Field Report From the E-Book Revolution #3: The New Equilibrium

James Scott Bell
@jamesscottbell

I was all ready to lay down my binoculars high in my observation tower and note that a certain peace had settled upon the land of publishing. Battles fought a couple of years ago, full of fury and bile, seem largely to have quieted down to the level of a spirited discussion. Both sides, traditional and indie, had reached a tentative, though perhaps still wary, acceptance of each other’s existence. And then came the Hydra’s head (see #1, below). [UPDATE: Random House responded to the pressure and has modified its contract terms]

I have a lot to report today, so you might want to bring a snack. We begin with: 

1. Digital Only Contracts From Traditional Publishers

As part of their adaptive strategy, some big publishers are offering digital-only contracts. Thomas NelsonLittle Brown UK and Random House are three examples. I know a couple of authors who have entered into such contracts. Both were no advance and a 50/50 royalty split. The publishers offered an editor, publicist and all the prep work (cover design, formatting, etc.) However, these costs (which are at the sole discretion of the publisher) are borne by the author, deducted from the author’s cut of the revenue right off the top.

NOTE: These types of deals are not the same as “vanity publishing.” That’s a whole other can of sour worms. See, e.g., April Hamilton’s take on Simon & Schuster’s foray. But because the author is expected to pick up costs a traditional publisher used to cover, there’s a certain blurring of lines that is occurring in the new world order.

The natural question is, what is the advantage for the author? The answer has to be a combination of these three: a) the “prestige” of being published by a traditional house; b) the chance to be taken up to the “big leagues” for print and further push with serious dollars; c) some marketing advantage.

That last is the real kicker. Random House’s press release states, “For the first time in history, authors will be able to forge wide-reaching and long-lasting relationships with their audiences, and we at Random House can’t wait to explore and create new opportunities in the digital space. The possibilities are endless, and we’re excited to offer authors the best opportunities to take advantage of this growing marketplace.”

This is the rub that has yet to be proved: can the big publishers offer authors the “best opportunities” in the digital world? Is there some form of marketing they have that authors cannot replicate or surpass on their own? If there is, is it worth giving up a book for the “life of the copyright” (a term in one of the contracts) and half the net income?

The Science Fiction & Fantasy Writers of America issued the following note to its members regarding one of Random House’s imprints, Hydra, which is for SF:

SFWA has determined that works published by Random House’s electronic imprint Hydra cannot be use as credentials for SFWA membership, and that Hydra is not an approved market. Hydra fails to pay authors an advance against royalties, as SFWA requires, and has contract terms that are onerous and unconscionable.
Hydra contracts also require authors to pay – through deductions from royalties due the authors – for the normal costs of doing business that should be borne by the publisher.
Hydra contracts are also for the life-of-copyright and include both primary and subsidiary rights. Such provisions are unacceptable.

To this, Random House responded, in part:

As with every business partnership, there are specific costs associated with bringing a book successfully to market, and we state them very straightforwardly and transparently in our author agreements. These costs could be much higher–and certainly be more stressful and labor-intensive to undertake–for an author with a self-publishing model. Profits are generated once those costs are subtracted from the sales revenue. Hydra and the author split those profits equally from the very first sale.  . . .



[M]y colleagues and I would welcome the opportunity to meet with you at your earliest convenience to discuss the advantages of the Hydra business model, describe the program overall, and respond to any of your expressed concerns. Please let me know a good time for us to set up this meeting.



Unfortunately, there is very little to discuss. SFWA has determined to its own satisfaction that Hydra does not meet our minimum standards for a qualifying market, as its contract does not offer an advance. Additionally, your attempt to shift to the author costs customarily borne by the publisher is, simply, outrageous and egregious. The first of these things alone would disqualify Hydra as a qualifying market. It is the second of these things, however, that causes us to believe that Hydra intends to act in a predatory manner towards authors, and in particular toward newer authors who may not have the experience to recognize the extent to which your contract is beyond the pale of standard publishing practices.

