Posted by: Kathy Temean | March 2, 2010

More Contract Ditty Gritty

Last week I shared the information that Edward Necarsulmer presented at the SCBWI conference held in NYC in January.  Well today, I found an article written by author Charlie Stross on his Charlie’s Diary Blog.  He goes through one of his own contracts to explain.  I am sharing just a part of what he discusses.  You can link to the full article at the bottom.  Here is what he has to say:

When you write, by the very act of writing, you acquire certain legal rights to your work.

You own  the exclusive right to copy, adapt, and distribute your own work, for a period which in the English-speaking nations is currently set at your life, plus 70 years.

When you “sell your novel” to a major publisher (or even a small one), what you are actually selling is the right to reproduce the work in a variety of specified formats in the English language in certain designated territories for a specified duration. In return for signing the ten-to-fifteen page contract, you receive royalties, which may vary depending on the format and the volume of sales, usually based on the publisher’s net receipts from the work. You may also receive an advance against royalties: this is effectively a loan against the anticipated value of your future royalty earnings.

Note that sensible authors do not negotiate contracts themselves, unless they have a day job as an intellectual property lawyer; they go through a literary agent. Literary agents have a lot more experience of contractual negotiations in publishing than any author, usually have a contract lawyer on tap, and their relationship with the author is a symbiotic one: that is, they take a percentage of the author’s cut, so they have a vested interest in maximizing the author’s income. (SF author Tobias Buckell’s survey suggests that agented first novels receive advances that are on average nearly twice the size of unagented novels; the literary agent’s cut is typically 15%. This is one of the reasons why authors use agents.)

The first chunk of the contract specifies the parties to the contract, the works to which the contract applies (two novels), and then the Author’s Grant of rights.

The Author’s Grant specifies that, during the full term of copyright and renewals (or until termination of the contract — there are termination clauses later on) I am selling the publisher the exclusive right to publish and sell the work, in whole or in part, in the English language, in [list of territories]. This part of the contract runs to ten clauses of dense legalese and includes formats in which the work may be published, including things like large type editions, newspaper serialisation, microfilm, ebook, and so on. (There’s also a struck-out-by-agent land grab for audio book rights, motion picture and TV rights, games, and stuffed toys. This is the other good reason why smart authors employ agents; a draft publishing contract is inevitably full of little whoopee cushions inserted by the publisher’s lawyers and intended to separate the author from control over the fruits of their labour.)

Moving swiftly on to clause two:

The second chunk of the contract specifies a bunch of contractual representations, warranties, and indemnities: notably, that I wrote the books, that they’re all my own work and I didn’t steal any of it, that it hasn’t previously been published by someone else and that I have the right to sell the rights in chunk one.

The third chunk is about deliverables and dates. It sets out precisely when, to the nearest day, I am required to hand over each manuscript; the format the manuscript is to be provided in: and so on. If I fail to deliver on time, the publisher can terminate the contract and require me to repay the advance. If the manuscript is crap, there are provisions for the editor to tell me to fix it, then a strict time period within which it must be fixed: again, if it’s not fixed on time and to spec, the publisher can terminate the contract. Oh, and I’m not allowed to tinker with the rejected novel and sell it elsewhere for 12 months after this date — I have to give the publisher a chance to decide whether or not they want to buy it.

There’s other stuff, too: I’m required to read, revise, correct and return proofs and copy edits promptly, and if I vomit red ink on the page proofs I may have to pay a contribution towards the additional typesetting costs (unless the editors agree it was justifiable).

Note that the dates in the third chunk of the contract are enforced flexibly and with discretion by any sane publisher; they know damn well that authors are sometimes late. A publisher who sacked every author who was ever late would rapidly run out of authors! Nevertheless, if I’m late in handing in a book, I’m relying on my publisher’s goodwill. Food for thought.

The fourth chunk is about publication dates and binds the publisher’s hands, much as the third chunk binds the author’s hands. The publisher is required to publish the book within 24 months of the date of acceptance of each book. There are a handful of loopholes (for lawsuits, labor disputes, or government intervention), but if they don’t publish within 24 months I can yell at them in writing: they then have six months to publish, and if they can’t manage that, I get to terminate the agreement, take my rights back, and keep the advance.

Other stuff: the publisher isn’t obligated to publish the work in all the editions to which they have publication rights. And there’s boilerplate about what to do if the final manuscript is legally questionable.

The fifth chunk: this is the one close to my heart, because it talks about money.

First, it sets out an advance. 50% of the advance is payable on execution of the contract; 25% upon publication of the first book; and the remaining 25% upon publication of the second book.

Next, it sets up royalties. Trade hardcovers pay royalties based on a percentage cut of publisher’s suggested retail price through normal channels. Credited returns (books returned unsold by shops) are deducted from the count of copies sold, and “a reasonable reserve for estimated returns” is withheld — that is, if the publisher ships 1000 hardbacks and they know from experience that 20% will be returned for credit, they must release the royalties due on 800 hardbacks, but may hold back 20% for two accounting periods of 3 months each against the anticipated returns. (If the returns don’t show up, the reserve against returns must then be released for payment to the author.)

