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The Traps in Publishing Contracts

16 Aug

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Traps-in-Publishing-Contracts
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Traditional Publishing Contracts – Part Two of a Series 

There should be a large neon sign that says: NEVER, NEVER, NEVER sign a contract without having your contract lawyer going over it and explaining it to you in detail – sentence for sentence. The contract clauses described here in this blog post are the “norm” in publishing. It is difficult to see how your publishing agreement will play out in the long term, what you sign today could have profound, long term consequences.

Contract attorney Ivan Hoffman explains in his blog:
“In the US, many contracts that consumers commonly sign, such as for mortgage or auto loans or to
obtain a credit card, are subject to statutory requirements for fairness, clarity, etc.  If some of the clauses and drafting techniques commonly included in publishing contracts used by publishers were found in consumer contracts, those provisions would be deemed void and unenforceable. In some cases, they might even constitute consumer fraud and would subject publishers to fines and penalties.”
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My advice: Before you even have a publishing contract meeting, do your homework and google the publisher, adding the word “complaint”. You might be surprised what you will discover!
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Publishing contracts are not negotiated from the ground up between the author and the publisher. They are prepared by the Publisher and delivered to the Author as though ready for signature.  And many authors sign without understanding what the contract contains or what rights they are giving up. They focus only on the royalty rate and the advance, if there is any. While those points are important, they might be far less important than some other provisions in the agreement. Authors should not assume a “standard” contract will be fair or equitable. Nor should authors assume they will be able to easily get out of that contract if found out later to be unfair.
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Samples of unfavorable publishing contracts

Duration of the contract and Territory:
“Author grants and assigns to publisher the sole and exclusive rights to the manuscript throughout the
territory, (which means the World – I have seen contracts that state “throughout the Universe” ….) during the entire term of the copyright and any renewals and extensions thereof.”

What is means: This contract is for the life of the author, plus 70 years after her death, plus renewals and extensions, binding to your heirs as well… Have you ever seen or signed a contract that extends beyond your lifetime? Pretty unfair and one-sided! It also should have a clause, that you get the rights back if the publishers doesn’t exploit it in a given time. For example: if they don’t translate your book into French, Spanish or Cantonese, they should state in the contract to return the rights for those countries to you, say after 2 or 3 years. Most likely they will refuse to …
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Rights granted by the author to the publisher:
“The Publisher has the exclusive rights to:

  • Magazine or newspaper before and following publication
  • Publication of condensations, abridgments, and in anthologies
  • Book club publication
  • Direct sale and mail order”

What it means: In their contracts, publishers will almost always seek to obtain ALL rights to the
manuscript. No author should give up all rights. If the author is in a stronger bargaining position, the
author may be able to withhold electronic rights, foreign rights or any other of the rights. If for any reason the contract terminates, there should be a clause, dealing directly with what happens to the rights in the book in those events. Do the rights revert to the author?
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Manuscript delivery and unsatisfactory material:
“If the manuscript for a book is not, in publisher’s sole judgement, satisfactory in all respects, the
publisher may terminate this agreement upon written notice.”

What it means: the Publisher can end the deal for pretty much any reason it sees fit, or for no reason at all. This clause has no single criteria to determine if a book is satisfactory – and it doesn’t give the author equal power to terminate the contract if she/he is not satisfied by the book the publisher created, for example if the publisher did not edit the book properly, priced it to high for the market or choose a terrible cover or a ridiculous title?
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Advances and Royalties

What is an advance
An advance payment is not a signing bonus. Instead, it is money the publisher is paying the author to live on while the book is being written. The publisher will be paid back this money once the book starts selling. They will take the advance money right off the top of your earnings. Depending on the size of your advance and how well your book sells, you may not receive any royalty payments for a long time. Maybe never. When a book sells enough copies to cover the cost of the advance, it means the book “has earned out.” Now your royalties can start rolling in …
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Royalties:
“Hardcover: 10% of the invoice price for the first 5000 copies, 12.5% thereof for copies from 5001 to
10,000, and 15% thereof for copies in excess of 10,000. Mass Market Paperback: 8% of the invoice
price for the first 150,000 and 10% thereof for all copies thereafter. On Ebooks: 25% of the amounts
received by Publisher, excluding taxes and handling charges.”

What it means: Between 8% and 12.5% for books is a pitance, and a lousy pay for the hard work of the author. And equally outrageous is what the author gets on e-books: 25% royalties – which is equivalent to 17.5% of the list price. However, the publisher gets 52.5% of the list price! Compare it to 70% you get from Amazon for books between $2.99 and $9.99. Do I need to say more?
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Royalty Payments
“Publisher shall provide Author with semi-annual royalty statements showing the amount due to the
Author, by April 1 and October 1 of each year for the six-month period ending the preceding December 31 and June 30th, respectively.”

