link to: 11:52 [GMT-6]

I Don't Like Mondays

 

These link sausages are guaranteed to be free of being and nothingness.

• Later this week, Apple is probably (at present, in rumor only) going to announce a new version of the iPad. Across the pond at the Grauniad, Charlie Booker describes the attitude problem behind Apple products:

  They make you feel good, Apple products. The little touches: the rounded corners, the strokeable screens, the satisfying clunk as you fold the Macbook shut – it's serene. Untroubled. Like being on Valium.

  Until, that is, you try to do something Apple doesn't want you to do. At which point you realise your shiny chum isn't on your side. It doesn't even understand sides. Only Apple: always Apple.

  This attitude is what I've been complaining about for decades now. If you don't do exactly what Steve Jobs does exactly the way he does it — and, in particular, if you believe in the necessity of documenting your sources in your writing instead of relying on inept and misleading graphics — Apple products are not for you. Neither are Apple products for you if you like to tinker under the hood or have a choice in meaningful accessories and/or content to use on those Apple products.

     I guess I am an Apple hater — not for the tech advances, but for the business practices and enforced conformity. It's sort of ironic to contrast the wild chaos and nonconformity of the Windows world with the 1984-like imagery of the notorious Super Bowl commercial (imagery which, as a sometime Orwell scholar, I find incompatible with the overall sense of quietness in the novel, but that's an argument for another time).

  Speaking of which, I don't own a dedicated e-reader. And I won't even consider doing so — despite their undoubted potential utility — until there's one that:

  • Handles the academic and law-practice/source standard for electronic documents (PDF files) in native mode; and
  • Uses, as its preferred file format, an open standard (I'm not really that picky on which one); and
  • Allows a manual, switched (not software-based) rejection of "syncing," for both wired and wireless connections (and, by the way, allows one to turn off wireless connectivity and power-draining); and
  • Maintains some sense of fidelity on page numbers; and
  • Uses standard SD cards up to 16gb with hot-swapping and no proprietary software required for creating/indexing/recognizing/transferring data; and
  • Runs on one or two standard AAA user-replaceable batteries for at least 100 hours of actual use with at least 21 days of standby in addition (hot-swappable, too); and
  • Has a non-glare screen of at least 22cm by 15cm at reasonable resolution (color optional, but would be nice if it doesn't cut into battery life); and
  • Is not tied to any "bookshelf" system that allows a third party to know what content is on the device, let alone delete or force storage of it, and ignores all purported territorial restrictions; and
  • Has built-in DRM-defeating measures giving the finger to Chapter 12 so that I can have multiple copies of the same damned work on multiple machines, not that I'm going to be reading them on multiple machines simultaneously; and
  • Costs in two figures or less, with no required subscriptions of any kind.

  That way, I won't feel like I'm renting from Skynet.

• Yeah, the Oscars are over. The awards ceremony was boring, but more importantly it was too damned soon. This year bears a disturbing resemblance to 1979, with the Academy using a warm-but-not-yet-hot-button-social-issue film (of more-than-usual worth for the type) to make up for past improprieties, at the expense — in all but one category — of superior performances/efforts/works. Colin Firth is a marvelous actor, and turned in a nuanced performance... but that, really, is about it for The King's Speech, at least in comparison to some of the competition. I don't think that in five years' time we'll be forgetting about The King's Speech in the same way that we did about Kramer v. Kramer by 1985, but it's not all that inapt a comparison.

  These Academy Awards needed Ricky Gervais or Jon Stewart to mock more of the bullshit. Unfortunately, the egos out there are far too fragile for that!

• Neil Gaiman offers the definitive refutation of the "information wants to be free" nonsense concerning copyright violations on the 'net:

  "No, that's pizza," I want to tell them. "Pizza wants to be free. Concentrate on liberating pizza from evil pizzerias. Information, on the other hand, really hates being free, and is never happier than when manacled to a wall, like Kirk and Spock in some piece of late 70s bondage-oriented slash fiction."

  (italics in original) My more prosaic rejoinder — "Entertainment is more than just information, and entertainers want to be paid" — pales in comparison to bondage-oriented slash fiction. Actually, it probably pales at the very concept of bondage-oriented slash fiction; it's not exactly a prude, but it does have some limits (and some taste).

• The off-screen antics of Charlie Sheen are far funnier than the show; I've never managed to make it more than ten minutes into an episode the few times I've tried. Some of them, anyway. Sadly, that goes for his antiintellectual boss, too: In claiming that "Lorre" (and, by implication, every other sitcom showrunner) tends toward tyranny, Sheen is not too far off target. Now contrast this (and the relatively strong actors' union) with the incipient labor unrest of public employees and the purported justification for union-busting there, and elsewhere in the entertainment industry, and one can see what the real meme is. In the eyes of those who have substantial financial capital, only financial capital has the right to organize — not workers, and certainly not (potential) voters.

  Ya know, given the leap from Charlie Sheen to election reform, that preceding paragraph looks a lot like either a stereotypical conspiracy theory or a severe caffeine deficiency following a sleepless night. And there's probably something to that, although the caffeine deficiency may well be impairing my analytical skills... but that doesn't make the statement of the underlying attitude any less accurate despite its hyperbole.

Labels: arts, civil rights, copyright, intellectual property, internet, mass media, miscellany, politics

link to: 12:17 [GMT-6]

Link Sausages Delayed by Technical Issues

 

Well, I was forced to spend money on a new laptop — the old one fried last August, and a look at my productivity over the last six months just made things too clear. Thus, the last couple of days have been spent installing software, copying data, doing setup, etc. On to the link sausages (some of which are cooking slowly for dinner in a very proper German stew with dark beer at the moment):

• "Johnson" offers some interesting comments on the myth that passive voice is always bad writing. The problem is not passive voice — which is, after all, a required form in many languages — but passive logic... and even then, only when the logic is being used to prevent communication by obfuscation and not to enhance communication by emphasizing the most-relevant material.
• Some interesting news from the publishing/library/e-books world for which just about nobody is making all of the links. HarperCollins (a NewsCorp company) is unilaterally changing the terms of e-book licenses for libraries in two respects: Demanding user data (implicating the PATRIOT Act) and limiting each license to 26 transactions, after which the library must purchase another license. Of course, part of the problem here is that there is yet to be a standard for the form of e-books established, and that has led to some less-than-entirely-satisfactory systems like Overdrive. Imagine, if you will, that popular music in 1962 was struggling simultaneously with mono, stereo, and quadrophonic 33¹/₃rpm LPs; 78rpm vinyl discs; 45rpm singles; 8-track tapes; reel-to-reel tapes; cassette tapes; CDs; minidiscs; MP3s; Windows Media files; and iTunes, at the same time as it became culturally mandatory to switch from radio to recorded music. That's an understatement of what things are like in e-books at present...

