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Negotiating Book Contract Terms and Royalties

Warning: This information is based on my personal experiences and confidential communications from others. It is not intended as legal advice.


You can’t assume that publishers are trying to be fair in order to create a relationship, they aren’t. You can’t count on your Acquisitions Editor to clarify contract terms for you, they (usually) aren’t lawyers themselves, and they work for the other party. Your contractual relationship with your publisher is based on what’s written in the signed contract, not on what your AE promises. Today’s trade publishers are, in essence, legal firms with small editorial departments attached. Think about it, and hire a lawyer of your own. I didn’t retain a book contract lawyer until after I had signed four publishing contracts, and I regret that very much.


When I signed my first book contract with a large publisher, I was lucky to have a couple other contracts around for comparison. One of these was an offer from a different publisher for the same book, which gave me the opportunity to compare them paragraph for paragraph. Since I was nearly broke at the time, I went with the larger advance over the better royalty schedule. Sometimes a bird in the hand really does beat two in the bush. Over the last five years I have signed several more contracts and agreements, rejected a couple out of hand, and done a little negotiating. At worst, contracts are the starting point for litigation; at best, contracts are a tool for ensuring both parties remain happy. My biggest failure in contract negotiations has been concentrating on the money and not paying enough attention to the issues that would make authoring a nice job. In retrospect, I believe that the majority of problems I’ve encountered in the publication process could have been avoided by getting more details in writing up-front. This article is by no means intended as legal advice. The information is offered solely for the purpose of bringing a few specific items to light for writers who haven’t yet encountered them. The contract clauses I will refer to are present in all of the contracts I have seen, though the order and exact wording differs greatly.

Grant of Rights

Here the author (you) grants the publisher and their legal heirs the right to publish the work. The contracts I have signed, not being a superstar, have granted the publisher the exclusive worldwide rights, including all derivative works, etc.. That’s not as bad as it sounds, because the author gets a percentage of a possible something rather than 100% of a probable nothing. You aren’t giving up your rights to royalties, but the rights to publishing the work yourself in any other form. If you believe something in your work is likely to become a smash TV hit or the next big Christmas toy, you might try negotiating here. Since I write computer books and I’ve never seen a superstar technician on a T-shirt, I never bothered.

Competing Works

This is where the author agrees not to produce another work that competes with the work being published without prior permission of the publisher. For example, if you write a book about flying propeller planes, can you write a book about flying jet planes for a different publisher? Completely different subject in one sense, but could be seen as competing in another. I see many authors who hop from publisher to publisher writing books in the same field and even on the same subject, so either they get different contracts than me or the clause is tough for publishers to enforce. I recently made up a long list of changes I wanted in a contract before I would do another edition of the book, then cut that list down to six items I thought I might get. Narrowing the non-compete was one of the items I asked for and got, probably because the original broad non-compete wasn’t enforceable. Just keep in mind that court battles take years and years and your contract might let your publisher withhold your royalties while they “reasonably believe” you’re in violation.

Author’s Warrantee

Here you are promising that you didn’t steal the work from somebody else and if anybody comes forth to claim you did, you get stuck with the legal costs. This includes obtaining rights for any materials or illustrations that you use in the book and didn’t produce yourself. A paraphrase of the final line in this clause goes something like “This warrantee goes on forever and we’ll dig you up to pay our legal fees if we get sued.” This is really scary stuff because you’d be stuck paying NYC lawyer fees without the option of having your brother-in-law handle some frivolous suit, but hey, life is a risk. Keep any permissions you get from contributors in your long term files and keep your fingers crossed.


Here’s another point on which I’ve been “educated.” While publishers will insist on some sort of author’s warrantee, you should limit the language in such a way that you aren’t stuck paying the publisher’s legal costs for something that isn’t your fault. I paid some people to do a little research on this subject, and it turns out that lawsuits for bad advice, at least, are rare, and may be protected speech (1st amendment). However, slander and plagiarism remain big no-no’s.

Manuscript Preparation

The work you are contracting to deliver is described here, including a word and illustration count. On contract after contract I’ve pointed out to different acquisitions editors that the word count was way out of whack with what I was going to deliver, by as much as a factor of two, and been told not to worry about it. Well, I did worry about it, but nothing came of it. All of my manuscripts have been accepted without comment. However, about 20% of the illustrations were cut from my last book without even consulting me as to which 20%, apparently because I went OVER on length. “Final Cut” issues are dealt with in another clause, but I intend to tighten up on the description of the manuscript next time I sign a book contract so I don’t get another nasty surprise.


