There are serious problems going on at Dreamspinner Press

[Demon_Lord]

I'm posting this in public for authors who don't know the situation. Dreamspinner Press is a small press that have published romance books very successfully for many years. I know that we have a private romance forum, but in case a newbie is unaware of this, I think it would be a good idea to post it public. If you think otherwise, Tim, please move it to where it's appropriate.

Anyway, these posts explain better what is going on:

AUTHORS' CONCERN GROWS OVER LATE ROYALTY PAYMENTS AT DREAMSPINNER PRESS
https://accrispin.blogspot.com/2019/09/authors-concern-grows-over-late-royalty.html

This is a detailed article about what's been taking place
DREAMSPINNER PRESS, ****, EMAILS, AND… OMG, REALLY? I CAN’T EVEN…
http://rjscott.co.uk/dsp2?

[TimothyEllis]

Moved the thread to the pub for now. Depends how the discussion goes as to where it ends up.

[LilyBLily]

I'm glad you posted. This has hit Twitter in a big way but lots of people don't do Twitter.

As a general comment, and not about this company per se (about which I know nothing), there is simply no excuse for a publisher to be so messed up that monies earned aren't paid to authors. If an author is owed $27k in royalties, that means the publisher received more than $27k. A lot more. There should be no barrier to paying the author the $27k, then, right?

So what we're seeing with a lot of these little companies is that they're doing something wrong somewhere else in their business. Instead of fixing it, they are diverting author royalties to attempt to plug a hole in their budget. This is an incredibly bad way to do business and sure to end in bankruptcy.

Why do I claim this? We all know how little it costs to produce an ebook and even how little it costs to produce a print book. So why are these small presses having such a hard time making ends meet? Because (1) their overhead has run amok (why?), or (2) they siphon off profits from one part of the company to bolster some failing part of their business instead of stopping the drain (don't do this), or (3) they take whatever money comes in as their personal income (I can't even). Or a combination of all three. 

I tend to believe it's usually #3. Some of these companies don't even pay their ms. readers. Often, they stiff their staff or freelance editors. So what is this mysterious overhead? What are these mysterious unexpected and catastrophic expenses that require all of the publisher's share of book sale income plus all of the author's share, too? A fancy office for the owner? A yacht?

The cost of printing books could be a reason for losing money, but is easily resolved by not printing more copies than the company has orders, or by letting the books be POD. A company that intends to stay in business does not print more copies of a book than it can sell and still make a profit. (Bantam's success story was built on that, by the way.) 

Is advertising the big expense? Really? Where? Why?

I could go on, but my gist is that I'm fed up with hearing about publishers who don't know how to run a profitable business even though their books are selling and then decide that the way to make it all magically work is to cheat their authors.
   

[TimothyEllis]

Is advertising the big expense? Really? Where? Why?

I could see some of them chew through massive amounts of money in AMS.

When Amazon changed AMS earlier in the year, ads which worked suddenly didn't, no matter how much money you put in the spend. A small publisher, not adapting fast enough, or not paying enough attention, could suddenly be spending tens of thousands without realizing it.

They'd only need to get this wrong a couple of times, to start getting behind badly.

[RPatton]

I actually had a long conversation with some people about the different costs a traditional publisher has compared to self publishers.

Traditional publishers have a lot more fixed cost and those don't translate well to the costs a self-publisher faces. Rents, insurance, salaries, utilities, equipment, supplies, and services all have to be paid out every month. On top of royalties paid to authors. The cost of publishing a book (even an ebook) is significantly more for a traditional publisher and their book prices have to be higher to help offset those costs. Self-publishers (especially in Romance) have done a good job of lowering the expected list price of an ebook and increasing the marketing costs. For the small publishers who don't have a bestseller to make up the volume, they have to lower their profit margin to keep up with trends. Eventually, the margin slips from profit to loss.

In most cases, it's not embezzlement or incompetence, but the slow creep into debt caused by the current market, exponentially more costs as the company gets bigger, and fluctuating costs that are beyond their control. The company  can't get out of the hole they suddenly find themselves at the bottom of.