You extol your business model as “different”; the more accurate description, we believe, is “exploitative.” We are particularly disappointed to see it arising out of Random House, a well-regarded, long-standing publishing firm. Bluntly put, Random House should know better.



2. The Continuing Decline of Physical Shelf Space

Barnes & Noble had a terrible quarter (ending January, 2013). Revenues fell 8.8%, to $2.2 billion, and net loss was $6.1 million. Much of the loss was Nook traceable:  $59 million in additional inventory charges because of unsold goods, $21 million in returns from partner retailers, $15 million in promotional allowances “to optimize future sales opportunities” and higher advertising charges.

James McQuivey offers a cool assessment of all this, including:

On the bookstore side, the big digital obstacle is the decline of the printed book, an inevitability that has to be faced no matter how warmly one feels toward the printed word. We’ve learned from CDs and DVDs that once a physical medium begins to slide, it slides rapidly. Even if readers initially lose only a tenth of their interest in buying physical books, they will end up coming to the store 20% less often, which will lead the bookseller to shrink inventory accordingly, causing even less commitment to physical books, and so on. Play that out several iterations and you end up with a business half the size of the prior business in short order. As happened to Borders, such a rapid decline usually leads to surrender. In that world, the retail unit would have to encourage foot traffic to the store with some other physical product that isn’t so easily substituted digitally. I wouldn’t be surprised if Barnes & Noble sells frozen yogurt in the future — whatever it takes to grab customers and keep them coming back often.

3. The Disappearance of the Midlist Author

This report, about author Mary Doria Russell, evidences the obsolescence of the midlist author. The trads need blockbusters and A-listers, and even if your books earn out, and receive prestigious awards, that may not be enough to continue the relationship.

Just as her new novel, Doc, was being released in 2011, [Russell] got word that her publisher [Random House] was not interested in any more books from her. She had been with Random House since 1996 and published five novels with the New York house. During that time, she had won an Arthur C. Clarke Award and an American Library Association Readers Choice Award. Entertainment Weekly had chosen The Sparrow as one of the 10 best books of year.

But that didn’t matter. Random House was done with her.

“There was no indication that was going to happen,” she said at the Howard County Library Gala on Feb. 23. “It was like having your husband throw you a 25th wedding anniversary party, and then serve you with divorce papers at dessert.”

So where does that leave the midlist author? See #4 and #5, below.

4. The Rise of the Entrepreneurial Author

Outside the walls of the Forbidden City you’ll find the encampment of a new breed of entrepreneurial author. Not just writers who are putting books up for digital sale, but those who are teaching themselves to think like a business and, as a result, are making a profit every month.

These authors know that any successful enterprise requires vision, planning and quality controls. And those who put those practices in place have a much greater chance to rise above the gurgling milk of indie sameness to become some of the sought-after cream.

Having run a successful law book publishing business, and a thriving self-publishing stream, I have put together a one-day seminar to teach these principles to authors. It’s on April 27, in Los Angeles.

5. The Emergence of the Business-Savvy Hybrid

And over here we find the author who is, or may soon be, trucking in both worlds, indie and traditional. And why not? It makes perfect business sense for a traditional publisher and an author who can deliver the goods to reach a mutually beneficial arrangement. There’s even a new literary agency, Foreword,blending the knowledge and skills of traditional publishing with the brash new opportunities engendered by digital publishing.”

What “mutually beneficial” means will vary according to circumstances, but there are three major areas for negotiation:

a. The digital royalty split. Should be up for discussion. Holding the line at an arbitrary 25% to the author is not reasonable. 

b. A meaningful and limited non-compete clause. No author should sign a traditional contract with an overbroad non-compete clause. On the other hand, no author should refuse a clause that restrains him from publishing a similar book that could directly compete with what the publisher is doing (e.g., similar form and genre). But the author should be free to publish other works (to be defined specifically) such as novellas and stories and perhaps even books of another genre. Further, the author owes the publisher his “best efforts,” and that means when you owe the publisher a book, you must give your full attention to that book over and above what you self-publish.

c. A definite term with benchmarks. Giving up rights for the “life of copyright” is a fool’s gambit for the author. Publishers need to see that there is room for creativity here. For example, the contract could be for three years with an option for more. That’s what startup Premier Digital Publishingoffers its authors, among whom are Alan Jacobson, Piers Anthony and the Stephen Ambrose estate.