The actual form of the manuscript is also detailed here, normally a Word file is required along with a couple printed copies and any artwork. In the first several contracts I received the author was required to perform any in-progress work, such as preparing an index in a timely manner, or be prepared for the publisher to get that work done elsewhere and charge it against author royalties. I didn’t have any problem with this and I always turned the index around in less than two days, as fast as any publisher could hope. However, my last contract came through with the definite statement, “The Author will be charged $3.00/page for an index as an advance against royalties.” I didn’t hesitate a minute in shooting my editor an e-mail and telling him that the publisher was definitely going to be doing the index, but I sure as hell wasn’t paying for it. That was my first successful experience in contract negotiation. I don’t know enough about the internal functioning of large publishers to know if this sort of contract change is a typical legal department gambit or if it is initiated through the business end, i.e. acquisitions editor.


In the last contract go-around, I got the publisher to give me approval on changes, not including those arising from routine copy editing. I was actually pretty surprised they agreed to this, though the truth is, my books usually go through the editorial process with nothing but copy edit changes in any case. The real reason I asked for the change is that the personnel turn-over at trade publishers is very high, and I wanted protection against some new psycho editor replacing my current AE and wanting to put their thumbprints all over the book.

Copyright

The publisher gets the copyright unless you demand otherwise. I don’t, it doesn’t matter to me whose name the copyright is in. There may also be some detail about pursuing money damages in case of copyright infringement. Basically, he who pays the lawyers gets the damages, or they split according to participation in the suit.


The Authors Guild strongly advises members to retain their copyrights, though it’s still unclear to me exactly why. To see who holds the copyrights on books in your field, go to the Library of Congress site: http://www.copyright.gov/records/cohm.html and check. I looked up all the famous computer book authors (my field) that I know, and none of them held their own copyrights on trade published books.

Viability and Publication Delay

There are often a whole bunch of little clauses protecting the publisher in case they decide to cancel the book, change the price, initial print run, anything like that. On the whole, I don’t worry about it since I know they are in it to make money and if they conclude something has changed such that nobody will buy the book, they’re probably right. Keep in mind that the publisher does have an investment in your work from the moment they begin considering it for publication. They count the time they invest as real overhead, so they aren’t in a hurry to cancel projects. If they do cancel, the author should get to retain the advance, and the full rights to the work should revert to the author so that the author can try to sell it elsewhere.


This is something I should have worried about, though it hasn’t bitten me yet. Make sure that your advance is yours to keep, and that the publisher can’t cancel your book for “market” reasons and ask for it back or withhold the remainder. Also get some language to prevent the publisher from be the sole arbiter as to the suitability for publication of your manuscript, so you don’t give them an easy out. Your publisher may simply run into economic problems and not want to publish your book, but why should you suffer?

Proofing and Editing

The publisher reserves the right to make all the revisions they want, which the author must promptly review, whether or not the author’s approval is required. The publisher also establishes a level, between 10% to 15% of the cost of preparing the proofs, over which the author will be charged against royalties if the author wants to make further changes. When I found the layout of a book to be unacceptable and was ready to go to the mat over it, my editor agreed to have it completely redone and not charge me the expense. However, I didn’t believe I was in the position to get some cuts restored and didn’t push that point, so there was both compromise and real anger on both sides. That experience taught me to make a greater effort up-front in thrashing out these issues in the contract, painful as that may be, to avoid getting an ulcer three months later.

Publication

The publisher agrees to pay the publication expenses and put the author’s name on the cover. For the books I’ve had published, the publisher agrees here to produce the book in the time that suits them. I initially thought that this was fine since they would want to hurry and recoup their money. Unfortunately, I’ve had a publisher miss their target date by more than a month three straight times, while I’ve been a month early each time getting them the manuscript. Apparently there is a lot of job hopping in the industry so the assistants who actually see to the production often skip town halfway through a project, or never even start the work in anticipation of moving on before it is completed.
However, I have had a recent humbling experience in self publishing in that I’m running two months behind my own deadline. When you have to work with other people, proofreaders, book designers and printers, your ability to meet deadlines becomes dependant on their ability to meet deadlines. In any case, if your material is time sensitive, better try to get the publication date in writing so at least you’ll have something to yell about. I don’t imagine any publisher would agree to a penalty clause for running late unless you are a top bestseller.

Royalties

This is the longest section in the book contract, and describes what’s in it for the author. One thing that should be in it for the author is an advance against royalties. This means a couple lump payments to the author before a book is ever sold. These payments may be split into two, three or four phases. The first payment comes after the contract signing, the next with follows the delivery of the work. Some publishers may spread partial payments over the whole proofing process, even all the way up to the publication date. My first advance was $5000, my last was $12,500. Advances are less of an issue to me than the royalty schedule which describes what the author gets if the book actually sells. Just don’t forget that the size of the advance is directly proportional to the publisher’s commitment to the book.


