How are an author’s royalties calculated?
Publishing resembles a game: the parties are aligned in some, but not all, respects. Both sides share the goal of enticing the public to purchase the book, but their interests diverge when it comes to the division of resulting revenues. Both sides want the greater share. An author’s share comes typically in the form of royalties and the basis of royalty computations, as well as the amount, deserves careful attention. A royalty based on a fixed percentage of a book’s cover price favors the author when it comes to certainty. A division of net revenues (that is, income after certain permissible deductions) may favor the publisher. Both bases are likely to permit the publisher to withhold a ppercentage ofan author’s earnings as a reserve against bookstore returns. That’s reasonable. Insist, however, on knowing each category of claimed deductibles. Resist those that are attributable to the publisher’s unpaid invoices (not the author’s fault) or reserves held for more than a single accounting period.
How often should royalties be paid?
The publishing agreement may call for royalties to be paid quarterly, semiannually or annually. Keep in mind that the longer the time between payments, the more the author steps into the shoes of the publisher’s banker.
What are termination provisions?
Termination provisions should identify each party’s exit strategy. Such provisions are typically aggregated near the end of the publishing agreement, but it is not unusual to find some scattered throughout. All should be expressly enumerated wherever the grounds for termination are discussed so that none is overlooked. An agreement may be terminated in whole or in part, and each whole or partial termination provision will likely have financial consequences that should also be explicit. By way of example, a publisher may reserve a right to terminate an agreement if an author fails to deliver an acceptable manuscript in a timely manner. An author should be able to terminate an agreement if royalties are not timely paid or the publisher otherwise fails to perform its contractual obligations.
What does a publishing agreement have to say about an author’s next work?
Naturally, a publisher wants to reap the rewards of an author’s success. Typically publishers attempt to claim a right of first refusal with respect to an author’s next work in a similar genre. “Show it to me first,” the publisher seems to be saying, “and if I’m not interested, you may take it elsewhere.” In addition, the publisher might insist on a right to match or improve on a competitor’s offer. Meanwhile, the clock is ticking, and the competitor’s interest might wane. Demand if you can that the publisher make its best offer upon initial review and not reserve a right to piggyback on a competitor’s judgment of the value of your next work. Instead of a right of first refusal, bargain for a right of first negotiation and resist any effort on the publisher’s part to impose on your next book the same economic terms that exist in your current contract.
ABOUT MITCH TUCHMAN
Mitch Tuchman is of counsel to Morningstar Law Group. Before becoming an intellectual property attorney, Mitch Tuchman spent ten years as a freelance writer/ editor and fourteen years as publisher of exhibition and collection catalogs at the Los Angeles County Museum of Art. Having been both a publisher and writer, Mitch has a unique understanding of copyright matters and helps writers and other creatives optimize the value of their works, defend their rights, and develop mutually beneficial business relationships.