Category Archives: contracts

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The acceptability clause

There are many clauses in publishing contracts that can be confusing to a first time author and that need clarification.  Most of these can be negotiated by the agent (on the author’s behalf) and the publisher.

The one clause, though, that can be truly disturbing is the “acceptability clause” because it states  that the sole decision as to whether a manuscript is acceptable or not is the publisher’s.

Usually we are able to get an addition to the clause that says that if the publisher finds the manuscript unacceptable, it must provide the reasons in writing and give the author the opportunity to make the requested changes.

Most of the time (I estimate over 95%), the publisher and the author work out their differences and the book is published. There are occasions, however, when publishers arbitrarily decide, for whatever reason, that they no longer want to publish the book they have contracted for and they reject the delivered manuscript and demand that the author return the advance already received.  In that case, if the author refuses to return the money, the publisher will not release the author from his or her contract, thus preventing a future sale of that project.

Sadly when this happens, the only recourse an author has is to seek legal counsel, which is expensive and which does not  guarantee that the author will win.  Still, the publisher generally doesn’t want the bad PR a lawsuit would bring and so an author taking this route—in an extreme situation—might, in fact, either get his or her rights back or the publisher might decide to publish the book after all.

The bottom line here is that the acceptability clause is an important one and should be taken very seriously by everyone.  Authors are required to deliver their manuscripts on a certain date.  If an extension on the delivery date is necessary, authors should notify the publisher that they will be late, why they will be late and, on occasion, show progress on the work they are doing. Extensions are usually granted unless there is a timeliness factor due to the subject matter of the book.

Looking around for a comprehensive  piece on the acceptability clause, I found this from my agent colleague Richard Curtis’ blog.  It covers the subject very well and it’s worth reading, especially by first time authors.

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Sublicenses, the Matryoshka of Publishing

One of my favorite podcasts is Stuff You Should Know, from the people at How Stuff Works.  Each episode hosts Josh and Chuck give a primer on a different subject, on topics as varied as Jim Henson, gambling, sea monsters, cinnamon, boomerangs, The Hum, and leper colonies, and that’s just in the last month.  Sometimes they’re serious.  Sometimes they’re ridiculous.  But they’re nearly always fascinating.

Photo by Salvatore Vuono courtesy of freedigitalphotos.net

Photo by Salvatore Vuono courtesy of freedigitalphotos.net

While I can’t promise to ever be quite as entertaining, one thing I can do is explain how some of the facets of publishing work.  I’ll start today with sublicenses—something I’m called on to explain fairly regularly—but if there are any other things about publishing you’d like to understand better, give me a topic in the comments and I’ll do my best to explain it or ask a colleague to take it on.

As with most things, there are exceptions to every rule, but here’s how sublicenses typically work:

So what’s a sublicense?  Basically, when you sign a deal with a publisher, you grant them some rights and reserve others to yourself.  (Those others are the ones that your agency would represent for you, which is where my job as Subsidiary Rights Director for DGLM comes in.)  So let’s say you sign a deal with Random House, and in that deal you’d generally give them print book rights and e-book rights, and you’d generally keep multimedia and film/TV rights.  Other things will be a part of the negotiation your agent is doing, like audio rights, translation rights, and the breadth of the territory granted to the publisher in English.  So let’s say you grant translation rights to the publisher as part of the deal.  That means that the publisher is the party empowered to sell those rights to another publisher.  When you do your deal with Random House, that’s a license.  When they sell your French rights to, let’s say, Hachette, that’s a sublicense.

That part is relatively straightforward. The thing that tends to trip people up is the money.  Now in your contract with Random House, terms will be set for how you earn money on that sublicense. Typically, Random House is going to get to keep 25% for their efforts.  The other 75% is for you, but it’s not really going straight into your pocket.  When Hachette pays Random House, 75% of the money goes into your royalty account and works to earn back your advance.  Advance with RH already earned out?  Great, then that money is coming your way soon.  Advance with RH still left to earn back? Then the money isn’t going to leave Random House. The French rights are part of what they bought from you in that advance, so they can use their French deal to earn back that investment.

Think of sublicenses like Russian nesting dolls full of coins:  your deal with Random House is the biggest of the dolls. When that dolls is full of coins—meaning once your royalty account has earned as much as they advanced you—the coins that don’t fit (aka, the amount above the amount previously advanced to you) come spilling out and get paid out to you!*  But inside your deal with Random House is Random House’s deal with Hachette, and that doll starts off empty, too.  Hachette paid an advance to Random House, which added to the coins inside the larger doll, but then the Hachette doll has to fill up with earnings from the French sale of the book.  Once the Hachette doll is full, coins spill into the Random House doll, and if the Random House doll is full, they spill over to you.  And yes, there can be a third doll inside the Hachette doll, where Hachette sublicenses, say, French audio rights.  As you might imagine, the French audio nesting doll is pretty tiny and doesn’t always exist.