Publishers sell books into different outlets at different prices, and this affects the amount they are willing to share with you. I’ve corresponded with unpublished writers who imagine they will split the cover price of the book 50/50 with the publisher. Good luck. The publisher is lucky if they can sell the book into distribution for 50% of the cover price! The richest part of the royalties in my contracts have been the US domestic sales. My percentage of the publisher’s net receipts for domestic sales (about 45% of the cover price) were as follows for my first contract:

• 10% on the first 5,000 copies
• 12.5% on the next 5,000 copies
• 15% thereafter


Another publisher who couldn’t go over $3,000 for the advance tried to sweeten the deal by offering 15% across the board, but I needed the advance at the time.


For my last book I negotiated a small increase:
• 12.5% on the first 10,000
• 15% thereafter


That’s as far as I’ve gotten with royalties. Since my publisher doesn’t actually have to renegotiate the contract for successive book editions, they have no motivation to give up money, especially in the form of royalties, which add up.

Foreign Sales

5% of the list price, i.e., $1.00 on a $20 book. This seems reasonable to me, though another publisher’s contract offered 50% of whatever the US rate was. On my last contract, the phrase “list price” had mysteriously morphed into “net receipts”, which I refused to go for. Time proved me right as my publisher sold over 12,000 copies to a book club in England for around 15% of the cover price. If I had signed that contract, I would have received less than $2500 dollars instead of $15,000 I was paid. Keep an eye on the small print. Frankly, if the first contract I was offered four years ago had that phrase, I would have signed and been none the wiser. Publishers are always changing what “standard contract terms” they offer new authors, generally to their benefit, I’m sure.

Special Sales, Publisher’s Book Clubs, etc…

Here are listed a whole bunch of special cases where the publisher sells the book at a very steep discount and your royalty is badly cut. Fortunately, at least in my case, all of these special sales make up a small proportion of the total, so it doesn’t hurt that much.


Another mistake. On early editions of my book, special sales and book clubs were trivial. On my latest statement, they are running over 15%. I actually missed a minor language change between contracts where the publisher removed domestic book clubs from a 50% bracket and introduced a new paragraph where it’s 25%. I can write about contracts, I just can’t read them. My publisher agreed to change this back to 50% in the current book contract, either because they actually like my books or because it just doesn’t amount to much in my case. Unfortunately, “negotiating” these changes created quite a bit of animosity between my AE and myself, and I don’t know if the relationship is really repairable. That’s another reason to have somebody else do your negotiation for you, sort of, Good Cop, Bad Cop. “Oh, I’d really like to sign the contract but my lawyer won’t let me!”

Sale of Rights

The publisher may sell the rights to your book for foreign translation or whatever else. The first couple contracts I signed made this split 50/50. When the last contract changed it to the same as the percentages for the domestic sales (i.e., 12.5% or 15%), I insisted on the old 50/50 formula. This might cost me in terms of potential translations as it lowers the publisher’s motivation to look for buyers, but these foreign rights are often sold so cheaply, (i.e. $1,300 for a Chinese translation, $595 for Arabic) that a smaller slice wouldn’t buy a decent bottle of Scotch. I’m hardly a cut-throat negotiator, but I would never go backwards, accepting lower royalties than the previous contract, unless the publisher documented for me that they were losing money.

Payments

The contract establishes a schedule for when the accounting is done and the payments are made. My first few contracts were semiannual, with the payment coming three months after the end of the accounting period. My last contract, on my request, changed the accounting to quarterly, with the payments coming two months after the end of the quarter. Payments are my favorite part of the contract relationship.

Reserve Against Returns

Your publisher is going to want to establish “a reasonable reserve against returns.” They used to reserve the right to determine what “reasonable” meant, but in my recent contracts, the wording “20% for not longer than two years” crept in. If you write a book that bombs, that’s fine, you got the advance and that’s the end of it. But what if your book succeeds? I could never follow the weird “returns” math on the royalty statements, and I finally found out why. The publisher is simply skimming 20% of all of my sales, and any returns that come in are deducted from my current royalties, after the 20% is taken out! In other words, the publisher has established the right to keep 20% of all of my sales for a little over two years, on the thin excuse of a reserve against returns that never accumulate since they are handled every quarter. What’s even worse, I’m told that new authors are stuck with a reserve of 30%! This is one of those cases where I figure I could drag them into court, prove that the funds they are holding exceed the potential return liability of all unsold books, and is therefore not “reasonable.” I also figure the court would award me court costs (assuming I won) and $34.81 interest on the unpaid amount. This is the issue that nearly broke my last contract negotiations, and impelled me to go out and retain a good lawyer. In the end, I dropped the issue since I hadn’t brought it up (didn’t know about it) until after we had discussed all the negotiating points, and I accepted my AE’s complaint that it wasn’t cricket to do so now.

