Chapter 17
Ten Facts about Book Contracts
In This Chapter
Copyright the right way
Knowing your rights and keeping them
Advances and royalties
Why you can — and should — negotiate
Demystifying option and libel clauses
Although a published writer and veteran editor ain’t no lawyer, she can certainly answer the ten most commonly asked questions about publishing contracts in a way that won’t get her hauled into court. Here goes . . .
Does the Publisher Own the Copyright to My Book?
No. You own the copyright to the work itself, from the very moment you create it. The publisher is buying only the rights to publish it. Because copyright law protects your ownership from the moment of creation, you don’t need to copyright your work through the United States Copyright Office before sending it out.
In fact, you never really need to register copyright. The purpose of registering is to create legal proof of ownership should you ever become involved in litigation about that work. Some writers find even the possibility of yucky legal stuff reason enough to go through the registration process. Others are fine with including “copyright © [year] by [your name]” on the first page of their manuscripts — although you don’t even need to do that. Regardless of your comfort level and how you tag your manuscript, be assured that your publisher will register the copyright in your name for you when the book is published. (Publishers don’t like yucky legal stuff, either.)
Make sure your publisher registers the copyright in your name, not theirs. There should be a clause in your book contract that specifies this. If there isn’t, ask your publisher to add it. And have a very candid conversation about why this standard item wasn’t included in the first place. It’s not a common situation, but some vanity publishers and author services companies (see Chapter 14) want rights that should belong to you — which should raise a red flag in your mind. That said, there are instances, such as with a trademarked series, where the publisher will want the copyright in their name. Talk to your publisher about this when you’re negotiating your contract.
The nice thing about a copyright is that it lasts a long time. U.S. copyright law sets the term of the copyright for works created after 1978 at the author’s lifetime plus 70 years, after which the work goes into the public domain and no longer has copyright protection. After the work goes into public domain, it’s anybody’s to publish as they see fit. (How do you think we get all those dirt-cheap copies of Shakespeare’s tragedies? Public domain, baby.) See the United States Copyright Office website (www.copyright.gov) for more information about copyrights.
Ever heard of the “poor man’s copyright”? That’s the practice of sending a copy of your own work to yourself through the U.S. mail to establish an official date of creation. Technically you didn’t create it the very day you mailed it, but the point is to have a date officially marked should a copyright issue arise. Problem is, U.S. copyright law doesn’t provide for this type of protection, so this practice isn’t a substitute for registration. But it is a nifty way to get one of those Elvis Presley memorial postage stamps. Who doesn’t love finding the King in their mailbox?
What Does “Buy All Rights” Mean?
Many publishers buy all rights to your story. This means you sell all your interest in the work, allowing the publisher to publish your book in any country, in any language, as well as any work that should stem from it (derivative works), such as sequels, books featuring the same characters (companion books), or alternate formats (such as movies or audio books).
You can negotiate a limit on those rights, such as selling first printing rights only, or you can designate a timeline that reverts the rights back to you at a specific time or in a specific situation, such as when book sales drop below a floor threshold in any given accounting period (generally, publishers have two accounting periods per year, which is when you get paid your royalties).
Selling your story’s rights to a publisher doesn’t mean the publisher would keep all the money from these deals; it just means the publisher’s crew would do the legwork and take a cut every time they secure a license for your book — that is, sell someone the right to use your work. You still get a portion, too.
Although the idea of selling rights to a possible future movie or theme park may sound like a terrible idea at first, consider that often the publisher is in a better position to exploit those rights, having the connections to production companies, merchandising companies, book clubs, foreign publishers, and so on. In fact, publishers typically have staff dedicated to handling these rights: the Subsidiary Rights Department, or simply Subrights.
What are Subsidiary Rights?
Subsidiary is a fancy world for secondary, which itself is a fancy word for all that stuff that isn’t necessarily print-related. Here’s the breakdown between primary and subsidiary rights:
Primary book-publishing rights are hardcover, trade paperback (sold in standard bookstores), mass market (smaller, lower-priced paperbacks sold in stores that don’t specialize in books, such as grocery stores or Wal-Mart), and direct mail (catalog-based selling to specific mailing lists). These are the areas publishers are best primed to exploit.
