Some thoughts on contracts

Over the last week or so, there’s been a lot of discussion over contract terms: what’s fair or not fair for the author and publisher. I’m not going to rehash what has been said, at least not right now. For one thing, I’m not looking to start a flame war. For another, well, I have friends who have been caught in the middle of the disagreement between the two sides and I don’t want to make them any more uncomfortable than they already are. Besides, I’m sitting here waiting for the mechanics to finish with my car and know that will be more than enough confrontation for the day.

So let’s talk contracts in general, starting with two very important things a writer needs to remember.

First is to understand what a contract is. In basic terms, it is an agreement between two persons or entities to do/not do something. In return for this, one party gives the other some form of consideration. In publishing terms, in return for delivery of the manuscript, the author will receive some form of payment from the publisher and will allow the publisher certain rights to his work for a certain period of time. (Note here, I am not an attorney, nor am I giving legal advice here.)

Second, money flows to the author and not from him, especially when you have signed with a publisher. The publisher is the one taking the risk and part of that is by paying for editing, copy editing, proofing, cover design, etc. That is their job. If you are asked to pay for any of that, or if the contract says the publisher will recover those fees through sales before paying out royalties, think long and hard about whether the end benefit of the contract is worth it to you.

So, when you are offered a contract, the first thing you need to do is make sure the terms you’ve discussed with the publisher are included in the contract and that nothing you don’t agree with have been included. If you are like many of us and your eyes glaze over when exposed to legalese, you need to get an attorney familiar with IP contracts to look it over. In fact, it’s a good thing to do even if you don’t glaze over.

I’m not going to list each and every thing that ought to go into a contract. What I am going to do is discuss a few points you need to be aware of. The first concerns what rights you are giving up to the publisher. Is the publisher only asking for print rights or digital or all rights, including to technologies not currently in existence? There are publishers out there that will try to grab up all rights, including audio and film as well as unspecified rights. Believe me, publishers want to hold as many rights as possible and will fight to keep you or your estate from trying to exercise rights that weren’t specifically granted to the publisher. All you have to do is look at how some of the major publishers have been fighting to hold onto digital rights to books they contracted for long before e-books were even thought of, books that have not yet gone out of print.

The next thing you need to look for is the term of the contract. You do not, in my opinion, ever want to give up your rights for the length of copyright. Yes, there are contracts that are trying to make you do just this. What constitutes “in print” should be clearly defined as should the mechanism for getting your rights back. It’s not enough that there is vague language there or that your editor says “Don’t worry. All you have to do is ask for your rights back and we’ll give them to you.” It needs to be in clear language as part of the contract.

Payment. This goes back to the “money flows to the writer” adage. Publishers have traditionally paid advances to authors as their consideration for the author assigning certain rights over to them. Then, after a book had “earned out”, the author would receive a royalty based on contractual terms. That still holds for most legacy publishers. However, in the age of digital publishing, there are publishers that don’t offer advances. To balance out the lack of an advance, these publishers usually offer much higher royalty rates than the legacy publishers.

Payment times. In other words, how often will your publisher report out sales and pay royalties (if any are due)? There is an increasing number of publishers, mainly e-publishers, that pay on a monthly basis. This is still a very small number, but it does appear to be growing. Most publishers, especially e-publishers, report on a quarterly basis. Some report semi-annually. I know of at least one publisher that reports only once a year. For me, that could be a huge sticking point. I want to know how my work is doing on a regular basis and I want payment more than once every 12 months — assuming payment is being made.

There are a number of other things you need to make sure are included in the contract, including but not limited to what happens if the publisher should go out of business. The key here is to remember that your work is your money maker. While it is great to be offered a contract, especially from a major publisher, you can’t let the glitter of success blind you to the business realities. You have to protect yourself.

So, what do you need to be on the look out for?

For me, it’s simple. You want to make sure that you maintain the rights to your work, your characters and settings, unless you are being paid damned well to give them up. If you are presented with a contract that states that you agree that the piece becomes the copyrighted property of the publisher, there should be a hefty payment up front. At least that’s my opinion. Why? Because what the publisher is actually doing is asking you to write for hire.

So what is write for hire? Here is a pretty clear explanation of it: When you write a work for hire, you are writing a piece for a company. They pay you (and should pay you quite well) – after which, the piece becomes theirs completely. You no longer own it. You can’t resell it or write a derivative piece from it. It’s not yours anymore.

Sarah has done write for hire. She can tell you more about it, but basically you agree to write something. You get paid a set fee for it. It now belongs to the publisher. No muss and no fuss.

You’ll see this done when there is a series and the publisher has several different authors working on it. There is a “house” name for an author and those hired to write the novels are not listed as authors. That credit goes to the house name. You’ll also see it in some series where there is a shared setting or “universe”. The key is that, if the author is not getting his rights to the story or novel back, he gets paid up front for his work.

