I was asked recently by a new author to have a peek at a contract offered to her and thought that a general post about pitfalls might be welcome. I’m not a lawyer, but I’ve read, rejected and signed a lot of publishing contracts. I’ve made some mistakes and learned from them. I’ve also learned from some generous people who are very experienced in publishing contract law.
Many authors actively express their dislike of contracts. While contracts are not the most riveting reads, I like them – they document the expectations of each party in the relationship. Sometimes you learn things about your proposed partner in a contract. Contracts also specify how the relationship will end and what happens in pretty much all eventualities. They’re maps, in a way, and I love maps.
The first and foremost thing you need to do is actually read the contract. Yes. Read it. Read the whole thing. Then read it again. If you don’t understand any part of the contract, then ask what it means. Research it. Know what you’re signing before you sign it. A contract isn’t like the Terms of Service at a portal – contract terms are negotiable. Everyone doesn’t get the same deal. You need to understand the terms of agreement.
Publishing contracts are negotiable – although how much the house is willing to negotiate with you is affected by how much they want to publish your book. The first contract offered by the house is called the boilerplate: this is the best deal for the house and the worst deal for authors. If you have an agent, he or she may have already negotiated an agency boilerplate, which is offered as a starting point for his or her clients, and is already a better deal. Whether you have an agent or not, there are probably places where you can make improvements to the boilerplate by negotiation. I’ll focus on some areas where you’re most likely to have success. This is by no means a substitute for asking questions and having more experienced individuals look over your contract. It’ll just give you an idea of some things to look for.
A publishing contract begins by listing the parties who are agreeing to do business together. For a book contract, this will be the publisher and the author. Notice that while you as author might be an individual, you’re probably making an agreement with a corporation, not the individual editor who is presenting the offer. If your editor leaves the publishing company, your contract will stand, because it’s with the house. (The same is true with an agency contract, unless your agent is a sole proprietorship.) Be sure that the contract is between the publisher and your legal entity – it might be your name, if you’re operating as a sole proprietorship, and it might be your corporation. If you are incorporated, there might be a rider that stipulates that you specifically will create the work.
The Grant of Rights is usually the first section of the contract. This part can be quite long as it defines what rights you as author are surrendering to the publisher for the duration of the contract. It’s pretty characteristic for a boilerplate contract to list all rights here – all territories, all languages, all formats and all subsidiary rights – even though in many cases the house only intends to use world English in ebook and print. Ideally, you will narrow the grant of rights to those rights the house actually intends to use. If they want the others later, they can always offer for them then. Any advance payment is, after all, calculated on the basis of what the house plans to do – if you surrender more rights than they plan to use, they’re essentially getting them free. You might make a strategic choice of letting the house “pave the way” for you in new markets – maybe with audio – if they have a strong record of doing that and doing it well. In that case, you might leave audiobook rights in the deal, even though the advance might not be increased. This is a personal choice and you can see an example of that at work below. FWIW, I never leave performance rights in a book deal. The vast majority of the time, they aren’t exercised, but when they are, there’s a lot of money involved and if/when that happens, I’d like control.
The work is defined in the contract, whether it’s one book or a series of books, in terms of length and genre/sub-genre. There will be delivery dates specified for each book, as well as the mechanism for delivery, and an editorial process should be defined, too. The publication date may be defined but more likely, there’s a window defined for publication, such as “within eighteen months of delivery of the book manuscript”. If it isn’t specified, it should be.
One of the things you should be looking for when you read the contract is ways that this deal could be stretched out and leave you in limbo. You’re going to be working with this publisher for several years at least, but if the relationship isn’t a successful one, you don’t want to be stuck in it forever.
There may be a non-compete clause and these clauses always deserve a close review. A non-compete may stipulate that you can’t publish a work elsewhere featuring the characters or the world in this work; it might stipulate that you can’t publish anything under the same author brand, regardless of content; it might declare that you can’t publish anything elsewhere under the term of the contract. This can be a pretty unreasonable condition, especially if the house is offering to publish one book and is paying no advance. If it’s a standalone book under a new pseudonym and you think the fit is perfect, that’s one thing – if it’s first in a series under your main author brand set in a world you intend to spend many books exploring, this clause is probably a deal-breaker for you. The non-compete might give the publisher control over your fictional world and/or your characters even after you deliver the work specified in this contract, which isn’t a concession to make lightly.
It is much cleaner to have an option clause. An option clause gives the house right-of-first-refusal on the next similar work, the next work under the same pseudonym, the next work set in the same world or featuring the same characters. Ideally, what’s due under the option clause should be tightly defined and limited to a single work. (There are perpetual option clauses out there, which allow right-of-first-refusal forever.) There should also be a date for the delivery of the option (within 30 days of the publication of the last book on the deal, for example) and there should be a date stipulated for a response from the house (30 or 60 days after submission). It should be clear that if the house declines to offer for the option book, you can publish it wherever and however you choose. The non-compete and the option clause can certainly work together to protect both the house’s investment and the author’s intellectual property. How much control you want to surrender in exchange for whatever they offer is a personal choice.