Also, a contract ought to require a substantive minimum royalty to the author every six months or a reversion of rights is triggered. This is especially true with a risk-free (to the publisher) no-advance contract.

This is business. The author who is informed can come to the table with more than just his hat in hand. Be informed. Know the key terms of a contract. Search around at blogs like The Passive Voice and Kristine Kathryn Rusch’s archive of “Business Rusch” posts, and always check out the twice-weekly Ether columns by Porter Anderson.

In a story about Hugh Howey, the Wall Street Journal states: “Publishing houses that once ignored independent authors are now furiously courting them. In the past year, more than 60 independent authors have landed contracts with traditional publishers. Several won seven-figure advances. A handful have negotiated deals that allow them to continue selling e-books on their own, including romance writers Bella Andre and Colleen Hoover, who have each sold more than a million copies of their books.”

6. 99¢ to Become the New “Free”?

A lot of blogdom in the last couple of weeks had been taken up with the decision by Amazon to limit payouts to its affiliate sites who generate traffic by hyping free books (mostly by authors participating in the KDP Select program). Without going into all the details and consequences (which have yet to play out), many are saying the value of the free book for self-publishing authors (viz., discoverability) has been severely reduced.

I don’t know whether this is a good thing or a bad thing. I think the value of FREE has downgraded naturally over time because all pricing decisions have effects on consumer behavior. My feeling (and it is a feeling, I don’t have data) is that a certain wariness about free books has set in, some readers feeling “burned” by less than quality content.

So where does that leave authors? Well, why not make 99¢ your new “free”? I ran a special for book #1 in my historical series, “The Trials of Kit Shannon.” The first book is CITY OF ANGELS, priced at $3.99. Last week I priced it at 99¢ and got the word out. On March 3 its Amazon rank (at the regular price) was #64,857. The next day, at the special price, it shot up to #283 in the paid Kindle store and #1 in religious/historical. I popped in to check later and it was #112 over all. In addition, sales of all the books in the series received a nice bump.

A good time was had by all.

7. A Challenge to Amazon?

A consortium of German booksellers, plus the world’s largest publisher and one of the world’s largest telecomm companies, have banded together to mount a Euro-challenge to Amazon’s digital territory. As outlined in Digital Book World:

The bookstore chains Thalia, Weltbild and Hugendubel have partnered with Bertelsmann (Random House parent) and Deutsche Telekom, parent to T-Mobile and other huge firms, have partnered to form Tolino, a company that will produce the Tolino Shine e-reader and sell ebooks. It goes on sale on March 7 in Germany for €99 ($129).

Tolino’s stats are formidable. It starts life for sale in 1,500 retail locations around the country and will have 300,000 titles available for purchase at launch (Amazon’s German Kindle store has over 1.8 million titles, however). One of its backers is heavyweight enough to compete with Amazon – Deutsche Telekom had €58.2 billion in revenues last year compared to $61.1 billion for Amazon.

Such challenges in industry are faced with a couple of huge obstacles, not the least of which is being “late to the game.” Plus, Amazon is not the leader without reason. It’s done most everything right, from customer service to innovation. So only an opponent of Bertelsmann’s size, seeking to nab a chunk of territory (and expand later), can possibly make the attempt. But will it be enough? Note: Read Sun-Tzu’s The Art of War if you want to follow the battle plans. Or play a good game of Risk.