Now, not all series or shared settings or “universes” do it this way. Some will pay an advance and royalty or strict royalty. However, most of those do not grab up all the rights to the story and do allow the story to revert back to the author at a later, set date. The copyright for the story rests with the author and both parties will, hopefully, benefit from the business relationship.

Also, be mindful of the royalty clause in any publishing contract. Do you earn royalties based on net or gross? Is it after “expenses” have been recovered? If it is either of the last two options, those terms should be defined in the contract. Frankly, if the contract says you, the author, won’t earn anything until the publisher has recovered its costs in putting out the book, you’d better have gotten a really good advance. Otherwise, you may as well accept you may never see a penny from the book.

Finally, the more attachments and exhibits to a contract, the more wary I become. A contract is a two-way street. It should benefit both parties, not just one. Writing is your business. You should treat it as such. As an accountant, you don’t agree to do a client’s books with payment coming only if you can get the IRS to give them a huge refund. As a mechanic you don’t agree to do a customer’s maintenance for free on the promise they will refer you to their friends. So don’t give away your hard work as a writer without fair compensation unless you think the benefit of doing so outweighs the negative of not getting paid.

14 comments

  1. Amanda, I am curious as to whether authors are able to negotiate a time limit or trigger after which rights revert? I dimly recall reading somewhere that there are or were contracts that allowed an author to regain rights if the book had been out of print for some specified period of time. Someone with bargaining power or the willingness to walk away might try to have that be a term of the contract.

    Also, just as an observation, I saw that Smashwords has an indemnification clause, which was kind of scary and seems excessive.

    1. Laura, all contracts that aren’t “write for hire” should have a reversion clause in them. With legacy publishers, it usually occurs when a book has been out of print for a certain period of time or has sold less than a set threshold number. The problem with this is how they define “out of print”. What a lot of authors are discovering now is that what they say in the contract constitutes out of print isn’t necessarily what they are trying to claim now. The same applies to not selling to a certain threshold. I’ve heard a number of stories of authors who have had to get attorneys to get their rights back even though they have royalty reports showing now, or minimal sales for the period specified by contract.

    2. Prior to signing on the line which is dotted, everything is negotiable. Well, in theory, anyway. A publisher may be unwilling to change language, and that might be a red flag, but clear demarcations of what a time limit should be or when rights revert, how to notify the publisher that you are exercising your contractual right to revert, etc., would be good things to have, and a good IP attorney with some experience in licensing contracts should be able to translate from contract language to layperson.
      Remember, too, that a contract sets rules that should be easy to follow. What came to mind as I was reading is that it’s all fine and good for an editor to say “We’ll give you back your rights for the asking,” when they’re negotiating the contract with you, and they may truly mean it. But in five years, when they’ve switched jobs and are at another publishing house, the subsequent editor will probably have no idea that the “ask and we’ll give you back your rights” was intended to be part of the agreement. Without that being spelled out in the contract, it’s going to be really hard to enforce that against the publisher.

      1. Zachary, you are right — in theory. In reality, there is so much boilerplate in contracts, especially publishing contracts, that nothing is clear cut. Then you get to the double problems of publishers adding clauses to contracts and authors not realizing it because they don’t read the things and signing because, well, they read an earlier contract for another work and it was all right. The other side of the problem is the ambiguous language publishers put into the contracts, making it difficult for anyone to find anything clear cut. Also, I’ve heard from others that they have sent their notice of reversion back to the publisher and it has been ignored. Okay, they can go ahead and try putting the book out on their own but the problem is Amazon will bounce it back and it up to them to prove copyright is now theirs.

        As for negotiation, it doesn’t happen — at least not for anyone but best sellers. Publishers — and some agents — simply say “here’s the contract. Sign it. Don’t like it, go find someone else.” Faced with that sort of attitude, too many authors will just sign, hoping they can negotiate better terms the next time they sign with the publisher.

  2. I recently signed a contract with a writer/editor who owns the copyright to a series I wrote some fanfic some years ago. Now he has signed a five-book contract with me to better align my stories with his and publish them via his small press as quality hardbounds and e-books. We have been going around on the subject of royalty frequencies and I’m holding out for monthly on the e-books and semi-annually on the HBs. What are your thoughts?

    1. Gina, the problem with monthly comes in with how he is distributing the digital versions. If he is using a repackager like Smashwords or Ingrams or one of the others, then he may not be getting a monthly report. The third party packagers are constrained by how often the e-stores report to them. Then there is the delay in reporting back to the publisher. That’s why I’ve always warned folks that their Smashwords reports for their premium catalog might be as much as six months or more late.

