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01 September

Time flies when you're otherwise engaged. Sometimes. Whatever. In any event, my legion of fans (both of them) reminded me that it had been several days since my last posting.

Another general statement of legal principles that may prove of use to writers. Remember, this is not legal advice for your particular situation.

In the last three weeks, I've seen five mentions of a "back of the check" publication contract. As a substitute for a regular contract, these include a variety of clauses stamped on the back of the check; the front of the check usually includes a statement to the effect that endorsing (signing) the check constitutes acceptance of the terms. In one of the five cases, the material on the back of the check purported to transfer the copyright of the article.

Not so fast.

First, a "choice of law" caveat. Not all states will treat this the same way. Since the publishing industry, for good or (mostly) for ill, is centered in New York, New York law is most probably relevant. However, some states treat any commercial paper (lawyerese for checks; if you're not in commercial banking, you don't need to know more, and if you are, you already do) negotiated within their boundaries as subject to their own law, so Article 3 of the Uniform Commercial Code (plus certain other provisions) may control. Thus, this is not even a universal general explanation of law.

Those of you who follow publishing at all—or even this journal—have heard of Tasini v. New York Times, a highly significant case on electronic rights that is at this microsecond on appeal to the United States Court of Appeals for the Second Circuit. Most of the "action" and publicity surrounding Tasini concerns electronic rights, and when and how those rights are distinct from first serial rights. The less-publicized part of the lower court's (S.D.N.Y., Sotomeyer, J.) opinion concerns publishers' attempts to grab electronic rights with "back of the check" stamps. Applying New York law, the district court found this a no-brainer: the "back of the check" contract provisions were void.

Even aside from the state-law issues, a "back of the check" stamp is probably insufficient to transfer the copyright under the Copyright Act of 1976. Generally, the check does not contain anywhere near an unambiguous description of the underlying property (most often a nonfiction article, but sometimes a piece of fiction), one of the core requirements of the Copyright Act. I advocate a fairly strict construction of transfer requirements (as does my judicial "home," the Seventh Circuit), which seems the only consistent way to interpret a law that explicitly makes it rather formal and difficult to transfer the copyright. Logically, transfer of less than the whole shouldn't be any less formal than transfer of the whole; the definitions in the first few sections of the Act, although far from crystalline in their clarity, do not support the expansive view of "easy transfer" advocated by certain segments of the publishing industry.

So, what's the bottom line? There are methods to deposit funds without an endorsement, which should be used while this gets finally decided through Tasini—say, by 2004. In the meantime, writers should reject these "contracts" by explicitly objecting. Failure to object help may make it an "industry standard," which will muddy the waters considerably.

Publishers (including ezines) who have any sense of ethics, morality, dignity, or respect for the material being published should refrain from using "back of the check" contracts for any purpose. On the other hand, publishers who do not have any sense of ethics, morality, dignity, or respect for the material being published should remember that there are plaintiff's-side attorneys like me out here. Eventually, we're gonna getcha. Under the Copyright Act, guess who gets to pay the plaintiff's attorney's fees when the publishers eventually lose? And I'm not that expensive if I'm the one to take the bad guys down; partners in New York law firms that handle this kind of matter bill out at $350-$375 an hour on both sides of the v. Plus costs.

02 September 1999

A short musical interlude:

One might infer some measure of my dubious sanity from the play list we're listening to at the moment. We started off with J. Marshall Hendrix's "All Around the Watchtower" (I can't stand Bob Dylan's version); veered off into Beethoven's Grosse Fuge and the piano sonatas opus 111 and opus 31 number 2; careened toward to the late 20th century with three from the Indigo Girls and three from Fairport Convention; started sliding backward in time with the second side of Renaissance's Ashes Are Burning (bass on maximum gain), Prokofiev's Alexander Nevsky, a little Borodin, a little Brahms; went into orbit with Rick Wakeman and Emerson, Lake, and Palmer; and finally settled down with some "hard folk" from Pentangle, Steeleye Span, and the gentle sonority of Pink Floyd.

