What Happens to the Author When Big 5 Goes Bankrupt

As a former Chapter 11 Bankruptcy attorney (business bankruptcies, called "reorganizations") I can somewhat predict what rules and forces will come into play when Big Publishing begins Title 11 (Bankruptcy) actions. If I were writing a novel about this scenario (thank heavens I'm not) these are some of activities I would consider for that fiction:

First, the BPH will most likely file chapter 11 over chapter 7. Chapter 11 gives them the opportunity to reorganize debt and hang on to certain assets. Chapter 7 is the opposite: while 7 jettisons debt altogether, it also jettisons assets.

How will Chapter 11 affect authors?

If you are a Big 5 author, you have signed a contract. In Chapter 11 parlance, that contract probably gets labeled as what is commonly called an executory contract. "Executory," in the sense that there are terms yet to be performed at the time the bankruptcy is filed. And these might include: the debtor (BPH1) still has to perform production, distribution, sale, and author payment under the contract. The author, of course, still has to produce works, etc., but the "executory" in "Executory Contracts" refers to the duties owed by the debtor/BPH. Your contract is also an asset of the debtor's estate. This creates an interest in you by the debtor's creditors that you probably never expected. And most like would just as soon not have.

So...in Chapter 11, BPH will tell the judge, Look, we have certain contracts we want to keep, mainly author contracts. Plus there is a lease or two we want to keep so we can continue our presence in NY. Or maybe we'll jettison ("reject") our lease and move the biz to Omaha, where rents are affordable. In other words, Your Honor, we wish to offer up a plan of reorganization that does this: [here fill in the Chapter 11 Plan of Reorganization, a document as brief as 25 pages for a pizza joint to 2500 pages for the first step of United Airlines].

Most important, Your Honor, here's what we would like to do with our author contracts:
   1. Reject those that are unproductive. Get rid of the author altogether, give them their rights back.
   2. Keep those that are making us money and abide by the original terms of the contract
   3. Hybrid: keep the parts we like, reject those parts we don't like. (Example: We'll keep ebook rights but reject paper book rights. Let the authors publish their own paper if they wish, but we're hanging onto to electronic book rights)
   4. Re-negotiate the contracts and offer these new terms based on our obtaining new financing: [use your imagination]

So that's a birds-eye view of what the BPH debtor will do.  Now let's take a look at what the affected author will do.

First, there's probably no worse position to be in than that of a party with a contract that ties one to a Chapter 11 debtor. This is true for two reasons: One, you will need a lawyer and you will need to commit a minimum of three years (part-time, one can only hope) to court appearances and preparation and filing of court pleadings. Two, you will be subject to the whimsy and imagination of the debtor's attorneys. They will be stridently looking out for BPH1's interests in both planning its moves inside the bankruptcy vehicle and inside the courtroom itself. They will offer plans, plans, and variations on plans until they finally arrive at a plan that a class, known as the authors class, will accept and vote for. As a member of that author class, you will require the services of a knowledgeable bankruptcy attorney to help you decide how to vote on the treatment of your class within the Chapter 11 plan or reorganization.

Second, the affected author will deal with years of uncertainty regarding revision of rights pre-term. For example, your BPH goes belly up, you want your rights back so you can self-pub and make payments on your Mercedes. Or Accord. Or--you get the idea. Problem is, there's really no one who has the power to give you your rights back. Except the debtor itself. And even that will require negotiations and approval by the judge before it is allowed to happen. Creditors will also get to vote on the resolution of how/when/price of you getting your rights back. Typically, your lawyer with negotiate with the BPH lawyer and say "We'll offer you $5,000 cash and ten percent of net epub sales for 24 months in return for a reversion of all rights effective immediately."  You'll leave your lawyer's office thinking That's damn fair. I hope they take it. Problem is, there must be a motion to settle your part of the pie on those terms and there must be a court hearing on your motion, at which time any creditor may object to you getting cut loose, the trustee may object, the debtor itself may object, and the creditors' committee may object. Whew. All for a lousy $5K advance and royalties every six months?  What?!

As you can see, when BPH jumps in the bath water, everyone gets soaked. You get soaked with untold hours of worry, delayed royalty payments, less-than-earned royalty payments, legal fees (probably worth more than your advance, when all is said and done) and you may or may not get your rights back.

