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Discussion Starter · #1 ·
Incoming: distressed author who needs (alcohol? chocolate? a nap?) help!

On April 29th, my small press publisher announced they were closing on May 31st and authors' rights would revert June 1st. The catch: because their model was team publishing with royalty split, the contracts we'd signed mandated that authors need to continue sharing royalties for the duration of the term. Each book's agreement was for five years.

Cue the panic attack. I'm broke. Being with small press publisher actually resulted in a hit to my income. (They didn't distribute to Kobo, and previously, Kobo was paying my bills because of their majestic indie promo list.) Re-publishing would cost me more (I had to update four books' ebook files (fees to Vellum), paperback files (free; DIY), and covers (fees to designers) to remove all instances of the publisher). I knew I couldn't afford to LLC and hire an accountant. There was no way. (Side note: some authors' team members started demanding payouts rather than royalties, which they weren't entitled to. This was another panic attack. Other authors' team members absolved authors from any further payment.)

Someone suggested I use Lulu to self-publish, because they distribute everywhere and also have a nifty feature that allows you to share royalties. But of course, there's a catch.

I'd settled up with my team -- who were all wonderful about the whole thing -- and was ready to go at midnight. I'd gone direct with Kobo (to take advantage of those promos), and logged into my Lulu dashboard just to check everything over and uncheck Kobo from the distribution list. Unchecking Kobo resulted in Amazon automatically being unchecked, too.

Apparently Lulu doesn't allow you to distribute to Amazon if you deselect "Kobo and others." This is not the first oddity I've run into with them, but I digress.

I'm not missing out on Amazon and I'm not missing out on my Kobo promos, so obviously I need to just go direct everywhere. That's fine; I was indie before the small press and I don't plan on going with another publisher ever again. This has been such a mess. But how in the world am I going to accurately calculate royalties to be paid out to several other people?

I can't afford an accountant. I seriously can't even afford a dollar pack of gum right now. Times are tough. I have autoimmune arthritis and can't work a "normal" job. My husband works full-time and it just supports our rent and bills.

I stayed calm all throughout May minus that initial crying fit, and now this. I'm on the verge of another panic attack.

I know a lot of you do box sets and share royalties. How do you do it?

Please help. Thanks in advance.

Update #1: Thank you so much to everyone who weighed in! I've contacted my team members with a more suitable arrangement for everyone.
 

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Discussion Starter · #7 ·
Tilly said:
*yikes* what a mess. I've never heard of an author having to split royalties with a "team" before.

How many people are involved?
What are the terms of their split, net or gross?
When does the 5 years run, from when the book was first published or from when your rigths revert?
What sort of accounting to them do you have to comply with? Eg: do you need to provide them with sales data on a monthly basis to show their cut?
What happens if you set your book to free, do they still get paid?
Do you need to deduct tax from their royalties and remit to the IRS?

So many questions...
Yep, total mess.

Term starts from when the publisher published the book. One was published last year, the other three were publisher in Q1 and Q2.

I'm not deducting taxes, unless I absolutely have to. I'll send payments via PayPal and post reports; they'll have to manage their own taxes the way freelancers would. I could send 1099s at end of year, I guess. I'd think the royalties would be paid net, after Amazon, etc take their cut.

Ugh. Cue the headache.
 

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Discussion Starter · #9 ·
AuthorX said:
Create a 1 page report that details the royalties earned per book and provide that report to the other authors each month.

Create a spreadsheet that lists each payout and the date that you paid the other author royalties. This should match up exactly with the statement of your method of payment (credit card, bank statement). These will go on your Schedule C as an expense.

This is very simple and doesn't require an accountant. If you're not comfortable working with spreadsheets, you are either going to have to get a friend to help you or hire an accountant though. If you're operating as a sole proprietor you must report this stuff on your taxes.

