Textbook Authors Sue over Cengage Unlimited Royalties

Back in January, I wrote of Cengage’s “all you can eat” Unlimited pricing announcement:

We don’t know whether Cengage will be a winner from this strategy, but we do know who will be the losers: textbook authors. Cengage, of course, denies this. Cengage CTO George Moore, when asked about the contract renegotiations with the authors to make this fly, said only that “Cengage renegotiates contracts with authors all time.” Michael Hansen claimed that Cengage’s interests and their authors are aligned, and that their authors are all very concerned about the affordability of textbooks.

Really?

In February of 2015, Greg Mankiw—Cengage’s blockbuster economics textbook author who has made literally millions of dollars from his relationship with Cengage—expressed perplexity at the The New York Times’ call for less expensive textbooks:

To me, this reaction seems strange. After all, the Times is a for-profit company in the business of providing information. If it really thought that some type of information (that is, textbooks) was vastly overpriced, wouldn’t the Times view this as a great business opportunity? Instead of merely editorializing, why not enter the market and offer a better product at a lower price? The Times knows how to hire writers, editors, printers, etc. There are no barriers to entry in the textbook market, and the Times starts with a pretty good brand name.

My guess is that the Times business managers would not view starting a new textbook publisher as an exceptionally profitable business opportunity, which if true only goes to undermine the premise of its editorial writers.

Given that Mankiw was name-checked in the Cengage Unlimited announcement press release, management must have worked something out with him to keep him happy. We are hearing whispers from the company’s competitors that not all authors were given such an opportunity and that lawsuits may follow. We’ll see whether that bears out. Regardless, though, this model does fundamentally change the relationship that the publisher has with its authors. With buffet-style pricing at a low rental price point, a model like Cengage Unlimited is likely to do to textbook authors what Spotify and other music subscription services did to musicians. There may still be a handful of superstar authors whose books are such outsized hits that they can still command royalties and large advances. But the vast majority of authors will see their income shrink. They either will get smaller royalty agreements or will be paid once on a fee-for-services basis so that the company can own the content outright. My guess is that there will be a lot more of the latter than the former. Keep in mind that copyright negotiations for a textbook or textbook-equivalent involve more than just the author(s). There may be literally hundreds of permissions to track for photographs, videos, animations, and so on. To the degree that “good enough” wins out over “better enough”, publishers will be under strong pressure to own as much of their content outright as they can.

Today’s Inside Higher Ed headline: Textbook Authors Sue Cengage Over Subscription Model.

To be clear, I don’t know if, contractually, this lawsuit has merit or what is likely to happen with this particular suit. But the handwriting is on the wall. If textbook prices come down, then textbook royalties also have to come down.

Regardless, all of this is transitional. As students are asking, “Why should we pay all this money for content that is increasingly available online for free?”, textbook publishers are asking themselves the same question. Rights management is an expensive nightmare for them. Their businesses would be much more manageable if they could use either OER, fee-for-service content that they own outright, or both. Their biggest challenge is that faculty are used to using a particular textbook and may have some attachment to the particular author. If the publishers replace that book with one that doesn’t have all of those royalty entanglements, then faculty are more likely to look around at competitors’ offerings since, hey, if they have to rework their class for a book anyway, they might as well look around. If it weren’t for that problem, I suspect that publishers would be swapping out titles more quickly.