Writing Your Book, part XIII: Anatomy of a Book Contract

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Last week, in our continuing “Writing Your Book” series, we found ourselves an agent and, at long last, received a viable offer for our book.  Yay, us!  This week we are going to take a closer look at book contracts and what they do and don’t say by breaking down a typical contract section by section.  I have to admit that I find myself somewhat disturbed by the fact that we’re doing this in installment 13 of the series (and that the contract I’ll be breaking down is for the Thieftaker series), but there’s little to be done about it.  Fates be damned; full speed ahead!

Book contracts, while not huge, are fairly significant pieces of legalese, typically running in the neighborhood of fifteen pages or so.  Most of the time, particularly for new writers, agents and publishers work off what is called a boilerplate contract.  A boilerplate is a standard contract worked out ahead of time by agencies and publishers and then applied with minimal changes to each new author.  Last week we went with Big Name Agency (BNA) in New York, and our agent received an offer for our book from Fantasy Book Enterprises (FBE).  Chances are that BNA has a boilerplate contract for all deals with FBE, just as it does for deals with Tor, Roc, Baen, etc.  And FBE has a different boilerplate for each agency it deals with.  Lots of boilerplates, lots of negotiations before authors even get involved.  And then, once your agent starts working on a deal for you with one of these publishers, the boilerplate is personalized for your needs, which, of course, involves even more negotiation.

Page 1 of the contract begins by specifying who are the parties to the contract:   “Agreement made as of September 20, 2010 between [author’s name] care of Big Name Agency, 1000 Gold Street, New York, NY 10000 (the ‘author’) and Fantasy Book Enterprises, 2000 Platinum Street, New York, NY 10001 (the ‘publisher’).”  That, with obvious changes, is just how my contract begins.  It then goes on to state that we’re granting rights for our book or books, specified here with a working title, to the publisher for a specified geographical region.  Sometimes we grant North American rights, sometimes we grant all English rights, sometimes we grant worldwide rights.  If we narrow the grant of rights to just North America, then we have a smaller distribution of our novel, but, on the other hand, we have greater opportunity to sell subsidiary rights for our book to other publishers in, say, the U.K. and Australia, not to mention translation rights in non-English-speaking countries.  Most contracts will also specify on that first page that the copyright belongs to the author but that the publisher will register the copyright.  That’s pretty standard.

The real fun begins with clause 3: “Delivery of Manuscript.”  This is where you get into your deadlines and word count limits.  For the sake of our example, let’s say that the book is supposed to be 100,000 words long and turned in on April 1, 2011.  (No foolin’.)  The contract will then tell us that if we miss that deadline by more than 60 days, the publisher has the right to terminate the contract and demand repayment of any monies paid to us.  Scary stuff.  It’s almost never enforced.  Seriously, most publishers worth their salt with give you the extra time you need, and most editors will work with you to help you complete the novel.  This is not to say that termination of contracts never happens, but it remains rare in our business.  Still, I go out of my way to make every deadline, because missing deadlines will usually result in publication dates being pushed back, which I hate.

The next few contract clauses provide for editing and copyediting of the manuscript — in essence they say that the publisher can edit with our approval and feedback, that we will read and correct the copyedited manuscript, and that we will read typeset proofs of the book, while trying to minimize changes to the final typeset version.  (In fact, there is a provision that says that if we change more than 10% of the typeset proofs, we can be charged for the extra expense.  So make sure you get your edits right in the revisions and copyediting stages.)  There is also a clause in which we promise that the work is original, that we didn’t steal anything from anyone else.

Clause 7 — Advance:  This is where we talk money.  Per the agreement we talked about in last week’s post, this is where the contract specifies that we get an advance of $7,500 with $2,500 paid when we sign the contract, $2,500 on delivery and acceptance of the manuscript, and $2,500 on publication of the first edition of the book.  This is also where publishers are now including one of the more pernicious provisions of contracts.  When you sell a series of books, the payout of the royalties can be accounted separately for each book, or jointly for all of them.  What does this mean?  For now let’s say that we’re contracting two books, each with advances of $7,500.  With separate accounting, as soon as the first book earns out its $7500 advance in royalties, we start to see money.  And then when the second book earns out its $7500, we see money for that book. With joint accounting, when the first book earns out, additional payments go toward paying off the advance for book 2.  We don’t see any additional money until we’ve earned out the entire $15,000 paid out for both books.  It’s clear why publishers would want to do things this way; it’s also clear why it sucks for authors.  This is a buyer’s market, and these days more and more publishers are getting joint accounting provisions placed in contracts.

Clause 8 — Schedule of Royalties:  More money talk.  This is where payout rates are set for each edition of the book.  For mass market paperbacks it’s often 6% of cover price for the first 100,000 copies, then 8% for all copies sold after that.  Hardcover is usually 10% of cover price for the first 5,000 copies, 12.5% for the next 5,000, and 15% for all copies after that.  Trade paper is often set at 6% of the first 25,000 copies, 7% on the rest.  Electronic rights often mirror the hardcover rates.  But I should mention here that royalty rates can be a great place to negotiate for better terms.  My Thieftaker contract is more favorable to me than the boilerplate in nearly all of these categories.  We couldn’t get Tor to budge on the advance or the joint accounting, but we got some concessions here.  Something to keep in mind.