8. The Rediscovery of Stoic Joy

I recently enjoyed this book: A Guide to the Good Life: The Ancient Art of Stoic Joy by William P. Irvine. The Stoics were the first cognitive therapists. They said, Look, most of your troubles are in your mind. If you learn to think right, you’ll feel right. Their wisdom is basic and easily understood, but it’s also an art you have to practice. We are prone to worry and fretting over things we can’t control. When it’s not a “chemical” problem, thinking straight is most often the answer.

And so, dear writer, in this new age of publishing anxiety, I commend to you one Epictetus, Stoic philosopher born in the mid-first century, who said, “There is only one way to happiness and that is to cease worrying about things which are beyond the power of our will.”

You can’t change the tides of technology, consumer behavior, or industry by the power of your will. You can’t will your book to the top of a bestseller list. Nor should you bear ill will toward, or waste time envying, other authors.

What iswithin your power are the words you write and the discipline you bring to the craft. Put your mind to that, and forget the rest. After you’ve written your quota for the day, put on Doris Day’s rendition of “Que Sera Sera,” open up a nice Pinot Noir and laugh with someone you love. 

And tomorrow? Write some more. 

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36 thoughts on “Field Report From the E-Book Revolution #3: The New Equilibrium

  1. Very interesting to watch how the evolution of the writing trade spins its way into reality. I’ve been wondering recently how long the free books part of KDP would continue to be a boon for self-pubbed writers. It has worked for me with all of my titles, pushing the free ones into the top 10 free list consistently, the last one was even #1 for a couple days in three different sub-genres. While it did boost sales the following days when it was back to full price at $2.99, the jumps in sales I’d seen a year ago after a similar campaign are not as massive lately.

    As one who has made it to but never past the editorial board in my attempts at the trads, I have grown comfortable with the thought of staying self pubbed. But the knowledge that there may be more changes in the industry makes me keep a wary eye on the scene around me.

    As a writer I sometimes feel like a point man on an infantry patrol in a beautiful wilderness. Walking along enjoying the wild beauty, the natural bounty of the forest, and the peaceful feeling of being surrounded by such glorious magnificence, but all the time there is this nagging feeling in the front of my thoughts that someone is out to kill me at any moment, and all this fun can quickly come to an end.

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  2. Oh…one thing I forgot to mention. With Amazon’s Audiobook Creation Exchange (http://www.acx.com) adding audiobook markets for self published authors the audiobook industry is just flying right now. Huge number of books and exponentially growing market, especially for known good authors. There is a major push to get as many books recorded into audio format as possible and I am always amazed at the good books out there looking to be narrated (including several authors right here at TKZ I’ve had the pleasure of narrating for).

    Just one more piece of the new pie.

    Basil
    http://www.sandmanproductionsak.com

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  3. Wow. That’s a lot of information to process. Thank you for posting it.

    Remember that segment of Bugs Bunny where Bugs is burrowing towards what he thinks is the beach and ends up in the middle of the woods during hunting season?

    As informative and important as this post is to my future, it makes me want to bury my head in my writing and never see the light of day again.

    I’ll get over it. Meanwhile, I’ll print this off and maybe sign up for yoga.

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    • As Bugs says, “I knew I shouldn’t have taken that left turn at Albuquerque.”

      Amanda, my intent is to help keep writing heads ABOVE the ground. Maybe focus on #8 today!

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  4. I follow John Scalzi’s blog, where he was kind enough to explain in plain terms what the boilerplate contract of Alibi and Hydra mean. He also gave his opinions for each item, and why this was a bad business model, giving reasons you touched on like the author bearing the cost of set up and copyright.

    There’s a lot happening in publishing, and it can make a person crazy trying to keep up with it. A few days ago I decided I was going to Calm Down, focus on making myself the best writer I can, and worry about the things I have control over. 😀

    Thanks for the field report!

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  5. I’m riled up, but yes. Ha!

    No advance + no production cost = no skin in the game

    What motivates them AT ALL to put any effort to marketing a free book…even if they really knew how?

