Macmillan Issues New Contract Boilerplate for All Divisions, E-Royalty Lower than RH, S&S, Other Majors

Agents are poring over a new contract boilerplate issued by Macmillan, parent company of St. Martin's, Farrar Straus and Giroux, Henry Holt, Picador, and Tor among others. The contract files were emailed to agents on Monday (October 26th) with a covering note from Macmillan CEO John Sargent (link at bottom of this post).

Sargent highlights key elements in the homogenization of the contract forms, namely: 1) a new across-the-board (all Macmillan divisions) e-book royalty; 2) a new across-the-board direct-to-consumer royalty; and 3) enhanced promotional and Internet marketing initiatives.

The e-book royalty will come as the biggest surprise to e-book royalty watchers, as it goes contrary to the trend (which some think is a polite word for something darker) among major publishers to pay 25% of net e-book receipts to authors. Unfortunately, Macmillan offers even less than that - 20%.

It will be interesting to see if Macmillan will hold the line at an e-book royalty below that of its playmates such as Random House and Simon & Schuster, who in the last year have reduced their e-book royalties to 25% of net receipts. It will be even more interesting to see if the agents fall into the trap of accepting 25% as the "standard" e-book royalty. Who says that's all it should be? (Full disclosure, E-Reads pays 50% of net receipts to its authors, and always has.)

As for direct-to-consumer sales, the new royalty is 10% of net receipts on the first 10,000 copies and 15% thereafter. The standard for as long as anyone can remember has been 5%. That low number was created in an era of mail order of hard copies, a cost-intensive process that was often generated by full color magazine ads, coupons, and other expensive forms of solicitation. This process will now yield to cheaper Web solicitations and streamlined delivery systems.

Buried deep in this change of royalty is the intriguing prospect that Macmillan might be moving toward a more aggressive approach to selling its books direct to consumers, a strategy from which many publishers have shrunk out of fear of upsetting Barnes & Noble and Amazon by competing with them. There is good reason to shrink, as Penguin discovered in April 2008 when Amazon threw an elbow at them over this very issue.

Nevertheless, if Macmillan is any bellwether, publishers may be gearing up for a push on direct-to-consumer sales. The prize? Nothing short of survival. See Direct Sales: Publishing's Last Stand.

Here's the link to Sargent's letter, reproduced in full.

Richard Curtis