Author’s Copies

The author can expect 10 or a dozen copies of the book to give to friends and family. If you have a lot of friends, you can probably ask for more. My free copies for my last book never showed up and I didn’t bother pursuing the matter. You will also be given the opportunity to buy additional copies at a good discount, 40% on my contracts.


The Authors Guild tells me that authors commonly request 25 copies or more. I don’t know what I’d do with them, but you can try. The current book contract actually gives me a 50% discount (I asked).

Revised Editions

If the book is successful, the publisher may bring out new editions. If the author can’t do the new edition in the time schedule the publisher wants, has died, or doesn’t want to do it for any other reason, the publisher has the right to get somebody else. However, the original author or heirs should get some royalties anyway. In my latest contract that’s 50% for the next edition and 25% for the edition after that. I don’t know whether that 50% is based on the last contract signed by the original author or the new contract signed by the replacement.


Here I really missed the boat. I didn’t have an escape clause to stop doing the book, I’m simply obligated to keep doing revisions as long as they ask or they can keep the book and my name and pay somebody else to do it, deducting that pay from my falling fraction of the royalties. I can only explain this as saying I wasn’t really worried about future editions when I signed on, wish I had. It’s still a little unclear to me whether the publisher must offer the identical contract, they’ve always made changes in the past.


I requested a major change here, and they did give me the first right of refusal on future editions, something I had thought was implicitly guaranteed, but apparently it was debatable. My lawyer pointed out that I could always offer to forfeit my royalties to get my name of the cover of a book I didn’t do, or use the royalties to publicize the fact I didn’t do it. I had thought I was implicitly promising to keep my mouth shut. Two implicitly’s don’t add up to one “shall.”

Out of Print

The book is definitely out of print when the publisher says so. It may also be officially out of print if it is no longer available from the publisher in any edition. The author may have to go through some set proceeding, like requesting in writing that the book be reprinted and waiting some pre-defined time period, but afterwards, the rights should revert to the author.


You should clarify this language to make it much easier, like the book is out of print and the rights revert to the author automatically if no copies are sold for X months, something like that. I have requested and received the rights back on a book of mine that’s been officially out of print for well over a year. Of course, I’m still on the hook if somebody comes out of the woodwork and sues the publisher over content. It took over five months for the request to be processed.

Other Stuff

Contracts contain other stuff that you really need to know something about the law to understand, like termination clauses, jurisdictions, and other nasty stuff that if it ever comes up, you’ll be phoning a lawyer.


In the final analysis, I’m grateful to have a publisher who can get the book on the shelves, but aggrieved when I feel they are trying to take advantage of me or not accomplishing their end of the job in a professional manner. My biggest complaint is probably the lack of communications, which I originally took for professionalism. Nobody wants to be a nag, but to send off a manuscript and not hear from the publisher until the final proofs show up (at the wrong address) is too extreme. I don’t have any particular advice for writers signing their first book contract, other than to go into it with eyes wide open. If anybody has any personal contract experiences they want to tell me about for possible posting on this site (don’t slander anybody), by all means share the data.


Feedback from Anon:

Competing books clause

-This was really vague at first, but when I pressed the publisher on this, they came up with a much tighter wording along the lines of ‘the author agrees not to publish a book on the same subject, for the same audience and a similar price point for another publisher without consent’. I was interested to see that they had a standard wording which I wasn’t offered first off and that this gets around many of the questions you pose on your site about competing books.

Publication schedules

-My first contract draft made no commitment from the publisher to produce the book, but when pressed they added another standard clause committing them to publish within 12 months of receiving the manuscript.

Proofing and editing

-As I understand my contract, I’ll be charged if authors’ corrections exceed 10% of the total cost. Basically, I get charged for any mistakes that I made in the MS I sent to them. But I don’t get charged for correcting their layout mistakes or editing mistakes, as I understand it.


I got through my last contract negotiation with the help of Zick Rubin, a terrific Intellectual Property lawyer operating out of the Boston area. Zick has just opened a new office and website at www.zickrubin.com.


Thomas Hauser writes in his Op Ed: The ” Standard” Book Contract: An Antitrust Lawsuit Waiting To Happen “… it’s about squeezing every last dollar out of every available source—and the most vulnerable source is the author.”
http://www.fonerbooks.com/contract.htm