Negotiating Your Book Contract-20 "Must" Topics to Talk About - Part II
In Part I of her article, attorney Brenda Warneka talked about ten topics writers should discuss with publishers when negotiating publishing contacts.
In Part II of her article, she shares ten more.
11.
ADVANCES Advances are usually paid in increments, such as one-third upon signing of the contract, one-third upon submission of a satisfactory manuscript, and one-third upon publication.
There is a rule of thumb that the publisher will pay as an advance what it expects you to earn in royalties during the first year of publication.
You may be able to research the size of advances paid by your publisher in the past in industry publications.
The larger the advance, the less incentive the publisher will have to back out of the contract (especially if advances are non-refundable), and the more incentive the publisher will have to promote your book once it is published.
The contract should state the amount of the advance, how it is to be paid, and how it is to be recouped.
Normally, you will not receive royalties until after the advance is "earned out," meaning that royalties earned are equal to the advance paid.
What happens if the advance is not earned out?The contract should be clear that you are not required to pay back any unearned advance.
But, yes, you are expected to return the advance if you never complete the manuscript, as well-known record producer, rapper, and clothing designer Sean "P Diddy" Combs found out when he was sued in 2005 by Random House for recovery of a $300,000 advance for an allegedly undelivered memoir due in 1999.
12.
ROYALTIES Look at how much the royalty percentage is, what it is based on, how it is calculated, and how often it is paid.
You should bargain for royalties based on the suggested retail or list price of the book.
Such royalties are higher than those based on the net sales income to the publisher of the same percentage, and will prevent the publisher from offering special deals, such as deep discounts, at your expense.
A typical arrangement might be 10% of the list price on the first 5,000 copies sold, 12.
5% on the next 5,000, and 15% thereafter, less returns.
If you do end up with a royalty based on net sales income, you might ask for a floor on the amount paid; e.
g.
, 10% of the net sales income, but not less than $2.
00 per book sold.
The publisher will want to pay lower royalties on special sales, such as book club, school editions, and mail order sales, but these may be negotiable.
No royalties will be paid on review copies.
If a percentage of your royalties is withheld as a reserve to cover returns, be sure the contract states the timing as to when the reserve will be liquidated.
13.
ACCOUNTING AND PAYMENT OF ROYALTIES The contract should specify how often the publisher will provide you with an accounting, and payment, of your royalties.
It is general practice in the industry to report royalties at least semi-annually, and to make payments within three months of the accounting.
You or your authorized agent should have the right to audit the publisher's books to confirm that the accounting statements are correct.
If an audit reveals errors, and the publisher owes you more than a certain percentage of the amounts reported in the accounting statements, perhaps 5%, they should be required to pay for the audit, and to pay interest at a specified rate on the royalties they owe you as a result of the audit.
Try to extend as far out as possible the time limits within which you may conduct an audit, object to the accounting provided by the publisher, and bring legal action.
The failure to provide an accounting, or failure to pay royalties that are due, should give you, after a specified period of time, the right to terminate the contract.
14.
NON-COMPETITION CLAUSE A publisher may wish to prevent you from writing another book that would compete with the one for which you are under contract or from using material from the book in other ways.
The definition of what it means "to compete" should be clearly stated, and any such provision should be limited to the specific period of time that is considered necessary for the success of the book subject to the contract.
If the book is tied to an existing brand or business, your ownership of the trademark should be addressed.
15.
REVISED EDITIONS What if your book is successful enough that you, or your publisher, wish to issue a revised edition?Unless you negotiate otherwise, the publisher may have the right to determine whether you or another author will do the revised edition, and whether or not you will receive author credit.
If another author does the revised edition, the publisher may want to deduct the new author's royalty and advance against your royalties.
If you prepare the revised edition, the publisher may wish to bind you to the terms and conditions of your original contract, even though it was negotiated at a time when you had no marketing clout.
If you have an escalating royalty based upon sales in the original contract, the publisher may wish to have the revised edition start over at zero, although it would be better for you to treat sales of the revised edition as a continuation of the original version.
A related issue is whether returns of the original book should be counted against sales of the revised edition.
