Book Contracts 101, Part 8 (Payment of Royalties)

January 25, 2011

I realized I skipped Part 8, and also skipped Clause 8, which is a fairly important one, so I'm going to do it now, with the idea that tomorrow's will be Part, er, 12, I think.

8. Payment of Royalties: Publisher agrees to pay Author an advance of BIG BUCKS HERE--payable upon the signing of this agreement. Said advance shall be deducted from royalties otherwise payable to Author pursuant to section 7 above and as set forth in this paragraph 8. Publisher shall render to Author an annual account of each calendar year of sales of the Work to December 31 on or before May 31 of the following year, at which time royalties shall be payable. However, Author's share of any sub-rights revenues will be paid within thirty (30) days of the time received. If sales fall below 100 copies in an accounting period, royalty payments may be suspended, and royalty and sales shall be accrued until that figure is reached, after which time Publisher will recommence payment of royalties at the customary time. If in any annual period the total payments due are less than $50, Publisher may defer the rendering of payments until such time as the sum of $50 or more shall be due to Author. Any monies due and owing from Author to Publisher (including any overpayment of royalties) may be deducted by Publisher from any sums otherwise payable to Author under this agreement. Publisher may retain a reserve for future returns in the amount of twenty percent (20%) from any amounts otherwise due Author. Said reserve shall be reduced or repaid to Author at such time and in such manner as Publisher shall determine in its sole discretion, based upon current sales and industry standards. Upon written request, Publisher further agrees to allow Author's audit by a licensed CPA, of Publisher's records as relate solely to the Work. Said audit shall be scheduled by mutual agreement no sooner than thirty (30) days after Publisher's receipt of Author's notice of its intent to conduct an audit and may occur only during normal working hours at Publisher's place of business.

Dear God, what a headache. Okay. Wow, where to begin. In case this is new to you, a book advance means an advance against royalties, so if you get a $10,000 advance, you need to sell enough books (let's say 5000 books at a $2/copy royalty) before you see another penny.

In this contract, the publisher indicates that the royalty periods are 6-months long and end on December 31st and May 31st, so you should get royalty checks and/or statements sometime (maybe) in January or June, although I've yet to hear of a publisher whose accounting system was even remotely efficient, so it's hard to say. Although twice a year is fairly common, it's just a likely to be March and September as January and June; occasionally a publisher will go for 4 or even 3 royalty periods per year, and if you're self-publishing through Amazon, etc., you get your royalties once a month. [Actually, a correction here. In carefully reading the language, I realize I'm not completely sure this contract has 6-month royalty periods. I believe it has a single royalty statement per year, for the year, which is compiled on December 31st. At which point the publisher has five months in which to get around to paying you. Which if that's the correct interpretation, the headache may be because I just put a gun to my head, but I think it is].

Addendum (1/25/11): I confess to being thrown by close reading of this, of which I don't want to discuss at length, but will undoubtedly be inspiration for some future post about the unreliability of income from fiction writing. So I looked up a different contract to see what the royalty dates were like:

21. A clear accounting of all moneys received by the Publisher from sales of this Work, or from licensing of rights for utilization of the Work by others, shall be provided by the Publisher to the Author on or before September 30th of each year covering the first six months of the calendar year, and on or before March 31st of each year covering the last six months of the preceding calendar year... There's more, but that's what I wanted to double-check.

There's a line in here which is surprisingly nice and useful for the author, and that's the one about sub-rights, which means that if you get a movie deal or audiobooks or whatever that your publisher is handling, they're not considered part of your standard royalties, you don't have to wait around for them, they'll pay them to you within 30 days of receiving them.

Then there's some interesting lines in here about how if your sales fall below 100 copies in the 6-month period, they just won't pay you until they feel like it. Unfortunately, this kind of statement is fairly standard, which doesn't make it any more wonderful for you. I'm often irritated by these types of subclauses because they suggest that $200 is such a small amount of money to the publisher that they won't even bother paying it to you, whereas I think most of us view $200 as a potential grocery bill, credit card bill, or down payment on our kid's dental braces.

I love the line about the Publisher possibly having an overpayment on a royalty statement. Yeah, sure.

Pay particular attention to: "Publisher may retain a reserve for future returns in the amount of twenty percent (20%) from any amounts otherwise due author." I've mentioned this before, but I'll reiterate: they're holding back, in this case, 20% of the royalties owed just in case bookstores fail to sell your book and start returning them for refund. This is a standard practice, although the "reserve against returns" percentage is all over the freakin' board. I've heard anywhere from 10% to 90%, so all in all, I don't have any particular problem with 20%. Just note that the next sentence in this clause indicates the publisher can pay you that reserve, if it's still available, when they feel like it. Also fairly standard, and I have to wonder, if an industry-wide audit occurred, just how many millions of dollars would be floating around in publishing house coffers that were "reserve against returns" that would be paid out at the publisher's "sole discretion."

The rest of it pretty much indicates that if you really want to get on the bad side of your publisher, you're free to hire an account to audit the publisher's records related to your work. This line always reminds me of agent Richard Curtis's book "How To Be Your Own Literary Agent: An Insider's Guide to Getting Your Book Published" (recommended reading, by the way, although I suspect it's out-of-date in many ways). In the book he talks about how he had as a client some low-level mafia enforcer who had written a memoir. When they got their royalty statement, Curtis was in a position of telling the guy about how the publisher was holding up paying all the monies owed. To which the enforcer asked who he should talk to at the publisher, who he then called and said something along the lines of, "You'll pay the rest of the money or I'll put you through a plate-glass window."

And yes, apparently he got his money.