    Plus they get to retain the monthly paid earnings on digital for 8-9 months in their antiquated royalty system (by the time an author receives a stmt). Amazing.

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  6. Great rundown of publishing options today! I have a friend who has digital only contract which has no advance (or what at one writing conference was called “advance free”, which makes it sound like a zero calorie beverage)but her contract still put all the cost of publication on the publisher.

    For my part, I like the hybrid approach, and your advice to not worry about things outside our control. As for what’s within my control, I intend to write more.

    I took Donald Maass’s Writing 21st Century Fiction workshop here in Portland yesterday, and that has me jazzed six ways to Sunday to do exactly that. As does this post.

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    • Dale, I’m glad you got to be with my agent and teaching colleague, the one and only Mr. Maass. He does that. He jazzes writers. So yes, write, write well, and the options will be there waiting.

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  7. There is so much here, Jim that it will take me awhile to soak it all up. I love your comment, “And so, dear writer, in this new age of publishing anxiety, I commend to you one Epictetus, Stoic philosopher born in the mid-first century, who said, “There is only one way to happiness and that is to cease worrying about things which are beyond the power of our will.”

    This reminds me of The Serenity Prayer,
    God grant me the serenity to accept the things I cannot change, Courage to change the things I can, And the wisdom to know the difference.

    Wisdom is sometimes hard to decipher in this crazy world of publishing. I appreciate your thoughts and words on all this. I think the best advice is to just write and yet it’s so hard when so hard to focus sometimes with all that is happening in a business world that’s so chaotic. I think it’s time I put the blinders on and just look straight ahead, not veering to left or right but getting the work done.

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  8. Brilliant business roundup, Jim. Hydra is a blatant attempt to take advantage of the newest and most vulnerable authors. No author who’s been in the business for more than two minutes would ever sign a contract with no advance, paying for development costs, and life-of-copyright terms. It would be as if an agent required an upfront fee, ongoing payment for expenses, and a lifetime agreement. Fortunately, I think this will be a self-correcting development. With the caliber of books Hydra will get, I’ll be surprised if they can eke out a profit even with their onerous terms. They still have to cover overhead and salaries.

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  9. Excellent roundup, Jim. Especially that last part about not letting your head explode.

    One other last change I would add: The era of boilerplate contracts, inflexible editors and editorial boards and agents who are living in the past is over. Everything is in flux now and if you are tethered to an agent who isn’t keeping up or a publishing house that refuses to think outside the box, it’s time to go rogue.

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  10. This is an eye-opener. Thanks for putting it together succinctly. Like others have said, it’s a lot to process.

    I’ve been wondering about the ethicality of the e-publishers listed in #1 because I’ve noticed prior to reading your article that those authors pay out of pocket for the bulk of the publishing (pay for editors, book cover artists, etc). So in essence they are paying for the use of the name of the publisher on their otherwise self-published books. Then again, the authors themselves made the decision to go with those publishers, so they’ll have to accept the agreement that they signed.

    I like to read traditionally published books, but more and more these days, ebooks. I hope that a balance can be struck between authors and publishers so that everyone will benefit, especially readers 🙂

    Glad you confirmed that discussions need to be had to be fair to authors and publishers alike in the new normal of book publishing.

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  11. Most of the Hydra stuff is just “buyer-beware” except for the “life of the copyright.”

    That is not an agreement to publish. That is an assignment, an outright sale, of the intellectual property. So, here is what the Hydra contract boils down to:

    1. You are giving us the book. Not contracting, not anything pretty, you are giving it to us. To do with as we please. And we really appreciate that. For 75 years after you meet your maker, your book belongs to us. Not you . . . us, we, Hydra.

    2. In exchange, we are not giving you anything. Not one red cent in exchange for your work.

    3. We are going to charge you to make it pretty and presentable. You are going to pay us to put a cover on the book you gave to us.

    4. We are going to offer the book that you gave us and paid us to make pretty for sale. You have to do the marketing. We’ll have a contractor ship out the book.