The advance will be stipulated in the contract, as well as how and when it will be paid. If there is an advance, there can be some wiggle room here, both in increasing the amount and speeding up the payments. I’ve seen a lot of contracts lately which offer no advance in exchange for all rights and would advise you to seriously consider what a house offering this kind of deal can do for you and your book.
An advance is an advance against royalties, so the contract will define how royalties are calculated and when they will be paid. This can be a huge section that allows for tiers of payment and deep discounting as well as various formats and territories. The big thing to look out for here is “net receipts“. There’s a very old bit of advice to authors that they should always negotiate to be paid out of gross sales when making a movie deal, not net sales, because even blockbuster movies don’t always make a profit. (Scroll down to Author Controversy on the Wiki page for Forrest Gump, for example.) Print royalties are usually calculated out of gross sales – for mass market editions, the author might get anywhere from 4% to 8% of gross sales. It’s common for digital rights to be paid according to a percentage of net receipts, though. At the very least, net receipts should be defined in the contract – are expenses deducted or not? If so, which ones? Even so, it’s much cleaner to be paid out of gross sales (although you may have a battle to get that.) Net receipts is often explained as “you’ll get X% of whatever we get”, but again, this is squishy. I got caught by this recently in a distribution agreement that I signed to get my work into libraries. It turned out that one of the portals delivering content to libraries was owned by the distributor with which I had the contract. On roughly $1000 of gross sales, the subsidiary reported net sales of $10. My share came out of the $10, i.e. “you’ll get X% of whatever we get”. I don’t do business with those people anymore.
When you create a work, you automatically hold copyright in that work. Copyright carries a number of rights for the creator, including the right to reproduce and sell the work. A publishing contract is essentially a licensing of that right for that work to a publisher. The contract should stipulate that the publisher will register your copyright in the nation of first publication (often the US) on publication, and it should stipulate what name will be used in that registration.
The contract should also define how and when this license ends, which is the moment that the rights to reproduce and sell the work revert to you. This is called the reversion clause. When your rights revert, you can license them to another publisher, or you can publish the book yourself in a new edition. There should be a precisely defined trigger for the reversion of rights. They might revert automatically in a specified number of years after the deal is signed. Foreign language rights tend to be handled this way: they’re often five-year licenses and at the end of that term, the rights revert without any paperwork. Once upon a time, reversion was possible when a book was “out-of-print” but with print-on-demand technology, books are never really out-of-print. OOP is intended as a measure of demand, so a better reversion clause defines out-of-print by sales volume- i.e. rights can revert when unit sales in all formats drop below a defined threshold per year. The goal, of course, is to make this number higher so reversion occurs sooner. Some houses stipulate that reversion can occur when a certain period of time has passed since the house’s last exercise of rights. This used to be the case at Harlequin, because they did very actively produce foreign editions. When I signed with them in the 1990’s, they did buy all rights, but they used them. As a result, when I went to Bantam and Warner, I already had audience in Germany and Italy and other foreign-language markets. The Harlequin editions “paved the way”, even though I didn’t make much money from them in the first place.
There are also a lot of repayment clauses in contracts these days, stipulating that the author must repay the cost of editing, formatting and packaging the book to the publisher in various situations. One situation might be if the book doesn’t sell sufficiently well, which is ridiculously vague, or if the author breaks the deal at any time. For me, these expenses are the house’s responsibility and not earning them back is their risk in entering the deal. After all, they’re the ones who decided to offer a contract for publication for the book. They must have some notion of how well it will sell. I think it is unfair to expect the author to repay the house for any of these expenses, particularly as there is no guarantee of how well any of these services will be done. If you are going to sign this kind of clause, be sure that it has a very tight deadline – if you break the deal before publication, for example – and that it gives you the right (but not the obligation) to use the edited book, the copy, the formatting and the cover as you see fit. (I still wouldn’t sign it.)
The bankruptcy clause is another place worth a closer look. Often in contracts with small presses, the bankruptcy clause allows for the reassignment of rights – this means that if the house goes out of business or closes or files for bankruptcy, they can sell your book rights as an asset to whoever they want. Um, no. You want this clause to say that if the house ceases to do business or files bankruptcy or closes, your rights immediately revert to you.
There are a few areas to examine in any contract that you’re offered. It’s also a good idea to just read the document through and see what impression it gives you of the company that created it (or paid for its creation). Some contracts have a bullying tone. Some contracts put all the onus for success on the author. This should be an exchange: you’re providing your intellectual property to be marketed as a book in exchange for something. Have a very good idea of what the “something” is that you want out of the deal before you negotiate. If a contract doesn’t feel right or fair to you, it probably isn’t. Trust your instincts.
If you want to learn more about your publishing contract, you can join the Authors’ Guild. Their team will review your contact and walk you through each clause. When I took advantage of this service, it was free to members – I had to pay for the phone call to New York during business hours. It was a long call (several hours) but incredibly informative. One of the classic references is Kirsch’s Handbook of Publishing Law, if you want to read more. It’s more than twenty years old, but some essentials of publishing don’t really change. Others have, so you’ll want to look for more recent information about e-rights, for example.
But first, read your contract!
©2019 Deborah A. Cooke