  On the one hand, I understand perfectly well why Harper is doing this. Some beancounter somewhere has noted that the "standard" is for libraries to expect to replace paperbacks after twenty-five-or-so loans, and twenty-six makes perfect sense to a beancounter who presumes that every e-book will be (a) based upon a paperback edition and (b) constantly on loan for a two-week period. (That libraries expect a great deal more durability from their casebound copies — and many e-books are based upon casebound editions — is something that I suspect the beancounter either didn't know or hoped would be swept under the rug.) That is, the 26-loan license is intended to guarantee to HarperCollins the same equivalent periodic income stream that it would ordinarily get over time from selling paperback editions to libraries.

  Then, too, I understand that HarperCollins's parent is among the more unethical publishing conglomerates on the planet (and that's up against some pretty stiff competition). Many libraries have stopped collecting much of the data that HarperCollins appears to demand precisely because of the undue civil liberties implications of the PATRIOT Act, which would otherwise allow federal authorities to get patrons' lending records essentially at whim and essentially just by asking for them. Hmm; wasn't there a potential Supreme Court justice who went through something like this to massive public outrage a couple of decades back with his video rental records?

  But what really irritates me about this story is that I'm reasonably certain that it's inconsistent with the authors' contracts. I just reread a relatively recent HarperCollins contract that included a "standard" (or at least "boilerplate") e-rights clause, and it does not appear to allow HarperCollins to transfer anything less than a permanent copy to a third party. Hmmm.

• Paul Weimar ponders why fantasyoid speculative fiction seems to be overtaking sciencefictionoid speculative fiction in current popularity, and comes close to making some sense. The thing that he's failed to do is look at who's writing the books, and for that both his demographics argument and a side issue in his educational argument (that, outside of the elite and want-to-be-elite schools more likely to produce hoity-toity-ivory-tower-lit-fic writers, our universities don't train scientists to write worth a damn or humanities/social sciences/business majors enough core science to matter) should get a lot more attention. During the purported "Golden Age of Science Fiction," 80% or more of the authors had science and/or engineering backgrounds... or, at least, 80% or more of the authors whose works were reread after initial publication in pulp magazines, and all of the "leading" authors of the time accept Fred Pohl and Lester Del Rey had that kind of background. If you look today, or even a decade ago, that's simply no longer true. And things were even worse on the demographic front, with only one or two female authors of any real significance to the field as it evolved by the 1960s, let alone today, having been part of that authorial clique (specifically, Leigh Brackett and Catherine Moore). I'm not sure whether this counts as "chicken" or "egg," though...
• The Borders bankruptcy proceeds apace... which is to say that there haven't been a lot of significant filings or public moves, but instead the action is taking place behind the scenes. The official meeting of creditors has now been set for 22 March, but that is virtually guaranteed to screw smaller publishers even more than they're already being screwed; a § 341 meeting in a retail-sector proceeding focuses on the interests of the large creditors (and the large lawfirms they bring to the meeting) almost to the exclusion of the small creditors (who are often unrepresented). The only amusing filing was an objection to the superpriority grant for debtor-in-possession financing (see The Definitive Work on Pain (2)) filed by a group of Texas tax authorities. What a surprise: The taxman cometh. Otherwise, it's been administrivia like notices of appearance, service of papers issues, and applications for (and grants of) motions to appear pro hac vice (which would be unnecessary if we just went to national lawyer licensing).

Labels: civil rights, culture, law practice, politics, publishing

link to: 19:23 [GMT-6]

The Definitive Work on Pain (3)

 

We've seen that, in a hypothetical liquidation of Borders, and assuming (since there is no better data as yet) that what was in the most-recent quarterly statement bears some resemblance to reality, publishers — thanks to the priority system — can expect to get around two-thirds of their invoiced receivables that were due prior to the bankruptcy filing on 16 February. This leads to two intertwined issues:

1. Isn't "inventory" just "inventory"? How can several parties have simultaneous claims on the inventory? This comes from two entirely different difficulties with books. The one that is common in all bankruptcies is the simultaneity problem. In a liquidation, debts that would otherwise be payable over time are all accelerated to be payable on the date that the bankruptcy is filed. In a world that runs on credit, this obviously causes some problems, because the total debt load is managed because it does not all come due at once. (In Borders' own case, the maturing of several debts, and refusals by lenders to renew and/or reschedule others, just exacerbated an already precarious situation. One could, and probably should, consider that the worst villain in all this was GE Capital...) That can cause assets that otherwise would have been divided among several parties over time to be claimed by all of those parties at once. For example, assume that an apartment landlord suddenly demanded the entire year's rent at once; that wouldn't leave much for paying the electric and water bills, the phone bill, the cable bill, etc.

The part that is unique to the world of book retailing, though, is the nature of the "inventory." The key thing to remember is this: What is called "inventory" for accounting purposes is not the same thing as "liquidatable property" in bankruptcy, although accounting standards tend to ignore that difference. It is a particular problem when the bookstore does not have clear, irrevocable title to the books in its inventory... and, if you recall the Publishers' Group West (distributorship) bankruptcy from a couple of years ago — which was also in the Southern District of New York — the court was very careful to treat books that were fully returnable as consigned, and not sold, property. As long as the books were fully returnable at the whim of PGW (then, and Borders now), for full credit, title had not passed irrevocably to PGW (or to Borders now)... meaning that the legal title to the books was the publishers', even if the books were in the possession of PGW (Borders).

2. All of the calculations were for a "hypothetical liquidation." What does that mean in a reorganization? Well, it's a beginning point. The hypothetical-liquidation calculations do have to be done, because they're part of the baseline that the Bankruptcy Judge must consider when deciding whether to confirm the proposed reorganization plan. However, a continuing business has two different cashflows that make the hypothetical liquidation calculations no more than a guideline and outer limit:

• Incoming cash flow from continuing sales, and
• Outgoing cashflow from continuing overhead, new merchandise purchases, and so on.

For example, the amounts that Borders receives from the store-closing liquidation sales will be part of an incoming cash flow... and the amounts it has to pay employees, the power companies, etc. while holding those store-closing liquidations sales will be part of an outgoing cash flow. The same goes for regular sales at stores not planned for closing.

Although the commodity-goods retail sector has developed some rules of thumb over time about the balances between these flows, those rules are entirely ridiculous for books. Unlike, say, a grocery store — in which, contrary to manufacturer representations, one box of dried spagetti noodles is fungible with (replaceable by) another — books are inherently nonfungible. If the store has no copy of The Two Towers, but does have a copy of The Return of the King, a buyer looking for The Two Towers cannot just buy The Return of the King instead. Further, as one goes to greater and greater levels of abstraction — author for author, category for category — they become even less likely to be replaceable.

What authors (and others dependent upon payments from publishers) need to remember is this: That 68% figure is the upper bound of what publishers can expect to receive on their outstanding receivables invoices. The actual figure is likely to be at least 8–10% lower than that, but it's much too early to tell. Keep in mind, too, that current sales should result in payment of very close to 100% of invoice value to the publishers; that 68% (or whatever) proportion is for receivables due and payable, but not yet paid, on 16 February 2011 — under normal publishing industry practices, essentially the entire holiday period and a bit more.