    5. When you have marketed the book that you gave us and paid us in full to make pretty, we will then split what’s left over 50-50.

    6. Oh, and by the way, if the book you gave us and paid to make pretty doesn’t sell enough to pay for the make-pretty, we are going to send you a bill and keep your book.

    7. Oh, and not only are you giving us your book, you are giving us all the other rights that go along with it. Don’t worry, if we manage to sell any of the other rights to the book you gave us, we’ll make sure you get a little sumpthin, sumpthin.

    So, sign right here and we’ll take that pesky book off your hands . . . hey, if you are going to use that kind of language, then we don’t want you to give us your book for free.

    SMH . . . Terri

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  12. Great summary of the latest news on the publishing side.

    My question is, where does this put literary agents? Specifically, as an author who’d like to have a mixed career of trad & indie work, do I want an agent, and what should I be wary of? How can my agent earn an income off my indie work?

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  13. Excellent report on the state of the industry. There are almost too many choices out there for us authors today. It’s scary to venture into new territory with self publishing, but becoming almost necessary to make an income.

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  14. Jim: Once again, you’ve done a wonderful job of sifting the wheat from the publishing industry chaff. We have finally reached an era in publishing where authors have almost unlimited choices. Authors need to bring business savvy to the table no matter which direction they choose—tradition, indie, or hybrid. Thanks for sharing this information with us.

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  15. I’m still digesting all the great and useful info in the post (not to mention the comments!) but I wanted to at least pop in and say thanks, as usual, for offering your insights and helping make sense of the industry changes.

    BK Jackson

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  16. Agents seemed to catch on to the changing environment faster than the pubishers, since many of them have now started offering to effectively publish their author’s work in digital format. Is this a conflict of interest? The attorney in me says “yes” but the author in me wants to believe that the agent and author share the same interest in this case – putting out a good quality book and selling many copies of it. So if the royalty split is good (and in all cases I’ve seen, it’s been very good) then I don’t see a problem. That doesnt’ mean it isn’t there, however.

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  17. Thanks for another great post, James. I’m constantly impressed by the quality of this blog.

    From what you and many, many others say, it makes me wonder: Is Amazon the new slush pile agents and publishers use to find new writers? Is the free market separating the wheat from the chaff, therefore removing the guesswork from the equation?

    If so, that may be a very good thing for authors. A successful indie book draws attention and a proven sales record will allow us to negotiate from a much stronger position. (Who am I kidding? It would allow is to actually negotiate for once instead of walking to the publishing table, empty bowl in hand, and asking, “May I have some more please?”)

    The dilemma then becomes, “Do I even need a publisher?” An increasing number of writers are saying, “No.” I can understand that decision. If you’ve already done the hard part (writing, cover design, marketing, etc) and sales are brisk and you’re keeping 70% of list price, why would you voluntarily cut that to 25% and give up the rights to your work? Not to say signing with a major publisher doesn’t also carry significant advantages, but it is a much tougher decision than it was just five years ago.

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  18. So much excellent information. I didn’t need to bring along snacks, just a cup of coffee. (I appreciate the positive end too, my head was swimming a little, but that was the perfect life ring!)

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  19. I do not want a publisher. I do want a distributor to give my book a showing to bookstore managers. That is in the works.

    I can’t think of anything a publisher can give me that I can’t do myself — and I will do it with much more zeal because I am committed to succeeding as an author and not worried about the bottom line. The money will come when I give the reader top-notch books.

    I believe in myself more than I believe in a publisher doing for me what I can do for myself.

    The main thing is to enjoy the ride, the process — and know God is in control. Whatever happens (or doesn’t happen), it’s for His glory!

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  20. This ancient historian and Alexander scholar got a kick out of the mention of Epictetus. (His teachings were collected by Arrian, who also wrote one of the major bios on Alexander the Great.)

    Enough off the topic commentary. Thanks for a very useful article!

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