Agent Andrew Wylie, whose business practices have been described as so unprincipled he has been nicknamed “The Jackal”, has been skewered in a wicked comic strip illustrated by Dan Goldman.  Wylie recently met his comeuppance in a failed challenge to Random House (see Did Jackal Screw Amazon?)

The pictures are worth a thousand words and we’ll spend no more of them other than to invite you to view The Life of Wylie by Boris Kachka here.

This is the text of an Authors Guild release posted on July 26 2010. For background see Will Random House Chicken Out Again?

We don’t know the details of the Odyssey-Amazon agreement, but we can make some informed guesses. The agreement is most likely under the agency model, with Amazon paying Odyssey 70% of the retail price of the books. Wylie and Odyssey are together taking a typical agent’s commission as compensation: 10 or 15% of the 70% received from Amazon. In round figures, this means that the author receives 60 to 63% of the retail price of the book.

For comparison, a typical contract with a traditional publisher pays e-book royalties of 25% of net proceeds. If the e-book is sold under the agency model, the author’s share is 25% of 70%, or 17.5% of the retail price of the book. After the agent’s commission, the author receives roughly 15 to 16% of the retail price of the book.

For a $9.99 book under the Odyssey-Amazon agreement, the author would receive royalties of $5.94 to $6.29 per book, net of all commissions. For a $9.99 e-book under a typical contract with a traditional publisher sold under the agency model, the author would receive royalties of $1.49 to $1.57, net of all commissions. The difference is about $4.50 per unit, a 300% increase in author income.

Revolutions produce unlikely heroes, and the Digital Revolution has produced a very unlikely one in the form of a man that many believe is so wanting in ethical principles that he is nicknamed The Jackal. Yet it is on literary agent Andrew Wylie’s fangs and claws that the populist dream of a fair e-book royalty rests as he dares the world’s highest profile trade book publisher to do something about the slap he has administered to its face.

The smart money is on The Jackal, and to understand why you have to think like a jackal.  While pundits debate contract law and publishing ethics, the real war is being conducted on a less visible battlefield. But it is one on which Wylie holds the high ground.

To understand Random House’s reluctance to protect its rights from Wylie and other marauders you need to understand a number of not so obvious factors.  The most salient of them is this: Publishers are loath to sue authors (or the widows and children of authors).

Let’s see how these factors play out in the power struggle unfolding before our eyes.

Random House not confident of its legal position

In 2001 Random House sued Rosetta, an e-book startup that acquired directly from authors the digital rights to books by such Random House lions as Kurt Vonnegut Jr., Robert B. Parker and William Styron, books that were still in print in paper format under Random House imprints. Random had published them before there was such a thing as e-books, but nevertheless considered a book is a book is a book whether in tangible or digital form. The courts however rejected Random’s position, denying their request for an injunction against Rosetta. Random filed an appeal and the court turned it down. A second appeal was rejected too, forcing Random to work out a settlement with Rosetta. The critical issue – what is a book? – remained unlitigated and left Random uncertain about its legal position.

Random Backs off from Open Road Threat

When publishing superstar Jane Friedman launched her Open Road e-book venture she declared her intention to start with several works by Styron including Sophie’s Choice and the Pulitzer Prize-winning Confessions of Nat Turner. The problem was, Random House claimed it owned those rights (presumably having recovered them from Rosetta as part of the settlement) and it issued a stern warning to all “third parties” without naming Friedman specifically. Authors, stated CEO Marcus Dohle, are “precluded from granting publishing rights to third parties that would compromise the rights for which Random House has bargained.” By drawing a line in the sand, Random expected Friedman and other potential interlopers to back off or face the full wrath of the publisher’s litigators. (see Random House Serves Notice on Would-Be E-Interlopers)

It is  a fundamental business principle that you don’t make threats you aren’t prepared to act on. And that is why we were flabbergasted four months later to learn that Random House had released e-rights to the Styron estate (See Random Returns Sabre to Scabbard in Styron E-Book Standoff). What was that about?

“The decision of the Styron estate is an exception,” Random executive Stuart Applebaum explained. “Our understanding is that this is a unique family situation.”

Why, after rattling its saber so truculently, did Random give in? In our estimation it’s because ultimately, to make good on their threat, they would have had to sue Styron’s widow and children. And that would be a public relations disaster.

Whether Styron was truly an exception or Random blinked, one thing was clear to publishing professionals: sooner or later there would be further tests of the publisher’s determination. How would Random react the next time?

We’re about to find out.

Don’t Bother Suing Agents

Claiming that he hates the low e-book royalties paid by traditional publishers (see Random House Changes E-Book Royalty Policy), agent Wylie, representing hundreds of distinguished authors such as Salman Rushdie, Martin Amis and the late John Updike, announced that he is starting his own e-book publishing venture and intends to launch it with books published by Random House and other trade book publishers.

Does he have the right to do that? Wylie says he does: “The fact remains that backlist digital rights were not conveyed to publishers, and so there’s an opportunity to do something with those rights,” he declares.

Despite what happened with Open Road, some industry observers expected Random House to threaten to sue Wylie’s ass into pebble-sized pieces. But Wylie knows they won’t, because, generally speaking, agents are not legally liable for breaches of contract committed by their clients. A lawsuit against Wylie would in all likelihood be thrown out of court, and the judge would tell Random that if they have a beef it’s with Wylie’s authors, they’ll have to sue Wylie’s authors. Which brings us back to our thesis: Publishers are loath to sue authors (or the widows and children of authors).

So? How does Random intend to punish Wylie? “Regrettably,” Applebaum declared, “Random House on a worldwide basis will not be entering into any new English-language business agreements with the Wylie Agency until this situation is resolved.”

This is known as the We’ll Cut Off Our Nose to Spite Your Face ploy, and it will avail Random nothing. Wylie’s clients are so coveted by Random’s rivals that if Random made good on its threat you’d see the greatest migration since the Aleuts crossed the Bering Land Bridge.  Jackals are standing by!

Buyer? Seller?

Though legal threats won’t faze Andrew Wylie, handling the challenge of being both an agent and an e-book publisher might. A number of knowledgeable people like Macmillan’s John Sargent have not only deplored Wylie’s decision to put all his authors’ eggs in Amazon’s basket but have questioned whether it’s in the best interests of his authors. There is arguably more money to be made selling not just to Amazon but to Sony, Barnes & Noble, Apple, Kobo, and other retailers.

Navigating the shoals of conflict of interest between buyer and seller is another daunting task. Even if he is able to build a “Chinese wall” insulating the two functions from short-circuiting each other, Wylie’s own clients will reasonably want to know how it’s going to work: “If my agent is now my publisher, who am I supposed hire to negotiate with him?”

Will Wylie’s stratagem succeed in forcing publishers to raise their royalty rate?  Not a chance.  E-book royalties will eventually go up, but it will be no thanks to Crusader Wylie. But we thank him for articulating the dissatisfaction of authors and agents with low royalty rates and for so fearlessly acting on his convictions.

Richard Curtis