Labels: culture, jurisprudence, politics, publishing

link to: 16:50 [GMT-6]

The Definitive Work on Pain (2)

 

I'm trying to get at least the first two parts of this ode to The Machine up before filings start happening again on Tuesday morning. This entry will move from the essentially unavoidable 7% loss to creditors caused by the fact of the bankruptcy filing to the particulars of the Borders matter, and why creditor v. creditor fighting (all too similar to "Spy vs. [sic] Spy" at times) is going to be much more significant than the priorities struggle in this particular proceeding. In part 3, I'll discuss the reasons that all of these calculations are horrendously overoptimistic.

In any event, the key problem with any retailer's bankruptcy is the conflict between cash flow and inventory — a conflict magnified when, as in this instance, a substantial proportion of the inventory is not properly treated as the retailer's property, but is instead properly treated as consignment goods. For example, the most-recent quarterly filing discloses that Borders owed approximately $445 million in trade accounts payable on 30 October 2010. Now, undoubtedly some of this has been paid; on the other hand, this was pre-holiday season. I've seen estimates of $219 million to $290 million as the "currently owed" figure, with a median of around $270 million, to print publishers of all sizes. Keep in mind that all of this is based upon unaudited financial statements; historically, in retail-sector bankruptcies there's a 1-3% understatement of the amounts actually owed, usually due simply to timing artifacts (e.g., a shipment was made the day before the bankruptcy filing that will be ultimately reflected as an amount owed, but did not make it into the books in time for the filing... if only because it was still in transit) and not to any creative accounting.

The problem here is the unsecured portion of receivables claimed by various financiers of the Borders cash accounts. When Joe Customer buys a copy of Bestseller X as Borders, he hands over (round numbers for the sake of argument) $25, plus sales tax, at the register (or online; it's immaterial for this purpose whether it's a brick-and-mortar sale or a 'net sale). As pointed out last time, that sales tax is no longer in the picture; it has a higher priority than almost any unsecured claim, specifically including claims on failed security interests (such as financiers' claims on inventory). And there's the problem: The amount that Borders then owes the publisher for the book — for the sake of argument, a trade-long discount of 40% net 90, or $15 — is also claimed by the bank/lender that financed the cash-flow accounts for Borders' current operations.

This is the difference between "debts owed" — the $1.15 billion that Borders owed after we accounted for the priority claims — and "claims for debts owed," which will total a helluva lot more than that... because both the publishers who own the inventory and the lenders who took an imperfect security interest in that inventory will claim on that inventory. The fight between the publishers and the lenders doesn't increase the amount that Borders owes; it just decreases the amount that individual publishers and individual lenders receive from that claim. Once again, the subtle dynamics of grade-school recess help illustrate this. Assume that Calvin, our student, has $3.00 in lunch money. Calvin is not entirely stupid; he knows that either Mo or Suzy is going to take his money. Both Mo and Suzy think that they have the proper claim on Calvin's lunch money. Miss Wormwood (the Bankruptcy Judge) will instead divide the $3.00 equally between Mo and Suzy, meaning that each receives 50% of his/her claim. Calvin is probably in for another pounding tomorrow at recess, but he doesn't owe any more from today's lunch money: He's already paid all of it.¹

And this is why authors are screwed. The authors are the rest of Mo's and Suzy's respective gangs — the ones Mo and Suzy each ordinarily give fifty cents a day out of Calvin's lunch money. Since Mo and Suzy only got half of their daily expected proceeds, they're only going to pay the gang members half of what they ordinarily get. At present prices, that's not even enough for a bag of stale corn chips.

Fortunately, the situation at present doesn't appear to be quite that bad. My back-of-the-envelope calculations indicate that — absent other legal shenanigans, which will be forthcoming — the various creditors will file approximately $1.45 billion in allowable claims against the assets of $1.07 billion. The LRR (reread Saturday's piece) then becomes 0.93 * (1.07/1.45) or about 68%... in a hypothetical liquidation.

But this isn't a liquidation, hypothetically or otherwise. So, next time, we'll have a bit more fun with numbers, wild-ass guesses, and The Machine.

---

1. "But," I hear you mumble, "What about the money that Borders is earning from store-closing sales, and all this talk about continuing operations as a debtor-in-possession?" Well, that money doesn't count for today any more than does tomorrow's lunch money for Calvin. Thanks to the magic of a superpriority claim by lenders who are providing funding for debtors in possession (see Doc. 28, 16 Feb 2011, requesting superpriority; Doc. 17, 17 Feb 2011, granting request), that money goes first to repay the lenders of the money being used to keep Borders afloat during the bankruptcy proceedings; that is, only the profits from sales, after expenses of lending and interest are deducted, will be poured back in to the bankruptcy estate.

Labels: jurisprudence, law practice, mass media, publishing

link to: 11:21 [GMT-6]

A Holiday for Dead Presidents

 

Just a few related link sausages today, then more of The Definitive Work on Pain later on.

• There's a distinction between "advancing the Sciences and useful Arts" and mere "innovation" — and some figures in the MSM (who, collectively over the last thirty years, has been the paradigm for that distinction) are finally figuring that out. Mr Cohen doesn't go nearly far enough, though, because he fails to note the critical artistic and commercial problem at the root of multimedia productions: Who is the author?
• The flip side of that consideration is what to do with "overbranding" problems like NBC's. The ultimate problem is that the NBC brand is severely self-tarnished; it's going to take at least two generations of material (translation: four television seasons) to remove that taint, let alone build a new identity. And Comcast's corporate culture is not renowned for giving people that much time...
• ... or for taking its eyes off last quarter's advertising revenue, which is precisely the problem with this piece of ill-founded speculation. The real cause of "the loss of 10pm to cable" has nothing whatsoever to do with "lack of competition" from two networks that didn't even exist when the slide began. It is, instead, a problem with outright censorship by the FCC that has not kept pace with the expectations of "real America"; instead, we're stuck with TV programs on broadcast that contain less profanity, acknowledgement of problems other than violence, and diversity than the average kindergarten recess. The current 18–49 cohort does not, in bulk, accept the values espoused by Jerry Falwell et al., and expects their entertainment to at least acknowledge (if seldom truly embrace, but the possibility is enough) their own values. As long as the FCC allows gunfights and mondo explosions on broadcast TV, but no opportunity for airmen to write "fuck" on the sides of their airplanes, that shift will continue. To which I would say Bravo if that particular cable network weren't so overrun with bad "reality" shows.
• GBS Update: Judge Chin has extended the deadline for filing claims for any cash from any result of the litigation (Doc. 970, 18 Feb 2011) (PACER PDF, behind paywall) to one year after final approval date (and that would also, under the Federal Rules of Civil Procedure, hold for post-trial if the settlement falls apart, unless it is specifically modified further). This ruling pretty much nails down that Judge Chin intends to issue the ruling on the settlement himself... at which point it will be appealed. Interestingly to procedure geeks like me, Judge Chin's signature is formally noted as "sitting by designation," but I cannot find the designation order in the docket; it's probably just a filing error.