Overall, it shouldn't take you anymore than 5-10 minutes per month to do this if you're organized. And as the others said, you should be publishing everything direct that you can. You probably want to invest in Vellum Unlimited rather than paying for file updates each time, and I personally would not work with a designer who did not provide me the PSD files for my book cover so you do not have to worry about paying for a text change.
Thank you.

I love spreadsheets, but I'm math-challenged. This is why I write books, haha. I have books that were not involved with the publisher. Feels like figuring out income by book -- there are different team members for each title -- is going to be such a nightmare. I record sales on a spreadsheet already as they hit my dashboard, estimating royalties.

It'll be okay. *breathes into paper bag*
 

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Discussion Starter · #11 ·
Tilly said:
The tax situation will depend where the other team members are resident. If they are non-US then you will be responsible for deducting appropriate withholding taxes and remitting to the IRS. At a minimum you will need to do the annual 1099 and keep the appropriate records.

You really need to look at your contract to see your exact accounting and legal obligations toward these people so you can set up a system to see you through the next few years.
Eesh. More math.

That's the thing; there's nothing in the contract about the publisher dissolving. Nothing. It's insane. Their lawyers told us because we'd signed an agreement with the team, separate from the author/publisher agreement, that team contract still stands. Third party lawyers agreed or disagreed, depending on how they interpreted it. The publisher basically dropped the news on a Friday night and left us to fend for ourselves. I'm just grateful I know how to self-publish; so many authors are totally lost right now.

I want to compensate my team. I really do. But this is almost above and beyond my own abilities at the moment. I'll figure it out. I always do. But what a mess.
 

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Discussion Starter · #12 ·
Basically, the creative team royalties break down like this:

Author (me) receives X% of royalties from books 1, 2, 3, 4;
Team member A (editor) receives X% of royalties from books 1, 2, 3, 4;
Team member B (cover designer 1) receives X% of royalties from books 1, 2;
Team member C (proofreader 1) receives X% of royalties from book 3;
etc.
 

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Discussion Starter · #24 ·
Thanks everyone.

The publisher was Booktrope. Yes, there was a thread and there are support groups on Facebook. My problem is not figuring out contracts. As far as the language of the contracts, if anything*, authors are responsible for continuing sharing royalties. That's the arrangement I've discussed with my team members and I intend on doing that. I'm sorry but I'm not going to just tell them they're out of luck -- at least not 'til I've done everything in my power to try. These people are professionals who worked hard on my books, and they're now out of a job too. So it's pretty cold to just tell them they're SOL. I'd also like to continue working with them on future projects, which won't happen if I burn bridges.

I could offer to buy them out based on past royalties. Then I wouldn't have to figure out this accounting stuff. I know zero about 1099s and taxes, and as someone pointed out, that could be serious trouble. I can't afford that either. So I think that's the offer I'm going to make at this point. I'll have to arrange payment plans, but I just can't do lump sums.

I do want to state that I don't think this was a scam on Booktrope's part. The dissolution was handled poorly -- authors were only alerted four weeks ago that they were closing -- but staff was incredibly helpful in assisting everyone close up. It was just a revolutionary idea that ultimately failed. It happens. Publishers close all the time. I'm really not into getting bitter and analyzing everything to death, which was why I didn't mention their name. I really just needed to know how those who manage box sets and whatnot handle splitting royalties.

However, I can say this is a lesson learned. If you go the publisher route, question the contracts. What happens if the publisher closes? This was not addressed in my contracts and I didn't think to ask. I didn't know better. Now I do. Lesson learned the hard way -- but I'm pretty sure I'll remain indie 'til I die at this point. I like control too much.

--

*This is debatable depending on the lawyer you talk to.
 

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Discussion Starter · #28 ·
Tilly said:
Get a lawyer to look at the contract. Did you contract directly with the team members, or did you all contract with Booktrope? I'm struggling to see how the dissolution of Booktrope can enforce a contract against you. As I said, if Booktrope disappears all contracts should be dissolved at you're starting from a zero position again.

