When you sign a publishing deal, the contract spells out different royalty rates for different kinds of commercial activity; you get so much every time a copy is sold, and significantly more from every licensing deal for the book.
When you buy an ebook, it, too, comes with a contract, a long, boring EULA, that inevitably says, "You have not bought this book" (because otherwise you'd have the right to sell it or give it away), and "You have merely licensed this book," meaning that you have to abide by the terms set out on the accompanying "license agreement."
In 2012, Eminem and Universal settled a lawsuit over this very issue, with Universal agreeing to pay Eminem the licensing rate on the digital music sales it made to customers who also got a "license agreement" with their purchase. It
Now, writer Sheldon Blau has filed a class action lawsuit against Simon and Shuster (who appear to have purged wording mentioning "licensing" from their fine-print after the Eminen/Universal settlement), saying that the publisher owes him, and other S&S writers, license-level royalties on all the ebooks they sold.
Simon and Shuster is trying to scuttle the suit at the outset by arguing that they assigned their rights to Blau's book to another party, and that his beef is with them. Nevertheless, you can expect more of this to come, and damned right, too: publishers put themselves in this bind by arguing that they got the best of the deal in both directions, with their customers and with their writers. They had to know it was bullshit when they did it, and it's time they were called on it. The best possible outcome from this? Publishers all drop the "licensing" language from our ebooks from now on, and writers get a big payday besides.
Statute of limitations runs out after six years, though: so lawyers, start your engines!
In its 2010 decision, the F.B.T court held that digital downloads should not be treated as auditable physical units for royalty accounting purposes. The Ninth Circuit ruling was important for the recording industry, because recording artists (like book authors) receive 50% of the record company’s net receipts from rights licensed to third parties -- as opposed to 12% to 20% of the retail price when a recording is "sold."
In the wake of the Eminem decision, most publishers amended their contracts, so the sale or license of an "eBook" is unambiguously treated as a sale. The lawsuit, therefore, challenges the publisher's interpretation of their legacy or backlist contracts.
Simon & Schuster Slapped with eBook Royalty Class Action Lawsuit
Summons [Supreme Court of New York]
(Image: Fine Print, CJ Sorg, CC-BY-SA)