So, does that make sublicenses clearer?  Or are you now just wondering why I think nesting dolls have coins inside them?  Any other questions about sublicenses?  And what topic should I tackle next?

*We don’t really pay our clients in coins.  But if they chose to withdraw their money from the bank in coins so they could Scrooge McDuck it up, we would never judge.

 

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Royalty rate questions from the interns

I’ve looked over so many royalty statements that sometimes it’s easy to forget that not everyone understands them. And believe me, there are times when royalty statements are very, very hard to understand. But I realized the necessity of this post when going over royalty statements with a few interns, and they had the same basic questions I first had.

How do publishers determine royalty rates?

Fair question. The answer is that they don’t. Not alone, at least. Royalty rates are outlined in the author’s contract, and if the author has an agent, it’s his or her job to negotiate the terms of this contract on behalf of their client, including the royalty rates. This also partially answered their second question.

Are hardcover royalties handled differently than e-book royalties? And what about audio royalties?

Well, yes, they are, and kudos to the interns for inadvertently asking a contentious question concerning a longtime issue in the publishing industry ever since the ascent of e-books. Although all royalty rates are outlined in each individual author’s contract, the industry standard generally dictates a royalty rate around 10-15% of the list price (retail price) for hardcover editions of a book–7.5% for trade paperback and 8%-10% for mass market. E-book rates hover around 25% of the net, meaning 25% of the publisher’s profits. Although the latter might seem more beneficial for authors, e-books are priced lower than print editions and have significantly lower production costs, which if we were to do the math, results in less earnings per unit.

And if considering a wide range of royalty rates for multiple editions of a book isn’t enough, many contracts have royalty escalators and different rates for exports, foreign sales, and subsidiary rights.

Confused yet? Want to know more? Well then let me hear your thoughts: post your question in comments section!

The longview…

It’s probably the worst kept secret in publishing that DGLM has been successfully repping a lot of Indie authors.  In fact, the recent RT conference was filled to the rafters with our clients (prompting a delightful voicemail message from Larry Kirshbaum of Amazon to Jane…but more on that in another blog post or over drinks at BEA).

We’ve learned a tremendous amount from these authors about how to successfully self-publish and these lessons have  direct and significant application to traditional publishing.  The smarter houses have committed to a partnership with us and our clients, showing tremendous vision and flexibility in the way they have modified their systems to accommodate the special needs of people who can sell oodles of books on their own, thank you very much.

Simon & Schuster, HarperCollins, Grand Central, and PenguinUSA have all been aggressive in offering huge deals that are enticing to our authors not just because of the money involved but because of their afore-mentioned flexibility in terms of publishing schedules, contractual terms (including options and non-compete clauses), marketing and promotion, and their genuine desire to help grow these writers’ careers.  And, here’s where the partnership aspect is important.

Some Indie authors are looking at what these publishers are offering and scoffing, especially if the advances being discussed are less than seven figures.  They think, and rightly so in most cases, that they can make that money themselves without giving such a huge percentage to a third party.  They also feel (again, rightly so in most cases) that they can market themselves more effectively than a house that is publishing hundreds, if not thousands, of books per year.   But, as we’ve often discussed on this blog, that’s a shortsighted view because of the intangibles.

The beauty of and frustrating thing about publishing is that it has never been an exact science—and given how many English majors work in this business, that’s hardly surprising.  So much of what succeeds in our world is due to serendipity and that most fickle of all phenomena, taste, that it’s impossible for a publishing “formula” to  show  a higher rate of success than, say, Derek Jeter’s batting average.    But, despite that, publishers offer a wealth of intangibles that are actually quite measurable over the course of a career, among them editorial support, an understanding of the book buying marketplace that is more macro than micro, a team of professionals whose job it is to make the author look good, a belief in books that is almost evangelical, and a brand identity that has evolved over centuries and that will continue to do so.

So, when an Indie client says to us, what can Publisher X do for me that I can’t do for myself, my answer would be, they can help you establish and grow your career with a goal toward longevity.  Given our success with negotiating non-compete and option clauses that allow Indie authors to continue to self-publish while they are working with a traditional house, I honestly don’t see the downside to also having a publisher’s imprimatur as an adjunct to your own publishing efforts.  I do, however, see how having books published by S&S or HC or GCP can enhance your brand and raise your visibility among readers.  Given how crowded and competitive the Indie marketplace has become, I would be heartened to see that an author has been or is published traditionally when deciding whether to buy his/her book.  I think many readers feel the same.

