You finished your book. You found an agent. You have a publisher who wants to buy the rights to publish your book. Congratulations! Now what?
It is time to negotiate your publishing contract.
“But isn’t that my agent’s job?” you say.
Well, yes. It is. However, you sign the contract. Which means you are legally obligated to the terms and should not enter into the contract lightly. At the very least, you should have a basic understanding of the terms so when the actual contract arrives, you know what questions to ask, what modifications to request, and what terms will protect your interests. Failing to address any issues with the terms of a publishing contract before signing, means the contract can, and often does, fit like handcuffs instead of nice Italian leather gloves.
Most writers who experience publishing for the first time (and more experienced authors too) feel compelled to sign the agreement the publisher offers for fear the deal will fall apart and put an end to their publishing dreams. After all, it took a long time to write the book, find the agent, and hook a publisher. But a publishing contract, like any contract, is meant for negotiations. While a debut author may have less leverage during negotiations than a well-established author, that does not mean the publishers are averse to negotiating the terms of the contract. Publishers want to buy the book, so there is plenty of leverage to adjust the contract terms if necessary.
A typical publishing contract is negotiated in two phases.
First, the major deal points are agreed upon before the contract is even drafted. These are the fundamentals of every publishing contract and should be negotiated. Once these deal points have been solidified, there should be a deal memo from the publisher listing the points discussed.
Second, the contract is created, reviewed, negotiated again, and signed. This phase includes the fundamentals of the contract from phase one, and a few boilerplate items that usually are not negotiated but can be depending on the needs of the publisher and author.
Here is a general overview of the top 8 deal points every writer should understand before signing a publishing contract.
1. Grant of rights
This deal point is the nucleus of the publishing contract because it outlines what rights the publisher has to reprint your book.
The author initially owns the copyright to their book, which is the right to reproduce the work themselves or sell it to publishers, studios, theaters or anyone else. The author under the grant of rights clause is granting the publisher certain rights to reproduce the work in certain formats (like hardcover, paper, digital, audio) and in certain territories. Basically this provision defines what rights under the copyright the author transfers to the publisher to commercially exploit in exchange for payment. It is important to understand that the rights to the author’s copyright need not be transferred in a single lump. Rights to exploit an author’s copyright can be sold separately to different publishers. They can be exclusive or non-exclusive, although typically the grant of rights clause is exclusive. So only transfer rights that the publisher will actually use. The duration or term of the grant of rights, if not specified, is typically for the life of the copyright, which is the life of the author plus 70 years.
The publisher will ask for the right to publish your book in certain territories. There are generally three major territories of interest.
1. North American Rights in English
– Usually this includes America, Canada, Philippines, and US Army Bases
2. World Rights in English
3. World Rights in all other languages
A writer should be clear as to what territories are included in the contract and only grant rights to a publisher that it is in the business of exploiting. For example, if the publisher only publishes books in English in the US, then why grant them world rights too. World rights could be sold to a publisher with that expertise. Or world rights could be sold but for a limited time period (like two years). If the publisher fails to sell the book in that territory within the time frame, the rights revert back to the author who is free to sell them again.
The contract will specify the formats the publisher can use to publish the book.
– Softcover like trade paperbacks (what you find in bookstores)
– Mass-market paperbacks (these tend to be a different quality than trade paperbacks. You’ll find mass-market paperbacks in places like grocery stores, drugstores, airports, department stores, and other non-bookstores that sell books)
– The right to ebooks will usually be treated like another book format. If ebook rights are granted, make sure the publisher can only exploit the book in its entirety and without changes.
There should be a specific royalty for each format. Also, be aware of catch-all phrases that might attempt to grab a larger scope of rights than you intended to grant – like “including but not limited to” language. See my previous post on the grant of rights clause for more tips on negotiating these terms.
2. Advance and Payout
Most publishers are willing to pay authors some portion of the royalties before publication. Advances tend to be scheduled in installments. These are called “payouts” and should be listed in the contract. Here are three typical payouts.
a) Small advances
– ½ at signing, ½ at publication
b) Medium advances
– ⅓ at signing, ⅓ at delivery and acceptance of the manuscript, ⅓ at publication
c) Large advances
– ¼ at signing, ¼ at delivery and acceptance of the manuscript, ¼ at publication (hardcover), ¼ publication (paperback)
It is important to remember that an author does not receive royalties until the advance has been recouped. The advance is an advance against royalties.
