Nightshade is a medium sized science fiction and fantasy press that has published some amazing authors over the last four or five years. And man, does the field need that dynamic, new-voiced sort of outlet. There are many happy readers of Nightshade Books.

But since 2010 or so, they’ve been having trouble managing cash flow and running their business.

As a result, in order to wind everything down, they’ve trying to sell author contracts to Sky Horse, a nonfiction print house, and the eBook rights to Start Publishing (but oddly enough, they’re not selling the company, as such, just the assets to cover their debt and wind down, it seems).

It’s gotten messy, particularly since authors are being asked to change the contracts.

Also, splitting off your rights with two different companies is… odd?

Furthermore, there’s an element of bullying here, as the letter states that if a ‘certain amount’ of authors choose to go through the with deal, it will happen. If not, it’s off to bankruptcy and rights being tied up for years.

In some ways, NSB is pitting authors against each other through lack of numbers and secrecy and personality.

Here’s the round up must reads to wrap your head around all of this:

iO9 gives us the basic summary:

Some of the edgiest, most interesting writing in the past several years has come out of Night Shade Books, a scrappy indie publisher in San Francisco. But now, it looks like one way or another, Night Shade might not be around much longer.

Night Shade has been struggling for a few years now, with authors complaining about difficulty getting paid. The publisher had a run-in with the Science Fiction and Fantasy Writers of America (SFWA) a few years ago, when SFWA put Night Shade on probation. But last night, the other shoe dropped. Night Shade wrote to its authors, saying that it’s selling its assets to Skyhorse Publishing and Start Publishing.

Over at Staffer’s Book Review, there is an amazing and detailed piece of journalism that looks at the business practices of NSB, and how we ended up where we are today:

Instead, as someone who has followed Night Shade for years said, “In the end. I just don’t want people saying ‘Oh, I’m so sorry. For a great small press to go under like that due to evil distributors and Borders’ collapse—tsk, tsk.’ I want it recognized that they ran the business into the ground.”

I’ve talked to a dozen people who have done business with Night Shade, and this is not an uncommon perspective. How then did we get here?

At Michael Stackpole’s blog, he examines the contract with a keen eye and has a lot of flags about it, and it’s yet another must read:

There are several points in the Night Shade Books letter of agreement (which modifies my contracts) that are ripe for abuse. Again, I’m not saying anyone will abuse the terms, but why sign anything where those terms are in the contract? And, no, I’ve not reached out to Skyhorse to negotiate different terms. That would come later, after NSB’s fate has been decided, and Skyhorse can decide if they really wanted my books, or wanted other books that happened to be in the basket with mine.

1) Old Debts: Authors are told that receipts from the sale would go to paying off all royalties and unpaid advances outstanding. I am given to believe that the money would be paid into an escrow account, with disbursement coming within two months of the deal’s finalization. However, details of the escrow account and payment schedule are not included in the agreement. If they are not there, they’re not enforceable. If that is the way things are going to be handled, the details should be in the agreement.

2) Physical Book Royalties: The agreement requires authors to accept a royalty rate of 10% of Net income. Net is defined as the amount of money the booksellers and distributors pay Skyhorse—usually 50% of cover price. For me this net amount is a 50% reduction in my royalty rate.

More importantly, net income is illusory. Let’s say that Skyhorse, in order to get more of my books into a store, offers a distributor or chain an extra 30% off, on the condition that they buy an extra dozen books. So, 36 copies of a $15 book pays Skyhorse $189, of which I make $18.90 as opposed to the $27 I’d make if all 36 had been sold at a normal price, or the $54 I’d make under the NSB contract.

The Foglios at Girl Genius are also not thrilled:

You see, there’s the whole tedious business of disengaging ourselves from Night Shade, which has decided to sell our contract to another publisher in order to cover their debts. This other publisher, Skyhorse, is perfectly willing to buy Night Shade’s assets (our contracts). However, they will rewrite them and everybody now gets paid a flat 10% of net sales. Let me put this another way; If I was a monkey, I’d be throwing this.

