Publisher Cheating on Sales and Royalty

I'm on the record as stating that publishing isn't a particularly civilized business. The ethics I've seen some publishers display are worse than some other industries I'm familiar with, but author fears about publisher cheating are compounded by the lack of publicly available sales data. Royalty payments, after the advance is worked off, are defined in the book contract, in terms of both the percentage paid for different kinds of sales and the schedule. Relatively few book contracts I've seen have an auditing clause that would allow the author to send a CPA into the publisher to inspect their records of book sales, and even that radical step would depend on the publisher keeping honest books.

In my own experience, when publishers make errors in paying royalties, they are as likely to err in favor of the author as the publisher. In other words, it's probably incompetence rather than cheating. Even in cases where large publishers behave unethically in business, I wouldn't expect them to knowingly cheat on sales reporting because the damage to their reputations would be very real, and the increase in profits would be marginal - they already take the lion's share. To make the reward of lying about book sales worth the risk, the publisher would have to underreport sales numbers by amounts that would make it possible to catch them at it, through comparison with Nielson Bookscan, Ingram and Amazon data. It makes much more sense for publishers to cheat authors up-front on contract terms, and if they want to lie, to lie about the type of sales. Thanks to deep discount clauses and selling books to overseas subsidiaries, publishers have plenty of room to nickel and dime authors out of royalties if that's their business model.

All that said, my gut feeling is that the vast majority of publishers are pretty honest about counting books. Interestingly, the majority of correspondence I get from authors relating to Amazon ranks and sales have been from subsidy published authors or trade authors whose books have seen falling royalties with age. When it comes to the big subsidy publishers, I can't see any reason they would want to cheat authors on sales, they've already made their profit up front on the subsidy payment for publishing the book, and the sales numbers are usually very low. I eventually had to add a note to my contact FAQ saying in essence, "Don't ask me to send you proof that your publisher is cheating you because your sales rank did a roller coaster thing and the publisher didn't report any sales." Thanks to Amazon stocking and the availability of books through third part sellers, a book that's only selling a few copies a month can move up and down by hundreds of thousands in rank without a new book being printed.

The complaints from trade authors who believe their publisher is cheating on the sales reports seem to be based on the misapprehension that Amazon sales are always a good proxy for overall retail sales. This is only the case when a book is well stocked in the big retail chains and a smattering of independents as well. Often, a new book does well enough during the first couple royalty reporting cycles, and then sales turn negative as returns come in and no new bookstore orders materialize. Whether this happens in six months or six years depends not just on the initial success of the book, but how time dependent (current events or technology) the title is and whether new killer competition from a deep pockets publisher appears. In either case, the Amazon rank may remain more or less constant from the "good years" to the "bad years" or the rank may even rise in the bad years when the book can only be obtained online. Thanks to all of the remainders available from Third Party sellers, the book can maintain a relatively high rank while the royalty reports continue to show negative sales and returns.

I've even gotten a couple of complaints over the years from authors of new books, primarily subsidy published, who are positive they are being cheated because at least a hundred people promised to buy their book but their all time sales haven't reached ten copies. It's easier for a casual acquaintance to forget an off-hand promise to buy a book than for a publisher to cheat. I should also point out that almost all of the large subsidy publishers, many academic presses, and even some large trades, use Lightning Source to print some or all of their titles on demand. I occasionally get a note from a publisher asking if I believe that Lightning Source reports the number of books they print and sell into distribution honestly, and I always say yes. I've been using Lighting Source for four years, I track my sales through various channels closely, and I've never seen or heard of any evidence that they are intentionally under counting sales.

No comments: