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Understanding Publishing Contracts

  The author receives a publishing agreement and it is at this point the novice writer gets cold feet, freezes, becomes confused, delays and loses a publishing opportunity.  Here's a basic primer with examples to help you understand publishing agreements.


  Before we explore the basic contract, the writer must first understand the publishing industry is a complex and professional business wrapped tightly in restrictive legalities.  It is no place for amateurs and yet amateur writers abound.  They refuse to be professional, refuse to play by industry rules and ultimately fail to become published book authors. 

Example 1:  A writer reads a publisher's submission guideline instruction sheet and ignores the procedure by submitting an unsolicited manuscript thinking they will succeed, but they never will.  It is unlawful for a publisher or agent to read your material without your permission or they can be sued.  It's the worse thing you can do and will infuriate the publisher or agent to the point they will not communicate with you again. 

Example 2:  A writer becomes intimidated by the legal terms and conditions publishers and agents require authors to abide by when submitting manuscripts.  The author fails to submit properly as instructed and strikes out. 

Example 3:   A writer receives a publishing contract then delays signing it for fear or greed and loses the opportunity. 

  What's the point here?  Be professional in all of your communications and actions and you will be noticed and be published.  Learning how to write "professional" query letters is the #1 best marketing tool a writer has.  We have a sample of a professionally written query letter on our Web site you may use: http://www.JamesRussellPublishing.com   This query has "critical elements" to snag a publisher or agent's interest within seconds.  Use this query letter format and you will see a remarkable increase of requests to submit your manuscript for evaluation!  Learn all you can how the publishing industry functions, then conform to the rules and regulations.  This will elevate a writer from amateur to professional status! 

  The next step should have been the first.  Have you had your manuscript professionally edited?  If not, your manuscript will be rejected!   You are wasting time and money and only putting yourself through heartache and grief of repeated rejection!  Publishers and agents are flooded with unprofessional writings and they will not do the editing for you as they did in years past.  Those days are gone forever over a long time ago.  Make the investment of hiring an editor or ghostwriter to bring your manuscript up to professional standards.  This is the great secret to getting published! 

  You can find editors who will proof and edit for as low as $1 per page, if you negotiate and search the Web.  For only a few hundred dollars invested in your work it could make you tens of thousands of dollars (or more) by getting published.  Fail here and you will fail.  If you don't have the money to pay an editor?  Save money until you have the funds.  Do not mislead yourself into hoping your book will be published if it is not professionally edited.  It's just not going to happen, ever.  It is the cold realities of the publishing business that only edited works will be published.        


  When you wrote your book you automatically own the copyright the moment the text was created, even if it is not formally registered with the Library of Congress US Copyright Office.  This means you own all rights.  A publishing agreement will require that you sign-over specific rights to the publisher.  What is happening here is you are "not selling" your manuscript, you are "leasing" it to a publisher for a specific term giving them a license to print, distribute, advertise and market your work to the world.  Some publishers require authors to transfer all rights with no reversion clause.  In this case you sold the book to the publisher, but most publishers have a "Reversion of Rights" clause so that if the book does not sell the book and rights will be reverted back to the author. 

  What rights are you giving away?  Too many to list here!  Publishing contracts are huge documents and are very complex to understand, so read some books on publishing law for authors and publishers.  We have some of these books listed on our Web site.  These books will break down each clause so you can understand the publishing agreement.  In essence, you give the publisher many, most to all rights exclusive to them to sell your book.  In return, a royalty payment will be given to the author for books sold.  So when you see all the rights you are giving away in the contract don't be a nervous wreck.  The publisher must have your permission to legally reproduce your book and your permission to sell it to specific markets and in different formats; paperback, hardcover, e-book, etc.

  Royalties to authors are paid semi-annual or quarterly in most cases depending on the publisher's policy.   No monthly paycheck.  This is one reason authors write many books to maintain sufficient cash flow income.  Another reason is your book may sell well initially then fall off the chart of interest and becomes a backlist title resulting in little to no royalty income, so writing many books is to your advantage. 

  Here's an example of the rights you sign over to a publisher.

1.       Grant of Rights. The Author grants, conveys, assigns and transfers to the Publisher in that unpublished Work exclusive rights as follows:

(A)  To publish, distribute, and sell the Work in the form of a book, paper, electronic or other media;

(B)  In the territory of: United States of America and at Publisher’s option foreign rights for Canada, United Kingdom, Europe and other nations worldwide.

(C)  In the English language, or at Publisher’s option, in a foreign language;

(D)  To sell film, motion picture, television and other electronic, visual or audio rights;

(E)   First right of refusal (Option) to publish Author’s next three completed Works in any medium;

(F)   To publish for the full term of the Copyright.

(G)  Exclusive right to publish, sell and license the Work including all means and methods to market and sell the Work.

(H)  To publish or market reprint, translation, serialization, book club, special editions, audio, audiovisual, calendars, comic books, merchandizing, mass market dramatic or performance and licensing rights.

(I)     To publish hard or soft cover trade or quality paperback editions, electronic future media or new technology forms, anthologies and collections, periodicals and serials, school editions, cheap editions, unbound sheets, premium and special editions, bulk sales, mirofilm, microfiche, photocopies, Braille, large print, handicap editions, adaptations, condensations, audio or visual broadcasts in any form or in any medium.

(J)   General Publication Rights to publish or authorize others to publish the Work, excerpts, condensations, abridgments or selections of the Work, in anthologies, compilations, digests, newspapers, magazines, radio, TV, syndicates, textbooks, and other works, and/or in Braille either before or after first publication of the Work in any form.

(K)  To publish or market translation, direct response marketing, premium and special editions, bulk sales, periodical or serial, cheap editions, unbound sheets, microfilm and microfiche, photocopies, Braille or other edition for the handicapped, large print and publicity, abridged or unabridged.  

(L)   Merchandising Rights to sell novelties and other items related to the Work.

In the contract there will be many subheadings comprising the entire agreement.  Here's a few examples:

1.       *Royalties.  Publisher does not pay flat fees or works for hire or pay royalties on the retail price of the Work.  Net Revenues, as used in this Agreement, refers to money actually received by Publisher, for the sale of copies of the Work, net of returns, after deduction of shipping, customs, insurance, fees and commissions, currency exchange discounts, and costs of collection.  Publisher shall pay the Author the following sliding scale royalties based on net revenue to publisher: 10 percent of the net revenue on sales on the first 10,000 copies sold; and 15 percent of the net revenue on sale on all copies sold thereafter in respect to each specific version of the Work published. These royalty rates are subject to the actual net sales dollar amount paid to the Publisher received from bookstores, distributors, wholesalers, book-clubs, libraries, catalog marketers, direct sales and all other retail and distribution markets except as noted otherwise in this agreement.  Mass Market book follows an alternative royalty formula: 5 percent of the net sales on the first 10,000 copies sold; and 6 percent of the net sale on all copies sold thereafter in respect to each specific version of the Work published.   &127;This Work is considered Mass Market.  &127;This Work is not considered Mass Market at the time of signing this Agreement.  Publisher reserves the exclusive right to switch the Work in part or in whole to Mass Market when and if market demand justifies mass sales.   


A.      The Publisher does not pay royalties based on the retail price of the Work, only for actual monies received by publisher.  Royalties are not paid on bad debts, sample copies, review copies, remainders, damaged Works, returns or any other means in which Publisher has not been paid or has not been paid over and beyond Publisher’s production costs.  All copies sold in this Work only (books) shall be cumulated for purposes of escalations in the royalty rates, excluding revised editions, paperback or hardbound editions, in book format.  Works in a different form; such as, but not excluding, electronic book sales, audiotapes, etc., shall be cumulated separately. Copies sold shall be reduced by copies returned in the same royalty category in which the copies were originally reported as sold. 


B.      In the event the Publisher has the right pursuant to Paragraph l to publish the Work in more than one format or form, the royalty rates specified above shall apply to publication in the form of a book and the royalty rates for other forms shall be specified here and in Subsidiary Rights paragraph:  Publisher shall not deduct manufacturing or operating expenses prior to paying royalties to Author except as noted in subsidiary rights and special sales paragraphs.  Royalty is paid, for each Work actually sold and paid to publisher, based on the percentages herein of the actual price of the Work sold.  Example:  Work sold at retail price of $34.95 royalty is 15% = $5.24.  Work sold at wholesale at $15.72 royalty at 15% = $2.36.


C.      No royalty shall be paid to Author on free copies given to Author or given to the electronic, print, film or live performance media, reviewers, or other free copies given to distributors, wholesalers and industry buyers.  Royalties are only paid to Author when publisher consumes a sale receiving payment for such sale.  Author is not paid royalties for any bad debt. 


D.      Royalties are paid at the same stated rates herein in United States currency dollars regardless of country or nation the sale originated or was consummated.  Exchange rates risk & reward is the Author’s responsibility to accept, as is, the currency rate at the time of Publisher’s payment/deposit into a USA bank account in US Dollars.  Maintaining bank account is Author’s responsibility and at Author’s cost and includes beneficiaries or other assigns.  


E.       Publisher agrees to render semi-annual statements of account due ninety days after the half has ended for books to clear and allow for late payments. Ordinary and extraordinary late collections shall carry forward to indefinite accounting periods.  No statements required if no sales in the accounting period. 


F.       Shipping and handling or other erroneous profits earned by Publisher are not subject to royalty income when calculating any royalty payments.  Royalties are only paid for Works sold and payment is received to Publisher from the Buyer for that Work.


G.      Royalties to author shall not be spread forward between tax years, so as to limit royalties in a tax year.   Publisher may, as a courtesy do so, but is not obligated to. 


H.      Assignment of royalties may be assigned to another person or entity upon written request of the Author once per year.  In the event of death or disability of recipient or valid emergency, assignment may occur more than once per year.  Assignment recipient shall retain a US bank account to accept deposits in US funds from the Publisher otherwise, Publisher will withhold funds until compliance.  Assignee will forfeit interest accrued during the holding period.


I.        Royalty reductions may apply in special situations.  Refer to Royalty Reductions paragraph.

 2.        Subsidiary Rights & Special Sales.   Publisher shall have the exclusive right, at the Publisher’s option, either to license the rights of publication to domestic or foreign accounts, sell copies or license the Work to a book club or with other distribution avenues, firms and entities and Author retains no right of approval for such sales to commence or cease.  If rights are so licensed the Publisher agrees to pay Author ten percent of the Publisher’s net receipts after deductions of the costs of any necessary manufacture, freight, co-publishing costs, advertising or other expenses arising from such subsidiary or special sale.  For regular editions copies sold to a book club, the Publisher agrees to pay the Author ten percent of the royalty paid by the book club to the publisher.  Publisher is entitled to decide whether to license secondary subsidiary rights to third parties or to exploit secondary subsidiary rights on its own initiative on a case-by-case basis.  The following subsidiary rights may be licensed by the party indicated and the proceeds divided as specified herein: 


Subsidiary Right                                               Right to License        Division of Proceeds

                                                                            Author     Publisher        Author     Publisher

Book Clubs______________________________            ______     ___X___    __see royalty rate__  

Foreign Rights __________________________            ______     ___X___     __see royalty rate__    

Catalog & Mail Order Entities____________               ______     ___X__      __see royalty rate__     

Abridgments ____________________________           ______     ___X__      __see royalty rate__    

Reprint by other publisher _______________             ______     ___X__       __50%__    __50%__     

Serializations ___________________________           ______     ___X__       __50%__    __50%__     

Syndications ____________________________          ______     ___X__        __50%__    __50%__     

Advertising______________________________          ______     ___X__       __50%__    __50%__     

Commercial Merchandising_______________           ______     ___X__      __50%__    __50%__

Motion Picture __________________________          ______     ___X__       __93%__     __7%___

Live Stage Play __________________________         ______     ___X__       __93%__     __7%___

Electronic Version________________________           ______     ___X__      __see royalty rate__  

Future Technology Version________________          ______     ___X__       __see royalty rate__  

   Publisher shall have all rights pursuant to this paragraph unless Publisher is in default of its obligations under this Agreement. The rights and the right to license any and all subsidiary right not set forth in this Paragraph is retained by the Publisher. Licensing income shall be divided as specified herein with any reductions for expenses.   Licensing income shall be collected by the Publisher authorized to license the right and the appropriate percentage remitted to Author or Author’s Agent pursuant to terms in Royalties paragraph within 90 days of receipt.  Foreign rights include the right to license the Work to a foreign publisher or other marketable sources, however, Publisher is under no obligation to license the Work to a foreign entity or a book club whether in the United States or any other nation or country.

  Now you have an idea how involved the publishing contract is and what it looks like.  A writer should not rely on his agent to decipher all the contract terms and conditions.  You must learn about the publishing industry if you wish to be successful.  Countless authors have been used, abused, taken, cheated from unscrupulous agents and publishers due to faulty contracts, verbal assurances, etc.  You can hire an attorney, but make sure he is reputable and familiar with publishing law.  Again, it takes money to make money; editing fees to get your book published and now attorney fees to review your publishing contract!  If you study publishing law - which is remarkably easy to do with the books on the market today - you can review and approve the contract yourself.

  Keep in mind that each publisher will require a different Grant of Rights, terms, conditions, etc.  If you compare contracts from two different publishers one may seem better than the other, but there are many factors to consider to realize one is truly a better deal.  A publisher that pays an advance with a higher royalty rate may seem great, but you may never earn a dime beyond the advance as most authors rudely discover.  Agents love publishers that pay advances, so your agent will steer you to that publisher.  But that same publisher may take a book off the market just to keep it off the market so it will not compete with their bestseller.   They may be a machine that launches books and backlists them like a bad habit.   It's rough out there. 

  Make certain you have a Reversion of Rights clause in any contract you sign.  This way when sales of your book fall to a specified level of sales, you can withdraw your book from that publisher and offer it to another publisher.   If not?  You lose your book!  The publisher owns it for the full term of the copyright and does not have to return it to you or pay any royalties if they don't sell the books. 

  What if you make a mistake and approve a contract that was not such a good deal?  Instead of filing a lawsuit that you can lose and have to pay tens of thousands of dollars in legal fees and court costs, just chalk it up to experience and make corrections on the next book contract.  Live and learn.   Basically, every writer needs to start somewhere, somehow and a new writer will rarely have the clout to alter a publishing contract to any large degree.  

  The terms and conditions you see in a publishing agreement is on the most part not negotiable for new authors.  Sign it, get published, write your next book and negotiate better terms and conditions the next time around.  Once you are published it is easier to obtain another publisher to pick up your next book or obtain better terms with your current publisher.  Getting published the first time is the big hurdle to overcome and those with edited manuscripts are the authors who win.

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