One of my own agents, Joshua Bilmes, has written an extensive and detailed must read of the ins and outs of the situation as he sees it here:

Unfortunately, the company was poorly run. In 2010, this became public knowledge. There were issues with late royalties, and with e-books being published by Night Shade when their contracts did not give them e-book rights. We were aware of those issues already, and we had stopped submitting to Night Shade. It wasn’t just that they were so often late, but that we never felt entirely comfortable with the excuses or forthrightness of the people who ran the company. But we hadn’t gone public. Authors don’t like to admit they aren’t being paid, and what high-powered literary agency talks about not being paid? You wonder: Do they just not want to pay us? We don’t have the clout and everyone else is getting paid?

snip:

Regardless of what your contract currently says, you have to give Skyhorse and Start the audio rights and second serial rights to your Night Shade book, unless you have sold or are about to sell those rights yourself. This is significant, because these rights have value. Even if the underlying print book is caught up in a bankruptcy proceeding, these rights may still have value.

snip:

Most important, the deal is structured in such a way that authors who might benefit have to start arm-twisting to get authors who shouldn’t sign to sign anyway, to be sure the mysterious unknown threshold of authors is met.

That last point is one of two things about this that raise my ‘I don’t like this’ feels, even though I don’t have a book tied up with NSB.

The second point is this weird thing where authors seem to have to split rights up between one group (Sky Horse) and this other entity we know very little about, Start Publishing.

With Sky Horse, from what I can determine, they are capitalized, able to pay the authors money owed (though Stackpole points out that can be fudged based on contract language as it exists) and have existing good will in terms of demonstrating they can run a business. One can imagine them starting up an imprint in the same manner that other non-fiction houses have created a genre imprint, the most famous recently being Pyr (that being said, Pyr just started the imprint, and purchased stuff. The whole, swoop on firesale assets and starting up the house from the ashes of a disaster feel squicky, but hey, I can imagine seeing that turn out okay)…

But Start Publishing?

Who names an eBook company after a phrase that every single person trying to think about how to start publishing types into a search engine? You can’t even find a company named that unless you look really really hard. Strike one in my ‘I think they have business smarts’ feelings.

Strike two is their entire catalogue seems to be royalty free reprints.

Strike three is that we know next to nothing about them.

Why aren’t Sky Horse doing the eBook in house? Will the single contract handle eBook and print for these authors? If Start owns the eBooks, what happens to the authors when Start and Sky go separate ways? Or have a falling out?

When your book goes out of print with print in Sky, does it go out of print with Start?

No matter what happens next, this is really messy. My heart goes out to the authors involved.

Addendum: Here is reportedly the contract hosted on Scribd.

Addendum: Jeremy Lassen of Nightshade blasts back via io9:

Many of these people are using this deal as a whipping rod, publically lambasting Night Shade, in public forums and in private. That’s fine too. I simply ask that you view their opinions in the proper context. Are those opinions about the relative merits of the deal, or is there a personal axe that is being ground?

For many, it’s not a personal axe. I have nothing to grind. I’m really bummed. But, man, my worries don’t go away. And saying that everyone who has concerns has a personal axe is a great way to keep burning bridges hard in terms of professionalism with people like me…

Addendum: Jason Sanford wonders about Objective Entertainment:

There are so many unanswered questions. For example, as was posted on the blog Brillig , Jarred Weisfeld is evidently tied in with this deal through the companies trying to purchase NSB assets. However, Jarred also is tied in with a literary agency called Objective Entertainment, which was mentioned in a SFWA Writers’ Beware post .

Addendum: more about Objective Entertainment.

Addendum: Kameron Hurley gives her reasons for considering the ‘buyout:’

And amid all the chatter, what gets me is how everybody goes on and on about how stupid writers must be to sign these things. And without weighing their options and personal situations and having all that information, I’d agree. The deal is seedy. It’s made to fuck writers in all sorts of interesting new ways. But guess what? So are a lot of boilerplate contracts sent to unagented authors from major and minor publishers all over the world. In fact, the SFWA just got a few fixed recently that have been in play for a bit now. That Hydra bullshit? That was from a major house, guys. One without a Writer Beware rep.

snip:

But when a writer weighs their options and collects the information and negotiates this boilerplate into something palatable (because yes, writers have agents, and no, you are not obligated or expected to sign a fucking boilerplate contract – has anyone said that publicly yet?) and signs, that’s their decision. And there are a number of people who need $5,000 or $10,000 or $25,000 right now – not a promise of 50% of retail ebook sales over the next ten years. These are people with medical conditions, crappy living conditions, and debt piled high because Night Shade kept promising to pay them next week, next month, next year.