Yes, that's writing music. I'm working on some real speculative fiction: the complaint is up to 16 counts in 71 pages. I don't even want to think about what it's going to cost to serve this sucker on 27 defendants. But I'm just consulting on this one; the plaintiff's local counsel doesn't know RICO, so I'm only "helping out."

Just remember: people with multiple personality disorder are never truly alone. Bwahahahahaha!

04 September 1999
Another One Bites the Dust

Imagine Queen's hit (I never liked the song, but it was played so many times on the radio when I was in college at the end of the disco era that I can't forget it) played very loudly in front of the federal courthouse in Lexington, Kentucky. Does the name "Deering" mean anything to you? How about "Sovereign Publications"?

Let's try categories, then. Alex, I'll take "Literary Scams Under Federal Criminal Indictment" for $9,000-$17,000 per customer, please. For a general description, try Nicholasville Family Facing Fraud Charges (Lexington [Ky.] Herald-Leader, September 4, 1999). Sometimes—just sometimes, mind you—federal prosecutors take time out from chasing minor-league drug dealers to deal with broader issues.

Scamsters, we're gonna getcha. And another one gone/and another one gone/and another one bites the dust . . .

In unrelated news, a selection of this year's Hugo winners:

Novel	Connie Willis, To Say Nothing of the Dog
Novella	Greg Egan, "Oceanic," Asimov's August 1998
Novellette	Bruce Sterling, "Taklamakan," Asimov's October 1998
Short Story	Michael Swanwick, "The Very Pulse of the Machine," Asimov's February 1998
Nonfiction	Thomas M. Disch, The Dreams Our Stuff Is Made Of
Campbell Award (technically not a Hugo)	Nalo Hopkinson

Initial comments: After the "A" magazines (Asimov's, Analog, Amazing, SF Age) got shut out at the Nebulas, one of them swept short fiction in Australia. Both phenomena bespeak a lot of politics. The complete disjunction between the Nebulas and Hugos fairly screams for someone—probably the SFWA, as the junior sponsor—to swallow its pride and change eligibility rules so they're identical. Really, guys. Even the Pulitzers, NBAs, and NBCCs use the same eligibility calendar, and most of those voters won't even visit the same restaurants. Such a change would be for the good of the field. However, there are too many bloated egos on the line, so it won't happen during this geologic era.

07 September 1999

The following material is from public records, provided by the office of the Clerk of the Court.

99-CR-0076	United States v. Deering, et al. United States District Court for the Eastern District of Kentucky
Defendants	Charles Deering, Dorothy Deering, Daniel Craig Deering, William Watson
Indicted	September 3, 1999
Conduct Charged	Multiple violations of 18 U.S.C. § 1341 (mail fraud) Multiple violations of 18 U.S.C. § 371 (conspiracy to defraud the United States)

The defendants in this matter are believed to have done business as Sovereign Publications, Deering Literary Agency, Daniel Craig Literary Agency, and Appaloosa Press, although it is possible that not all defendants participated in each business organization. None of the business organizations are indicted as defendants in this matter.

Further updates as they become available.

Viacom, the owner of Paramount Pictures and Simon and Schuster trade books (which includes Pocket Books, among other imprints) proposes to spend over $35 billion—with a B—to acquire CBS and all of its subsidiaries. Maybe we'll see Star Trek^tm reruns after Letterman.

This is, again, bad news for authors and the book-buying public. The "street value" (market capitalization plus issued debt) of the new conglomerate will be around $83 billion, give or take a couple billion dollars. This is a combination of both horizontal and vertical integration that should raise serious antitrust concerns, which will ultimately get blown off by the FTC and DoJ. It gives a single entity cradle-to-grave control over anything Star Trek ^tm that has a story attached to it. This will significantly depress author compensation, and will probably result in eventual centralization "to eliminate administrative duplication, take advantage of economies of scale, ensure a consistent approach to the valuable [Star Trek^tm] mark, and maximize shareholder profits." (That is a quotation from a news release from another media consolidation earlier this decade.)