There’s an escalator on royalties. I get 10% on the first 5000 copies of each book, 12.5% on the next 5000 copies, and 15% on all copies of each book sold thereafter.

(In reality, neither of these books sold at the 15% rate; they both nudged into 12.5%.)

Next, there are a whole bunch of accounting provisions for different channels — wholesale distributors, jobbers, or booksellers. If the discount for a channel is over 50% off SRP, “the publisher shall pay to the author the prevailing royalty rate above less one half the difference between a 44% discount and the discount granted (it being understood that in no event shall the amount paid to the author be less than one half the prevailing royalty rate [detailed above]”. In other words, steeply discounted books pay a correspondingly smaller royalty, but never less than 5%. Most likely a hardcover won’t be steeply discounted unless it goes bestseller, in which case it’s cranking on the 15% royalty rate; so the floor on hardback royalties is more realistically 7.5%.

Copies sold via radio or TV solicitation or direct mail or coupon advertising pay 5% of the actual selling price, incidentally. And there is a 10% of SRP or royalty equal to the initial royalty rate (whichever is lower) on all copies sold from a reprinting of 2500 copies or less made within two years of publication. And, and, and.

(Forget spreadsheets: trying to do cash flow projections based on the royalty schedule in this contract really demands an expert system. These contracts would be easier to understand if they were written in Lisp or ML …)

Royalties on mass market paperback editions are set at 8% on the first 150,000 copies of each book, and 10% thereafter, or 5% on copies sold at a discount of more than 55% off SRP.

(In reality, neither book came anywhere near to 150,000 in mass market. Most midlist SF/F books in the US sell 15,000-35,000 in mass market.)

Trade paperbacks: the author gets 7.5% of SRP (subject to the aforementioned confusing smoke and mirrors about discount rates).

Royalties for “other editions” — this includes ebooks: the author gets 15% of the SRP on all copies sold. (Note that this contract predates current norms on ebook publishing in which I could expect 20% or even 25% on ebooks.)

Next there’s a chunk on who gets what if the publisher sublicenses some of the rights they’ve bought.

Publishers, as a licensee of the author’s rights, can farm them out to other publishers such as book clubs, or for anthology excerpts, or in abridged publication (in the unlikely event “Reader’s Digest” wanted to publish a Stross novel). They have a sub-rights department, in which clerical staff who manage their contract portfolio try to identify rights that they can sell to other publishers. If they do this, I generally get 50% of the proceeds of this additional sale. This is the third reason why smart authors use literary agents: my agent only takes a 20% cut for sub-rights sales, but they’re on commission (unlike the publisher’s clerical staff) which provides them with a strong motive for getting out and selling.

(Note: Publishers try to buy all the rights that are available. Smart authors hold back as much as possible and get their agents to parcel them up and sell them on their behalf. It would have been easy for me to have sold the translation rights to these two novels as part of the package with my American publisher — and they might have given me an extra 20% on the book advance. But by holding back the translation rights and selling them piecemeal over several years, these two books have earned me almost as much revenue from translated editions as the entire US advance.)

No royalties: there’s a waiver of royalties for: review and promotional copies, books destroyed prior to sale, sale of copies at below manufacturing cost … and publication in Braille or by audio recording for the blind and other physically handicapped persons.

There now follows an entire page specifying accounting arrangements for the preceding two US Legal pages of mind-numbing percentages. The publisher is required to provide semiannual statements in accordance with regular accounting practice. There’s a strict timetable for these. At each statement period, royalties must be paid to the author (or their agent), unless less than $10 has accrued (in which case it can be carried over).

The author has the right to examine the publisher’s written records on serving written notice; if there are errors amounting to 5% or more of the total sum paid to the author during the period under question, the publisher foots the auditor’s bill.

Other chunks: A bunch of other clauses now follow, setting out terms …

Click link to read the terms and the full article.   http://www.antipope.org/charlie/blog-static/2010/02/cmap-3-how-books-are-sold.html

I think you can see the value an agent brings to the table.

Kathy


Responses

  1. Kathy, you don’t have to sell me!!! lol I DEFINITELY want an agent! It’s GETting one that’s the problem! lol
    Donna

    Like

    • You, me and over half of the people we know are in the same boat with us.

      Like

  2. The subject is fully clear but why does the text lack clarity? But in general your blog is great.

    Like

    • Gualetar,

      Thanks for leaving a comment. I wish you would have pointed out where the text lacks clarity, because it reads pretty clear to me. I’m not saying your wrong. I’m just saying I wish I coiuld see it, so I could correct it. It sounds like you have visited before, which is great. My goal is to help as many writers as I can so feedback is good.

      Kathy

      Like


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