How Not to Change Your Business Model: The Latest on Permuted Press

This post has been updated

This is a very long post. If you’re already familiar with the issues involved, scroll down to the third section and read from there.

Last week, social media lit up with news that Permuted Press, a well-regarded small publisher of horror fiction, was going digital-first, and also suspending new title releases until 2015.

In an email sent to authors, Permuted Press’s President, Michael L. Wilson, touted PP’s success in 2014, along with a huge increase in its release schedule: from 20-25 books per year to over 100 so far in 2014. However,

While we’re thrilled at the response to the “new” Permuted Press, our staff has been burning the candle at both ends pulling it all together. Everyone here is upbeat about the results, but to be totally honest – we’re exhausted.

In order for us to operate at our optimum and to be able to build upon the successes we’ve already seen, we need to make a few adjustments to our original plans. So, we’re writing to inform you of some important changes that are taking place right away.

1: We will be ceasing the production of print-on-demand books. Exceptions may be made for top sellers or for works we subjectively choose. Our data revealed that 41.65% of our production team’s time is spent making print on demand versions of our books, but those products account for only 7.41% of our income. This disproportionate figure revealed the need to make prompt changes to our previous policy.

2: We are pausing the release of most new titles until early 2015. This will grant us the time necessary to increase margin in our production schedule. This will have a positive effect on our promotional efforts and enable us to better serve our authors.

PP authors–and outside observers—reacted with shock and anger. News coverage was equally uncomplimentary. The Horror Writers Association, concerned that PP was suspending print publication without reverting print rights, and also about reports (by me, among others) that PP was demanding fees from authors who wanted to get out of their contracts, referred the matter to their Grievance Committee.

PP did have its defenders, and some of the news coverage was criticized as biased and inaccurate. But for most commenters, PP was a scummy outfit that got greedy with acquisitions, wound up in over its head, and, by suspending print publishing but retaining print rights, wanted to have its cake and eat it too.

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I first became aware of Permuted Press in 2006, when I served as a judge for the World Fantasy Awards. They submitted several books for consideration, all of which were attractively-produced and well-edited. Unlike many small presses, they’d managed to gain real-world presence in physical bookstores, and had achieved significant sales success with some of their titles. In 2009, they inked a co-licensing deal with Simon & Schuster.

In 2013, PP was sold. Under new management, acquisition ramped up, with a ginormous increase in the company’s release schedule. PP also launched Permuted Platinum, intended to increase its brick-and-mortar presence with distribution through Ingram Publisher Services, and established Permuted Pictures, a film development arm.

Probably due to the jump in acquisitions, I heard from a number of authors in 2013 and early 2014 who wanted me to comment on their contracts. I had serious concerns, which I discussed last spring at Absolute Write. Problems included:

• A life-of-copyright grant term without adequate provision for reversion (books were said to be “in print” as long as they were “available from the publisher or licensee in any edition”). Reversion in a life-of-copyright contract should always be tied to specific sales minimums.
• An overly sweeping Option clause (“any full-length work of fiction based substantially on subject matter, material, characters or incidents in the Work”) that gave the publisher first refusal right on any sequels, prequels, successor works, or even, possibly, works in the same genre.
• Royalty rates potentially substantially reduced by “special discount sales”–defined as any print books sold at a discount of more than 40% (most online retailers demand a much bigger discount), in which case royalties dropped to just 5% of net.
• Substandard ebook royalties (20% of net, poor even for a big publisher, seriously bad for a small press) and subrights splits (30% of net).
• An excessively long publication window (four years).

Unlike many small presses that have author-unfriendly contracts, PP wasn’t some fly-by-night outfit run by delusional amateurs. Even so–and months before any other negative information surfaced–that contract was enough for me to counsel serious caution.

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When the shit hit the fan last week, I reached out to PP with a couple of questions.

I’m wondering if Permuted Press is planning to revert print rights to authors whose contracts include a grant of print rights but whose books are now going to be e-only; and if Permuted will be changing its future contracts to reflect this change in publishing policy (for instance, offering e-only contracts, or contracts that revert print rights after a period of time if the publisher doesn’t use them).

I quickly heard back from PP President Michael Wilson.

Our recent decision to go to an “e-first” model was based on an analysis of sales for print on demand titles that we were issuing. We found the time and effort that went in to producing those printed versions was disproportionate to the amount they were earning in sales. So, our shift in policy went from a book getting an automatic print on demand version, to one where the books sales must first warrant us doing that print edition.

That scenario may partially answer your question. When a book performs well in ebook format, we will move that book to print. Therefore, we wouldn’t want to give up the print rights. In fact, with the expansion of our print on demand distribution by moving to LightningSource from Createspace, the titles that do “graduate” in to print will now have more opportunity for retail placement than before.