Yeah, I'm convinced.

08 September 1999
Pyramids, Part I

Pyramid scheme (also known as Ponzi scheme, after Charles Ponzi)

A fraudulent scheme for inverse redistribution of wealth through creation and redistribution of "memberships." Common examples include chain letters and email, many "multi-level marketing" organizations, and "mailing list generation" operations. The test for a pyramid scheme is whether a nonoriginating participant must recruit new members of the operation in order to at least recoup his or her initial investment. The only individuals who can make money (even in theory) in a pyramid scheme are the originator and early participants, who are receiving shares of membership fees; this assumes complete honesty in the actual operation of the scheme, which itself is rare. This is because the number of potential new members is finite, but each member must recruit new members to recoup his or her investment. The chain eventually runs out of potential new members to pay membership fees to the previous generation of members, leaving someone other than the originator of the scheme having paid a membership fee without recoupment. A pyramid scheme is fraudulent under both federal law and the laws of all fifty states, the District of Columbia, and Puerto Rico if it meets this test, even if the scheme offers or creates a product or service with a nonzero value (such as a "validated mailing list").

Commercial publishing is starting to resemble a pyramid scheme in many respects. This will take a little explanation, spread over a few days.

The actual trade-book-buying public is fairly limited. The vast majority of trade sales are to a small minority of the population. The pyramid-scheme aspects of commercial publishing become apparent when one looks not at the steak, but at the sizzle.

Of the small minority that makes the bulk of trade purchases, a significant (but indefineable) proportion make purchase decisions independently of all marketing efforts. Due to consolidations in the trade publishing industry, a significant (but indefineable) proportion of the remainder ends up routing its money into the same corporate pockets, because several publishing categories are dominated by only a few corporations with several imprints each. As an example, consider the "romance fiction" market, which replaces titles even faster than speculative fiction.

Which leads to the $6.95 mppk/$15.95 tppk/$25.95 hbk question: Does marketing realistically make a difference, or is the "competition" only illusory? As we'll see next time, some of both.

The suspense is terrific. I hope it lasts.

12 September 1999
Pyramids, Part II

One of the truisms of marketing is that only 10-20% of every marketing dollar actually results in greater sales. The problem is that nobody really knows which 10-20% is effective.

This statement is probably true under the standard of the FTC Act—the unsophisticated consumer. However, the core book-buying public is not the "unsophisticated" consumer. Those academic studies that have been done in the area tend to show that advertising is even less successful with sophisticated consumers, with one exception: marketing and sales professionals tend to be more susceptible to advertising, because it is higher in their awareness.

So, where is this going? Like Deep Throat said, "Follow the money."

The top people, and certainly the best-paid people, at any media-conglomerate publisher have sales-and-marketing backgrounds, not editorial backgrounds. The way to impress sales-and-marketing people is with slick sales-and-marketing materials—soundbites, slogans, logos, shiny colors, and so on. Thus, the lower-tier sales-and-marketing people are most interested in finding the "sizzle" of a book. A book is treated like, say, a box of laundry detergent. Since this is also what impresses the boss, editors believe—all too often, rightly so—that the initial ease of the sales-and-marketing campaign matters more than the quality of the product.

That's one circle. Another circle comes from the theory of marketing categories. For every brilliant new kind of product, there are forty or fifty that flop. That's not a winning percentage. Thus, as long as immediate sales—the kind that accountants can easily ascribe to particular line-items—are the measure of publishing success, sales-and-marketing has a built-in incentive to make new books seem just like books that have already been "successful," but "new and improved." Again, with sales-and-marketing at the top of the pyramid . . .

