Cengage Responds to Lawsuit about New Subscription Service

In May, two authors filed a lawsuit against textbook publisher Cengage, saying the new Cengage Unlimited subscription service will cost the authors significant sales

Subscription News: Cengage Responds to Lawsuit about New Subscription Service

Source: Cengage

In May, two authors filed a lawsuit against textbook publisher Cengage, saying the new Cengage Unlimited subscription service will cost the authors significant sales and royalty revenue. Authors David Knox and Caroline Schact are seeking class action status in U.S. District Court in the Southern District of New York. Cengage’s lawyers have finally responded to the lawsuit, reports Publishers Weekly. The lawyers say there is no reason to believe that the authors’ income will substantially decline.

The authors claim that by moving from a royalty-on-sale business model to one where they receive compensation based on relative use their sales will be dramatically reduced. The authors are also claiming that Cengage is not properly compensating the authors for related products including multimedia, tests and homework.

Here is an excerpt to Cengage’s 12-page response to the original complaint:

“Defendants admit that Learning and Holdings emerged from bankruptcy in 2014. Defendants deny that its business model ‘tramples on’ or is in any way inconsistent with its authors’ rights; to the contrary, Defendants believe that the new Cengage Unlimited model will increase sales and revenues (and, accordingly, royalties to authors). First, Learning is implementing Cengage Unlimited to address the decades-old problem of affordability in higher education. The traditional model of students buying course materials individually at high prices is broken. Sales continue to decline because students are not buying the materials. Students overwhelmingly state that course materials are overpriced and that the high costs are their top source of financial stress after paying for tuition. In addition, students state that the high price of course materials is an impediment to their educational goals. Cengage strongly believes that Cengage Unlimited will accrue enormous benefits to students and their ability to afford access to the quality works of authors such as Plaintiffs.”  

In the reply, Cengage admits that it has launched the subscription service which will give students access to most of the Cengage library for a flat, per-semester subscription fee and that usage of specific works is part of how the company will calculate payments to authors. However, they believe this methodology will actually increase royalty payments, not decrease them.

Cengage also admits that royalties to these authors declined between 2016 and 2017, and that the authors requested a “full, third-party royalties audit.” The company said the authors’ agreement did not entitle the authors to such an audit and refused. Cengage says that the authors did not make the case against them and the case should be dismissed.

Cengage Unlimited is set to launch this month, making more than 22,000 products available to subscribers, including 20,000 eBooks and 2,300 digital learning platforms and study tools. After a 30-day free trial, a four-month digital subscription is priced at $119.99, a one-year digital subscription at $179.99 and a two-year digital subscription at $239.99. Print copies of textbooks are available to rent for $7.99 with free shipping. After a subscription expires, students can keep up to six textbooks in a digital locker and access them for up to a year at no additional cost.

During the free trial, subscribers are enrolled in an auto-renewable monthly subscription for Chegg Study Pack which includes Chegg Study, Chegg Math Solver and EasyBib Plus. Subscribers will be charged $19.95 for this service until they cancel.

Insider Take:

From the perspective of a student or a parent of a college student, Cengage Unlimited sounds like a great deal – a way to provide more affordable access to college educational materials. However, until the subscription is actually implemented and royalty payments are calculated based on usage, it is hard to say how the authors will actually fare financially. However, Cengage’s experience with the authors could likely be improved upon.

For example, offering authors full transparency and thorough communication would go a long way to alleviating concerns, including agreeing to an audit, even though the company was not legally obligated to conduct one. Did Cengage explain the new methodology to the authors? Did they provide fictional examples of how royalty payments could change? What mechanism or system have they implemented to give authors an opportunity to voice concerns? It will be interesting to watch how this lawsuit plays out and the potential ramifications for other subscription businesses.

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