The biggest trade-off is the advance versus the territory. If the advance is on the smaller side then the author may want to keep foreign rights. That way the author can sell those rights and have more money upfront instead of waiting for the publisher to exploit those rights and deliver royalties on their own timetable.
The contract should list a schedule of royalties paid as a percentage of the sale of each book for all formats. Typically there are four major formats: hardcover, trade paperback, mass-market paperback, and ebook. You will want to be clear about how the publisher calculates the royalties. There are a variety of formulas. A percentage of the retail price (or list price) is much different (and more money to the author) than a percentage of the net price (which takes into consideration any discounts given to induce a bookstore to buy the book). The basic calculation looks like this: Retail Price x Royalty Percentage x Books Sold = Author Royalty Payment. Examples of royalty percentages might be:
– 10% retail price on first 5,000 copies, 12½% on the next 5000 copies, then 15% thereafter.
– 6-7½% of retail price. This rate can escalate like for hardcover based on the number of books sold. That mark can be 25,000 books or even 150,000, then 8%.
– 25% of retail price or net price (which is low if you consider the publisher does not have the standard printing and shipping costs to pay).
4. Subsidiary Rights
These are less important rights than the primary right to publish the book. The publisher can license these rights to a third-party for a license fee, or exploit them itself. Sometimes the publisher will forgo subsidiary rights, thinking the author and agent can do better at marketing them.
a) Dramatic or Performance
– This covers the right to produce the work in formats like film, television, plays, and cable. Generally, an agent will reserve these rights to be sold separately to a studio or network. A publisher will still benefit when the movie enhances book sales.
– This covers audiobooks. Frequently these rights are licensed to multiple audio producers.
– These may not be important but it is good to be clear who controls the right to make things like t-shirts, toys, etc.
d) Reprints/Mass-market paperbacks
– Some publishers are not in the business of mass-market paperbacks and will license the rights to a trade publisher who specializes in them.
e) First Serialization
– This would be pre-publications like excerpts in newspapers, periodicals, or on-line publications to help generate interest in the book before it reaches the shelves.
5. Delivery Date and Acceptance
See my previous post on Unfair Delivery and Acceptance Clauses for more information on negotiating this clause.
6. Editorial Control
See my previous post on Editorial Control for more information on negotiating this clause.
7. Options and Right-of-first-refusal
If the contract contains an option clause, then the publisher is requesting the right to publish the author’s next book under the same terms as the first. If the contract contains a right-of-first-refusal clause, then the terms covering the rights to the second book can be negotiated.
Keep these provisions clean and simple. Have a specific date for the proposal or next book to be submitted. Have a specific time for the publisher to review it (say 60 days), and then a specific time to negotiate a deal (say 30 days). If not, then the parties go their own way. The shorter the response times, the better for the author. Try to avoid being bound by extraneous language that might allow the publisher to match any offer after they have declined, or extend their option or right-of-first-refusal past an unreasonable time limit. Such language only restricts the author’s ability to seek the best market and publisher for the book.
A few other points to remember:
– Make sure the option can be exercised only if the publisher is not in breach of the publishing contract. For example, if the publisher owes royalties on the first book and have not paid, you do not want to be obligated to them for the second book.
– Decide if you want the clause to be exercisable even if the first book has gone out of print.
8. Consultation and Approvals
An author often wants the right to consult on the title, jacket copy, and cover. New authors might be able to get consultation rights. Famous authors can sometimes get approval rights. (Consultation = the publisher must get the author’s input before publication; Approval = the publisher must get the author’s approval before publication).
A publishing contract will have a huge impact on your writing career and your wallet. So why not make the best of it. Do your homework and be informed so you can negotiate favorable terms in your publishing contract before signing. If you do not, you may be shackled to a contract that is damaging to both your artistic and financial future. Need more information on publishing contracts? There are many resources to help in that regards – The Writer’s Legal Guide by Murray and Crawford, and The Writer’s Legal Companion by Bunnin and Beren.