforward royalty of £1.50 per copy sold. Neither I nor the adjudicator (Chancery Master Barratt) properly understood the reason for OUP's repeated insistence upon a net-receipts calculation, so when the two methods produced different totals, Oxford's counsel, Harvey McGregor Q.C., was obliged to explain why (see also McGregor on royalties):
Malcolm: I thought we had agreed that it didn't matter which system you choose, so long as the percentages are correct.
McGregor: You may have agreed, but I hadn't agreed.
Malcolm: Oh, I thought the courtroom had agreed.
Barratt: And so did I. I had put forward the proposition that as long as the percentage figures came to the same eventually, it did not matter by which route. But these two examples do not come to the same result.
McGregor: I think one of the reasons is because you don't know what the net receipts are, and therefore sometimes you might do better, and sometimes you might do worse.
The 'net-receipts' issue became even thornier when applied to 'sheet-dealing,' a practise raised by one of my book-trade witnesses, who outlined it thus:
"Among the many advantages to the publisher of net-receipts contracts is the fact that they make possible what is called a 'sheet deal'. In this, a multinational publisher of, say, a 10,000 print-run, can substantially reduce its printing costs by 'running on' a further 10,000 copies (that is to say, printing but not binding them), and then further profit by selling these 'sheets' at cost-price or lower to its overseas subsidiaries or branches. The author will get, say, 12.5 percent 'net receipts' of this artificially-deflated sheet deal, while the overseas subsidiary then binds up the sheets and sells the book at full price and a nice profit, of which the author gets zero."
This scam came uncomfortably close to home when one of Oxford's witnesses, the Managing Director of Routledge*, testily admitted that his company negotiated deals with its overseas branches at a whopping eighty percent discount, and when the English edition of one of OUP's own books, upon which my royalties were to have been modelled, was found to feature American spellings. When OUP was ordered by the court to produce the sales records for the book, it argued, unsuccessfully, that it was unable to do so because OUP (USA) was "a separate Delaware Corporation."
The more one thinks about it, the more one realises that such 'sheet-dealing' can come pretty close to legalised piracy, and its respectable practitioners pretty close to the back-street copyright-infringers of Bombay and Shanghai whom western diplomats are presently so anxious to bring to heel. My original mystified contractor does not record what response, if any, he got from Oxford to his plaintive question. My own, as usual, is caveat auctor. Now go to: Englade & Simpson vs. HarperCollins. Report in The Authors Guild Bulletin (USA) of Spring 2003 concerning two authors' 'class action' victory over HarperCollins' excessive discounting of books to its foreign affiliates (akin to sheet-dealing). Also see Can they do that? Article by Nicola Solomon in The Author, Spring 2003