Secondary, or subsidiary, rights include periodical rights, first serial rights, book club rights, dramatic rights, motion picture rights, television rights, radio rights, animation rights, merchandising or commercial tie-in rights, electronic rights, and video and audiocassette rights.
You can choose to grant only the rights that the publisher can adequately exploit. If you’re contracting with a book publisher, granting the publisher rights to print, publish, and sell printed books makes sense. Book club rights usually go to the hardcover book publisher, too, as do other print-related rights, such as paperback reprint editions, condensations or abridgments in anthologies and textbooks, and first and second serial rights (such as publication in newspapers and magazines). Those are the formats publishers are wired for.
Literary agents like to hang on to nonprint subrights, especially film and merchandising, in order to license them out themselves through their own Subrights staff or through specialized subsidiary rights co-agents. That cuts the publisher out of the deal, meaning more money for you.
The book contract specifies the subrights splits. Although the splits can vary from publisher to publisher, generally the minimum split is 50 percent for you, 50 percent for the publisher, with increases in that percentage (up to 75 percent for you, 25 percent for the publisher) going in your favor.
When negotiating the rights language in your book contract, be as specific and clear with the language as possible. Present copyright law says that you retain any rights you do not expressly grant to the publisher. But vague contract language can cause all kinds of legal hoo-ha. If you have an agent, then he or she is just as vested in protecting your rights as you are, but if you’re on your own, consulting a publishing attorney before signing the contract may be in your best interest. A few bucks upfront may save you big bucks down the line.
Make sure your contract stipulates that the rights will be returned to you if the book goes out of print (OP). This is a tricky item (what was that I said about enlisting a publishing attorney?), because the publisher can let a title sit OS (out of stock) for long periods of time before declaring it OP, in effect allowing them the chance to reprint the book anytime they see a prime reason to get it back out there. It also lets them hang on to the rights for print-on-demand, a printing method that lets them publish individual books as customers order them instead of printing a batch of books and then holding them in warehouses or shipping them out to stores. Letting a title remain out of stock also lets publishers lock up your rights as they wait for new technologies that offer new-edition opportunities.
Many author organizations advise that electronic and print-on-demand editions should not constitute in print, which should instead be defined as available for sale in the United States in English-language hardcover or paperback editions. If your contract doesn’t already have an Out-of-Print Clause, you can negotiate one that stipulates your ability to terminate the contract and regain all your rights (called reverting your rights) if book sales fall to a specified minimum number per accounting period. That way, publishers can’t claim a few print-on-demand sales as reason to lock up your rights, and they can’t sit on those while they wait to see who invents what. You don’t have to have earned out your advance for such termination and reversion. (See “What Does ‘Advance Against Royalties’ Mean?” to find out what earning out your advance means.)
What’s the Deal with Electronic Rights?
These days, terms such as book form and electronic rights are major hot buttons. As technology is outpacing publishers, many publishers are incorporating expansive language such as “including all known and unknown technologies” into contracts to make sure they don’t lose out on electronic editions whenever a new technology is developed. And writers are understandably concerned about getting the shaft.
What should you do about broad electronic-rights language in your contract? If you see in the Grant of Rights clause that your publisher is reserving the exclusive ability to publish or allow others to publish electronic versions of your book, you can ask them to insert a stipulation requiring the publisher to negotiate royalty and subrights splits with you before they enter into any electronic-rights licensing agreements or publish a new electronic edition themselves. Or you can ask for the publisher to specify in the contract exactly which electronics rights they want to license, such as full text editions, Internet downloads, or specific multimedia formats. Then again, you can simply reserve all or specific electronic rights to license yourself or hold for a later date, depending on who invents what.
Even publishers are struggling to understand and define technology’s role in publishing. Try not to be intimidated by electronic rights. Everyone’s in the same boat, even if some do have seats with better views.
The Authors Guild is a vocal advocate for author rights in the digital age. For the latest on electronic rights issues, go to the Legal Services section (under Services) of the Authors Guild website, www.authorsguild.org.