A couple of years ago, when Wizards of the Coast bought TSR, I predicted that there would be another change in control by the end of the century. Just in time, Wizards of the Coast has been sold to Hasbro. Elsewhere in the tangled web of the new corporate structure one will find Lewis Galoob Toys. That's right—the licensee for Star Wars^tm action figures, among other plastic things. Hasbro will now become a direct competitor (with its awful, but popular, Dungeons and Dragons spin-offs) of Viacom/CBS and Bertelsmann GmbH. The Bertelsmann connection should be the most interesting, since Bertelsmann now owns both the "old" Star Wars^tm literary licensee (Bantam Doubleday Dell) and the new one (Ballantine/Del Rey).

This is starting to sound more and more like Japanese real estate. And, for that matter, the old utility and industrial holding companies (see, e.g., Frank Norris, The Octopus). Which were the immediate cause of the Sherman and Clayton Antitrust Acts.

Maybe I should ask for a guest shot at the "Connections" column in Scientific American.

15 September 1999
Pyramids, Part III

So, how is this description of publishing—run by sales-and-marketing, selling to sales-and-marketing—similar to a pyramid scheme? Showing it in symbolic notation makes it clearer:

Income = Sales_s&m + Sales_non-s&m

So, given that marketing efforts do not significantly increase Sales_non-s&m (sales to non-sales-and-marketing customers), the only way to significantly increase Income is to significantly increase Sales_s&m (sales to sales-and-marketing customers). There is probably a limit to how much each sales-and-marketing customer will spend on entertainment, not all of which goes to books. So, at some point, the proportion of sales-and-marketing persons in the economy must increase.

Everyone who noted that this sounds a lot like the sale of "memberships" in a pyramid scheme may put a gold star on his or her report card.

That points to the real barrier for print publishing: It is a mature industry and market, at least in the United States. Literacy isn't going to increase much further, and the contemporary United States already has the highest proportion of "entertainment" income spent on the printed word in recorded history. In the past century, not one company based in a mature industry and market has significantly increased in size, either as a proportion of the measureable economy or in market capitalization. Instead, all of the growing companies purveyed new products and services.

One other interesting aspect is that the media conglomerates demand that each division maintain a profit margin and return on equity that exceeds the market average. That conflicts with the nature of the print-publishing industry. And that points to eventual spin-off of print publishing from the media conglomerates, or at least business opportunities for non-conglomerate-based publishers. The recent rumblings that the Simon & Schuster trade imprint may be either spun off or sold to another conglomerate may be the first leak in the dike. I, for one, will not be plugging leaks with my fingers.

16 September 1999

Well, Time (the magazine) is hiring illiterates to write about literature. I suppose that I should be happy that Harry Potter made the cover of Time. But I'm really appalled by the shallowness of the article itself. It is just riddled with factual errors. For example, the article includes a table "summarizing" a number of classics of children's fantasy. The choices are, themselves, somewhat depressing. No Madeleine L'Engle, or Lloyd Alexander, or Ursula LeGuin. Instead, Time chose Lewis Carroll—and based its summary on the Disney movie version. The last entry in the table is labelled "moral," but two of the entries are actually plot summaries.

It gets worse from there, probably because the bigwigs at Warner are pissed off that Scholastic got the US rights. (Contrary to all protestations otherwise, editors and staff writers at news magazines are all too aware of what top management really wants, and do allow that knowledge to strongly influence their work.) The article is far too ready with facile explanations for the success of the Harry Potter books, and tries to squeeze them into the comfortable categories taught to children's librarians in the 1920s.

I don't buy any of that analysis. Maybe I'm too optimistic, but I believe that one of the reasons that the Harry Potter books have been successful is that they have little competition in YA books published over the last quarter-century, and virtually none among its contemporaries. The award-winners tend to be very preachy, what LeGuin calls "problem books" (the problem of evil, the problem of drugs, etc.). The bestsellers tend to be unchallenging, to use the politest language I can. One cannot live on either caviar or pizza alone (I've tried the pizza method). Rowling's work challenges the reader without degenerating into preaching, and features clean writing without being condescending.

