Publisher Book Contracts

Copyright 2011 by Morris Rosenthal - All Rights Reserved

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Copyright 2011 by Morris Rosenthal

All Rights Reserved

Negotiating Book Contract Terms and Royalties

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Warning: This information is based on my personal experiences and confidential communications from others. It is not intended as legal advice

First, my advice to all commercial authors is, get a good lawyer with book contract experience. I got through my last contract negotiation and a Federal court lawsuit for copyright infringement (somebody ripped me off) with the help of Zick Rubin, a terrific Intellectual Property lawyer in the Boston area. Zick and his associate Brenda Ulrich have just rolled out a new version of their website at The Law Office of Zick Rubin. Check out his "Really Legal" columns.

The publishing industry has a bad reputation amongst the majority of writers, many of whom see publishers as little more than law firms with an editorial department in tow. Publishers reel in unwary authors with a carrot, the advance, then whack them with a stick, the contract. An acquisition editor is the employee at the publisher whose job it is to sign authors to write books. Most new authors fail to retain legal counsel before signing their first book contract, and actually depend on the acquisitions editor to tell them what's fair and normal for the publisher to request. This creates an excellent negotiating position for the publisher and a horrible one for the author. Unfortunately, publishers really take advantage.

Author advocacy organizations can be a good source for publishing contract advice, but the catch is you usually have to be a published writer before you can join. There's nothing quite like the feeling of joining a prestigious author's guild after publishing a trade book, sending them the publisher's book contract for your next edition for free legal review, and hearing something like, "Oh, you never should have signed the first contract. Now you're stuck with it forever."

Subsidy publisher book contracts from outfits like iUniverse, AuthorHouse and Xlibirs, may outwardly resemble trade publishing contracts, but there's no reason you should be giving away any rights at all when you're paying them to publish the book. Don't fall for the line that the fee you're paying only offsets part of the production cost, blah, blah, blah. A good subsidy publisher will offer a short contract that describes the publisher's responsibilities, a royalty schedule, and how the author can (quickly) terminate the agreement, not a three year lock-up. Some subsidy publishers hide their contract details until the last minute, hoping you'll sign simply because you've gone so far down the path. Don't even consider a subsidy publisher who doesn't have their book contract available on their website where you can read it before you contact them. Unlike contracts from trade publishers, I've never heard of a subsidy publisher willing to negotiate their contracts. It's a volume business, if they don't get your book they'll get somebody else's. They may have different publishing contracts for their different packages, like iUniverse with their different royalty rate contracts.

The contractual relationship between the author and the publisher is based on what's written in the signed book contract, not on implicit understandings. Even experienced authors and agents sometime make the mistake of concentrating on the money and not paying enough attention to the clauses that protect the author's rights. All contract terms are negotiable, though acquisitions editors like to pretend they have a standard publishing contract that all their authors are happy to sign. A brief summary of standard trade publisher contract terms follows, but it's by no means all-inclusive: I advise everyone who is looking at a contract signing to consult a lawyer.

Before getting on to all the boring legal clauses that you have to worry about, you may enjoy a brief video break. Both of these shorts talk about some publishing legal issues, though not author contracts.

Grant of Rights

Here the author grants the publisher the right to publish the work, as protected by copyright law. For most authors this means the exclusive worldwide rights, including all derivative works, etc. While it's not in the interests of the author to give up anything without negotiation, the publisher is frequently in a better position than the author to exploit these rights (such as publishing translations), which will result in further payments to the author. If the author believes the work is likely to become a smash TV hit or the next big Christmas toy, the derivative rights could be the plum of the book contract.

Competing Works

Many non-fiction publishers try to get an author to commit to a non-compete clause. In a non-compete clause, the author agrees not to produce another work that competes with the title under contract without prior permission of the publisher. It's usually not in the interest of an author to write books that compete with each other, since this fractionates the market and may cause both books to fail. Experienced authors will not sign a contract with a non-compete clause, and publishers aren't going to promise not to publish books that compete directly with the author's, so it's just a bad deal. If the publisher insists on a non-compete from a new author, it should at least be narrowed to the point that the only way to violate it would be to write an essentially identical book. If you've signed a book contract with a non-compete, it's worth talking to a lawyer to find out just how limited you really are.

Author's Warranty

The author is asked to guarantee that the work is actually theirs to sell, not plagiarized, stolen, or already sold to another publisher. This includes rights for any materials or illustrations in the book that the author didn't create. A paraphrase of the final line in this clause goes something like: "This warranty goes on forever and we'll dig you up to pay our legal fees if we get sued." This is really scary stuff because the author could get stuck paying NYC lawyer fees for a frivolous suit. While publishers will rightfully insist on an author's warranty, the language should limit the author's liability to pay the publisher's legal costs for something that isn't the author's fault. Keep any permissions you get from contributors in your long term files and keep your fingers crossed.