One other curious item, curious to authors, that is. Say your BPH files its Chapter 11 and six months into it you submit your third novel, according to the contract. At this point, the debtor is going to be able to perform its side of the contract in what is called the "ordinary course of business" and your novel will be edited, printed, distributed, and accounted for. Fair enough. But what if your novel is rejected by the debtor for whatever reason? Welcome to No Man's Land. Why? Because you now own both a rejected or declined novel and may or may not own the rights to it. You see, all dealings with a debtor like a BPH are subject to court approval. So do you dare self-pub our novel at that point? Are you sure about that?  Again, your legal counsel only can advise you.

This blog post is supposed to raise some of the fictional questions around a fictional Big 5 Publishing House's corporate reorganization aka bankruptcy. This post offers no solutions and is not legal advice. No attorney-client relationship is created by this blog post, whether or not you read and act on it or refrain from acting on it.

In other words, this is fictional only. It's supposed to be interesting, not usable.

I hope it's that.

Welcome to John Ellsworth Books

I have to wonder when I see fellow writers say they need "help marketing" their books. Help in what form? TV commercials? PPC ads? Magazine display ads, Yellow Pages? TV spots? Then there are the social media "opportunities" so often touted--Twitter and FB and Linked In etc. Then there are the Bookbubs, ENT's, BKNights and etc. Then there are growing up before our very eyes a new group calling themselves "estributors" who claim, variously, knowledge of how to manipulate the Amazon algorithm. Sounds scientific and thus sounds appealing as well. (As a one-time software engineer who has written his share of algorithms, ahem, excuse me while I explode with hilarity at this notion,)

I am inclined to venture that, in our particular line of retailing, perhaps the best (and possibly only) effective medium is word-of-mouth. Maybe rather than casting about for ways to "market" our work we should instead be looking at ways to let our work market us. Which means, of course, we have to write books that make people want to tell other people about what we've given them to read.

I think I like this idea. I think I am compelled to look harder at my writing and learn how to make it better. How to make it compelling. How to make it have the kind of impact that makes people want to tell other people about it.

That's the direction I think I'll head.

How I Made a Box Set - Info for Authors

I am going to describe how I made a box set myself. I posted twice on KBoards looking for help but no one came to my rescue, so I can only assume this is an unknown quantity and the need for this post might be valid. At any rate, for the next person searching these boards for a Box Set How-To, here we go.
Disclaimer: For all I know, how I did this might be the worst way to do it. I honestly don't know. So if you can add (or subtract) anything to this, please do. 

STEPS FOR MAKING A BOX SET:

Materials:
--3d cover
--3 book covers (assuming it's a 3-book set)
--1 word document consisting of your three novels property titled and chaptered (page break chapters with number at top of each chapter)
Steps I took:
1.Open Word doc in Vellum. It responds with consecutively numbered chapters. Add front matter and back matter. I added front matter and back matter to each one of the three novels, separate set for each. Jason at Polgarus Studio told me you only need it for very front of box set and very back of box set. I chose to do it for all three, but that's just me and my sense of everything presented as three separate interior packages, like I would expect to receive if I were buying a dead tree box set. Use Vellum to generate the epub file.

2. Using Sigil, open the epub file that Vellum generated. Drag cover file to very top. Right click cover and select "Add Copy" -- make two more cover files. Titles of all three are now Cover, Cover2, Cover3 or whatever you like.  Go to images folder and bring in cover images. Now there are four images inside: Box Set cover, Book 1 cover, Book 2 cover, Book 3 cover. Connect images to cover files and place appropriately in the xhtml hierarchy -- left hand side of screen.

3. Add front matter to Box Set and back matter to Box Set, or add same to each book individually--your preference

4. Generate TOC in Sigil: First go to each individual chapter file in Sigil for each book and number the chapters 1-10, start over for book 2 1-10, start over for book 3 1-10. Now each book has its chapters number sequentially within that book, not sequentially in the box set. Very important not to confuse the two.

5. My TOC file was duplicated twice (right-click "Add Copy") and positioned within the hierarchy at the beginning of each book. TOC for Book 1 contained links for each chapter, and at the end of those I added a link to book 2 and a link to book 3. Did the same thing for book 2: first a link back to book 1, then book 2's TOC, then a link to book 3. Repeat for book 3.

6. Now you can go to the page just after box seat cover and add a page with three links: book 1, book 2, book 3. Now your reader can select which book to go to. The way I set it up, each of these book 1,2,3 links connects to the TOC for each interior book.


7. Use Sigil to save the epub file

8. Open epub file with Calibre, make your mobi file forKindle.

9. Make yourself a nice cup of coffee and pat your back, put your feet up, try to do this math: 70% times full cover price (book 1 + book 2 + book 3) = price I'm going to set my box set at. Or something like that. Some people give them away, some price at .99 and up to 9.99.