I don't know the specifics of Dreamspinner, but it's frightening for both the authors and the publishers. And this isn't the first time it's happened. The past few years are littered with small publishers who disappeared. Some bowed out before they got to the point where they wouldn't be able to meet royalty payments, but some didn't. Part of the issue here is Dreamspinner not communicating with their authors and not addressing any of the concerns. All I've heard (and not saying this is small) is that Dreamspinner hasn't paid out royalties, but nothing about what they've said or even haven't said to authors.

[LilyBLily]

The argument about how risky being a publisher is founders when I compare it to me telling my cover designer that, sorry, I'm unable to pay for the cover I received and used on my book, because, well, making a profit publishing is HARD.

It's not the publisher's money, some vague Amazon bonus. It is by legal contract the author's money due from sales of books that can be proven.   

This happens in real estate all the time. The developer hires the work from the small contractors and even the big ones and then defaults on paying any of them. Goes into bankruptcy reorganization and is allowed by the courts to get a free pass on ever paying more than pennies on the dollar of what is owed, if that. A couple of years later, the developer nevertheless sells the building or whatever for a whopping profit and pockets it all.

"Publishing is expensive, so I guess you don't get your $27,000 in royalties after all" doesn't cut it with me. That's theft. 
 

[okey dokey]

In the world of book contracts, as opposed to Terms of Service, trad published authors and their agents would push for a special clause.
It would demand that the author's royalties be separated from the publisher's operating budget.
This made the publisher a legal guardian of the author's royalties which were held in escrow.


(I realize this could be better worded, but the legal terms escape me right now)

[123mlh]

Asking for the funds to be escrowed I believe would create a fiduciary duty to the author, but try getting anyone to take that case even if the publisher were willing to agree to that.

[Al Stevens]

In the world of book contracts, as opposed to Terms of Service, trad published authors and their agents would push for a special clause.
It would demand that the author's royalties be separated from the publisher's operating budget.
This made the publisher a legal guardian of the author's royalties which were held in escrow.


(I realize this could be better worded, but the legal terms escape me right now)

That practice was known as holding earned royalties in reserve against anticipated returns from retailers of book hardcopies. It was a common practice in the old days.

[okey dokey]

123lh has the right legal term.
With that clause, the trad publisher could not co-mingle the author's royalties with the publisher's operating funds.
Thus if the publisher went bankrupt, the author's supposedly were still intact in an escrow account.
But authors and agents had to fight to get an escrow clause in the contracts.

In todays Terms of Service, you can't fight for or against any clause. You just take the offered terms, even if they can be changed willy nilly down the road.

[Dormouse]

Traditional publishers have a lot more fixed cost and those don't translate well to the costs a self-publisher faces. Rents, insurance, salaries, utilities, equipment, supplies, and services all have to be paid out every month. On top of royalties paid to authors. The cost of publishing a book (even an ebook) is significantly more for a traditional publisher and their book prices have to be higher to help offset those costs. Self-publishers (especially in Romance) have done a good job of lowering the expected list price of an ebook and increasing the marketing costs. For the small publishers who don't have a bestseller to make up the volume, they have to lower their profit margin to keep up with trends. Eventually, the margin slips from profit to loss.

In most cases, it's not embezzlement or incompetence, but the slow creep into debt caused by the current market, exponentially more costs as the company gets bigger, and fluctuating costs that are beyond their control. The company  can't get out of the hole they suddenly find themselves at the bottom of.

I believe this is fundamentally hokum.
Big publishers have these costs, many small publishers don't have all of them. Small publishers tend to skew more to variable costs than fixed.
The argument for the fixed costs is that it is easier to maintain quality levels and there are benefits from economies of scale. But fixed costs make any business more vulnerable to a reduction in sales. Sales level tends to be more important than price.

The market is harder than it used to be. Amazon's domination is a problem. Self-publishers seem content to sell at a loss. It's much harder for a small publisher to carve out a profitable niche. They need to be competent and good at the mechanics of running a business to succeed and small publishers are often more interested in writers and books than analysing the accounts.

Small businesses have always gone bust (large too, but less often) and that includes small publishers. Sometimes it's incompetence, sometimes it's the market; but not paying suppliers and leaving debts is always incompetence.