What it means: These publishers might have never heard from a computer, nor do they use any : ) It does not take 6 months to compile the data for sold books, Amazon shoes your sales in mere minutes, and Barnes&Noble, CreateSpace and Kobo pay monthly. But if the money is withheld for months,it’s to the Publisher’s advantage. The longer, the more interest they can earn on the principal due to delayed payments.
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Most important: What is your royalty based on?
Retail price? Wholesale price? Or net price? Bookstores and other retailers get often deep discounts, up to 55%. If your contract states 10% of net, and the book is delivered at 55% discount to retailers, you might end up with only a couple of cents per book …

  • At a discount of 50%, 20% of net is same as 10% of the retail price of your book
  • At a discount of 40%, 16,66% of net is same as 10% of the lretail price of your book
  • At a discount of 20%, 12,5% of net is the same as 10% of the list price of your book

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Joint accounts – another trick of the trade publishers:
“Books one, two, and three will be held in a joint and open account, and the publisher shall not pay the
author’s share of royalties and subsidiary rights income on any book of the work until the author’s share of royalties and subsidiary rights income for all books exceeds the total advance.”

What it means: If you have a three-book deal with an advance of $60,000, you don’t make a cent in
royalties until all $60,000 has earned out – if for example book one earns already royalties, those
royalties go toward paying off the advances on books two and three. This is called a basket account or joint accounting. This way you might not earn anything, even with one very successful book, just
because other books in the basket weren’t as successful, often at the publishers fault – or haven’t been released yet.
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Statements and Payments
“Books one, two, and three will be held in a joint and open account, and the publisher shall not pay the
author’s share of royalties and subsidiary rights income on any book of the work until the author’s share of royalties and subsidiary rights income for all books exceeds the total advance.”

What it means: If you have a three-book deal with an advance of $60,000, you don’t make a cent in
royalties until all $60,000 has earned out – if for example book one earns already royalties, those
royalties go toward paying off the advances on books two and three. This is called a basket account or joint accounting. This way you might not earn anything, even with one very successful book, just
because other books in the basket weren’t as successful, often at the publishers fault – or haven’t been released yet.
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Reasonable Reserve
“The publisher may retain a reasonable reserve against returns in any accounting period. If the author
receives an over-payment of royalties resulting from copies of the work reported, sold, but subsequently returned, the author shall repay such amounts to Publisher to the extent that Publisher is not able to deduct such amounts from monies due to Author at the end of the royalty payment period after the period in which the over-payment is discovered.

What it means: This looks like a Publisher can pretty much withhold money from an author, and it
doesn’t define what a “reasonable” reserve is.

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As contract lawyer Ivan Hoffman wrote:
“However, in the absence of consumer-type protections, the laws governing (publishing) business contracts assume that each party to such contracts will watch out for themselves. If both parties sign a contract, the strong presumption is that each party understood what the contract meant and voluntarily agreed to be bound by it. In extreme cases, if a lawsuit were filed, a contract might be deemed unconscionable and voided in whole or in part, but that is a high hurdle to clear.”
Knowing the problem is widespread, doesn’t mean it should be ignored. Big companies are exploiting artists. They are getting rich, and the creators are getting shafted.
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Stay tuned for number three (final) in the series, and spread the word, RE-BLOG these articles, so that as much writers as possible learn about the tactics of the publishing industry and how to read between the lines.

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Resources:

Great Book Contract Checklist

Book Publishing Contracts: Checklist of Deal Terms

Copyright Termination

How to Read a Book Contract

Author Concerns and Complaints at Crimson Romance Contracts

Blog Posts by a New York Contract Lawyer

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5 responses to “The Traps in Publishing Contracts

  1. Dyane

    August 16, 2013 at 4:15 pm

    Excellent post! I wish everyone could read this.

     
  2. Rebecca Vance

    August 16, 2013 at 4:17 pm

    Reblogged this on Becky's Book Notes and commented:
    Part Two of the series. Don’t miss the entire series, it is extremely informative, especially for those that only consider traditional publishing. Read this before you publish and it could save you many headaches!

     
  3. Melissa D. Johnston

    August 16, 2013 at 10:33 pm

    So helpful. Filed it in Evernote with all my important business writing info. Thanks!

     
  4. Kathryn Goldman

    September 12, 2013 at 8:30 am

    These are all goods points for traditional publishing.

    As we all know, the publishing world is becoming an on-line creature. An author-publisher should never click “Accept Terms and Conditions” without knowing what those terms mean.

    Amazon’s terms and conditions have changed three times this year already. Understanding on-line terms is as important as understanding contract terms with traditional publishers.

     
  5. ebooksinternational

    May 4, 2014 at 7:36 am

    Reblogged this on Savvy Writers & e-Books online and commented:

    The key to a good publishing contract is clarity. For authors, it is helpful to keep in mind that most contracts are not take-it-or-leave-it propositions. Be courteous. Be tactful. Knowing what to ask for is critical. Use an agent or attorney who understands the parameters of the typical publishing deal to negotiate your contract. Working through an agent or attorney allows the author to preserve his creative relationship with the editor or publishing house, explains Attorney Lloyd J. Jassin on his website.

     

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