10. Add the book to KDP. Use a blurb similar to this:

Books one through three of the popular Thaddeus Murfee series by John Ellsworth are offered in a box set at a discounted price. "The Defendants," "Beyond a Reasonable Death," and "Attorney at Large" have received a combined 1xx FIVE-STAR reviews from readers in less than three months. All three of the novels are consistently rated among the top-1x bestselling legal thrillers, and all three are among the most highly-rated novels on Amazon. Enjoy a quality set that will offer you more than twenty hours of pleasure and entertainment -- nearly x000 pages.

(Please, no complaints about the blurb. It's an example, not a suggestion).

That's it. You just made your own box set. BTW, Vellum can be downloaded free and you can pay $50 for a one-time use to make your box set. $50 Vellum, Sigil $0, Calibre $0

Chase, the Bad Baby just cut his first tooth!

That's right, Chase, published yesterday, July 21, just had his first sales today, July 22! It's an exciting time and I have very high hopes for this book about mister Chase. He is by far my most beloved character and I will always carry him in my heart.

Chase is probably like a lot of us: damaged or injured in some way through no fault of his own, yet challenged to live as fully as possible. Plus, he is an infant, which I think in most of us causes us to run to the scene of the "crime" and try to help him.

I love this baby. I hope you do too.

The Defendants # 807 Paid in Kindle!

The Defendants was published just six months ago and it has become Kindle's #807 paid in Kindle Store!

• Amazon Best Sellers Rank: #807 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
• #13 in Kindle Store > Kindle eBooks > Mystery, Thriller & Suspense > Thrillers > Legal
• #16 in Kindle Store > Kindle eBooks > Mystery, Thriller & Suspense > Thrillers > Crime
• #53 in Books > Mystery, Thriller & Suspense > Thrillers & Suspense > Crime

I am very proud of this book and hope you will want to read it too. It had a free day on Sunday and gave away 5,000 copies. Then yesterday it gave away 1500 copies before coming off the free and then selling 250 copies. Read it now, great summer fun!

While Amazon and Hachette Duke it Out...

Tell the truth, I don't like to take sides in commercial disputes such as the ongoing one between Amazon and Hachette Books. If I did like to take sides then I would go back to practicing law, where I got paid to take sides. But since I became a full-time writer I enjoy my freedom from commercial disputes and my freedom from having to represent people in various difficult life-situations, especially those I really didn't personally favor. That's right, when you're a lawyer you oftentimes have to take the "wrong" side in a dispute, the side you don't believe in, simply because someone has the money to pay you to do so. In other words, you take money to go against your personal beliefs just about everyday you practice law. Can you imagine a more self-destructive way of living your life? So I quit. That's right, I discovered how to get my writing published and sell enough books to pay the bills, which allowed me to unplug from disputes like the Amazon-Hachette miasma.

Sometimes, however, the best books are built around a character who is conflicted because he or she is somehow being forced to do some act that he or she doesn't personally believe in. In fact, sometimes the required act is even revolting. That kind of conflict can make for page-turning fiction that's fun to write and fun to read, even if the reality of living through something like that is awful.

Amazon or Hachette? Lots of writers are taking sides. As if the outcome of the dispute will add to or subtract from their personal fortunes in some meaningful way.

Sorry, but I've been there. As a lawyer I was forced to spend my time on causes I despised simply because I had bills to pay.

As a writer, I no longer have to do that to myself.

And after all, like always, it's only about money. If we don't know by now that there are things far more important than money, then we haven't learned a key lesson yet.

Sign me, Unplugged.

Fourth Thaddeus Murfee Done!

The Thaddeus Murfee family continues to grow. Today I sent the first edit draft off to my editor. She will carefully go through and find all my hilarious errors and then send me back a marked-up copy. I can then go through and accept (yes) or reject (fat chance) her recommended changes. Most likely the book will be on in Amazon in about 2-4 weeks. The title is Chase, the Bad Baby.

Chase is the story of a baby injured at birth by the OB doctor's negligence. Sadly, sadly, it is based on a type of malpractice that occurs far too often. What happens is, a baby gets in trouble for various reasons while mom is in labor (the novel goes into the reasons it can happen in the examination of the expert doctor by Thaddeus) and the baby suffers anoxia--lack of oxygen. If this is allowed to continue for anywhere beyond thirty minutes, the chances of getting a "bad baby" skyrockets. Thus there has come into being a rule called "Decision to Incision," and this rule says that the ACOG standard for delivering babies in fetal distress from the moment the decision is made to go C-section, until the actual C-section is performed, should not exceed thirty minutes.