Labels: censorship, civil rights, copyright, culture, intellectual property, mass media, miscellany, politics, publishing

link to: 15:19 [GMT-6]

The Definitive Work on Pain (1)

 

... will probably be created from either (a) trying to develop a definitive, prospective definition of "fair use" that works or (b) trying to figure out what unsecured creditors are going to get out of a Chapter 11 bankruptcy proceeding; both are far more fiendish than The Machine. I spend an awful lot of time pondering possibility (a); with the Borders situation, I'll change to (b). Unfortunately, as we'll see, that's not a route out of the Pit of Despair — especially for authors.

First of all, we must make one thing clear: Authors are not creditors of Borders (well, except for self-published authors, but they're merely publisher and author in one for this purpose). Instead, the creditors are publishers and distributors... and, as I've noted previously, landlords and utilities and employees and tax authorities and so on. That's because the purpose of bankruptcy is twofold:

• ensuring an orderly distribution of the debtor's assets to creditors, in equal proportion for equally situated creditors; and
• giving the unlucky/improvident debtor a fresh start and chance to rebuild his/her/its life

For the moment, we're going to concentrate on the first aspect. The key point is "equally situated", because not all creditors are equal. Some creditors have secured interests, and (in most situations, and almost certainly for the Borders matter) can expect to get all of their money/secured interests back... except when they are "oversecured" (the value of the security interest is greater than the remaining actual debt due; consider a car loan that is almost paid off). Within the general group of unsecured creditors, the Bankruptcy Code establishes certain priorities; all of the creditors in higher priority must be paid in full before creditors in the next-lower priority get anything. See 11 U.S.C. § 507.

With that in mind, let's deconstruct the initial bankruptcy petition that was filed by Borders (PDF), and try to estimate what the publishers (and, hence, the authors) might receive. Keep in mind that this is only a thumbnail, initial analysis, and should not be relied upon for much more than justification for following the matter with some knowledge of the context. Do not treat any of the following as legal advice; or as material for tax planning; or, indeed, for anything other than just context. Also, for simplicity's sake, I will silently round all figures to four or fewer significant digits.

The petition (page 6) discloses total debts of $1.293 billion against assets of $1.275 billion. If Borders voluntarily liquidated today outside of bankruptcy — and did not require any assets to continue in business, nor require any administrative expenses to liquidate, nor have any secured interests — this would result in paying 98.6% of all claims. But watch the magic of bankruptcy priorities at work:

• First, one must remove all secured claims. Unfortunately, as a large Chapter 11 matter of a retailer, this is an entirely unpredictable matter... and the Bankruptcy Court (properly) waived the requirement to file a statement of secured interests. These secured interests will include both the obvious (mortgages on properties Borders actually owns, instead of leases) and the less obvious (the security interests in cash flow demanded by lenders, such as the abortive refinancing attempt that led to the bankruptcy filing). Unfortunately, the bankruptcy petition doesn't provide much insight on this... but SEC filings do. The most-recent quarterly statement (filed 09 December 2010) and annual report (filed 01 Apr 2010) disclose lots of claims that are categorized as "secured by inventory" and "secured by receivables," amounting to approximately $975 million. However, given that Borders does not actually own books on its shelves that are actually returnable for full credit — instead, these are properly consignments — the claims on inventory are likely to be recast as "unsecured" by the bankruptcy court during the free-for-all. The value of "inventory" disclosed on the most-recent quarterly report was $896 million, leaving claims secured by cash flow of $79 million.

  Subtracting that undoubted secured claim from both sides above, that leaves remaining debts of $1.214 billion against remaining assets of $1.194 billion, already dropping liquidation repayment rate (LRR) to 98.3%.

• Next, one must remove unsecured claims in priority order, under the priorities established in § 507. Once again, this will require substantial cross-referencing with the annual and quarterly reports, plus an estimate of further liabilities and cash flows to date. In short, it's an art, not a science... and must account for the fact that the highest-revenue quarter for publishing retailers is a quarter beginning in early November and stretching through late January, which is precisely that period not covered by a relevant SEC filing.

  First up will be administrative expenses of the bankruptcy filing itself (§ 507(a)(2))... including, naturally enough, attorney's fees. (Hey, lawyers wrote the Bankruptcy Code; you didn't really think they'd be willing to stand in line with the unwashed masses, did you?) The purely administrative expenses for a retailing operation, such as the costs of doing inventory checks and special sales and the fees charged by liquidation specialists, are typically slightly over 3% of the stated face value of that inventory; in round numbers, we should allow $30 million here. Legal fees that are chargeable out of the bankruptcy estate will be much less predictable, and range from negligible to exhorbitant... especially when, as for Borders, there are major shareholders with reputations for asset-stripping, greenmail, and failed turnarounds. As a round number, I would allow about $25 million if the case stays in Chapter 11, and $40 million or more if converted to liquidation under Chapter 7. These expenses are pure deductions from assets available to creditors. Thus, assets have now been reduced to $1.139 billion, dropping LRR to 94%.

• Next, one must remove certain claims by employees for back pay (up to $10k, § 507(a)(4)) and contributions to benefit plans (up to $10k, § 507(a)(5)). From what I understand, Borders has not fallen behind on (a)(4) payments, but is probably behind a bit on (a)(5) payments. Nonetheless, with only around 8,500 full-time employees a year ago (nonunionized to boot) and some reduction in employment over the past year, the maximum claim in this category would be $85 million, and is likely less than $20 million. Subtracting that estimated $20 million from both assets and liabilities leaves us with debts of $1.194 billion, assets of $1.119 billion, and an LRR of slightly under 94%.
• Next, one must remove taxes due and accrued prior to the filing (§ 507(a)(8)). For a company operating at a loss, the income-tax proportion will, of course, not be an issue. Sales taxes, property taxes, excise taxes, etc., however, are not. Once again, the abbreviated filings make calculating this very difficult. The $44.1 million figure at the end of January, 2010 is probably representative of the amount currently due and owing; the problems with the economy in 2010 are largely offset by significant increases in local taxation rates in many localities, plus the better 2010 holiday selling season. Subtracting a rounded $45 million from both assets and liabilities leaves us with debts of $1.15 billion, assets of $1.07 billion, and an LRR of slightly over 93%.

And now it's time for the real fun to begin: Arguing over the unsecured claims of lenders against the inventory, versus the publisher claims, and considering existing trade debt to the publishers. But that's for next time (which will hopefully be before the end of the holiday weekend). Our temporary summary is that before these arguments begin — and pretending for the moment that Borders was liquidating, and thus would not require any further cash and/or inventory to continue operating — there's already a 7% loss to publishers at best on their trade debt receivables (amounts owed by Borders for inventory shipped to Borders but not yet paid for). Of course, it's nowhere near that optimistic after untangling the rest of things. The key point to take away from things is that the publishers — and, hence, authors — are second-to-last in line for money, being ahead only of common stockholders in the corporation (who will get nothing, except perhaps shares in the reorganized entity).

Labels: intellectual property, jurisprudence, publishing

link to: 10:41 [GMT-6]

Borders Refuses to Pay the Rent

 

... leading to bankruptcy. It's not worth doing link sausages today thanks to the Borders Chapter 11 bankruptcy filing.