It may seem premature to be considering such things when the first copy of your book still has to see the light of day, but if you don't pay attention now, you may find out you can no longer address certain issues later on.
16.
OUT-OF-PRINT STATUS AND REVERSION The rights you have granted to the publisher should revert to you once the book is out of print (although this reversion may be subject to any license granted by the publisher).
The contract should carefully define what "out of print" means.
Most out-of-print clauses will require you to notify the publisher that you want the publisher to reprint the book.
Failure by the publisher to do so within a certain period will give you the right to terminate the contract.
With today's "print on demand" capabilities and "ultra short-run printing," allowing books to be printed as few as one at a time, reversion of rights based on books no longer in print may not make sense.
Perhaps a right of reversion should be tied to a minimum number of sales in the last 12 months, or upon royalties falling below a certain level in a certain number of consecutive reporting periods.
The publisher may be willing to agree, as part of any reversion of rights to you, to allow you to buy the book plates and engravings, if any, and leftover inventory and other materials at nominal cost.
17.
OPTION FOR NEXT WORK The publisher may want an option now on your next work, even before the manuscript for the one presently being written is complete.
Options work different ways.
One type of option gives the publisher a "first look" at your next "similar work" for a certain period of time.
If you turn down the publisher's offer based on this first look, you may sell the manuscript to a different publisher, but only if the terms are more favorable than those offered by the original publisher.
Be sure you understand the definition of the work to which the option will apply, how the option works, and when the option period will start.
Understanding exactly how the option works can be tricky, but is very important.
18.
BANKRUPTCY If the publisher ends up in the U.
S.
Bankruptcy Court, the bankruptcy law may determine which provisions of your contract are, or are not, enforceable.
What happens may depend upon whether the publisher is in a "Chapter 7 liquidation" or a "Chapter 11 reorganization.
"Chapter 7 of the Bankruptcy Code provides for the orderly liquidation of the assets of the debtor company, with the proceeds distributed equitably among the creditors.
Under Chapter 11, a troubled company tries to reorganize to cut its expenses and continue in business, and toward this end, may do such things as liquidate assets and reject executory contracts (contracts not yet fully performed on both sides).
When independent publisher Stein & Day, Inc.
, went into a Chapter 11 bankruptcy in New York, in the late 1980s, the company was unable to continue publishing, and its backlist (the publisher's list of books still available) was sold at auction to the highest bidder, without any consideration for the wishes of the authors.
The publishing contract you sign should provide that you have a right to terminate the contract, with all rights to your book reverting to you, if the publisher goes into voluntary or involuntary bankruptcy, makes an assignment for the benefit of creditors, or liquidates its business for any reason.
Realize, however, that in the event of bankruptcy, the contract does not necessarily control what happens.
19.
CHOICE OF LAW AND SELECTION OF FORUM The choice of law governing the interpretation of the contract, and the forum (the jurisdiction or location of the courts where any litigation will take place), will normally be those where the publisher is headquartered.
This will make it easy for the publisher to sue you, and difficult for you to sue, or defend against, the publisher, unless you live in the same area.
Trying to get the publisher to change these provisions is a lost cause.
Courts generally honor "choice of law" and "forum selection" clauses in commercial contracts.
Your contract with the publisher is a commercial contract.
The federal court system has exclusive jurisdiction in copyright infringement cases under the United States Constitution.
Breach of contract issues are decided under state law, even if the case is in federal court.
20.
RESOLUTION OF DISPUTES Arbitration normally provides a quicker end to what could otherwise be long and expensive litigation in the court system.
It is generally thought to be favorable to the underdog in a contract.
If the contract does not provide for arbitration, seriously consider requesting that a standard arbitration clause be added.
The publisher will want to specify that arbitration takes place in the city where the publishing company is located.
Arbitrators will sometimes move the arbitration to an area more convenient for you if it is a hardship for you to arbitrate in the city where the publisher is located.
Arbitration clauses are enforceable under the Federal Arbitration Act.
CONCLUSION This discussion should have alerted you to some of the issues involved in reviewing a publisher's contract.
As a last step, go through the contract carefully and look for issues not included here that you need to discuss with the publisher.