But that point aside, since you want to carry on the arrangement, you will need to get professional accounting advice. This is a 5-year commitment and you need to get all the reporting and tax matters correct or you're creating a potentially bigger nightmare for yourself.

Personally, since this involves 3 books (and 2 & 3 aren't yet published, is that right?) and unless book 1 is a major seller for you, I'd be shelving the entire series and not republishing them. Explain to the team you simply can't afford to continue the royalty split arrangement so the books won't be published under your imprint. Then if you want to work with the team members on other books you can do it like the rest of us, payment up front.
The contracts with team members -- again, depending on who you ask -- were essentially set up with Booktrope as the middle man; the agreement between the author and creative team continues for its term if the publisher closes. I really am not concerned about whether the contract is still in place. There was so much debate about this, with authors refusing to pay anything at all and team members demanding exorbitant lump sums. I came a decision that I thought worked for both me and my team members.

But obviously paying out royalties for the next four and five years, respectively, for four separate books would be tricky and potentially get me in trouble with the IRS, if I make any mistakes. Which I probably will. I can't afford to LLC and hire an accountant. So I am offering lump sum payments, in regular installments, to my team members based on past royalties. I'll pay via PayPal, just as I do for any other freelance work.

What a mess. It's so good to be indie again.
 

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Discussion Starter · #29 ·
sstroble said:
Elizabeth:
Your story reminds of what an author published by a big NYC house said at a seminar. She had a difficult time and had to fight to get the rights back for her books after they went out of print. There was something in her contracts about the publisher retaining the rights to her books for X number of years (can't remember how many years). So, contracts can prove messy, just like your situation. At least all the rights reverted back to you in your case.
At least you are trying to be fair with those who helped you with your books. Integrity is hard to find these days.
I really am. These are great people. Some authors had trouble finding team members, and I went through my share too, but my team's work was high quality. And they're all just amazing people in general. I really can't stomach not at least trying. I've been screwed so many times. I know it's not my fault that Booktrope closed, but my actions in the aftermath are in my control, if that makes sense.
 

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Discussion Starter · #30 ·
ilamont said:
Booktrope is not a typical small press -- it's Y Combinator-backed startup that raised $1.2 million dollars one year ago, and additional amounts from other investors since the early teens. It modeled itself as a "platform" as opposed to a publisher, and like all investor-backed startups had a grand vision to achieve scale, disrupt the industry, etc. Founders crowed that they did not have a publishing background...
^ THIS.
 

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Discussion Starter · #35 ·
Update #1:

Thank you all so much for your advice and input. You're right that the stress on my health would be too much! I've reached out to all of my team members and offered to buy out their contracts based on projected earnings (calculated by their past royalties). This was the only fair, legit way to wrap everything up. So far all but one have agreed to the new terms; I haven't heard from one of them, but I'm sure she is just very busy and plan on reminding her again. (She wanted a lump sum in the first place, so I foresee no issues with arranging this with her.)

After some more thought, I do have to agree that this whole business feels... questionable, to say the least. I'd like to hope that it wasn't on purpose, but the more I learn, the more I have to wonder. Maybe it was an honest attempt at revolutionizing the business. But it seems that no one won, in the end.

Let this be a lesson to all authors. I had professionals look at my contracts, but none of us questioned what would happen should the publisher go under. Question everything. Don't be afraid to negotiate contracts. And don't sign rights away for more than three years. Five years is an eternity in the fast-paced publishing industry. Lesson learned (though as I said, I'm never leaving indie pub again).

Anyway, onward and up! I've never been one to dwell or stew -- but I don't make the same mistake twice. All of my books are back on the market and I'm back in the indie game, which feels like coming home. I've maintained relationships with my team members, and we've started new projects under more fair arrangements for everyone. One foot in front of the other. I have a new release coming this summer!

Thanks again for all your help. I'll keep you posted, but I think this is my happy ending.
 
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