What does that mean? Chapter 11 of the Bankruptcy Code (Title 11, United States Code) is intended to give companies in trouble some breathing space to reorganize themselves and continue in business. Borders has established an "official" website that does/will describe its plans. This proceeding is not what has come to be known as a "prepackaged" bankruptcy — that is, there isn't a substantial plan already in place with substantial agreement between the debtor (Borders) and creditors (its suppliers, landlords, employees... and tax authorities and lenders, who are likely to be the biggest roadblocks). Borders has announced that it will continue to operate its stores as close to as-usual as possible, which may be rather difficult in one important sense: Some publishers had already suspended shipments, so there may be stock drawdown leading inexorably to patron shifts to other stores.

There are also rumored plans to close slightly less than a third of the Borders stores out there, but no announcements yet which stores... except that they'll be the "underperforming" ones. Don't expect to know that for at least four weeks; and even then, it will be part of a plan that must ultimately be approved by the Bankruptcy Court before Borders can leave chapter 11 proceedings... by either emerging "successfully" as a new, reorganizing company, or converting to a liquidation proceeding under chapter 7. This is going to be a fun, high-stakes ride with lots of expensive litigators sucking revenue and assets like nuclear-powered vacuum cleaners.

But what does that mean to me as a customer? It means, largely, business as usual until things change. They will change, but it's much too early to predict how, and in particular how for the store(s) nearest you, let alone when. For the next few weeks, though, you should expect lower stock levels, particularly of backlist titles and outside of top-ten CSAs (that is, NYC, LA, Chicago, DC area, Boston, the Bay Area, Philadelphia, Houston, and Atlanta). This may seem counterintuitive, as the official website claims that "orders after the filing date will be paid in full." The problem is that an order placed today — particularly for backlist material — will take some time to be processed... and vendors will nonetheless be reluctant to ship new material when they're still owed money for old material.

E-book customers are in an odd situation. The Borders "semisponsored" e-reader is the Canadian-owned Kobo, which (at least in theory) should be entirely unaffected by the Borders bankruptcy. Riiiiiiiiight. On the one hand, the Kobo reader does just fine with plain-vanilla EPUB files from non-Borders sources. On the other hand, it doesn't do well at all with DRM-enabled flavors of EPUB files (like the Barnes & Noble variant used on the Nook); it requires significant contortions to work with Adobe Digital editions (and doesn't handle PDF graphics at all); and appears — on the basis of an unscientific sample — to require more tech support inquiries than do its competitors, which may have an adverse impact on a small company linked to a single US vendor. That said, at least the Kobo is not based on a bookstore-managed central bookshelf from which books can be silently deleted, or at least not so annoyingly as is the Kindle.

The biggest worry for customers is going to be which stores close. That largely depends upon how "underperforming" eventually gets defined and implemented. In an area like this one — which is growing much faster than the national average, which contains a Big Ten university, and has two trade bookstores (one Borders, one B&N) serving a much-more-highly-educated-than-the-mean population of nearly 200,000 in this county, but is a hundred miles from the nearest major transshipment point — it's a real worry.

But what does that mean to me as an author? That you're screwed, but you should be used to that by now.

The first thing that you're going to see happen is an increase in the reserve against returns on your next royalty statement. Borders allegedly has about 15% of the market... but its share of returns is much higher, running over 20%. What is most likely is that your reserve against returns will be jacked up by a fifth on the next royalty statement; what might be justifiable is jacking it up by a tenth, but justification for reserves against returns is more than somewhat lacking.

The second thing that you're going to see happen is that some publishers — in particular smaller publishers and those that imposed net-receipts royalty streams — are going to refuse to credit you with all of the sales, claiming (rightly or wrongly) that the sales don't count until they've been paid... and that they're going to have to "adjust" actual sales based on how much they get paid for outstanding invoices. This is a key point for authors near escalator points and at risk from "deep discount" royalty slashes — do not allow the publisher to get away with either

• For "simplicity's sake," discounting the number of copies sold by the proportion it gives up in bankruptcy; that is, treating (hypothetically) 4,000 sales as 3,000 sales because it only got 75% of its invoiced receivables paid. This will not only take you farther away from any royalty-rate escalator, but will be used against you in the next contract negotiation to demonstrate that you had "lower" sales.
• Claiming that the combination of the ordinary trade long discount plus allowing for the virtual "discount" imposed by not having its invoices paid in full means that all sales for the period to/through Borders were "deep discount" sales, and therefore due only the lower rate for "deep discount" sales (usually half, or less, of the regular royalty rate). At present, given typical terms, that means that if rumors start floating that Borders will be paying publishers anything less than about 88% on their outstanding invoices, you should watch for these shenanigans. I consider it extraordinarily unlikely that publishers will get more than 75% on their outstanding invoices; much more than that would not leave Borders with adequate capitalization to continue as a going concern, the goal of chapter 11, and that only if most other classes of creditors agreed to take substantially less than that (and they won't).

  As I read typical trade-book contract terms (I just went through and reviewed a couple dozen different publishers' contracts), this kind of double-application-of-discounts would be inconsistent with and a breach of the contracts. What matters is not the publisher's receipts from sales (except, of course, for net-receipts contracts), but the terms of sale to the end-user — that is, the payor, in this case Borders. Paying less than what is on the invoice is not an alteration of the terms of sale, and therefore it is inappropriate for publishers to treat what they've given up due to the bankruptcy proceedings as a part of the "discount" for this purpose. That's not going to stop them from trying, though; that's precisely what [names deleted to protect the guilty, since there are new CFOs in place since] did when Crown went under.

The third thing that you're going to see happen is some additional pressure on and during negotiations over new contracts, and delays in consideration for books that are "marginal" (for somebody's definition that you'll never see justified). The misbehavior of [publisher's name deleted due to confidentiality requirements] during and shortly after the Crown bankruptcy along these lines is nearly legendary... and noneditorial management at that conglomerate is largely the same now as it was then, so one should expect the same sorts of misbehavior.

In short, this is bad news for everyone who cares about, or earns money from, trade publishing. Ultimately, it's a result of failure to account for the First Amendment rent. Back when Kmart acquired Borders, in the 1990s, Kmart imposed a nearly broken model on Borders (as reflected in Kmart's own bankruptcy a few years later, after it spun off Borders Group but imposed its own managerial personnel and structure on the new entity). The more-subtle effect, though, was that profit, productivity, and performance expectations for the First Amendment activities at Borders were the same as those for all other divisions of Kmart. Nobody really knows how much that "rent" is, or should be... but anyone who pays attention at all (not very many of us) knows that it's a number greater than zero, due to the hidden externality of First Amendment protection for those activities. Another way to look at it is that there is a nonzero cost (a "rent") for the First Amendment's encouragement of a broad range of activities, but nobody at Kmart (or, for that matter, nobody who does financial analysis of publishing and/or the entire entertainment industry) accounts for that cost in comparing the apples of commodity-based business like consumer nondurables (toilet paper, towels, etc.) to the kumquats of the First Amendment (books, magazines, CDs, videotapes, etc.). That failure, in turn, leads to unrealistic expectations and stupid management decisions in an attempt to "catch up" to other business lines.