Manuscript Preparation

The deliverable of a publishing contract is the manuscript, which is outlined here in size and content, including counts for the number of pages, words and illustrations. Acquisitions editors can be very casual about this description, even if the author has a pretty exact idea what the final numbers will be, primarily to maintain the maximum flexibility. There's no reason they shouldn't agree to describe the book as exactly what the author has agreed to write. The actual form of the manuscript is also detailed here, normally a Word file is required, though a couple printed copies and any artwork may also required. If the book will have an index, some reference to how that index will be prepared is often mentioned here or in a later paragraph. Authors shouldn't be asked to pay the expense of creating an index, but some book contracts casually charge a couple thousand dollars against author royalties, or several dollars per book page. While the author should be willing to create an index if requested, paying the publisher to do it is ridiculous, and this language should be stricken from the contract.

Viability and Publication Delay

The publisher will also include language granting them the right to reject the manuscript the author presents, and either requiring changes or canceling the book contract. Determining the fitness of a manuscript for publication may sound like a subjective judgement, but a book contract should contain some description of what makes a manuscript "fit for publication" to allow the author to contest the issue if the publisher cancels the book after the manuscript is submitted. Some books are years in the making, and the more time an author invests in a work the more important it is to nail down the conditions that must be met for publication. The author should also seek some language limiting the publisher's right to make changes beyond routine copy-editing without the author's approval. If the book is cancelled for any reason, the author should retain the advance money paid, and the full rights to the work should revert to the author for potential sale elsewhere.

Copyright

The publisher will often seek to register the copyright in place of the author. There may be some financial benefit to the publisher in owning the copyright if somebody actually infringes on it, since the proceeds of a lawsuit might then go to the publisher and not the author. However, the author has already assigned the rights to publish the book at the beginning of the contract, so even if the author retains the copyright, it doesn't mean the book remains the author's property. For what it's worth, the professional author's organization I belong to strongly recommends that authors retain their copyrights.

Proofing and Editing

The publisher will reserve the right to make revisions, which will ideally be subject to the author's approval. Whether or not that approval is required, the author must promptly review revisions for errors. Publishers also establish a level of changes which they will allow the author to make in the final stages of production, often 10% or 15% of the cost of preparing the proofs, above which the author will be charged against royalties. That may be fair if the author is trying to substantially rewrite the manuscript late in the production process. However, there should be no fee for correcting problems that are due to the publisher or their outsourced book designer introducing a large number of errors, whatever the cost. When an outsourced book designer ruined a book of mine such that every page had to be redone, the publisher "generously" agreed not to charge for the rework.

Publication

The primary thing separating a trade publisher from a subsidy press is that a trade publisher undertakes to pay the publication expenses of the book. The publisher will seek language that allows them to publish the book in the time that suits them, but authors should obtain some upper limit on this. It's entirely normal for publishers to miss their target dates by more than a month, in part due to a constant turnover of employees, but they should be willing to set a date at which the manuscript will revert to the author if they fail to publish. If the publisher wants a clause that would return any advances paid in this case, it should be dependent on the successful sale of the manuscript to another publisher.

Royalties

This is usually the longest section in the book contract, and describes the division of the money, provided the author hasn't written the book for a one-time payment in a work-for-hire arrangement. There's no real standard for domestic royalties, which is the most profitable segment of sales for most authors. It depends on the genre of the work and the publishing house. Ignoring super-star authors who write their own tickets, the best rate most writers can hope for is 15% of the cover price of trade hardcover books, with this percentage being achieved only after a certain number of copies have been sold. Many segments of the publishing industry have successfully changed that maximum to 15% of publisher net, which amounts to less than half the cover price. The lowest royalties I've heard of are less than 5% of net in genres like romance literature, where the publisher may even own the rights to the pen name under which the books are published.

It's common to set a number of steps with which the royalties escalate, setting a lower rate for the first 5,000 copies, a higher rate for the next 5,000, and only reaching the maximum rate after 10,000 or more copies have been sold. These break points may be one of the easier issues to negotiate. I've found it easier to move the break points, even eliminating the lowest category, than to increase the final royalty. Make sure you understand what books are actually being counted towards the royalty steps. In contracts I've signed, only the domestic full price sales have counted, which means that as much as half of my sales haven't counted toward increasing my royalty.

Advances

One thing that should be included in any trade publishing contract is an advance against royalties. Advances are traditionally intended to support the author financially while they are in the process of writing the book. Advance payments may be split into multiple phases, with a payment for signing and further payments for reaching milestones in completing the contract requirements. Some publishers may spread partial payments over the whole proofing process, even all the way up to the publication date. Many publishers pay their bills so slowly that an author in a hurry may submit the final manuscript before receiving the signing payment. If the publisher cancels the book contract at this point, it may prove difficult or impossible for the author to obtain any advance money, as ownership is nine-tenths of the law. The lowest advance I've been offered by a trade publisher is $2,000 (split over four payments), the highest was $13,000.

Publishers can actually be very flexible on advances, which they use to try to lure authors into signing bad book contracts. Since so many writers live a hand-to-mouth existence, the promise of an extra few thousand dollars up-front may lure them into signing a contract with a lower royalty rate or longer escalation schedule. It's always a gamble, and many trade authors never see any ongoing royalties because their books never sell enough copies to pay back the advance. Some authors and agents even feel that if the book does pay back the advance, it just means that they failed to negotiate a high enough advance to start with. I'm always optimistic that my books will sell, so I prefer a higher royalty to a larger advance, but if I thought I could get $100,000, I might sing a different tune.

