[Cherise]

This is one of the many reasons I would never edit for royalty share.

 

[C. Gockel]

I'm so sorry about this. I would see about letting all the authors go their own way. If you're all in a group, can't you decide to disband?

Be careful about the tax advice you're getting here. Talk to an accountant. Really. Talk to an accountant. There is a PayPal loophole and if you pay through PayPal you don't have to 1099 if they're in the US (and if you do 1099 them and they make more than 20,000k a year in PayPal payments they'll get double taxed. Scary, messed up, IRS.) I don't know about 1099ing out of country.

 

[Cherise]

I'm so sorry about this. I would see about letting all the authors go their own way. If you're all in a group, can't you decide to disband?

Be careful about the tax advice you're getting here. Talk to an accountant. Really. Talk to an accountant. There is a PayPal loophole and if you pay through PayPal you don't have to 1099 if they're in the US (and if you do 1099 them and they make more than 20,000k a year in PayPal payments they'll get double taxed. Scary, messed up, IRS.) I don't know about 1099ing out of country.

Unfortunately, it isn't other authors she's grouped with but an editor, cover provider, and formatter. I truly don't think she needs to honor an agreement the publisher made after all rights have been returned to her.

But she should probably consult a lawyer about that.

Until she can afford to consult a lawyer, in her shoes I would just set these books aside and not re-publish them. Work on new books.

 

[Elizabeth Barone]

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.

 

[sstroble]

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.

 

[ilamont]

Now is probably a good time to remind lurkers and others that:

REAL PUBLISHERS are responsible for 100% of the costs of production, distribution, and marketing. ANY publisher that relies on "royalty sharing" schemes or expects the author to foot even $1 of the bill is not a real publisher. It is a person with a website. The entire point of a publisher is that someone with competency is responsible for all of the nuts-and-bolts of the publication process so the author doesn't have to deal with it. THAT IS YOUR JOB as a publisher. It is your only job!

These idiots make the rest of us look bad.

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:

Chief Marketing Officer Katherine Sears said that she and her co-founders don't come from the publishing world, which she argued is a good thing: "We're coming at this from an unbiased and fresh perspective, but all of us have a passion and a love for books."

... But talking to Sears, CEO Ken Shear (father of TwitchTV co-founder Emmett Shear), and CTO Andy Roberts convinced me they may not come from the publishing industry, but they're plenty knowledgeable about it, and they've also thought through the details of their model."

One thing I have learned from watching several startups trying to disrupt book publishing is the interests of individual authors are often an afterthought. The subscription services Oyster and Scribd targeted readers with cheap reads and sidled up to big publishers, but didn't have anything for authors working on their own. Booktrope's vision for a new team publishing paradigm did not think adequately through what would happen to its authors if the service failed -- a likely outcome for any investor-backed startup with platform aspirations. I find it disturbing that this company had lots of money, experienced business advisors, and access to top-notch lawyers, yet they could not figure out a way to avoid the serious legal mess that individual authors (and designers, editors, and others) would have to deal with in the event of the company going belly-up. They clearly did not think through the details, and now authors like Elizabeth have a big legal and accounting problem on their hands.

Silicon Valley loves to promote the idea of failing fast, failing often, and failing hard. Founders learn lessons from failure, and failure encourages them to take risks that a normal business could never afford.

Unfortunately, its the people at the bottom of the food chain -- whether employees, partners, vendors, contractors, or content providers -- who are left behind to pick up the pieces and deal with the fallout.

 

[Guest]

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.

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.

 

[Elizabeth Barone]

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.

 

[Elizabeth Barone]

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.

 

[Elizabeth Barone]

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.

 

[Guest]

I do want to state that I don't think this was a scam on Booktrope's part.

Scams are attempts to defraud. This was simply a very, very, very BAD idea. It wasn't revolutionary. It was a person or persons who wanted the "prestige" of calling themselves a publisher without accepting the responsibilities of being a publisher. There is nothing revolutionary about convincing a bunch of people to work for free on the promise of royalties. It allowed the "publisher" to pretend they were a legitimate publishing entity without accepting any of the risk inherent in being a publisher. They allowed others to do all the work, accept all the risk, and they took a percentage of the reward.

You owe them nothing. It isn't about being bitter. It is about warning others how hilariously bad these so-called publishers with their "new paradigms" and schemes are.

Again, I repeat it. The entire point of a publisher is that the publisher is 100% responsible for the risk of publishing. ANY publishing contract that puts the risk on the author (and gods forbid, the editors, proofreaders, and cover artists too!) IS NOT A REAL PUBLISHER. If the author has to assume the risk, there is no reason to use the publisher. Self-publish. At least then you have 100% control to go along with the 100% risk.

I get worked up about this nonsense because I work very hard to take care of my authors. And when stuff like this happens, it reflects poorly on all small press publishers who have to deal with the anti-publisher fallout.

 

[sstroble]

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.

You got that right. Read an article in the 1980s of how the exact same tax situation was given to 2 dozen tax lawyers, accountants, tax preparers, and so on. No 2 of them came up with the same results after completing the federal 1040 tax form. Results ranged from the hypothetical taxpayer owing thousands of dollars to the IRS to the taxpayer being owed thousands of dollars from the IRS.
That was 30 years ago, when the tax code was over 60,000 pages. Lord only knows how many pages it is now.
Taxes are a minefield.
Look at country singer Willie Nelson. His "income tax experts" advice seemed great for a while. Then an audit by the IRS left him owing millions of dollars in taxes, interest, and penalties.

 

[X. Aratare]

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.

I'm not sure if you're considering this, but there are fees associated with sending sums through paypal. I get some amount free to send b/c I have a relatively large amount sitting with them. But have you discussed with these people who are going to pay those paypal fees?

I think its honorable that you want to pay these people, but in all honesty, this is a mess that no one needs, not even them for what sounds like a small amount of royalties (unless you're hitting it big but I'm thinking not). So really I think you should consider a different course, such as a lump sum payment as soon as you can or simply not republishing these books. Unless these books are making you A LOT of money, you're just asking for A LOT of trouble doing it this way.

 

[RedAlert]

The way I see it, your publisher knew exactly what it was doing with its contracts.  The contract is totally weighted against you.  Seek a lawyer's advice, however.

I see this as a health issue for you.  No way can you go through 5 years of hell that your currently proposed solution will turn into.  The stress could put you in the hospital.

Who told you that you are not honorable if you walk away?  I think you should walk away and write new books.  Your team took the same chance you did.  It didn't work out.  End of chapter. 

 

[Elizabeth Barone]

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.