Book Contracts 101, Part 4 (More Sub Rights Clauses)

January 14, 2011

Yesterday we started with the Sub Rights Clause, noting that Clause 1a lays out what some of those sub rights are. Now, we get into some breakdown of money, a subject near and dear to my heart.

1b. The Publisher shall notify the Author of the terms of any contracts or agreements entered into by the Publisher with any agent and for any grants or licenses arranged by any agent or Publisher permitted under this agreement where the Author's share of the proceeds or the royalty is or is likely to amount to $500 or more. Upon the Author's written request, the Publisher shall furnish the Author with a copy of such agreement.

Okay, two thoughts. First, I imagine that the $500 number if quite variable, and if there's actually $499 there I'd like to know about it and get paid for it ASAP rather than have it gathering interest in my publisher's bank account. Still, you've got to put a dollar figure in there and I suppose $500 is reasonable. Second, please note the last sentence of Clause 1b. I know I hope that the Publisher will provide me or my agent with documentation of EVERYTHING that involves financial agreements related to my work without my having to ask for it. Still, I suppose this keeps the paper shuffling to a minimum, although it strikes me as being a way of keeping the author in the dark. Publishers probably argue that the author doesn't need to be privy to every internal and external document related to their work. I'd actually be very interested in what anybody else has to say about this, because I don't know what the issues actually are.

1c. In the case of each of the subsidiary rights specified in clause 1a, any and all of the amount paid shall be shared 50/50, net of agents' commissions and other expenses incurred by the Publisher in selling the rights, between the Publisher and Author.

Yeah. Okay. Remember where I mentioned "standard value" back in Part 1? This 50/50 split is where we get into "standard value." Because it's totally negotiable (or is to the extent that the publisher will negotiate). 50/50 may or may not be standard, but it's probably not atypical. But it is negotiable. I'm reasonably certain that if you were a big author who almost certainly gets your books serialized and turned into audiobooks, that a 50/50 split is unlikely. For someone with little track record and even less clout, you may be stuck with the 50/50 split.

And when we discuss 50/50 splits on subsidiary rights (or any splits in general), I suggest keeping something in mind: what does the publisher do to earn 50% of that revenue? I'm not putting a value judgement on it here, but it's a question the author needs to consider. In the current publishing paradigm, literary agents receive 15% of whatever they sell on behalf of the author, so 15% is considered a reasonable agenting fee. But when a publisher basically acts as an agent by trying to sell, say, the serialized rights of your World War II book to Smithsonian or Reader's Digest, or to have your book turned into an audio version, they're asking for 50%. Does 50% seem high for an agenting fee?

Well, yes, it does to me, particularly if you then consider (if you have an agent), that your agent will then get 15% of the 50% you receive. Just a for instance here:

Let's say your book is huge and your publisher manages to sell the audiobook rights for $100,000. Basically what your publisher did was take the book or even the manuscript and show it to an audiobook company, who then agrees or does not agree to pay for the right to use it. So you've got this fabulous deal and your publisher gets $50,000 and you get $50,000. Then your agent takes 15% of the $50,000, so what gets delivered to you is $42,500. That's a nice piece of money, but remember you have to pay taxes on it, and to make it straightforward, we'll say 24% for federal taxes and 4% for your state taxes. That means you pay $11,900 in taxes. That leaves you with $30,900.

Now, again, I'm being a nice guy here and not placing value judgements on this, but YOU as a BUSINESS PERSON need to know what you're signing and what that can potentially do to your money. So let me break that down given our most recent scenario.

For YOUR INTELLECTUAL PROPERTY, for certain subrights, YOU agreed to let a third party (the publisher) have 50% of the revenue generated by part of the rights, while you yourself will eventually end up with less than a third of that value because of your business expenses (which only accounts for your BUSINESS EXPENSES related to TAXES and AGENT FEES). And the publisher is basically getting that by acting as an agent.

Like I said, at least in this venue, I'm not putting a value judgement on that (although it must be clear I have opinions on it), just that you need to know what it is you're doing here. There are many, many things in a book contract that on the surface seem to make sense, but when you start to break the monies down in a realistic fashion, tend to freak you out a little bit. That's true in many areas of life, right? Ever bought a house? Ever wondered why over 30 years a $150,000 house will cost you $380,000? Or why you need to pay the bank all those fees on top of paying them interest? In many ways, it just is what it is, going back to "standard value."

When I'm in a grousing mood and somebody makes a comment about publishing and how great it is to be a writer, I will sometimes grumble about how everybody has their hands in a writer's pocket. Well, this is why. As I said, it is what is it. But I'm sort of reminded today of the line from Indiana Jones and the Last Crusade where the guy tells the young Indiana Jones, "You lost today, kid, but that doesn't mean you have to like it."