The bottom line, of course, is that as with all of our clients, we want our Indie authors to have long, prosperous publishing lives and we feel that, under the right conditions, a trade house can be an invaluable partner in achieving that goal.    I’d love to hear what you all think about this because it is a subject that I’m becoming very passionate about.

 

 

Penguin sues authors

When I started working in publishing (roughly 100 years ago) the business was still one of “gentlemen’s agreements,” of editors coddling temperamental authors, and agents selling books based on a persuasive conversation rather than book proposals (look up Swifty Lazar, if you don’t believe me).  Too, it was always a tenet of agenting that despite the terms in a publishing agreement, there were ways around everything, from an onerous option clause to the repayment of an advance for a cancelled book.

This all worked, of course, because publishers have traditionally been unwilling to persecute their authors (very bad p.r.).  Given the conventional wisdom that authors are fragile, creative souls with no real grasp of practical details—like deadlines or basic accounting—even with cutthroat agents involved, the optics of going after someone publicly for non-delivery and non-payment did not work in a publisher’s favor.  So, often, authors got away with not repaying advances based on flimsy loopholes and how skilled their agents were at scaring or shaming the publisher.

But, times have gotten tough in recent years.  Margins are tighter as a result of the e-book revolution and the Justice Department has decided to stick its nose into publishing practices that many argue it has no knowledge of or understanding about.  So, it’s not entirely surprising that Penguin has taken the rather shocking step of suing a number of high profile writers for non-payment.

On the one hand…well, yes.  If you sign a contract that specifies that you need to repay an advance under certain conditions and those conditions come to pass, any legitimate business would go after you to recoup their money.

On the other hand, this makes me sad, because it feels like yet another of publishing’s intangibles has been sacrificed to the bottom line.   To me it seems that this takes us many more steps away from the days when publishers went out of their way, financially and otherwise, to enable an author—even the most wayward of them (see The Lost Generation)—to thrive creatively and produce the kinds of literature we’re still reading today.  Did they lose some money? Sure, but I’m pretty certain Scribner (and Random House and S&S, etc.) is still collecting on its investment.

What do you all think of this action by Penguin?

 

 

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The ominous delivery date and what happens when you don’t make it

Most writers know that as a part of the book publishing negotiations, a delivery date is established in the publishing contract.  I usually leave this date entirely up to my clients, telling them that they should take a realistic amount of time to complete their manuscripts.

Most opt for a year or twelve months from their receipt of the publisher’s on-signing money.  Sometimes they will go for less, especially if the subject matter is a timely one or if there is a competitive book in the works.

And then there are those who take well over a year to complete their book and then wonder why they have to wait yet another year before it is published.  (This of course is the way traditional publishing works – a general rule is that there is a 12-months lag between manuscript acceptance and book publication).

But what happens when the author is late?  I thought about this when I ran across this piece which appeared in last Thursday’s Wall Street Journal.

Usually the first thing that happens when  authors tell me they are going to be late with their manuscript is that I go to the publisher and with the author’s agreement establish a new delivery date.  “Extensions” as they are called are not at all unusual, but the publisher is generally not willing to grant more than one or two at most.  After these are exhausted, more often than not, the publisher will cancel the contract if the manuscript has not been delivered, and as a result, the author has to pay back all of the monies he or she has previously received.

Sometimes though, as in the piece above, the publisher tolerates an author being late, hoping that when the manuscript is finally delivered, it is so good that it is well worth the wait.  I actually have a project which is currently about seven years late, so late, in fact, that the acquiring editor left the company for a new career for a number of years and then decided he really wanted to be an editor so he returned to the same house to find that the manuscript was still not delivered.  This is one of those cases where the hope is that the final result will improve with age.

My own feeling about late deliveries is that they are unfortunate but often unavoidable.  The most important thing is that the author do everything he or she can to effect the ultimate delivery of a solid manuscript which the publisher will be happy to publish – even if it is seven or ten or fifteen years late.

I wonder what you think about the question of the timeliness of manuscript deliveries?  Should the author be allowed an unlimited number of extensions?  Should they be penalized for being late, even once?  Or is a good book worth the wait?

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Know when to walk away, know when to run…

I warn you, I’m feeling crabby this week.  Christmas is in ten days and I’m woefully behind on my shopping and general preparedness.  Sure, I’m not like Jane who’s finished buying everyone’s holiday present by July 4th weekend, but I like to give myself a little leeway and not have to deal with the last minute rush to buy, wrap, and decorate.  This year, I’m so swamped, I can’t even run out during lunch to visit the shops in Union Square Park.

