This post, from Mark Barrett, originally appeared on his Ditchwalk site on 10/8/09 and is reprinted here in its entirety with his permission.
I ran across a short note on Mashable yesterday announcing that Yahoo will be closing GeoCities this month. While the post rightly notes that GeoCities was one of the first social networking sites, that’s not what I first thought about when I read the news.
What I thought of was this:
In January 1999, near the peak of the dot-com bubble, Geocities was purchased by Yahoo! for $3.57 billion in stock, with Yahoo! taking control on May 28. The acquisition proved extremely unpopular; users began to leave en masse in protest at the new terms of service put out by Yahoo! for GeoCities. The terms stated that the company owned all rights and content, including media such as pictures.
Yes, you’re reading that right. Yahoo paid 3.5 billion dollars for an online community, then one of the first things they told every user in the GeoCities community was that Yahoo now owned all of the content on each and every GeoCities web site. In the business world this type of decision is known as the dumbest thing anyone has ever done.
I wasn’t going to post about this bit of web history, however, because there’s nothing new under the sun. Facebook, MySpace, Google, Amazon, Microsoft and hundreds of other tech players are constantly trying to figure out how they can own or exploit user-generated content. That’s the entire online game. It’s not the ads or the clicks or the twits or the tweets or the bleats. It’s legal ownership. (Which is why there is no greater battle being waged on behalf of independent authors than the copyright battle.)
Yesterday afternoon, however, I ran across a week-old forum post on a writing-related forum in which a frustrated writer pointed to this section of the Scribd Support FAQ:
Every three months we’ll review your earnings balance. If your balance is at least US$100, Scribd will issue you a check or credit your PayPal account, depending on your preferred payment setting. If your balance is less than US$100, we’ll roll your earnings over to the next quarter.
The author in question wanted to remove a story from Scribd and cash out her balance of approximately $50. But the Scribd elves pointed her to the $100 threshold in the FAQ and told her they couldn’t give her the money she’d earned from her own story. In effect, until she earns $100 from the work, Scribd holds any earnings hostage.
I have no idea if her dispute was resolved or not, but I have to hand it to Scribd: they figured out how to effectively lease content from authors with no money down, while simultaneously cutting cash-flow needs by instituting a relatively-high minimum-payment threshold. Where GeoCities tried to steal user-generated content outright, the noble lords at Scribd — whose stated passion is making documents available to the masses — have figured out how to control authored content and disbursements in a way that benefits themselves.
Am I saying Scribd is doing something illegal? No, and that’s exactly the point. If you put your content on Scribd you’re agreeing to a CONTRACT Scribd wrote which governs how you are paid for YOUR CONTENT.
Given that most authors probably do not meet the $100 threshold for any given quarter it would be interesting to know how much cash Scribd rolls over each month, and how much interest is made on that money. Assuming the money is being invested, of course, as opposed to, say, being used to cover operating or legal expenses.
It would obviously be a shame if Scribd went under and took all those small author-earned balances with it. I would hope funds earned by authors are kept separate from Scribd’s own business expenses, but the FAQ doesn’t seem to address that question. It also doesn’t spell out whether Scribd invests author-earned revenue, or whether authors are entitled to interest on their own earnings.
The moral here is pretty simple. If you have content, corporations who want you or your stuff on their web sites are going to try to profit from your content any way they legally can. That’s how you know these people are not your friends. At best they’re your business partners, but they’re better at business than you’re ever going to be. They have lawyers and financial advisers on staff or available through funding agents. You have nothing, and they know it.
Watch your back. Read the fine print. Don’t give up your rights.
Update: To make sure that Scribd’s policy was not the industry standard, I asked Smashwords’ Mark Coker about his policy on payments to writers:
We’ve traditionally had a $25 threshold, though we officially lowered it last week when we added a formal PayPal option. See your Payee page via your Account page. If an author leaves Smashwords, we settle up with them, no matter how small the amount. Otherwise, we pay at the thresholds (though we make exceptions all the time on request).
Mark added that Smashwords settles up with any author who wants to leave the site:
We’ve paid some former authors as little as $2.80. It’s their money.
Yes it is.