Two authors have filed a federal lawsuit against educational publisher Cengage, alleging that the company’s new Cengage Unlimited subscription service will improperly cost them sales and royalty payments.
Filed this week in the Southern District of New York by authors David Knox and Caroline Schact, the suit claims that in introducing its subscription-based service, Cengage “is systematically dismantling and frustrating the business of selling Plaintiffs’ work” in favor of selling subscriptions to Cengage’s digital products, adding that the authors “expect their royalties to decline substantially” as a result of the Cengage Unlimited business plan.
“The fundamental bargain struck between Plaintiffs and their publishers was for the payment of royalties upon the sale of their works,” the filing states. “In 2014, however, Cengage came out of bankruptcy with a plan to overhaul its business model. In doing so, Cengage has trampled on its authors’ rights.”
The suit seeks class action status on behalf of Cengage authors.
On its website, Cengage lists a launch date of August, 2018, for Cengage Unlimited. Described as a “subscription service for college course materials,” a recent release notes that “students can access all the digital learning platforms, e-books, online homework and study tools Cengage has to offer” (totaling more than 22,000 products across 70 disciplines and 675 courses) for $119.99 per term or $179.99 for the year.
But in pivoting to its digital subscription service, the suit claims the publisher has “wrongfully” implemented “a unilateral change to the compensation structure for its authors,” switching from “the contractual royalty-on-sale” compensation model, to a “relative use” model, which pays authors a “fractional percentage of Cengage’s subscription fees, based on the relative use of the work.”
The suit also claims that Cengage is not properly compensating authors for its distribution of “digital courseware” and other add-ons such as “multimedia displays, homework, quizzes, tests and other supplements” derived from their authors’ work.
“Cengage has adopted a portfolio-wide practice of arbitrarily and improperly ascribing value to the supplemental material packaged with the author’s work,” the suit claims, “when the courseware is derivative of the author’s work and the author royalty should be paid on the entire, or substantially all, of the courseware package.”
And finally, the authors claim that Cengage is refusing to share royalty and sales data that would allow the authors to audit their payments. “Over the past year, Plaintiffs have experienced marked declines in their per-unit royalty payments, and have sought access to underlying sales data and royalty calculations, so that they can determine how their royalties are being calculated.” But, the authors claim, “Cengage has adopted a policy of refusing to provide the requested data.”
The suit seeks individual and collective damages for Cengage’s alleged breach of the contract; injunctive relief to prohibit Cengage from including class members in Cengage Unlimited without permission; the ability of class members to terminate their contracts if they do not wish to be included in Cengage Unlimited; and a declaratory judgement that Cengage must provide authors with the data needed to audit their payments.
The suit comes after Cengage in late March alerted authors in a release to a change to its “author royalty framework” to accommodate Cengage Unlimited.
“Our authors are incredible partners and we appreciate their willingness to work with us to change our business model to one that truly puts students first,” said Erin Joyner, senior v-p, Higher Education Product Management, Cengage, in the release. “In many cases, our authors are also instructors who witness firsthand the challenges students face in securing the best learning materials. This subscription model will disrupt the industry and make affordable access possible for more students.”
The release said that the model being adopted by Cengage is “similar to royalty models used by other online subscription companies,” and noted that the publisher “will continue to sell products outside of Cengage Unlimited as it always has and the royalty framework for that business model will continue.”
In a statement to PW, Cengage officials reiterated those points:
“We have communicated clearly with our authors that the subscription service is consistent with the terms of their contracts, which we continue to honor. In addition, we have outlined for them the rationale behind the new business model: it is designed to address the decades-old problem of affordability in higher education,” the statement reads. “While we are disappointed that this complaint was filed, as it seeks to perpetuate a broken model of high costs and less access, we are grateful for the support we have received from the majority of our authors, as well as students, faculty and administrators. We remain steadfast in our commitment to proceeding down the path that will ultimately save students hundreds of dollars a year.”