McGraw Hill Reduced Royalties for Textbooks on Connect Platform Class Action

Book publishers pay authors royalties, which are normally based on the number of books sold. Authors might think that when books are published electronically, without the expense of printing and physical distribution, that their royalties would go up. However, the complaint for this class action alleges that McGraw Hill, LLC has reduced the amount of royalties it pays on electronic textbooks by claiming that part of the textbook’s cost is actually for “access” to the platform on which it publishes the textbooks.

The class for this action is all persons or entities who have entered into a royalty contract with McGraw Hill or any of its predecessors or successors in interest in the US, whose books are currently sold via Connect, and who have been harmed by McGraw Hill’s reduction of royalties on sales of the Connect books.

Traditionally, authors have been paid via royalties, a percentage of the sale price of books sold.

In 2009, McGraw began offering Connect, an online platform for textbooks, which may have “ancillary materials built around them.” During most of the time since then, McGraw has been paying the usual royalty on each textbook sold on Connect. Now, however, McGraw has decided it should do things differently.

The complaint says that, “in direct contravention of the terms of McGraw Hill’s contracts with its authors, recently McGraw Hill unilaterally decided that it would only pay the contractually required royalties on what it now claims is the ‘textbook’ portion of the sales price. Thus McGraw Hill decided not to pay royalties on what it asserts is the ‘Connect Access’ portion of the textbook sales and will only pay a reduced royalty on what it says is the ‘online course material’ portion of the sales.”

Why is this a problem? The contracts with the authors, the complaint says, “state that McGraw Hill will publish the authors’ works ‘at its own expense.’ This is equivalent to reducing royalties for sales of paper textbooks based on McGraw Hill’s costs of printing those books, which would violate the explicit terms of the contracts.” It also goes against McGraw Hill’s own practice since 2009, which recognizes that royalties must be paid on the entire amounts received for the textbooks.

In effect, the complaint argues, McGraw Hill has redefined the price of these works as being only a fraction of what the company is paid for them. The complaint estimates that royalties will be reduced by 25% to 35%, a significant portion.

According to the complaint, McGraw Hill should not be changing the manner in which it calculates and pays royalties until such time as it has revised the agreements with the authors of the materials.

Article Type:
Topic: Automobile, Royalties
Tags: Breach of Contract, Royalties