In Chase, the baby is allowed to go too long while in distress, and the negligent doctor gets sued.
What follows is the typical defense tactics in defending these bad doctors and the plaintiff's (baby's) lawyer's strategy in getting a good result--money--for the victim.

Along with Chase, Thaddeus is also dealing with the man who kidnapped Sarai in Attorney at Large.

Be sure to watch for Chase, the Bad Baby, on Amazon in the next few weeks.

Thanks for reading.

--John

Attorney at Large Sales

My third novel, Attorney at Large, was published three weeks ago. Already it is outselling the first two books. It has had a great sendoff! It doesn't have that many reviews, but what there are seem to be very favorable.

Attorney at Large required more research than the first two books. The first two were written about people and places I was already familiar with--downstate Illinois, Chicago, northern Arizona, southwestern Colorado. When I practiced law in Flagstaff I had a firm airplane because the distances between towns were so great and my criminal practice was so widespread. So the area and the roads, the mountains, the Native American tribes and some of their traditions and hallowed beliefs became known to me.

But much of Attorney at Large takes place in Las Vegas, in a casino, much less, as Thaddeus has now taken over a casino as a result of the lawsuit against the mob. The casino itself is a figment of my imagination, but the staffing and workings of the casino are the result of much good old research. Especially the parts on card counting at the blackjack tables. I found those portions totally fascinating and totally loved writing about them.

Thanks for buying these books. Your support means I get to write more of them. And for that, I am very grateful.

Amazon & Antitrust: What Hatchette Wants

In the current Amazon/Hatchette business disagreement, the legacy pub side is making noises like there's some kind of antitrust behavior by Amazon that bears looking into by the DOJ. 

Here is an overview of the three core federal antitrust laws.

The Sherman Act outlaws "every contract, combination, or conspiracy in restraint of trade," and any "monopolization, attempted monopolization, or conspiracy or combination to monopolize." Long ago, the Supreme Court decided that the Sherman Act does not prohibit every restraint of trade, only those that are unreasonable. For instance, in some sense, an agreement between two individuals to form a partnership restrains trade, but may not do so unreasonably, and thus may be lawful under the antitrust laws. On the other hand, certain acts are considered so harmful to competition that they are almost always illegal. These include plain arrangements among competing individuals or businesses to fix prices, divide markets, or rig bids. These acts are "per se" violations of the Sherman Act; in other words, no defense or justification is allowed.

The penalties for violating the Sherman Act can be severe. Although most enforcement actions are civil, the Sherman Act is also a criminal law, and individuals and businesses that violate it may be prosecuted by the Department of Justice. Criminal prosecutions are typically limited to intentional and clear violations such as when competitors fix prices or rig bids. The Sherman Act imposes criminal penalties of up to $100 million for a corporation and $1 million for an individual, along with up to 10 years in prison. Under federal law, the maximum fine may be increased to twice the amount the conspirators gained from the illegal acts or twice the money lost by the victims of the crime, if either of those amounts is over $100 million.

The Federal Trade Commission Act bans "unfair methods of competition" and "unfair or deceptive acts or practices." The Supreme Court has said that all violations of the Sherman Act also violate the FTC Act. Thus, although the FTC does not technically enforce the Sherman Act, it can bring cases under the FTC Act against the same kinds of activities that violate the Sherman Act. The FTC Act also reaches other practices that harm competition, but that may not fit neatly into categories of conduct formally prohibited by the Sherman Act. Only the FTC brings cases under the FTC Act.

The Clayton Act addresses specific practices that the Sherman Act does not clearly prohibit, such as mergers and interlocking directorates (that is, the same person making business decisions for competing companies). Section 7 of the Clayton Act prohibits mergers and acquisitions where the effect "may be substantially to lessen competition, or to tend to create a monopoly." As amended by the Robinson-Patman Act of 1936, the Clayton Act also bans certain discriminatory prices, services, and allowances in dealings between merchants. The Clayton Act was amended again in 1976 by the Hart-Scott-Rodino Antitrust Improvements Act to require companies planning large mergers or acquisitions to notify the government of their plans in advance. The Clayton Act also authorizes private parties to sue for triple damages when they have been harmed by conduct that violates either the Sherman or Clayton Act and to obtain a court order prohibiting the anticompetitive practice in the future.

As you can see, these laws have one goal: to protect the consumer of goods and services in a capitalistic economy. Odd, isn't it, that these are the same goals practiced and preached by Amazon itself. 

Antitrust and Amazon? About as much symbiosis as NFL football rules and the NY Yankees.

Not.