And thus, we're back to one of the other problems with Borders' management over the years: Ownership/leasing of the stores and the land they sit on. But that's for another time; suffice it to say that outside of New York/Boston/LA/Chicago, the default Borders method is substantially different from the default method of its competitors, both chain and otherwise... and has come around to bite Borders Group in a very delicate portion of its anatomy. Assuming that it has that portion left after having been owned by Kmart, that is. This is the real elephant in the room, and is driving a great deal of the priorities struggle beloved by bankruptcy practitioners... and is well beyond my capability to begin to explain in a blawg entry. Suffice it to say that the people who are ultimately screwing authors the most in this situation are local tax authorities and real-estate speculators, who themselves are under unusually high pressure thanks to the partial bubble deflation in 2007–08.

Labels: civil rights, culture, intellectual property, jurisprudence, politics, publishing

link to: 10:39 [GMT-6]

Cynical Link Sausages for Monday Morning

 

These link sausages are exceptionally cynical, even for me.

• The Egyptian protesters are starting to discover Pete Townsend's clairvoyance: "Meet the new boss, same as the old boss." Mubarek had been in power for so long that almost nobody remembers that he and his predecessors Sadat and Nasser were all members of the top council of Egypt's military immediately before assuming power. That's nearly sixty years of, in essence, military rule... and the Egyptian military has imposed martial law and has not (as yet) stated when it will defer to civilian authority — if ever. That's not how one gets democracy; on the other hand, what the hell do we expect from former European colonies? The US, Canada, Australia, and India are outliers!
• Professor Krugman's editorial in the NYT this morning concentrates on the realities of what people want cut from government budgets. As he puts it, "Republicans don’t have a mandate to cut spending; they have a mandate to repeal the laws of arithmetic." Such as mandating that 2 + 2 = 5 (and if you don't understand that reference, particularly since the PATRIOT Act¹ is up for partial renewal/extension at the moment...). His key point, though, is that the Heffalumps are essentially expecting the U.S. government to behave exactly like the great unwashed and impoverished: The first thing to go when one falls into poverty is not luxury consumption, but investment in the future. That says more than a little bit about the class-warfare aspirations of the Heffalumps in general and the Mad Tea Party in particular.
• Cui bono the Huffington Post/AOL deal? Not the actual providers of the content — and even the MSM is noticing. The contrast with the preceding items is, and should be, quite disturbing... especially in light of the converse case: celebrity ghostwriters. It appears that the new meme is that "the actual writer can have either the credit or the money, but almost never both." What's really disturbing, though, is a recent survey of publishing figures that essentially says "we think a mail-order MBA is more important than being able to select and develop content to be successful in this industry" — which is really not at all surprising, just irritatingly obvious to me even when I was in-house.

---

1. The USA Totalitarian Regime Activity Incitement To Obscure Reality Act, Pub. L. No. 107–56: they had to destroy representative democracy to save it.

Labels: intellectual property, internet, mass media, politics, publishing

link to: 12:34 [GMT-6]

Dismal Link Sausages

 

Today's platter of link sausages is mostly dismal... or at least drawn from the dismal science.

• The Economist offers several interesting perspectives on slightly-beneath-the-surface-but-still-important matters. A surprisingly balanced piece describes the "hot news" doctrine — a quasi-copyright doctrine in the US that keeps people from just rewriting "hot news" and reprinting it without paying or acknowledging the originator. The doctrine has since evolved somewhat, but it has never properly acknowledged that it is not at all a copyright (or indeed any property right) doctrine, but a restriction on unfair competition.
• Not precisely a literal sausage, but awfully close, is a book review concerned with nutritional logistics in the Second Thirty Years War. Both the author of the book and the author of the review are so focused on food production that they don't see the real roadblock: Getting what food is available (whatever it is), unspoiled, into the bellies of people thousands of miles away who do not have stable preparation and/or storage facilities. And that's not just troops; it's also refugees, which makes the book still relevant.
• The Economist also hosts an interesting piece describing an analyst's disdain for AOL's purchase of HuffPo... or, at least, for the stated justifications therefore. My disdain comes from many, many other directions, but mostly from the union-busting potential. Arianna Huffington has a long history of not paying her contributors; although it's impossible to know for certain (as no SEC reporting requirements came into place), the low-end estimate of unpaid contributions to HuffPo was about 25%, and most are higher. In turn, this represents on of AOL's long-term financial models, making this perhaps a better fit (in terms of corporate cultures) than many might think: The repackaging of others' content without paying the originators for it. This problem begins nibbling on the first sausage noted above... although the closest thing to "hot news" that I've ever seen on HuffPo has been yet another anti-science diatribe from a denialist of some sort, which isn't exactly news in the first place.
• The White House — in particular, the intellectual property czar working there — has issued an annual report on copyright and intellectual property issues (large PDF) that looks like it might have been written by MSM lobbyists. I'm still digesting the whole thing (and it's already giving me gas), but Ms. Espinel's report is focused almost entirely on enforcement of digital rights... and completely neglects some of the longstanding problems with both intellectual property in general and copyright in particular, including (in no particular order) copyright's work-for-hire doctrine; the ridiculous logjam created by the descent-of-rights provisions in § 203 and § 304(c) of the Copyright Act; the unstated fifth fair-use factor (administrative convenience); the must-defend nature of trademark law; and a number of other, much more fundamental problems. Overall, I give this report a C- ... because even its enforcement flag-waving neglects a number of fairly significant events.

Labels: copyright, intellectual property, internet, politics, science

link to: 12:02 [GMT-6]

It's Better With Chunks

 

Just two great big link sausages today, each made from multiple varieties of meats (please don't ask about the fillers).

• I've been predicting this for almost a decade now: A major name in publishing is abolishing territorial divisions and going over to product-line imprints. At least within Europe, this change has been inevitable for years — ever since a decision on grey-market construction equipment within the EU made clear that territorial rights are a dead letter for identical products. That is, if you license the French-language rights to a work anywhere within the EU, you've just licensed the French-language rights throughout the EU. A recent decision on decoder cards for satellite dishes only confirms that territorial rights within the EU are, in a word, dead.

  But this can actually be good for authors. Really. Particularly for English-language works, the accounting tricks involved in foreign-rights transactions — even when handled by the author instead of a publisher — always operate to the author's disadvantage. So, for that matter, do the tax considerations (just ask anyone who has tried to get money out of Germany or Italy since an EU ruling in January 2009 forced a substantial change in tax paperwork!). It will be a lot harder to engage in some kinds of common chicanery if one company is producing a consolidated royalty statement with everything in one place. That's not to say that nobody will figure out a way to do so... but only that when caught, the consequences will be a lot more enforceable.