      That’s a long winded way of saying that if this is your only real sticking point and he wants to do quarterly, I’d go with it. But that’s just me. I wouldn’t accept anything longer than quarterly. Of course, all of this also depends on what your financial needs are and what the payment threshold is.

  3. I remember Jim Baen saying, once, that if either party to a contract intends to cheat, no amount of legal terminology will prevent it. And that if both parties intend to honor the contract, all that is necessary is that the terms are clear and understood by both parties.

    However. I don’t know if it was you, Amanda, or Sarah, who mentioned just a few days ago, that you also need to think about what happens if the Publisher goes bankrupt, dies, or sells the company. Will the same contract protect your interests when the other party is suddenly a mega corp with an entire legal department? Or the first party’s cousin Boris, who knows nothing about publishing, but all about creative accounting?

    Gah. And then there’s all the online bookstore/distributor/publisher agreements with clauses about how they can change the terms of service or whatever.

    There’s sharks in the water. Don’t bleed.

    1. Pam, all of that is why I recommend you have an IP attorney look at any contract. I also tend to warn folks away from contracts where none of the terms are negotiable. That just shows the other party isn’t interested in doing anything but making sure his position is the one the contract protects. I don’t know about others, but I feel a contract is a two way street and should protect both parties. That’s why I get so upset when I hear about contracts that take advantage of writers.

    2. What Jim Baen said may be true as a matter of human nature; but, the contract is there, not only as a checklist of the obligations you intend to honor, but as a means of getting what you are owed if someone cheats. You may have to pursue your remedies with a lawyer and in court, but you don’t have much recourse against a cheater if you don’t have a contract.

  4. My local IP attorney says the thing he hates most is when people show up with a horrible contract and beg him to find a way to get them (and their book/photo/music/play/what-have-you) out of it, or to change the appalling clauses they signed three or four years ago.

    Everything Amanda, Kris Rusch, Sarah, and others have said.

  5. Thank you, Ms. Amanda, for writing a quick overview of such a terrifying subject. And thank you Laura, Zachary, Gina and Pam for your input as well. I really enjoyed your comments, Ms. Pam about Mr. Baen take on contracts and your last remark about blood. My husband always says locks just keep an honest man honest. Guess that’s true in the publishing industry too.

    All of this talk about dishonesty/self-serving people in the publishing industry is discouraging for a naive and too-trusting newbie who wants to get paid for writing (tis why I’m here, looking for tips and tricks from folks with more experience…) without falling into the numerous pits and traps set out for me by unscrupulous people. I will admit a part of me is wondering why the heck I am bothering even trying to make my way through such a quagmire when there are less complicated ways (that have a lot less inherent heartbreak) than writing. This is one of the many issues that set writers apart from ‘dreamers’. That and the hours and hours of ‘real work’; putting words together in an interesting and coherent fashion.

    I will conclude this post by thanking you again. I see all of you as bright beacons of knowledge in the murky world of publishing and I am very grateful for this blog that allows a newbie like me to hear from authors who are ‘making it’ against the odds. Perhaps one day I will be able to join you in saying “I get paid to write”.

  6. Samantha, don’t get us wrong. Not all publishers are like that — most of them aren’t. It’s just that contracts are traditionally written to protect one side more than another and authors aren’t, for the most part, well versed in IP and contract law. That’s why i always recommend you have a second set of eyes look at any contract, especially if you start glazing over reading the legalese.

    If you really want to write, do it. You can try the traditional route but, as you do, also consider looking at options like going with smaller presses and even going indie. The world is wide-open to writers right now and it is an exciting, if a bit terrifying, time. Always remember that step one is to write. Step two is to finish what you are writing and step three, after edits, is to send your baby out into the wild. It is up to you to decide what course your work takes.

    Good luck and welcome to the maddening, frightening and wonderful world of writing!

    1. Thank You Amanda! I am working on ‘step one’ whenever I get the chance so I can get to ‘step two’ more often. I have been published in two literary magazines (once as a runner up for a scholarship, etc.). Oh, and I had a poem published when I was in 4th grade–about it for for my ‘works’.

      I will definitely be getting several sets of eyes to view any future contracts including a lawyer that specializes in IP, but I’m a long way from that.

      Another thing this newfly has always found baffling is that there is no set training to be an editor or a literary agent. Both jobs take experience of course, but there isn’t a ‘defined educational pathway’ for either. I have also heard/read that if you want to get in one of the ‘big’ traditional publishers, a ‘good’ agent is getting to be more essential because of all the ‘pressures’ in the publishing industry. This is after a decade or two span in which the ‘big houses’ were more open to ‘un-agented’ works. All the ‘iffyness’ makes my head spin.

      Maybe I’ll go Indie and forgo all the ‘traditional publishing’ chaos. Well, gotta get through steps one and two first…

      Happy Writing and thanks again for the encouragement,
      SheBear

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