Addendum: Mike Stackpole has more thoughts:

2) A really unsettling part of this deal is that we’re being asked to sign off without seeing any numbers or having any chance to verify the amounts that we’ve been told we’re owed. Basically, this is a request to trust NSB and Skyhorse that the numbers are right. Assuming they are, the numbers (which were due in the beginning of March by contract anyway) could also allow authors to address another point. (See below.) The fact is that we’re being asked to make a very important decision, and not being given the information upon which we can make an informed choice.

Addendum, Andrew Zack, another agent, weighs in:

When a publisher buys another publisher, the new publisher may try to change the terms of the contract but more often the publisher merely honors the existing contract. When Kensington bought the bankrupt Carol Publishing Group, it paid out the overdue royalties and followed the existing contracts . . . and publishers loved them for it. Even when John Colby bought the assets of the bankrupt Byron Preiss imprint, ibooks, he just picked up where they left off in terms of the contract (alas, he only bought the assets and did not make good on royalties owed). So why would Skyhorse take such an aggressive position as to demand that the authors accept worse terms and sign over rights not covered by the original contracts? I don’t know, but if this was a decision by Tony Lyons and his team, it doesn’t reflect well on them, I feel.

So what’s an author to do? Traditionally, publishing contracts have clauses that revert rights automatically when a publishing house goes bankrupt, but bankruptcy court judges tend to say those will not be honored, since the contracts are assets and the judge’s job is to protect assets for the creditors. But in practice, I have found that trustees assigned to look after bankrupt companies are flexible on reversions of rights. If Night Shade can’t close the deal with Skyhorse, then it will declare Chapter 7 bankruptcy, as per its letter. Authors who are owed money will not see that money. But they may be able to get their rights back . . . eventually. And what happens then is anybody’s guess.

Addendum: Start Publishing and Sky Horse talk to IO9 about the deal:

In Lyons and Weisfeld’s view, Night Shade was shockingly unprofitable, and a big reason for this was its unrealistically high royalty rate. “Night Shade was losing like 25 percent per year,” says Lyons. “They were losing more than almost any publishing company I’ve ever heard of.” And a big reason for this was the fact that “they were paying royalties which really nobody else pays.”

“If you went to Knopf and you were a bestselling author, you would negotiate the kinds of royalties they have” for all authors, adds Lyons. Night Shade’s royalties escalated from 8 to 10 to 12 percent of retail price for paperbacks. “I don’t believe that New York Times bestselling authors get that from the best and biggest publishers,” says Lyons. “Those are not realistic royalties in the kind of print publishing environment we have now.”

I have 8% on my own mass market paperbacks. It’s hard to discern from just that though, what they mean. If the step clause was negotiated properly, higher royalties step in once a book has made all its money back and then some, so that everyone wins.

For example, I have 8% on my paperbacks, but I’m not a big enough name to have step clauses on paperback, but I do have them on hardcovers.

The acquirers plan to put out 90 titles over the next few years:

So for Night Shade, Lyons says he and Weisfeld aim to put out 90 new titles over the next few years. They want to hire brand new staff to run it, including a new acquiring editor, “an expert in the field” who’s got a lot of experience in science fiction publishing. They’ve already asked a couple agents for editor recommendations.

While the represent themselves as industry standard, I’d love to see someone do a contract comparison between theirs and an industry standard one. If (big if) Nightshade is so fast and loose, as they claim, it would help us see that they’re offering a similar one.

Addendum: Neal Asher notes his existing contract with NSB states:

8% on the first 50,000 copies, 10% on 50,001-100,000 copies, and 12% over that, of the retail price of all MASS MARKET PAPERBACK copies sold.

That’s a very decent stepped clause, and not the sort of thing that ‘only best sellers’ can get, so we know Weisfeld is not being truthful with his earlier statement. Very few authors these days are moving over 50K copies of paperbacks, and if they are, the book is making so much money that it has covered its costs, earned out, and is making nothing but cream for author and publisher. This clause is not bankrupting anyone. For it to be blamed for all this does not sit right with me.

