Educational publisher Cengage is under fire for its new unlimited subscription service. Two authors – David Knox and Caroline Schacht – filed suit in the Southern District of New York, claiming that Cengage’s new unlimited subscription service, Cengage Unlimited, will cause their sales and royalties to plummet substantially. Though the suit was filed by only two authors, they are seeking class action status on behalf of other textbook authors.

The suit comes less than two months after Cengage announced a change in its royalty payments to authors, based on the content actually used by students. According to a news release, Cengage Unlimited gives students access to more than 22,000 products across 70 disciplines and more than 675 courses for $119.99 a semester. Students who subscribe also get access to free print rentals for just the $7.99 cost of shipping.

‘Our industry must change and be contributors to lowering the cost of higher learning.  With the introduction of Cengage Unlimited, we are breaking with tradition to offer students complete access to quality learning materials at an affordable price point,’ said Michael Hansen, Cengage CEO, in the March 29 news release. ‘Today’s announcement marks an important milestone on our journey and we look forward to working with our authors to reach more students.’

Similar to how Spotify pays artists based on usage, Cengage has adjusted its royalty model based on usage. Starting in the first quarter of 2019, royalty statements for authors will reflect total sales, including individual product sales and royalties from Cengage Unlimited. Authors were notified by postal mail and e-mail of the change.

‘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 Vice President, Higher Education Product Management, Cengage, in the news 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.’

In the lawsuit, the plaintiffs allege the following: ‘In transforming its business model, Cengage is wrongfully implementing a unilateral change to the compensation structure for its authors, seeking to convert the contractual “royalty-on-sale” compensation model agreed to by Plaintiffs into a “relative use” compensation structure designed by Cengage, for Cengage’s benefit, which Plaintiffs reject.’

The plaintiffs also allege that Cengage has hampered the authors’ ability to earn royalties according to the original agreement, constituting a breach of contract and good faith. In addition, the plaintiffs have asked Cengage to provide sales and subscription data, so they can audit the royalty payments, but Cengage has thus far refused to provide the request information.

In a statement made to Textbook & Academic Authors Association, Cengage refutes the plaintiffs’ claims. Here is an excerpt:

‘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,’ Cengage said.

Insider Take:

This sounds very familiar. Musical artists and publishers have long argued that they receive a fraction of royalties each time their songs are played on streaming music services like Apple Music and Spotify and have filed similar lawsuits. In this case, the textbook authors are arguing similar inequities, and they seem justified in doing so. Their original agreement with Cengage was for the sale of materials, not for a fraction of subscription fees based on use of content. If this suit gets class action status, Cengage could be risking its reputation at best, and at worst, its long-term financial sustainability.