Try not to sign any publishing contracts with cross-accounting schemes, where payments due on one title may be charged against debits from another of your titles by the same publisher. Authors are under no legal or moral obligation to make sure a publisher never loses money on a book, it's part of the risk they undertake in claiming the lion's share of the income. If you have signed a cross-accounting clause in a contract with a publisher and they want another book from you, you can probably get them to leave it out of the new book contract and modify the original contract so that the clause no longer applies. Otherwise, take the new title to another publisher. A cross-accounting clause shouldn't be viewed as a deal-breaker for a first book, since it has no impact unless you go on to write more books for the same publisher or the book goes into edition.

Foreign Sales

Publishers will always establish a different royalty schedule for foreign sales. The rate may be a little lower than the domestic royalty rate, but it shouldn't be a mere fraction. Publishers have been successfully sued for selling their own books to foreign subsidiaries at drastically reduced prices in order to reduce author royalties. It's best for the author to have foreign royalties based on the cover price, since overseas net is so easy to manipulate.

Deep Discounts and Book Clubs

Publishers sell books into different outlets at different prices, and when they earn less they like to pay the author less. There's no reason the author should agree to such an arrangement, but it's become quite standard, and the best most authors can hope for is that both parties share the pain equally. It's in the interest of the author to limit special pricing as much as possible, since the royalty will be greatly reduced while the special sales may cannibalize the author's domestic sales. Authors should pay special attention to deep discount clauses, which allow publishers to sharply reduce, even halve author royalties, if the sale price falls below a set percentage of the cover. This creates a situation where it's actually more profitable for the publisher to sell books at the deep discount than just above it, since the reduction in the author's royalty more than offsets the amount of the reduction in the selling price.

Sale of Rights

Publishers who acquire the exclusive international rights for a book will set a royalty schedule for when those rights are sold to third parties or their own overseas subsidiaries. Splits of 50/50 on net receipts are common, though some publishers try to get authors to agree to base the split on the domestic royalty schedule, amounting to a quarter or a fifth of the amount a 50/50 split on publisher net would generate. Foreign rights are sold so cheaply for most books, sometimes for as low as a few hundred dollars, that anything less than a 50/50 split barely produces pocket change for an author. Translation rights for some of my own trade published computer books have been: $1,300 for a Chinese translation, $595 for Arabic, $2000 for Russian, $450 for Polish.

Payments

The book contract establishes a schedule for when the accounting is done and payments are made. Quarterly royalty payments are normal, though they will lag the actual sales period by a month or two. Some publishers still push semi-annual payments, with royalties for the January 1st through June 30th period being due before September 30th. Some publishers may agree to pay within 30 days of the end of the accounting period. Authors should try to have a clause inserted that allows them to have an independent auditor check the publisher's accounts.

Reserve Against Returns

Publishers usually insist on a clause allowing them to establish "a reasonable reserve against returns." The intention of the clause is to protect the publisher against paying the author for books that are sitting on store shelves but may eventually be returned to the publisher. It's best to have this "reasonable reserve" spelled out, both in terms of the percentage of total sales to be held in reserve and the length of time for which the publisher can hold the money. A 20% or less reserve may be viewed as reasonable, though some publishers attempt to hold out for much higher amounts. The reserve retention period will likely be a year or longer, though two years is probably the longest period that can be justified by market economics. The main risk for the author is that the publisher goes out of business and any sums owed the author are unrecoverable.

Author's Copies

The author can expect a dozen or more free copies of the book to give to friends and family. Publishers should always be happy to provide free review copies of books and may offer to take care of the shipping and handling. There is often the option for the author to buy more copies at a discount, though these books won't be counted towards the author's royalties and there may be restrictions on selling them.

Revised Editions

Publishers will insist on the right to publish revised editions of the work. The author should insist on the right to do those editions. The publisher will want the right to get another writer if the original author is unavailable to do a new edition on a reasonable time schedule after the publisher requests it. However, the original author or heirs should continue to receive royalties. These royalties will be at a reduced rate, and the author should try to negotiate that the reduction be based on the extent of the revisions. The author may also seek to negotiate the right not to have later editions published under the author's name if the author doesn't participate. An open-ended clause that would allow the publisher to spend profligately on producing a new edition and debit the amount from the author's royalties should be avoided if at all possible.

Out of Print

A book is only out of print when the publisher declares it so and updates the ISBN record to reflect this fact. It may also be considered out of print for the purpose of reversion of rights to the author if it is no longer available from the publisher in any edition. The author may have to go through a set procedure, such as requesting in writing that the book be reprinted and waiting a pre-defined time period, but afterwards the rights should revert to the author. One of the problems with print-on-demand is it allows publishers to keep books in print indefinitely when availability is the only test. The author should seek to clarify this contract language as much as possible, setting a minimum number of books sold or moneys earned in consecutive royalty periods, after which the book will be deemed out of print.

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