Neal Asher notes that he also has not come up with a certain decision:

And, because I keep producing books and keep getting published I’ve been doing okay, which is why I never lawyered up and went after NSB. As a consequence they owe me a shitload of money. I might decide to sign up so that I get that money, and consider those other two books loss-leaders – in America, since they are still published here in Britain and in translation. I’m certainly going to push for some changes to that contract. Or I might just say fuck it, shove your contract.

Addendum: J M McDermott on the deal:

I’ve seen publishers fold before, and I’ve been involved in the mess, and the weird thing is, it doesn’t destroy anyone’s career if everyone keeps writing.

Agent Andrew Zack comes back again to the question with more thoughts about what could be tweaked to make the deal better:

The psychological impact of the letter that was sent was underestimated.
I think that 98% of the problem with this deal is psychological.

I’ve tried to avoid tossing up much of my own opinion, but I think this cuts to the quick of the matter and I’m ready to riff on that, so here goes:

Skyhorse showed up, with Jeremy and Jason, with two big sticks and not much carrot. Stick one: we have a deal that isn’t as good as a contract you’d sign at any other SF/F house, but you’ll get your money if you sign. Stick two: don’t sign it, Nightshade goes bankrupt, and you’ll most likely not get your novel back (not just lose the pay, but have rights tied up).

Those were the threats. What’s the carrot? Who wants to begin a relationship in business based on a fait accompli and people showing up saying ‘you WILL do X?’

That sets a tone.

Skyhorse says they want to be a player in the field. And that’s cool. I said earlier that spinning out a genre player from a non-fiction house isn’t all that new. Pyr is a division of Prometheus. It’s not that unheard of.

Skyhorse obviously has business sense. They’re coming, buying titles, taking over a whole backlist, and getting in the game without having to start from scratch.

They can make an argument that by wiping out NSB’s debt, they need less than normal contracts in order to make back their investment.

However, at no time have they approached the authors first saying ‘hey, we’re going to be operating your novels in the red until that debt is paid back, hence the new terms. But once we do that, let’s get back to a relationship similar to other houses in the field.’ The fact that they claimed the royalty rates we saw were impossible indicates they don’t know what their competition is like. They seemed to assume they had SFWA’s complete backing, as they used it as another stick in an interview, in comments online, and on their Facebook page. Again, another stick.

So the question is, other than everyone siccing agents on them, what’s the carrot? And how do they envision moving forward?

Skyhorse would gain a lot of good will if they’d release what they think normal terms are going to be. Do they expect future writers with new books to show up to them if these are the terms they offer? Or are they willing to step writers clauses up after the debt they have taken on is taken care of?

Everyone is paying close attention. What Andrew Zack notes is important, I found his the most interesting post yet, as someone on the outside of this and paying close attention. Will there be some way for authors to move to more normal contracts? What are future Skyhorse/Start NSB line contracts going to be? Because if they are known for this, they’ll be the last house everyone shows a manuscript to.

Addendum: looks like Skyhorse is thinking about the future, which is a positive sign. They’ve announced different terms:

Here are the revised terms:

7 1/2 % of retail for all printing books.

25% of net receipts on all ebooks up to 15,000 copies sold and 30% thereafter

50/50 on audio, with a reversion if we don’t sell the rights in six months. Audio rights money to flow through within 30 days of receipt of payment, provided that the advance has earned out.

Jeremy Lyons still seems to think 7.5% is generous because:

Lyons tells io9 that he believes the new rate of 7 1/2 percent of retail is higher than a lot of agents ask for, and is in fact higher than some of the existing Night Shade contracts — although it’s slightly lower than in most of them.

Again, I’ll reiterate that in the SF/F genre, it isn’t high, it’s spot on.

Other than that, it’s good to see Skyhorse is looking serious about being a long term player.

Michael Stackpole announces he will sign the modified agreement:

The agreement isn’t perfect. I still have my royalties cut, but not nearly as drastically as before. The ebooks royalty clause actually includes an escalator—as more books sell, my percentage goes up—which is a good precedent to have set in that realm. Other clauses have been modified or added that make the sort of nightmare scenarios I outlined in last week’s posts unlikely. The audio book and second serial rights clause was changed to include a sunset provision and the pass-through wording I wanted.

Publishers Weekly’s Rose Fox interviewed Start/Skyhorse about non-author creditors owed money:

EDIT: Weisfeld called me back to clarify that if the deal goes through, settlements for creditors will likely be in the 30%–50% range. Not ideal, obviously, but better than zero.