What Does “Advance Against Royalties” Mean?
After your book is published, you receive a portion of its earnings, or royalties. Luckily, you don’t have to wait until your book actually starts selling to get some moola. Your publisher pays you an advance against royalties before publication. This advance is a sum of money that the publisher agrees to pay you upfront, when you sign the contract. It’s neither free money nor a bonus — that sum will be deducted from your royalties until the advance is fully recouped by the publisher, at which point your advance is said to have earned out. After that, your share of the royalties comes to you without being dinged by the publisher.
Here’s an example: You get a $10,000 advance for a book, with a 10 percent royalty. This means the publisher pays you $10,000 before the book publishes and then keeps your 10 percent share of the earnings until that amount reaches $10,000, at which time your advance has earned out. Now your 10 percent share of the subsequent royalties starts showing up in your mailbox.
That example clarifies the earning-out process, but the example is actually quite simplified. In truth, every penny of contracted income that your book brings in helps you earn out that advance, be those pennies from physical book sales or audio book licensing or movie rights sales. Another factor is reserves, which are the funds publishers hold “in reserve” in case your books get returned by bookstores because customers aren’t buying them. The accounting can get quite complicated. Your publisher will send you statements several times each year accounting for all these details.
Publishers pay advances when the contract is signed, although your advance may be doled out as you hit manuscript delivery deadlines that are specifically stated in your contract. A common scenario has you being paid a portion of the advance upon signing, a portion upon delivery of half the manuscript, and the final portion upon delivery of the complete manuscript.
Publishers generally calculate the amount of your advance based on their predictions of the number of books they’ll sell. That means advances vary hugely, depending on the publisher, the market, and your stature in the marketplace. So if the publisher thinks you have a big enough name and/or the book has a big enough commercial potential, then you’ll get a bigger advance because, hey, they think they’re gonna sell more copies. Makes sense, doesn’t it?
What’s the Difference between Royalties on “Net” and “Gross”?
Gross is the book’s list price, also known as the cover price or retail price. Net is the amount of money the publisher actually receives on all sales, after expenses such as overhead, marketing, production costs, bad debts, and special deals to its customers have been factored out.
Because net is usually about half the list price, you make more money on gross-based royalties. Luckily, most young adult book publishers base royalties on the list price. Not all do, though, so keep an eye on this detail when you get your contract. Typically, authors get between 10 and 15 percent of gross for each book sold.
Whether you’re getting royalties on net or gross, sometimes those royalties can escalate. That means your royalty increases as you reach certain sales thresholds. In one common escalator scenario, you’d get a 10 percent royalty on the first 10,000 books sold, 12.5 percent on the next 5,000 books sold, and 15 percent thereafter. Publishers are often more willing to negotiate escalators than larger advances because royalties are paid when books are actually sold; advances, on the other hand, are based on sales projections, and crystal-ball technology hasn’t yet been perfected. (Remember, your first earnings pay off your advance; you won’t get any checks in the mail until after the publisher recoups that advance.)
Do some math when you’re considering your publisher’s offer — you may find that you’ll be better off in the long run negotiating an escalating royalty rather than digging in your heels for a few thousand dollars more on the advance. High advances are pretty glamorous, and some folks believe that the higher the advance, the more promotional effort the publisher will kick in. That may be so, especially when you’re talking astronomical advances. But most writers aren’t Big Name Authors with sales projections in the millions, so they don’t get million-dollar offers.
Why Do My Royalties Go to My Agent?
Every book contract that involves a literary agency includes an Agency Clause. This clause instructs the publisher to send all your royalties and advances directly to your agent. Don’t worry; she’s not keeping it! She deducts her commission and disburses the remainder to you. To do that, she deposits the money in a separate client trust account rather than a general account to protect it from any possible creditor action should the agency encounter financial problems.
If your agent doesn’t have a separate client trust account, request that your Agency Clause stipulate your right to cancel the clause in the event of the agent’s bankruptcy, death, or disability. Your agent should give you an annual accounting when she provides you with your IRS Form 1099 each tax season.