You will never regret time you spend negotiating your contract, but you may well regret time not spent if you don't understand something that later turns out to be very important.
In Part II of her article, she shares ten more.
11.
ADVANCES Advances are usually paid in increments, such as one-third upon signing of the contract, one-third upon submission of a satisfactory manuscript, and one-third upon publication.
There is a rule of thumb that the publisher will pay as an advance what it expects you to earn in royalties during the first year of publication.
You may be able to research the size of advances paid by your publisher in the past in industry publications.
The larger the advance, the less incentive the publisher will have to back out of the contract (especially if advances are non-refundable), and the more incentive the publisher will have to promote your book once it is published.
The contract should state the amount of the advance, how it is to be paid, and how it is to be recouped.
Normally, you will not receive royalties until after the advance is "earned out," meaning that royalties earned are equal to the advance paid.
What happens if the advance is not earned out?The contract should be clear that you are not required to pay back any unearned advance.
But, yes, you are expected to return the advance if you never complete the manuscript, as well-known record producer, rapper, and clothing designer Sean "P Diddy" Combs found out when he was sued in 2005 by Random House for recovery of a $300,000 advance for an allegedly undelivered memoir due in 1999.
12.
ROYALTIES Look at how much the royalty percentage is, what it is based on, how it is calculated, and how often it is paid.
You should bargain for royalties based on the suggested retail or list price of the book.
Such royalties are higher than those based on the net sales income to the publisher of the same percentage, and will prevent the publisher from offering special deals, such as deep discounts, at your expense.
A typical arrangement might be 10% of the list price on the first 5,000 copies sold, 12.
5% on the next 5,000, and 15% thereafter, less returns.
If you do end up with a royalty based on net sales income, you might ask for a floor on the amount paid; e.
g.
, 10% of the net sales income, but not less than $2.
00 per book sold.
The publisher will want to pay lower royalties on special sales, such as book club, school editions, and mail order sales, but these may be negotiable.
No royalties will be paid on review copies.
If a percentage of your royalties is withheld as a reserve to cover returns, be sure the contract states the timing as to when the reserve will be liquidated.
13.
ACCOUNTING AND PAYMENT OF ROYALTIES The contract should specify how often the publisher will provide you with an accounting, and payment, of your royalties.
It is general practice in the industry to report royalties at least semi-annually, and to make payments within three months of the accounting.
You or your authorized agent should have the right to audit the publisher's books to confirm that the accounting statements are correct.
If an audit reveals errors, and the publisher owes you more than a certain percentage of the amounts reported in the accounting statements, perhaps 5%, they should be required to pay for the audit, and to pay interest at a specified rate on the royalties they owe you as a result of the audit.
Try to extend as far out as possible the time limits within which you may conduct an audit, object to the accounting provided by the publisher, and bring legal action.
The failure to provide an accounting, or failure to pay royalties that are due, should give you, after a specified period of time, the right to terminate the contract.
14.
NON-COMPETITION CLAUSE A publisher may wish to prevent you from writing another book that would compete with the one for which you are under contract or from using material from the book in other ways.
The definition of what it means "to compete" should be clearly stated, and any such provision should be limited to the specific period of time that is considered necessary for the success of the book subject to the contract.
If the book is tied to an existing brand or business, your ownership of the trademark should be addressed.
15.
REVISED EDITIONS What if your book is successful enough that you, or your publisher, wish to issue a revised edition?Unless you negotiate otherwise, the publisher may have the right to determine whether you or another author will do the revised edition, and whether or not you will receive author credit.
If another author does the revised edition, the publisher may want to deduct the new author's royalty and advance against your royalties.
If you prepare the revised edition, the publisher may wish to bind you to the terms and conditions of your original contract, even though it was negotiated at a time when you had no marketing clout.
If you have an escalating royalty based upon sales in the original contract, the publisher may wish to have the revised edition start over at zero, although it would be better for you to treat sales of the revised edition as a continuation of the original version.
A related issue is whether returns of the original book should be counted against sales of the revised edition.
It may seem premature to be considering such things when the first copy of your book still has to see the light of day, but if you don't pay attention now, you may find out you can no longer address certain issues later on.
