Book publishing contracts

Problems with Publishers' Contracts
A Report from Adler & Robin Books, Inc.

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Don't sign anything you're unsure about.

Book publishing contracts are fraught with pitfalls for writers. As you would expect, contracts are written from the publisher's perspective, and for the purpose of benefiting the publisher.

Contracts are often the sum of a publisher's past mistakes and problems. If something went wrong in the past--a disappearing author or a messy libel suit for example--the publisher will work into its contract clauses to prevent those problems from occurring again.

Most of the time, the process of writing and publishing a book go smoothly. Publishers recognize this, too. As a result, they may be willing to be flexible about their contracts. But you have to ask for changes. Insist, sometimes. Otherwise, you will be stuck with a bad contract.

A special warning about print-on-demand. You've no doubt heard about print-on-demand. (Print-on-demand lets a publisher print exactly the number of books ordered.) This can been a boon to writers, by keeping a book in print virtually forever. Or it can be a terrible thing. Why terrible? Let's say your publisher decides to keep a book "in print" by using a print-on-demand service. Without print-on-demand a publisher might put the book out to pasture, with the rights reverting back to you. But with print-on-demand, a publisher could keep the book "in print" forever, even if the publisher is selling only 250 books a year. (For a large publisher, selling 250 books a year for say 1,000 books, isn't bad.) For individual authors this isn't good. It's very important that you specify in your out-of-print clause that the book is out-of-print if it sells less than a certain number of copies, perhaps 1,500, over a 12-month period.

Here are some of the most egregious contract pitfalls that we see. Your contract may, or may not, have these clauses (hopefully not!) Look out for:

Too low an advance. Advances should be on par with the author's talent and credentials, the amount of work involved, and the anticipated sales.

Skewed distribution of subsidiary rights. Subsidiary rights include magazine articles, films, audio tapes, foreign sales, book clubs and electronic rights. The larger the percentage for the author, the better.

Royalty rate too low. The larger the percentage the better off the writer is. Publishers have two ways of calculating royalty rates: Net and gross. Royalties paid on net are generally half of those paid on gross receipts (which is the list price of the book.) Royalties should be paid on an escalating scale based on the sales of the book.

Advance paid in slow stages. Sometimes publishers pay the advance in four, five or six segments. The fewer are better. The final part of the advance should be paid on delivery and acceptance; never on publication.
A vague out-of-print clause. Without a precisely defined out-of-print clause, a publisher can keep your book in print forever. Why is this bad? Let's say the publisher is selling 50 copies of your book a year. That's nothing, and it's certainly not earning you much at all. (It's really bad if those 50 copies are sold at deep discount.) Fifty copies a year should be considered out-of-print. But unless you define out-of-print with some precision, such as at least 1,000 copies sold during the previous 12 months, then this clause can come back to haunt you.

Late penalties. Some publishers impose a draconian penalty for late delivery of the manuscript (or part of the manuscript.)
Book club sales don't count toward royalties. They should! Royalty breaks in publishing contracts allow authors to receive increasing percentages as more books are sold. For example, a publisher might pay 10% for the first 10,000 copies, 12.5% for the next 10,000 copies sold, and 15% thereafter. That's works in the author's favor, but publishers often don't like to count book club sales toward these breaks.
Lack of an early delivery bonus. (If there's a late penalty provision, there certainly should be an early delivery bonus!)

No requirement that the publisher accept or reject the manuscript within a given time period. And no requirement that the publisher publish the book within a given time, or return the rights to the author.

"Deep discount" starting at too low a percentage break. The so-called deep discount clause can, without much fanfare, cut an author's royalty rate in half. Publishers often put something like this into their contracts: "On those copies sold at a price greater than the Publisher's manufacturing cost, but at a discount greater than 55 percent of the Publisher's retail price, the Publisher shall pay the Author one half the applicable royalty rate." Since many --sometimes most-- books are sold to bookstores at a discount rate greater than 55 percent (or a number close to that), this clause in effect guarantees that the author's royalty rate will be half of what it appears to be. (Chains such as Borders and Barnes and Noble get steep discounts from the publisher.) It is important to try an increase this percentage.

A strict option clause. Option clauses require the author to submit his or her next proposal to the publisher; sometimes this clause can limit the author's ability to pursue his craft.

No immediate pass-through for subsidiary rights sales. If the publisher sells foreign rights to your book for $5,000, that money should be passed through to you right away, not at the next accounting period.

A strict noncompetition clause. Publishers don't want authors writing books on similar subjects, but authors need to write about what they know.

No audit clause. Every publishing contract should give the author the chance to audit the publisher's books.

No bankruptcy clause. It does happen--publishers sometimes go belly up. What happens to you, then? If a publisher goes bankrupt, the rights should revert to the author immediately.

A strict reserve against return clause. Publishers are permitted to hold a certain amount of the royalties against possible book returns from stores, but this has to be limited.

A requirement that the author repay the publisher if the publisher cancels the book.

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