Can we talk about payments? (the Donadio & Olson mess)

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heza

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Lots of people have probably heard about Chuck Palahniuk who, among other authors, was robbed blind by the bookkeeper at his agency. It's been briefly talked about in the agency's BR&BC thread here.

I'm realizing that I don't really know how getting paid works. I knew, vaguely, that your agent gets the check and royalty statements from the publishers, does whatever auditing they do (I know some agents/agencies do it to different extents), and then cuts you a check for the total minus their commission? Is that about right?

Do authors usually get a copy of the royalty statements? How can you figure all this stuff out to make sure the agency is sending the right amount of money? Is there a Best Practices for this?

(I wasn't sure if this should be Roundtable or Ask the Agent.)
 

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Either RT or Ask the Agent is fine for questions like this. If at some point the thread needs to be moved, I'll be happy to do that.
 

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This is how payment works. Roughly.

At the agreed time of year, Publisher counts up how many copies a book has sold, refers to various contracts to see what's payable on those sales, and then sends a cheque for the required amount either direct to the author, or to the author's agent, along with a royalty statement which details the number of copies sold and so on, so everyone can see what's been paid and why.

Agent checks the royalty statement against the appropriate contracts, checks them against previous royalty statements, calculates the royalties due, and makes sure the amounts that have been paid are correct. Often they aren't. If they're not, the agency will let the publisher know and will demand the rest of the payment, and this can sometimes take a while.

Once the correct payment has been received by the agency, the agency will then send payment to it's author, keeping back their commission. They'll also send on a copy of the royalty statement so the author will know what they've been paid for.

Agencies usually employ contracts and royalties staff, to do all this checking and collating and paying. Authors should do their own checking, of course: if they had, I wonder if this particular fraud would have been discovered sooner. It seems amazing that the fraud has been going on since 2011 and no one had noticed.

If an agency loses money to fraud, as has happened in this case, it still has to pay its authors. I should imagine that there's a lot of negotiating going on behind the scenes right now.

(On a slightly different tack, if a writer signs a contract, is paid, and then for some reason or other has to pay back their advance then their agent will often be entitled to retain their commission on the deal, which would leave the writer significantly out of pocket.)
 

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Once the correct payment has been received by the agency, the agency will then send payment to it's author, keeping back their commission. They'll also send on a copy of the royalty statement so the author will know what they've been paid for.

One agency I used to use would send their own royalty statement, not the one from the publisher, which irked me.
 

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I can understand why they might do that--if they'd had to correct the publisher's statement, for example: but I wouldn't like that at all. I'm not surprised you were irked.
 

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I can understand why they might do that--if they'd had to correct the publisher's statement, for example: but I wouldn't like that at all. I'm not surprised you were irked.

I'd be fine if they'd sent the original along and their own; but their own statement was not much more than the advance, the copies sold, and the total amount of royalties to date.

That's not good enough.

I want to see specifics; format sales, held against returns, translation sales, the lot.
 

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You'd think they would have sent both copies along, if only to highlight the bits that were different, and what they'd had corrected. Shouldn't they want to show off what a good job they're doing for you? Worth every penny, etc?
 

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So is it important, then, to specify with your agency that you want copies of the publisher's royalty statements? Or do you just take what you get? Is this something appropriate to discuss during The Call or would that be too nitpicky?
 

heza

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It's just hard for me to imagine that this agency was sending on the original royalty statements and no author since 2011 ever did their own cursory audit. I thought there might be more to it than I'd always assumed.
 

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I'd be fine if they'd sent the original along and their own; but their own statement was not much more than the advance, the copies sold, and the total amount of royalties to date.

That's not good enough.

I want to see specifics; format sales, held against returns, translation sales, the lot.

Me too. Because then you know exactly what you're getting and why. It's common sense.

It's just hard for me to imagine that this agency was sending on the original royalty statements and no author since 2011 ever did their own cursory audit. I thought there might be more to it than I'd always assumed.

In one of the pieces I've read about it, Chuck P (whose last name is something I can never spell) said his payments had decreased over the years and then finally stopped. He queried it several times with the agency accountant, who always gave a credible explanation--but it was the agency accountant who was skimming the money out into his own account, so no one else was alerted.

But yes: I always check my statements, and refer back to the contracts, and make sure they all tally. And so do most of the writers I know who I've discussed this with. It does seem odd to me that no one noticed.
 

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I get royalties for some books quarterly, others twice a year, based on the publisher's accounting year. I always get two statements, if an agent is involved, one a copy of the original publisher statement and one the agency statement. I usually get a statement in email a few days to a month before the actual payment, if one is due, though one publisher emails me a statement at the same time I get a deposit in my bank account.

The only discrepancy I've had in three decades has been the way publishers count copies sold and, once my agent assured me it was according to the contract I signed, I accepted their version. There are a lot of ways to measure sales, especially with different versions of a book, and I swear you need an advanced mathematics degree, three doctorates in accounting and economics, a deep legal background and a Ouija board to figure it all out. :)

Jeff
 

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There are a lot of ways to measure sales, especially with different versions of a book, and I swear you need an advanced mathematics degree, three doctorates in accounting and economics, a deep legal background and a Ouija board to figure it all out. :)

Ha! Yes, royalty statements use all sorts of odd language. But your agent and/or editor will explain it to you, so that you know what's going on.
 
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