The Agency Clause also empowers your agent to act on your behalf in any matters that arise from that particular agreement. If you and your agent should break up, then after you’re done burning all your photos of the two of you together, be sure to notify your publisher in writing that you’ve had a rep change so the contract may be amended.
For more on the agent-author relationship, see Chapter 13. If you have specific questions about agency agreements, the Association of Author Representatives (AAR) has resources available on its website, www.aaronline.org.
What’s a Boilerplate?
A boilerplate is simply a standard form contract. Think template. Every publisher has a boilerplate contract, and in their eyes, it’s the perfect basic agreement — for them. Wait, wait, I’m not saying publishers draft the boilerplate to be unfair to you. The folks behind the big doors of the publishing house are usually very nice people who want you to succeed; I know because I was one of them. That said, the boilerplate is skewed in the publisher’s favor.
You should consider the boilerplate your starting point for contract negotiations. Publishers do. They know and expect that writers and their agents will negotiate the contracts until the agreement has been molded to suit everyone’s needs as much as possible. It’s part of the process.
Never shy away from requesting changes to the boilerplate or just asking questions to clarify your understanding. No one’s going to be miffed at you. This is a legal document, and no one — not you, not the publisher — wants a legal mess later on. Contract negotiation is the time to get everything out on the table and work toward an agreement that you can all sign in good faith and with high hopes for a successful partnership.
Most publishers have agency boilerplates, which are contracts that reflect each literary agency’s basic musts. That way, agents don’t have to negotiate every detail for every contract the agency enters into with that publishing house. This saves everyone time.
The same goes for you: When you sign with a publisher, all your future contracts with that publisher will start with your current contract as your boilerplate. That doesn’t mean the negotiation ends there. Your needs and your ability to exploit rights may change, and your current contract should reflect that.
Am I Protected from Libel Suits?
You’re treading in the world of warranties and indemnities now, and for that, you’d best consult a publishing attorney if you don’t have an agent involved in your book contract negotiations.
Your book contract will almost certainly require you to “indemnify and hold harmless” the publisher against claims — including libel or copyright — or breaches of contract related to the work. Essentially, they’re covering their britches against your breaches. Your “warranty” is your promise to the publisher that you’ve never published this work before, you haven’t plagiarized, and you haven’t libeled or in any other way defamed someone or violated his or her privacy rights. Indemnifying and holding harmless the publisher means that you agree to foot the bills if the legal logs start rolling.
You can ask a publisher to strike the warranty and indemnity clause from your contract . . . but they probably won’t. This is where you ask your publishing attorney or your agent what to do. Based on her knowledge of publishing law and precedents, of the content of your particular work, and of your individual needs, she may recommend that you
Ask to be added to the publisher’s media liability insurance, which protects against copyright and infringement claims and invasion of privacy and defamation. This insurance sometimes provides assistance in paying attorney’s fees.
Purchase your own professional liability insurance.
Request contract language that limits your obligation to “final judgments” (meaning you won’t have to cover the costs of lawsuits that eventually get thrown out as frivolous).
Ask for language that limits your warranties to “the best of Author’s knowledge.”
Some national writers’ groups, such as the Authors Guild, have agreements with media liability insurance companies, allowing their members to purchase the insurance at specially negotiated rates. If you’re a member of a national writers’ group, check their membership benefits to see what they can offer you.
What’s an Option, and Why Would I Grant It?
An option gives the publisher the right of first refusal, or the right to read and buy or reject your next work before you show it to anyone else.
Although a publisher may ask for an option, you don’t have to grant it. An option isn’t really in your favor, except perhaps as a statement of the publisher’s investment in you. For a publisher, it’s a hedge against sequels or companion novels, if not a blatant grab at your future manuscripts.
If the publisher insists on an option — as they may do when there’s a strong likelihood of a sequel or a companion book, or in the case of a series — make the option as specific as possible. Have the language state that they get an option on a book featuring the same characters, the next book in a series, or a book in the same genre as the contracted work. And make sure the clause specifies a time period — such as 90 days — during which the publisher must review the work and give you a thumbs up or a thumbs down.