I actually understand PP’s business decision. For many small presses, as for many self-publishers, print is typically a low-selling format. PP would be far from the only small press to adopt a digital-first business model.

However, I think the switch has been poorly handled. For one thing, the messaging has been confusing. In the email sent to authors, “ceasing the production” and “exceptions may be made” does not really convey the “e-first” policy that Michael describes above (forcing Michael to subsequently send out a clarifying email). Also, authors at PP’s September convention in Nashville were apparently told about the switch but asked not to discuss it publicly, resulting in even more anger from non-attending authors who felt they’d been unfairly kept in the dark.

Damage could also have been limited if the digital-first policy had been implemented only for new contracts going forward, rather than imposed on all pending releases. For already-contracted authors who’d been expecting their books to appear in print, PP’s abrupt change in business model has been devastating (including for one author who had taken extensive print pre-orders). Alternatively, rather than unilaterally holding on to print rights, PP could have agreed to revert them after a reasonable period of time if they didn’t plan on using them.

To date, much of the discussion and anger has been focused on the issues surrounding the elimination of print, along with the inept messaging. But what worries me as much, or possibly even more, is the apparent lack of planning and forethought that led PP, under its new ownership, to acquire such a glut of titles and release them so fast that they apparently couldn’t manage the workload–resulting ultimately not just in a change in business model, but in the suspension of its publishing program. Whatever spin a publisher attempts to put on something like this, it is never a good sign.

And then there’s the contract–which, as I’ve noted, is reason all on its own to think twice about signing up with PP.

The Horror Writers Association is concerned about all of this as well, and has been in dialog with Michael Wilson over the past few days. I’ve been given permission to share this announcement, which HWA President Rocky Wood plans to make shortly:

The Horror Writers Association has held detailed discussions with Permuted Press over the last week, regarding their decision to stop publishing POD editions of books by many of their contracted authors; claims that some authors were required to pay compensation to revert their rights where they objected to the halt on publishing POD editions; and clauses in their boilerplate contract that HWA finds unconscionable.

Permuted have advised that they have agreed the reversion of rights to all authors requesting reversion; and that the reversion has been agreed to with no compensation excepting repayment of advances.

On the issue of the boilerplate contract Permuted have made very significant concessions to the HWA over most disputed clauses. Permuted have asked for another two weeks to finalise a draft to be submitted to the HWA for further feedback or approval. Permuted’s business model and contracts are in the final analysis their own, so it may be that HWA will advise its members only to sign a Permuted contract if certain boilerplate clauses are removed or amended. In the meantime HWA maintains its advice that our members should not sign the current boilerplate.

Proposed changes to the contract include limiting the option language; shortening the four-year publication window; a possible switch from life-of-copyright to a 10-year grant term (in my opinion, still considerably too long); and a new reversion clause tying reversion to minimum sales within four consecutive royalty periods. Also, in email to me, Michael has indicated that PP is willing to consider my suggestion that PP revert print rights on request if they haven’t used them within, say, 12 months of publication.

I’ve independently confirmed what the HWA statement says about reversion fees. Although some authors were originally asked to reimburse editing and artwork, PP has reversed that decision.

I hope to have a chance to review the new contract when it’s presented to HWA.

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So what’s the final word?

HWA’s announcement indicates that some good has come out of all the uproar. By listening to critics and being open to change, PP has gone some way toward demonstrating that it’s not the greedy, sleazy outfit some of its detractors have claimed. Having seen way too much of the bullheadedness and belligerence that infests the small press world, I think PP deserves major props for that.

However, even with an ideal contract, it’s hard to predict anything about PP’s future until it resumes publishing next year. And while I hope very much that PP will start publishing again, I remain concerned about the planning problems and the overambitious vision that precipitated this crisis.

Only time will tell. In the meantime, for authors seeking publication, I think wait-and-see is the best approach.

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EDITED 2/26/15 TO ADD: In an email to authors a few days ago, Permuted announced that it is moving to further trim its list:

Moving forward, Permuted Press is going to be focusing primarily on more established authors, and is becoming very selective about the projects that we publish from newcomers, or from existing authors who have not sold very well. Given this reexamination, we’re going to be returning the book rights to a number of upcoming titles to the authors.

Not surprising, in light of Permuted’s huge overstock of titles, but a nasty shock to the authors who are being cut. One author who asked for clarification received a response that reads in part (my bolding):

There were a number of factors that we took in to account when making our decisions. Admittedly, I did not read the books in full. That is usually done by our editors when the editing process begins.

Sloppy acquisition policies…one more reason why Permuted has gotten itself into trouble.

As of this writing, I haven’t seen a revised Permuted contract, or heard anything about whether they’ve changed their bad boilerplate.