One of the biggest mistakes young writers make is getting into a terrible contract they can never leave. I’ve dealt with this several times with books I want to publish. The creator sends me their original contract and THEY DON’T EVEN OWN THE RIGHTS.
That’s right. More than one person has sent me a contract in which they signed away the rights to their book for less than it cost them to make the book in the first place. It’s a brutal lesson, and I hate being the bearer of bad news, but I have to go back and tell them even they can’t do anything with the book because it’s not their property.
Imagine that. You have poured your blood, sweat, and tears into a book. You’ve paid for artists out of your own pocket. You’ve stayed up late nights toiling away to get the pages right. You were so excited to finally be able to get the book out there…and in doing so signed away the rights to the publishing company.
That’s bad enough, but what happens if that publisher sells their catalog to a company that sells the catalog to another company until that whole catalog of books is picked up by a conglomerate that sits on the books forever? This isn’t a fictitious tale. This actually happened to somebody I know.
I would much rather have you self-publish your book and reap all the profits. However, since many of you want a publisher the least I can do is give you some tips on what to look for in a contract. Before I get started I want to emphasize this:
I AM NOT A LAWYER. This is not legal advice. Consult a lawyer before signing ANYTHING!
Cool? Because that’s really important. This is advice from somebody who has dealt with a lot of contracts, but I always consult with a lawyer before signing a contract, or before sending out a contract for signature. If you decide not to hire a lawyer, that is on you, not me. Alright. Now we can get on with the good stuff.
Net profits mean you will never make any money on your publishing contract
There is a big difference between gross receipts and net profits. Net profits mean the remainder left after the publisher has taken out all expenses. The publisher gets to recoup their printing costs, marketing costs, distribution costs, editing costs, and just about any cost imaginable before you see any money. This is the reason why producers sue movie studios because they show Avatar is 130 million in the red even though it’s one of the highest grossing movies of all time.
Net profits is a bad deal for creators. If you must take a net profit deal, make sure it is accompanied by an upfront payment equal to or greater than the cost it took to make the book because otherwise, you will never see a dime. Publishers are very good at manipulating the accounting so that every book looks like it loses money on paper.
Gross receipts, which is what Wannabe Press and most traditional book publishers give, is what you want. Gross receipts come off the top of the amount made. If you have 10% of gross receipts for a book that sells for $10.00, you make $1 every book sale no questions asked. Gross receipts look less appealing on paper (usually net profits is 50% or more compared to 5–10% of gross), but over time gross receipts will make you way more money than net profits.
Even better than gross receipts is a percentage of cover price. That means no matter what the publisher sells the book for, you get the same amount. Expect 5-10% of the cover price if you negotiate this deal. It is uncommon to get this deal nowadays, but if you can get it then the accounting becomes very easy. You check the units sold and simply multiply by whatever percentage you agreed upon in the contract.
Make sure YOU own the rights to your book
Many publishers will put something like this in a contract. “Publisher and Creator will split profits 50/50 with Publisher owning 100% of the Project and paying Creator 50% of profits”. This doesn’t seem so bad on the surface. I mean you get 50% of the money still, right?
In this scenario, the publisher owns the book. That means they can sell the book to other companies and make changes to the book without your permission. It also means you cannot negotiate any ancillary or other deals with your book because it’s not your book. You don’t own it.
You should NEVER sign over IP rights to a book b/c your publisher will most likely only be one of many publishers you have for the book. Most publishing deals should last 3-5 years maximum, and then you will get the right back, at which time you can look for another publisher. However, if you sign over IP rights, which is the rights to the underlying intellectual property, then your publisher will own a piece of that project FOREVER, even if you take it to another publisher.
A publisher should only be interested in publishing rights to a project, not intellectual property rights. This is becoming rarer as publishers start to see the value of IP, but a publisher should be able to make a profit and stay in business from book sales alone. If they insist on some ownership, tell them that if they bring a deal to the table, then they can be compensated as a producer would on a movie project. However, the underlying IP rests solely with you. I can’t stress this enough. DO NOT GIVE UP IP OWNERSHIP!
Make sure there is a reversion of rights clause in your publishing contract
So often people sign deals that give publishers the right to their works in perpetuity, even if it’s out of print. There is no problem with a good publisher continuing to publish a book if it’s in print, but you want to make sure that there is language in your contract that gets you the rights back after a certain period of time, if you want it, or if the book is ever out of print. Especially now with the ability for “digital printing” to be considered in print, it’s incredibly important that you specify what IN PRINT means when it comes to books. A good barometer is 25 books per month over a three-month window. If your publisher does not sell that many copies over EACH quarter, then the book is considered out of print and the rights immediately revert back to you. By tying “in print” to book sales you prevent a publisher from any shenanigans they can pull to keep a book in print by uploading it to Createspace. Do not let a publisher amortize the book sales over time (for instance sell 5,000 in the first quarter and use that to prove they sold 25 books every month b/c 5000/12 is more than 25).
Additionally, you want to make sure that you have a reversion clause for what happens if a publisher doesn’t publish a book for a certain amount of time, usually 18 months after the signing of a contract. Getting a book onto a publishing slate is hard work. However, if a publisher sits on a book for more than 18 months they never intend to publish it and you should be able to get the rights back.