  This does have two important implications for contract negotiations by authors, though. First, and most obvious, is that authors need to ensure that their contracts are absolutely clear on the relationship between territory (if mentioned at all) and language... and ensure that, for existing contracts, they actually pay attention to what the publisher is doing. A certain NY conglomerate is probably still smarting from being caught with its hand in the cookie jar over purported "export sales," and that sort of thing is just going to get worse. Second, and more important, authors need to ensure that their warranties will be judged under United States law. If I go to the effort of ensuring that there's no Arabic-language edition of my hypothetical English-language novel that hypothetically impugns the integrity of Mohammed, I shouldn't then get a surprise when some court in Ireland sanctions me for blasphemy (look it up, it's on the books, and it's not limited to Christianity) and my publisher then claims I breached the warranty for something that the First Amendment guarantees me the right to do in this country. And I only wish this was entirely hypothetical; cf., e.g., Ehrenfeld v. Mahfouz, 518 F.3d 102 (2d Cir. 2008), abrogated by SPEECH Act, Pub. L. No. 111–223, 124 Stat. 2480, to be codified at 28 U.S.C. §§ 4101–05 (that particular publisher did not, to my knowledge, claim that as a breach of the author's warranties... that time).

• It's really amusing watching the publishing industry struggle with how to handle e-books. The preceding sausage is an example of one of the necessary changes, true enough... and it's one that actually makes some sense. That said, there are a lot of other things that have to change, in particular marketing (and the lack thereof) and publicity (and the accelerating delegation of publicity responsibilities to the author). Sisters in Crime attended a recent conference and blogged their impressions in five parts: A1 A2 B1 B2 B3. It's a fascinating view of the shortsightedness of s&m dorks in the publishing industry, because nowhere can one find acknowledgement of the historical Godzilla in the room that's going to eat commercial publishing's lunch (and dinner, and probably underwear). I can invoke that city-destroying movie monster with one word:

  Betamax

  Some parts of the entertainment industry learned their lessons from the VHS v. Betamax battle; consider the widespread ability of DVD players and computers to handle both the DVD+ and DVD- writeable/rewriteable formats, which are more different than it might otherwise seem. Imagine, for a moment, trying to rethread a Betamax tape onto a VHS spool and play the result in a VHS player; today's DVD players accomplish that task with such ease that nobody ever really notices. They didn't learn quite all the way (remember HD-DVD?); but now imagine, for a moment, trying to read that PDF-image journal article for class (an increasingly common event thanks to JSTOR and professor frustration with textbook publishers) on your Kindle. Oops.

  Of course, things aren't going to get better for a while... and the publishers (who are organized and have trade organizations to lobby for them) and e-device manufacturers (ditto) are going to use that time to steamroller authors (cats are more organized, and authors are too busy misusing the word "professional" for their subtrades to form trade associations with the ability, let alone will, to lobby).

Oh, the title of this post? A common (sarcastic) remark from instructor pilots after the orientation flight for Air Force officer candidates... you can fill in the blanks. Or your oxygen mask.

Labels: civil rights, copyright, culture, intellectual property, internet, jurisprudence, publishing

link to: 10:49 [GMT-6]

The Ads Were More Boring Than the Super Bowl

 

• Professor Krugman does something unusual: He puts economic events into the context in which they occur before theorizing on their causes. This is a great big hint to those who claim that "all government deficits are always evil"... particularly while they're running up their own mortgages and credit card balances, and doing private debt-instrument swaps, and so on.

  Which leads back to an item posted by the Perfesser last week, in which he decries "corporate social responsibility" as inconsistent with the purpose of corporations. Now part of his ire is based on a common overstatement of the purpose of corporations: It's not always profit per se that's at issue; sometimes it's more-subtle means of enhancing "wealth", ranging from asset accumulation to equalizing bargaining power in suboptimally competitive markets. Only a small part, though; and it reflects badly on the Frankenstein's monster of "corporate personhood" in a way that we have collectively refused to acknowledge. Why might we demand "social responsibility" from corporations only? We seldom, if ever, do so from partnerships (ranging from medical practices to accountancies to law firms); we virtually never do so from individuals, ranging from entertainment figures to supervillain-like individuals (depending on your ideological predispositions, that might be George Soros or the Koch brothers... or maybe just the members of the Walton or Rockefeller families with their wealth inherited from dubious wielding of monopoly power). It's all related to the insoluble free-rider problem and the gulf between self-interest and enlightenment.

• Speaking of free riders, failure to pay for positive externalities, and insanity: AOL is out acquiring again... this time, Arianna Huffington and the Huffington Post. <SARCASM> At least now there'll be a counterpoint to the Drudge Report — one just as divorced from the facts and circumstances and just as insane, but nonetheless a counterpoint. </SARCASM> The anti-science attitude underlying so much of the HP's work is an unfortunate albatross around the neck of some occasionally insightful political and/or cultural commentary. The real problem is that Huffington — a former ideologically pure right-wing nutcase who has shifted wings — is not a member of the fact/reality-based community, and seldom even tries. Instead, it's all about ideology; her (and her minions') continued support for the anti-vaccers even after Wakefield, and without any evidence, is just one example. And that's bad regardless of its premises or orientation; we don't need religious fervor — particularly rabidly anti-science religious fervor — in top editorial and managerial posts. Eppur se muove.
• There are two unfortunate confluences of the preceding two items in Canada in the last few days. First, the entirely unsurprising bankruptcy filing by Canada's largest book distributor has allegedly caught a lot of New York-based publishing figures by surprise. (Of course, I'm not in New York, so it doesn't matter that I predicted precisely this problem in various memos eighteen months ago.) Conversely, Toronto's leading newspaper wonders where the book editors have gone... in a story published on the same day.

  There's a very simple commonality between the two: Shortsighted outsourcing as a "costcutting measure" by corporate publishers. It's not going to be too long before many of those editors band together to create editorial combines, which will then hire themselves out to publishers. Wait a minute: That's called "book packaging." Or Harper's. It's also an interesting contrast with too-frequently-in-bad-faith publisher refusals to negotiate with authors (which I also noted last week... and this is just the tip of the iceberg).

• Poets are mad. In other news, the world is round; Bill Gates has a lot of money; and most "Presidents" in world government are not democratically elected in fair and free elections.
• As usual, George Orwell has something to say that is disturbingly prescient about current world events, from his diary of sixty years ago. For those who, on Monday mornings, need a sledgehammer to see parallels (which includes most Western government officials): In the Middle East, are we "fighting" (or worried about "fighting") theocratic Islamicists or Muslims?

Labels: arts, mass media, politics, publishing

link to: 11:56 [GMT-6]

Snowpocalypse Redux

 

Not a snowpocalypse after all — only 41cm. That polar bear was right.

• The ghosts of James Frey and the Beardstown Ladies are now ganging up, along with some dubiously motivated lawyers, on a Nobel Peace Prize winner: Former President Jimmy Carter. A class-action lawsuit claiming that Carter's book on Middle East peace negotiations is "factually inaccurate" but improperly presented as fact has been filed... ironically enough, in Montgomery, Alabama, the same place that gave rise to the seminal case on factual accuracy in advertising: New York Times v. Sullivan, 376 U.S. 254 (1964).
• I can't honestly say that I'm surprised to see a few people figuring out that Apple's app store is not the paradise it is marketed as for e-books. Leaving aside the monopolistic/monopsonistic pricing, Apple has a thirty-year history of making its products hostile to the moderately visually impaired, like those of us who wear bifocals. That (along with ethical reasons relating to overreaching IP policies and tying arrangements) prevents me from even being interested in an iPhone, iPad, Mac, or whatever... so I personally don't have to deal with the problem. I just have to deal with authors who do. Windows may not be a paradise, but at least it's not a closed system optimized for Steve Jobs's idea of proper workflow and use.
• On the same day as UK competition regulators began a formal investigation of the "agency model resale price maintenance agreements" spearheaded by Macmillan, Macmillan USA sent a deceptive letter to authors and agents "offering" to rewrite their contracts for compensation for e-books... that explicitly accused Amazon of being a monopolistic bully. Apparently, "irony" is not in the vocabulary of John Sargent (the president of Macmillan USA), or perhaps it's like irony (just like goldy and bronzy, but made out of iron).

