Cengage’s announcement of a new subscription service, Cengage Unlimited, that gives students at U.S. higher education institutions access to all of the company’s digital higher education materials for $119.99 a semester has Cengage authors concerned about how their contracts will be affected.

“I think the authors should find out as soon as possible how we are going to be paid,” said mathematics author Pat McKeague, who did not receive any information from his publisher about the new service prior to its public announcement, and has not been able to reach his editor for more information. “My contracts require my written permission before any electronic version of my book can be published.”

“They have had trouble with this type of thing before, when they pooled the income from the Enhanced WebAssign royalties and then divided it up among authors according to a percentage,” said McKeague. “They have made an attempt to correct this in the first quarter of this year, but it took a long time to get any kind of acknowledgement that something was wrong.”

Juli Saitz, senior managing director at Ankura, which provides royalty review services, said the news of Cengage’s new subscription service “is very troubling” as “there are a number of problems inherent in properly attributing revenue across multiple authors.” Regarding the news that the subscription service will offer free rentals, she said: “I’m not sure that’s allowed and obviously authors wouldn’t get a royalty on those rentals. Most contracts pay royalties on the net sales of the book, so are they selling the book or access to a subscription service? The question becomes where does the sale occur and how are royalties calculated?”

Saitz is forming a working group of Cengage authors interested in discussing the new subscription service and how it will affect them. To join the group, email her at Juli.Saitz@ankura.com.

Stephen Gillen, an intellectual property attorney with Wood Herron & Evans, and a member of the TAA Council, said how Cengage’s new subscription service will affect authors will depend on each author’s contract with the publisher. “There is no one-size-fits-all answer, ” he said. “Most textbook contracts say essentially, in some form or other, that the publisher will pay the author a royalty based on net proceeds from sales (and here there is some variation in the contracts in the precise language used and some variation in how ‘sales’ is explained or defined) of the work. So, in general, if the publisher gets money from providing access to a book (regardless of the form it takes, print or digital, stand-alone or bundle), then the publisher must pay a royalty on that money. Here, things get complicated. If the money received is for access to material from more than one book, then the money has to be allocated over them in some way. Also, the royalty rates vary from channel to channel and market to market, so determining the right rate in the contract to apply against any given transaction may also be open to question.”

Gillen said that each author should ask his/her editor whether the editor will provide an explanation of how Cengage plans to calculate royalties for the author’s books (given the contracts presently in force) for the revenue streams that will be generated by this program, including:

• Proceeds from the per-semester, all-content access fee (how will this be allocated across all books in the program and what royalty rate will they use).
• Proceeds from direct book rentals (at what royalty rate).

Cengage has launched a promotional campaign, including a press release, emails to professors and students, and YouTube videos, What is Cengage Unlimited? and Why Cengage Unlimited?, touting the service’s low-cost alternative to purchasing textbooks individually.

Text of email to faculty by Cengage:

Professor [name has been removed],

Have you ever wondered what learning would be like if high costs did NOT hinder your students’ ability to access course materials that help them succeed? So did we.

Today, we’re excited to announce Cengage Unlimited! This first-of-its-kind subscription gives students complete, on-demand digital access to our comprehensive library of content including 19,800 eBooks, 2,300 digital leading products across 70 disciplines and 675 course areas for $119.99 a semester. Plus, students using Cengage digital platforms can get a free print rental!

Students deserve a better way. Learn what unlimited learning looks like for your students here.

Sincerely,
The Cengage Team

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Some Cengage authors received this email two days after the public announcement:

Greetings,

As our key partner in creating high-quality learning solutions for students, we wanted you to be among the first to know about our latest news. Earlier this morning, Cengage announced Cengage Unlimited, a first-of-its-kind subscription model to offer students access to a comprehensive library of course materials for an affordable price. To learn more about Cengage Unlimited, please click here.

We are so excited about this innovative approach to digital learning solutions and the impact that it will have on millions of students. This model will reduce the cost of course materials as a barrier to a successful educational experience.

Cengage Unlimited will be available starting in August 2018 and our sales team will be talking with the market this spring about this access option for students taking courses during the Fall 2018 semester. For today, we wanted to share this news with you as a member of the Cengage family. You can expect to hear more from our Product teams in the coming months. Your Product Manager is available to you at any time, do not hesitate to connect with him or her directly if you have additional questions about this exciting news.

We take our shared responsibility of offering affordable, high-quality learning solutions seriously, and we know you do as well. To that end, Cengage Unlimited opens the gates to unlimited opportunity for you, for faculty, students, and for us by making education and learning content more accessible to all who seek it. We look forward to taking this bold step forward and are thrilled that you will join us.

Thank you for your continued partnership.

Fernando Bleichmar
Interim Chief Product Officer & Chief Strategy Officer

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If you are a Cengage author and would like to share your story with us, please contact Kim.Pawlak@TAAonline.net.