Finally, you want to make sure that no matter what all rights revert back to you after a specific time, hopefully within 3-5 years. After that time, a publisher can sell any remaining copies in their warehouse, but you are allowed to again shop around the book. This means that when the book reverts back to you, the existing publisher would have to bid to keep the rights as well, allowing you to make more money on the book than if the original publisher held onto it forever.
Look closely at the non-compete clause in your contract
Publishers are sneaky and they love to slip in that will you as an author. The non-compete clause is the perfect example. A non-compete clause is meant to cover a publisher and make sure that you are not directly competing with their book by putting out your own book, or putting out a book with a competing publisher. However, the language is often overreaching, using verbiage indicating that you can NEVER make a work that might damage their sales, and since you are, by my definition, an author, and want to make more books, literally every book you ever write might damage their sales of another book. That means they’ve got you in a bind, making it impossible for you to EVER write another book again. Now, this is pretty widely understood to be illegal and unenforceable, but do you really want to go to court and roll the dice? No, of course not. So look carefully at your non-compete clause. If you can, try to negotiate this down a small window before and after the book launches (1-2 month on either end) so that they still have an exclusivity window, but you aren’t prevented from doing your job.
While you are at it, comb over the limit of liability clause and look for any non-standard language, especially if in the clause it promises that this will be the next book you release. If you see something like that, run, because it means you could be prevented from releasing another book for 1-2 years.
Definitely, consult with a lawyer about both these topics…for sure.
Define what each party can do with your work inside the publishing contract
In our contracts, I very clearly define that a creator can create exclusive prints and other materials as long as they are in limited quantities and they do not engage a distributor. The only thing the contract forbids is making and reproduction of the work.
This gives the creator the ability to at least make money doing exclusives at their table. However, most contracts forbid this entirely or don’t define it. You will be making money tabling at shows and in person. You want to make sure that falls within the purview of the contract. Carving out the contract in this manner makes it very clear what can and cannot be done by all the parties involved. This is the essence of a good contract. A good contract clearly states what everybody involved can do in CLEAR and CONCISE terms and in the standard language of contracts. You should be able to take the contract to a lawyer and have them easily be able to interpret what is meant by each clause. Ambiguity is your enemy.
Make sure your publishing contract gives you approval over any licensing deals
At the end of the day, your name is on your work, so you want to make sure you can approve the licensing deals your publisher negotiates, and that you get a piece of the licensing commensurate with your part in the process. You created the work, so you should get a large portion of the licensing monies. Do not allow publishers to make licensing deals without your knowledge. In fact, the publisher should not even have the ability to negotiate licensing deals as they only assume publishing rights, but if you allow them a percentage of the ancillary rights, like movie/tv/toy deals, then you definitely want to approve said deals. Ideally, only you will negotiate licensing deals because you have retained 100% of the rights to your IP.
Your publishing contract should give you the ability to audit your publisher’s books
Yearly audits are a general rule in business when you make a deal. When you sign away your book, this is a business deal. You cannot expect the publisher to be honest with you about sales, and even if they are you have the right to make sure they are paying you fairly. There is a clause in most contracts that talk about “reasonable and customary expenses” being deducted before a publisher pays your royalties, and you want to very clearly define what that means, and make sure that they are staying within the bounds of the contract limits.
Define a payment schedule in the contract with penalty should you not be paid on time
If you don’t define a payment schedule, then there will be nothing legally actionable on your part should the publisher not pay you, so make sure you set a timetable for payment. However, you should also include a penalty to the publisher should they not pay on time. Publishers know you will most likely not take them to court. However, if they see the money piling up from late fees then they will be more likely to pay you.
Make sure the publishing company cannot assign the rights to your book without your approval
When a company owns the publishing rights to your books, they usually include a provision that allows them to sell the publishing rights to another company without your approval. This is called assignment and is included as a provision so that a publisher can negotiate with foreign publishers, paperback publishers, and other publishers so that they can get more exposure for your book. However, there is a nasty underside to this clause, which allows them to sell their whole company and assign the rights to your book to that company–even if that company isn’t a publisher.
I have seen instances where publishers are sold, resold, and resold again and again until its impossible to track who owns the rights to a book anymore, and that means either the writer has to fight tooth and nail to recover their book or they have to abandon it into the ether. To prevent this, make sure you have a no assignment clause in your contract, which means a publisher cannot assign the rights to anybody else without your permission. Additionally, make sure if the publishing company is sold, disbands, or goes bankrupt that you recover the rights to your book immediately.
Contracts don’t have to be scary. You don’t have to be scared of them. I so often see artists that sign contracts without reading them, and then complain that the contract is unfair. Of course, the contract is unfair. The publisher is out for their best interests. You have to be out for your best interests. For me, there is no better way to tell the true character of a company than to negotiate with them. It tells you everything you need to know about their professionalism, ability to collaborate, and how much they value your work.
If a publisher is not willing to work with you on these points, then you shouldn’t do business with them. I’m not saying you will get any or all of the points I mentioned, but you should certainly ask for them and get clarification before you sign anything. There is no harm in asking. A contract is a negotiation. If they are not willing to negotiate, then move on.
Culled from The Complete Creative