And that's where Rowling succeeds so admirably, and contemporary "children's" literature fails so miserably. Rowling fills a void in the marketplace. Readers are starved for something to sink their teeth into and really remember with pleasure. In that sense, Rowling's series is a solid meat-and-potatoes-and-corn meal. Which need not be fancy to be fulfilling, and can be a very fine meal indeed.

21 September 1999

The Deerings have accepted service of the criminal indictments against them, and are free on bond. Trial is set for November 15th, which implies to me (as an attorney) that there are active plea negotiations. The Deering defendants have all claimed poverty to get court-appointed attorneys. This requires, of course, filing an affidavit that supposedly lists all property owned or controlled by each individual. Given that the indictment is for fraud, I wouldn't place a whole lot of faith in the truthfulness and completeness of those affidavits.

Things could move very quickly, with little or no public notice. If you, or anyone you know, has had any dealings with the Deering Literary Agency, the Daniel Craig Literary Agency, Sovereign Publications, or Appaloosa Press, contact Eric Evans at (606) 231-8161 now. Mr. Evans is the class counsel in a civil suit filed on behalf of the class of authors defrauded by these operations. Individuals who do not step forward jeopardize both their monetary investment in publication/representation and their rights in their works.

HarperPrism might as well be dead. The HarperCollins management has announced a significant reorganization in light of the Morrow/Avon acquisition. The reorganization explicitly mentions Eos as a continuing imprint, but does not mention HarperPrism (although several other HarperDivision imprints do merit mention). Jennifer Hershey is being promoted to Associate Publisher and Editor-in-Chief, but I've found no mention of anyone who was associated with HarperPrism, include longtimer John Silbersack.

Congratulations to Ms. Hershey. But from an author's perspective, or that of anyone who cares about competition, this corporate duplicity is not good news.

24 September 1999

The Agent and the (Subsidy) Publisher

a parody by John Savage (with no apologies to Lewis Carroll)
 

The Author printed out her book,
Word-processed on the screen:
She did her very best to make
The printout smooth and clean—
And this was odd, because it was
The middle of a scene.

The postman walked up sulkily,
Because he thought the run
Had got no business to be there
After pickup was done—
"It's very rude of her," he said,
"To come and spoil the fun!"

The box was full as full could be,
The ink was dry as dry.
You could not see a sale, because
No sale was in the sky:
No books were flying overhead—
There were no books to buy.

The Agent and the Publisher
Were lurking close at hand;
They wept like anything to see
Such mannered prose, yet bland:
"If this had even ought to say,
We'd charge eleven grand!"

"If seven scribes with seven pens
Revised for half a year.
Do you suppose," the Agent said,
"That they could make it clear?"
"I doubt it," said the Publisher,
And shed a bitter tear.

"O Authors, come and talk with us!"
The Agent did beseech.
"A pleasant talk, a query call,
Full contract fees, no breach:
We cannot send out more than four,
To give a hand to each."

The eldest Author looked askance,
But never a word he said:
The eldest Author winked his eye,
And shook his heavy head—
Meaning to say he did not choose
To leave the Author-bed.

But four young Authors hurried up,
Unsure what had been said:
Their brains were washed, their wallets clean,
Their poems were put to bed—
And this was odd, because, you know,
They hadn't yet been read.

Four other Authors followed them,
And yet another four;
And thick and fast they came at last,
And more, and more, and more—
All hopping through the promises,
And scrambling to the shore.

The Agent and the Publisher
Talked on three hours or so,
And then they sent out manuscripts
To friends of theirs, for show:
And all the little Authors stood
And waited in a row.

"The time has come," the Agent said,
"To talk of many things:
Of poems—and scripts—and galley proofs—
Of editors—and links—
And why the market's boiling hot—
And whether books have wings."

"But wait a bit," the Authors cried,
"Before we have our chat;
For some of us are elderly,
And all our heads are fat!"
"No hurry!" said the Publisher.
They thanked him much for that.