  What makes this letter especially dubious is its ridiculous claim that "25% of net received" is always a better deal than whatever is in the author's existing contract. Leaving aside that a fair number of authors have probably negotiated different terms than a straight 10/12.5/15-for-casebound-editions rate for e-books (and, for that matter, that many authors are not published by Macmillan in casebound editions either primarily or at all!), the letter never provides any factual or mathematical support for its assertions. Its only redeeming feature is that it does not directly impose the 25%-of-net calculation, but invites authors to revise their contracts to that level. Don't do it without getting more facts and running the numbers. And, in particular, don't do it until you have a fair idea of how Borders — which remains a more-than-bit-player in e-book sales — is going to get through the almost-inevitable bankruptcy proceedings... since a "net received" basis means that if payments are delayed to the publisher, they're going to be delayed to the author, too (for even longer, but authors should be used to that by now).

  Here's an example of what running the numbers based on Mr Sargent's letter might look like for an actual current release

  New release, casebound:

  List price: $24.99

  Royalty rate: 15% of list (for simplicity; it has already sold enough copies to make this category)

  Royalty per copy: $3.7485 per copy

  Same work, Kindle edition:

  Amazon price: $11.99

  Royalty rate: 25% of net received

  Royalty rate per copy if publisher receives entire Amazon receipt: $2.9975

  Estimated publisher receipt from Amazon selling price: 70% (based on current Apple app store policies)

  Effective royalty rate: 70% of 25% = 17.5% absent any other deductions

  Royalty rate based on net receipt from Amazon absent any other deductions: $2.09825 per copy

  That is, for total royalties paid to the author to be even equal under Mr Sargent's proposal for this particular work, the price difference must generate sales of the electronic edition of nearly 180% of the copies of the casebound edition without any cannibalization of casebound sales or improper withholding of reserves against returns for e-books. Riiiiiiiight. And it assumes that the authors weren't smart enough to negotiate better rates in the first place (this one would have been). Further, it assumes that the "70% to the publisher" ratio is correct both now and in the long term; I have more than grave doubts, I have substantial historical evidence that it won't (just look at the evolution of the "long discount" over the last decade, let alone the last half-century).

  I'm even more worried about what's going to happen to authors who don't knuckle under a couple of years down the line when somebody in royalty accounting just applies that 25% of net across the board to everyone (even those who didn't agree to the change) as an efficiency measure...

• The (currently) most-dysfunctional federal court of appeals — the Sixth Circuit — got something right yesterday: A judge can't hang a poster with the Ten Commandments on it in his courtroom without running afoul of the First Amendment. This is a no-brainer decision, although I suspect that even the judge didn't understand that under one significant line of Talmudic thought the very existence of his secular-authority courtroom violates two of the Commandments... and we'll leave aside, for the moment, the possibility that some Hindu, or Buddhist, or Muslim might be tried for a criminal act in that courtroom with the Ten Commandments on the wall.

  Personally, I'd call that judge before the Judicial Qualifications and Conduct Commission; but then, I also advocate keeping "so help me god" out of government oaths, "in god we trust" off the money, and "under god" out of the Pledge of Allegiance because I'm a religious minority by ancestry and by choice. I've seen invidious religious discrimination at work (as if there is any other kind), and there is no place for it in any nation that so inherently celebrates dissent as does any form of representative democracy, regardless of the content of the substantive rights afforded citizens.

• Locus has issued its 2010 "recommended reading" list, with even more dubious choices and omissions than usual... but that's probably more cyclical than anything else; it's still a helpful starting point. It should not, however, be taken as some kind of long list from which award-winners/finalists (I'm talkin' to you, Nebula and Hugo voters) should/must be drawn, particularly due to the omissions.

Labels: arts, civil rights, mass media, politics, publishing

link to: 12:44 [GMT-6]

Snowpocalypse Now!

 

• It's pretty obvious that the various parts of publishing think of themselves as "special," and not subject to other law. The story at Harper's is good-old-fashioned union busting: The "Publisher" has attempted to fire organizers and refuses to negotiate until after a round of layoffs, even going to the extreme of rejecting donations intended to avoid the layoffs. This is, to put it bluntly, a pure power play, in which the Publisher is attempting to demonstrate — rather like Al Haig — that "I'm in charge."
• You may well have gotten tired of me harping on the antitrust concerns raised by e-book resale price maintenance agreements, inaccurately aka the "agency model". Too bad: The British authorities have not, and have opened a formal inquiry into whether the "agency model" breaches competition law Over There (just as the Net Books Agreement did before it).
• Meanwhile, Borders lurches further toward bankruptcy thanks to the management practices (and lack of vision) inherited from its former corporate parent. I remember quite a few worthwhile shopping trips to the Borders on Rockville Pike when I was stationed in DC... but that was two decades ago, under the original management and ownership. Back then, the store made sure that it stocked an extensive backlist, and was crowded with shoppers and usually had (short) lines at multiple registers on Sunday afternoons. A visit to the store in early 1994 disclosed some deterioration, but it was still obviously run by book people. According to a friend who is still in the area, that essentially stopped in the late 1990s when the store went on an efficiency kick... and it's similar here in East Central Redneckistan, with our much smaller store accompanied by a much less diverse selection in a Big Ten university town that does not have a general bookstore on campus.
• There's a fascinating essay by Professor Pollack at The Reality-Based Community on what Frances Fox Piven actually said that might have set off Glenn Back (this time, anyway) and revealed Beck's own fascist tendencies and methodology. As an exercise in historical comparison, try reading some of the German newspapers in the weeks leading up to Kristallnacht and comparing both the rhetoric and the nature of the evidence offered to what is coming from Fox News and the Mad Tea Party. There are, indeed, differences; the similarities, however, are dominant and far more striking.

  In short, I wish that Professor Pollack had mentioned the word "scapegoat" in his piece. That said, he does point out that Frances Fox Piven is a 78-year-old academic, which should be good enough. Probable next target: Dean Baker (whose point probably has more rhetorical weight than evidence behind it... so far).

• The best government your money wasn't sufficient to buy: In California's most-recent gubernatorial contest, the loser spent $43 for every vote she received. Yeah, we've got free and fair elections here...
• Once again, more proof that the internet is for porn. Free porn.

Finally, in honor of the weather rolling through — fortunately, here (a little bit south of Chicago) it will probably be only 40–50cm of snow instead of the 70cm+ they're expecting:

Labels: internet, life, politics, publishing