16.
OUT-OF-PRINT STATUS AND REVERSION The rights you have granted to the publisher should revert to you once the book is out of print (although this reversion may be subject to any license granted by the publisher).
The contract should carefully define what "out of print" means.
Most out-of-print clauses will require you to notify the publisher that you want the publisher to reprint the book.
Failure by the publisher to do so within a certain period will give you the right to terminate the contract.
With today's "print on demand" capabilities and "ultra short-run printing," allowing books to be printed as few as one at a time, reversion of rights based on books no longer in print may not make sense.
Perhaps a right of reversion should be tied to a minimum number of sales in the last 12 months, or upon royalties falling below a certain level in a certain number of consecutive reporting periods.
The publisher may be willing to agree, as part of any reversion of rights to you, to allow you to buy the book plates and engravings, if any, and leftover inventory and other materials at nominal cost.
17.
OPTION FOR NEXT WORK The publisher may want an option now on your next work, even before the manuscript for the one presently being written is complete.
Options work different ways.
One type of option gives the publisher a "first look" at your next "similar work" for a certain period of time.
If you turn down the publisher's offer based on this first look, you may sell the manuscript to a different publisher, but only if the terms are more favorable than those offered by the original publisher.
Be sure you understand the definition of the work to which the option will apply, how the option works, and when the option period will start.
Understanding exactly how the option works can be tricky, but is very important.
18.
BANKRUPTCY If the publisher ends up in the U.
S.
Bankruptcy Court, the bankruptcy law may determine which provisions of your contract are, or are not, enforceable.
What happens may depend upon whether the publisher is in a "Chapter 7 liquidation" or a "Chapter 11 reorganization.
"Chapter 7 of the Bankruptcy Code provides for the orderly liquidation of the assets of the debtor company, with the proceeds distributed equitably among the creditors.
Under Chapter 11, a troubled company tries to reorganize to cut its expenses and continue in business, and toward this end, may do such things as liquidate assets and reject executory contracts (contracts not yet fully performed on both sides).
When independent publisher Stein & Day, Inc.
, went into a Chapter 11 bankruptcy in New York, in the late 1980s, the company was unable to continue publishing, and its backlist (the publisher's list of books still available) was sold at auction to the highest bidder, without any consideration for the wishes of the authors.
The publishing contract you sign should provide that you have a right to terminate the contract, with all rights to your book reverting to you, if the publisher goes into voluntary or involuntary bankruptcy, makes an assignment for the benefit of creditors, or liquidates its business for any reason.
Realize, however, that in the event of bankruptcy, the contract does not necessarily control what happens.
19.
CHOICE OF LAW AND SELECTION OF FORUM The choice of law governing the interpretation of the contract, and the forum (the jurisdiction or location of the courts where any litigation will take place), will normally be those where the publisher is headquartered.
This will make it easy for the publisher to sue you, and difficult for you to sue, or defend against, the publisher, unless you live in the same area.
Trying to get the publisher to change these provisions is a lost cause.
Courts generally honor "choice of law" and "forum selection" clauses in commercial contracts.
Your contract with the publisher is a commercial contract.
The federal court system has exclusive jurisdiction in copyright infringement cases under the United States Constitution.
Breach of contract issues are decided under state law, even if the case is in federal court.
20.
RESOLUTION OF DISPUTES Arbitration normally provides a quicker end to what could otherwise be long and expensive litigation in the court system.
It is generally thought to be favorable to the underdog in a contract.
If the contract does not provide for arbitration, seriously consider requesting that a standard arbitration clause be added.
The publisher will want to specify that arbitration takes place in the city where the publishing company is located.
Arbitrators will sometimes move the arbitration to an area more convenient for you if it is a hardship for you to arbitrate in the city where the publisher is located.
Arbitration clauses are enforceable under the Federal Arbitration Act.
CONCLUSION This discussion should have alerted you to some of the issues involved in reviewing a publisher's contract.
As a last step, go through the contract carefully and look for issues not included here that you need to discuss with the publisher.
You will never regret time you spend negotiating your contract, but you may well regret time not spent if you don't understand something that later turns out to be very important.
Source...