I know, I know, I should be grateful that business is booming at a typically dead time of year.  And in theory I am.  Unfortunately, I’ve been busy with a slew of difficult contract negotiations that have me yanking at my already unmanageable hair.  In general, difficult contracts don’t make me all that crabby.  The difference right now is that the negotiations are unnecessarily difficult—lots of lawyerly requests for language that does nothing but overgild the lily  without adding anything of substance to the deal.  Or, worse yet, a negotiation that has taken weeks of pointless back and forth for something we advised our client to walk away from in the first place.

To be clear, we don’t often advise our clients to walk away from any deal that has the potential to make money for them.  That would go against their interests and ours.  But we draw the line at allowing our clients to be treated unfairly or exposed to onerous terms and liabilities without a strong word of caution and a push in the direction of “run, don’t walk away from this deal.”  It pains us when our advice is not heeded because, usually, we’re right.  And even when the most dire consequences do not materialize, a process that starts out as contentious and unreasonable usually continues to be so up until the bitter end…of the book project that is.

So, while we like to keep our clients busy and happy and in funds for their own Christmas shopping, sometimes the only thing that makes sense to us is for them to walk away no matter how tempting it might be to take a bad deal.

Here’s my question to you guys:  If your agent is suggesting that you walk away from an offer—whether it’s a publishing offer from a house that wants your first born in exchange for print publication of your work or a chance to collaborate with a celebrity housewife on her juicy tell-all, say— and you are not in desperate financial straits that leave you without choices, would you listen and take his/her advice?

P.S.  Boy, you guys really don’t have any interest in headlines, do you?  I’m gonna call it a tie between Tamara and Sarah.  Send me your addresses at miriam@dystel.com for your prizes, ladies.

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Yikes!

by Lauren

As we leave you for the holiday weekend, a cautionary tale:  Apparently Penguin is suing an author to recover the signing payment on a contract they’ve canceled for failure to meet a deadline.  It must be said, that deadline was in 2007, and there were presumably multiple extensions that got them here, so Penguin has been quite accommodating.  And that signing payment is not exactly chump change.

As a person who is ever so slightly panicked at the prospect of finishing my to do list before leaving for the holiday weekend, the notion of breaking a contract for non-delivery strikes fear into my heart, but for those of you who need that extra bit of danger before something seems real, it seems this might just be it.

But hey, a three day weekend is a great time to hunker down and write, right?

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The importance of reading your contract

by Jane

Over the past months, we have spoken of the many reasons an author needs an agent, and this week, once again one of them became crystal clear.

On Thursday, June 10th, The Authors Guild sent out an alert to its membership that former Bloomberg Press authors should not sign a letter they had received from John Wiley & Sons which is actually a contract amendment that The Authors Guild maintains will make their contracts with their publisher less favorable to them in numerous ways, which Wiley disputed.

Clearly, if an author didn’t read the letter carefully and understand what it was and what effect it would ultimately have if signed, he or she would most likely have been giving up something unintentionally.

This has happened time and again recently with publishers sending authors letters trying to add electronic royalty rates or alter those that are currently in their contracts. In an age of enormous change in our business, I know this kind of thing will only continue to happen.

Which is why it is all the more important for the author to have his or her agent carefully review all of this correspondence and analyze its effect before the documents/letters are signed and sent back to publishers. Even many lawyers often don’t pick up the nuances of publishing contracts and amendments—another reason having a literary agent is necessary.

I would love to hear your thoughts on these contractual shenanigans and whether you think you have been duped in the past.

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Why do you need an agent?

by Jane

So back to that age-old question again, and an experience I had last week that provides the response.

I received a call from a man who had already sold his book to a publisher (he had not submitted it to multiple publishers, and so really had no idea what it was worth) for a modest sum and had located and “hired” a movie agent through the internet. He had found an attorney (I am not sure how) who had “reviewed” his contract for him.

When he called me, he wasn’t sure why–he had just been told by his editor and publisher that he should have an agent.

I agreed that I would be interested in helping him, and he instructed his attorney to send me a copy of the contract and to talk with the movie agent to tell him that I would be on board.

But then I looked at the contract and I was stunned. There was a huge problem on the very first page; knowing that we didn’t have a signed agency agreement, I didn’t read further but I am absolutely certain that there are other major problems in that contract that will lead to problems down the road.

Ultimately, this writer told me that he had decided not to use an agent, after all. He thought there was no need as the publishing contract was already signed. I wished him well, but thought to myself that he had made a very big mistake at the beginning and hoped that he doesn’t rue the day he made this decision and that the movie agent is successful in helping the book become a film.

Vetting contracts, of course, is not all we agents do. And, as you’ve gathered from our posts on this blog, the sale of a book is just the beginning of our work with our clients. But, this is a good example of why it’s important to have an agent in your corner.

I am curious what you think about this experience and look forward to hearing.