Author Altert: Investigation Into Underpayment of Ebook Royalties

In the past I've written about the growing suspicion among writers that their publishers -- even big 6 publishers -- are under-reporting their ebook royalties, in some cases by a significant margin.

Are Big Six Publishers Stealing Royalties? (April 22, 2011)
Publishers are under-reporting electronic book sales (June 1, 2011)
Writers Despair (June 30, 2011)

Here is an update on the situation. Hagens Berman, a law firm, is

... investigating claims that several large e-book publishers are under-reporting the number of e-books sold, paying authors less than their share of royalties.

E-book authors typically receive royalty statements, which report the number of e-books sold in a specified time period. The authors are paid based on these sales numbers.

According to reports, the so-called “big six” e-book publishers may be using an outdated accounting systems to track the sales of e-books. As a result, some authors have reported various accounting errors on their statements, including the under-reporting of sales of the e-books.

Read the rest of the article here.

This is what Passive Guy, a former attorney, has to say about this:

With those caveats, it appears Hagens Berman is developing a practice that’s focused on big publishing. In the majority of cases, the losses of any single author from something like ebook royalty under-reporting would not justify the cost of mounting a lawsuit to collect royalties. What PG suspects is happening is Hagens Berman is collecting information and possible plaintiffs for a class-action suit on behalf of all authors who have been harmed by ebook royalty shortfalls.

If PG is correct, this is good for authors and bad for big publishers.

What are the implications for authors besides being paid proper ebook royalties? If the agency pricing suit and a class action suit on eroyalties move forward, big publishers will be spending serious money on legal fees and, quite possibly, settlements. We’ve already heard numerous reports that advances are down and we know publishing contracts are becoming more and more onerous. Serious lawsuits accelerate, but don’t change that trend.

If, as PG believes, big publishing is in a financial death/downsizing spiral because of indie publishing, ebooks, Amazon pricing pressure, death of physical bookstores, etc., that spiral will grow tighter if it has large losses in class action suits. You’ll see some consolidation, so unwary authors may end up publishing with a different house than the one who gave them their contract. Bankruptcy is also a possibility, so unwary authors may end up having their books unpublished or poorly published and their copyrights in a legal limbo.

Link to PG's post: Investigation into Underpayment of Ebook Royalties

Here are very informative blog posts PG wrote about this issue:
- All these royalty numbers are just so confusing for us literary types (April 16, 2011)
- Imaginary Sales Numbers on Royalty Statements – An Update (May 1, 2011)
- Publishers are Under-Reporting Ebook Sales (June 1, 2011)
- Random House Royalty Switcheroo (June 29, 2011)