"A manuscript," the Agent said,
"Is what we chiefly need:
Writing and character besides
Are very good indeed—
Now if you're ready, Authors dear,
We can begin to read."

"Refer us not!" the Authors cried,
Though never prone to sue.
"After such payment, that would be
A dismal thing to do!"
"Your work is fine," the Agent said.
"We'll make your cover blue.

"It was so kind of you to come!
And you are very nice."
The Publisher said nothing but
"Cut us another slice:
I wish you were more circumspect—
I've had to ask you twice!"

"It seems a shame," the Agent said,
"To admit such a trick,
After we've led them on so long,
And made them pay so quick!"
The Publisher said nothing but
"The binding's much too thick!"

"I weep for you," the Agent said:
"I deeply sympathize."
With sobs and tears he sorted out
Checks of the largest size,
Holding his pocket-handkerchief
Before his streaming eyes.

"O Authors," said the Publisher,
"You've had a printing run!
Shall we be writing books again?"
But answer came there none—
And this was scarcely odd, because
They'd sold not even one.

See what Percodan can do for creativity?

As food for thought, consider who recites Carroll's poem, to whom, and why.

25 September 1999
Tasini Overturned

On Friday, September 24, 1999, the United States Court of Appeals for the Second Circuit (Winter, C.J.) overturned Tasini. The Court ruled that electronic databases are not "revisions" of print publications, and that publishers therefore must explicitly request and receive rights for such use from authors.

I anticipate a petition for certiorari (appeal) to the Supreme Court and an immediate stay, since this decision completely destroys NEXIS (the largest private supplier of electronic archives). I also expect massive lobbying and legislative action. So, authors, don't get your hopes up yet; it ain't over 'til it's over.

Neither the New York Times (lead defendant) nor the National Writers' Union, whose de facto president-for-life Jonathan Tasini is the lead plaintiff, have included even a hint of the decision, over 30 hours after announcement. The Times, Chicago Tribune, and Washington Post somehow managed to refrain from any mention of the case in their respective Saturday (25 September) editions.

I am reviewing the decision now. With due respect to Judge Winter, the opinion appears somewhat overwritten. After I can distill it, I'll step through the significant aspects in this journal. And I'll admit it—I expected the Second Circuit to reverse the one pro-author aspect of the District Court opinion, but it did not.

26 September 1999
Crocodile Tears

Still no word from the big five daily newspapers on Tasini. Nothing like a little enlightened self-interest while authors are doing the Wombat Dance of Joy.

But, nonetheless, I'm shedding crocodile tears for NEXIS and its competitors. I find it awfully hard to sympathize with the publishers on this one. First of all, it only affects material provided by freelancers; material produced by their employees remains work-for-hire and thus the property of the publisher in the first instance. We'll ignore the practice of purchasing all rights pursued so diligently by some publishers—including the New York Times. (If the publisher already purchases all rights, it doesn't need to pay for database rights, does it?)

More to the point, though, I can't believe that profit margins will be measureably reduced. NEXIS and its competitor WestLaw charge well over $4 per minute just for browsing and searching their databases. Downloading and printing material costs more—over $0.30 per line based on the most recent pricing schedules to which I have access.

Let's do a little simple math here. We'll assume that the database rights will result in additional payments of 50% to every freelancer—an extraordinarily high estimate. However, the vast majority of the material online and on CD-ROM will not generate higher payments to authors. As noted above, Tasini has no impact at all on material generated in-house. Let's assume that as many as 20% of the articles in any given database originate with freelancers. This means that payments to freelance authors in toto would increase by:

50% * 20% = 10%

But even this grossly overestimates the increased cost of author compensation to the database as a whole. Ignoring compilation and indexing costs—which are nontrivial, but considered proprietary information—net compensation to authors typically amounts to less than 15% of fully diluted per-issue costs of for-profit periodicals in the United States. Thus, actual content costs to the database would increase by just under 3%.

Anyone care to place a bet on double-digit increases in the access and use fees for online and CD-ROM-based databases of general periodicals?

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