What To Look For In A Publishing Contract (2011)

[This article first appeared in the December 2011 edition of the ACT Writers’ Centre magazine. ©Alex Adsett, 2011]

Contracts can be tricksy things.  You may be so ecstatic that someone anyone wants to publish your book that you would sign the house away, but take a deep breath and hold on. A little forethought before you sign will help build your career as a writer and protect you if things go very well or very badly.

The first point to consider isn’t even contractual: you need to be satisfied that the publisher offering the contract is reputable. If they have been around for decades and published Peter Carey, you can probably trust they are legitimate. If you haven’t heard of them before: check references with previous authors, investigate if your local bookshop stocks their titles, and check the quality of their previous books.

The next thing to remember is that you do not need to accept everything that is offered.  A genuine offer is not going to be withdrawn because you try to negotiate, and the worst that can happen is that the publisher says no.  Knowing that, here are some of the bigger issues with contracts that you should watch out for, and try to improve if not up to standard.

Licence vs Assignment

As an author, you will most likely be the sole copyright owner in your work. When you sign a contract with a publisher there are a number of things that can happen to your copyright.

The most common option in trade publishing is for you to grant the publisher an exclusive licence. This means that you remain the copyright owner in name, but the publisher owns the exclusive rights you have licensed. This is comparable to the publisher `renting’ the copyright in the work from you. If someone rents a house from you, they have the exclusive right to live in the house, and even though you are the owner/ landlord, you cannot do certain things with your property while it is leased to someone else. If you grant the publisher an exclusive licence for the copyright then you cannot take advantage of whatever specific rights you have granted to the publisher for as long as the publisher has those rights.

It is not uncommon, particularly in educational publishing, for a publisher to request an assignment of copyright. This means that the publisher becomes the owner of the work. G oing back to the house analogy, this is like selling someone your house instead of just renting it to them. You do not have any rights in the work anymore, and you will probably not be able to get the work back when the publisher has finished using it.

Sometimes you can get away with granting only a non-exclusive licence. This is used more when licensing a short story into an anthology, and it means that the publisher has the right to use it, but you can still use it as well.

Royalties

a) Flat fee or royalty: When you license or assign rights in your work, the publisher will usually pay you by royalties (with or without an advance) or by a once-off flat fee payment.  Royalties are a way for the publisher and the author to share the risk with a book. It means that the author will get a percentage share of the profits from each book sold, and so the more the book sells, the more income an author will receive. A flat fee is more common when the rights are being assigned to the publisher, and means the author will not receive any more income no matter how many or few copies the book sells.

b) Base royalty: It is important to look at whether your publisher has offered you a royalty against recommended retail price (RRP) or net receipts, as this can make a big difference to your income. The standard royalty in Australia for printed copies of the book is 10% RRP, which can roughly be equated to 20% of net receipts, while electronic book (e-book) royalties are about 25% of net receipts.  If your royalty is 10% of RRP, then no matter what price the bookshop sells your book at (eg full price at $30 or on sale at $2), you will still receive 10% of the recommended retail price set by the publisher.

If you are getting a royalty of 20% net receipts, then you receive 20% of whatever price the bookseller passes back to the publisher. Standard publisher discounts for bookshops range between 35 and 55%, so this means you might be getting a lot less for a book sold at a big chain store than you would for a book sold through your local independent bookshop.

c) High discount royalty: The royalty clause in your contract will probably include a lower royalty if the publisher has had to give a higher-than usual discount. If the royalty is based on RRP then this is not unreasonable, as the publisher is earning less as well. It is very important to make sure that the high discount reduction does not start lower than about 55%, as otherwise it would be reducing your royalty on standard bookshop discounts, not only in special circumstances.

d) Advance against royalties: An advance payment (different from a flat fee payment) is recoupable against royalties, which means the publisher will keep all the author’s royalties until the advance has been earned back. Afterwards, any royalties due are paid to the author at regular intervals (usually every six or twelve months). As a rough guide, the publisher should be willing to offer you an advance equal to half the royalty of first print run.

For example: If the author is going to get 10% of RRP for a book priced at $20 (exclusive of G ST) with a first print run of 2,000 copies, if the whole print run were to sell through without any damaged or free copies, the author should receive $4,000. As there is always risk and uncertainty in publishing, you could expect the publisher to offer the author an advance of $2,000 before the book is published. The author’s royalties on the first 1,000 copies sold would be deducted from the $2,000 advance, but the royalties due on any copies sold after the first 1,000 would be payable to the author.

e) Cost share: Some publishers are now offering a higher royalty in exchange for the author’s royalty contributing to half of the print and marketing costs. This is not necessarily dodgy (although should ring an alarm bell) but before you agree, it is important that the costs are i) capped at a reasonable amount, and ii) that your consent is obtained before any significant costs are incurred. Without these protections, you may never see a cent of your royalties, particularly if the publisher starts adding up exorbitant publicity costs and expecting you to help pay.

Rights

Copyright in a book can be split up in any number of ways, and can be licensed (or assigned) to any number of different people.

When the publisher licenses the rights, they are going to try to acquire as broadly as possible – all forms, editions, and languages throughout the world. This will give the publisher the best chance of exploiting all the possibilities in your book and recouping their investment. Before licensing all or some of your rights you should ask: i) what is the publisher going to dif they get these rights and ii) what would I be able to do if I kept hold of these rights?

If an Australian publisher wants World rights, or UK, Asia, or USA , or translation, then you need to know that they are able to exploit these rights in a way that will help your book. At the same time, there is no point your holding on to World and translation rights if you have no way to use them yourself.

When the publisher licenses your book, they will want to use some rights directly themselves (eg to print copies and sell them in Australia), and sublicense some rights to other people (eg translations). The rights that the publisher are able to sublicense are called subsidiary rights, and instead of getting a royalty as when the publisher directly sells a copy of your book, you will usually get a 50 – 90% share of any subsidiary rights income received by the publisher. Some subsidiary rights include quotation rights, audio, UK or US sales, translations, and film.

Reversion

The term of most book publishing contracts is duration of copyright. This means the publisher could hold the rights for 70 years from the author’s death, subject to certain conditions. It is important to have a reversion clause in the contract so that the copyright reverts back to you if the publisher is no longer selling the book or keeping it available for sale. With e-books now available, your book might always be available, so I recommend having a reversion clause that requires the publisher to sell a certain number of your book (eg 100 copies) every year, or else the rights revert to you.

Other things to watch out for

There are many things that should be included in a publishing contract to both protect the publisher and protect the author. Along with licenses, territories, rights, and royalties, there should also be some mention of delivery dates and what exactly is being delivered, what will happen if your manuscript isn’t quite what the publisher wanted, who will pay for any permission fees and cancellation if the publisher does not fulfill its obligations.

It is important for you, or someone you trust, to read every word of the contract you are signing. Do not make promises you cannot keep (ie delivery dates or warranty clauses) and do not sign anything that you do not understand. Essentially, anything that the publisher has promised you in arranging the publishing deal should be included in the contract. If your publisher has promised you a publicity trip to New York and gold laminated jacket cover, get them to put it in writing.  Seek independent advice if you do not understand the contract or need help with negotiation, but never be worried about asking your publisher for an explanation of the terms.

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