After this we get into Subsidiary rights, which is very complicated and will take too much space to explain at length.  What you need to know is this:  If a novel does well, authors and publishers can make additional money selling foreign language rights, movie rights, gaming rights, cartoon and novelty rights, audio rights, and more.  The contract specifies who holds each set of rights (for instance, Lucienne and I always keep the movie rights to my books, so that if someone wants to make a movie out of one of them, we get all the money), and, for those rights held by the publisher, how big our share of any sale might be.

The rest of the contract deals with reports and payments (how often we get to see royalty statements and checks); how many author copies (read free copies) of our book we get (usually 10 to 20); and other technical details of that sort.  The most important of these last clauses is usually the Option clause, which says that when this contract is over and we’re trying to sell our next book, the publisher gets first crack at it.  Sometimes the option clause can be so broad as to specify that the publisher gets first right of refusal on any subsequent work of fiction.  Or it can be restricted to “next work of fantasy” or even “next work in the series.”  On the one hand, the option is nice in that it means that a publisher will definitely look at our next project.  On the other hand, even if we wind up not being happy with this publisher, we have to give them a chance to bid on the next book we write.

This is a lot to process, and yet there is still more to most contracts.  Much of it is legalese, some of it is more significant. (Some contracts have provisions for advance bonuses if our book reaches the NYT Bestseller list, and stuff like that.)  But let’s stop there and talk about this.  What questions do you have?  Anything here surprise you?  Anything strike you as better or worse than you expected?

David B. Coe
http://DavidBCoe.livejournal.com
http://www.DavidBCoe.com
http://magicalwords.net
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20 comments to Writing Your Book, part XIII: Anatomy of a Book Contract

  • Hi,
    You mention that the various rights to the work get split up and that you personally like to keep the movie rights. How is this now shaping up with electronic distribution rights. I mainly ask because it is pretty easy for anyone to sign up with say, Amazon, and “publish” an e-book to be sold through Amazon. But since you’ve essentially worked with the publisher’s editors and so for to polish the book into its final form do publishers now just claim the e-rights or are they still separate? And if they are separate, what stops authors from taking the finished manuscript that the publisher worked hard on and publishing the ebook of it riding on the back of the publisher’s marketing and distribution?
    I would expect either the publisher just claims e-book rights up front which would avoid any conflict there, but if they don’t… Amazon gives 35% of cover price.
    Sounds pretty complicated. Any insight?

  • Hi, Scion. That’s a great question. Electronic editions are included in the schedule of royalties section of the contract and if they are mentioned in the subsidiary rights section they are not a category likely to be negotiated away by the publisher. I can get the movie rights, because most publishers will let those go as a negotiation point — the percentage of books optioned as movies is very small, and the money is surprisingly insignificant. It’s not going to be a deal breaker either way. Electronic rights are the future of the industry and would absolutely be a deal breaker if authors insisted on keeping them for themselves. Authors who are well established are beginning to bring out books or short stories on their own in electronic form — it’s something I’ve considered. But those works are not contracted with traditional publishers. Hope that answers your question.

  • David,

    I am surprised at the rates for paperbacks. Everything else I’ve read on the subject just talks about the “standard” rates as being 10-15%. I didn’t realize that it changes with the paperbacks.

  • David,

    Very helpful stuff. Thanks. You mentioned with regard to clause 3 that publishers are usually pretty flexible regarding delivery time of the MS. How flexible are they regarding the other items? Which clauses are more negotiable, and which are more likely to make the publisher dig their heels in and refuse to budge?

  • David, I just thought of a question. Regarding the advance: how much does it hold true that if the book does not earn out the advance, you have to pay it back? One author at a writing conference I attend was very stern about yes, you do, but I have heard no one else mention that.

  • David,

    Great stuff, as always. I have also heard that earning out your advance is sometimes problematic in the sense that once the advance has earned out, a published has gotten what they need from the book and will shift their marketing resources elsewhere. Which means that even if a book earns out, an author may not see much beyond the original advance because it is no longer being actively marketed by the publisher. I imagine that some self-promotion can help here, but was curious as to how much promotion you find your publisher doing on your behalf, and how much you have to do on your own?

  • I’m dying to answer some of these questions, but I’ll let david handle that! I will say that my first novel (The Mask of Atreus) was an odd case because we (my agent and I)actually sold Greek rights before US, thereby taking world rights off the table. We retained world rights and were able to sell them individually. The book came out in 25 languages and it was the world sales that made it by far my most lucrative book to date. In my most recent deals, the publisher insisted on keeping world rights, though I do get a percentage of sales, should they make any.

  • Great questions and comments, all. Keep ’em comin’!

    Moira, yes, the paperback and trade paperback rates are significantly lower than the hardcover rates. I’m not sure why this — one would think that with hardcover production values higher, and, thus, costs higher as well, that authors would get proportionally less for hardcovers than the other formats, but it’s just the opposite. The percentages I give in the post are pretty much standard across the industry.

    Edmund, thanks. The flexibility in manuscript delivery deadlines is a product of two things. 1) Most authors don’t get paid a significant portion of their advance until the manuscript is turned in, so in a way, by being late, authors are hurting themselves more than anyone else. 2) — and this is much more important — until a book is turned in, it’s not in production and so doesn’t yet have a place in the publishing schedule. Once a book has been revised and is put in for copyedits and such, it is in the schedule. Those later deadlines — returning a book with revisions, turning in the copyedited manuscript, turning in page proofs — are far more rigid, and also tend to be much tighter (ie. you have far less time though those stages are still work intensive). As for which contracted items tend to be more or less negotiable: Publishers tend to stick to their guns on advances (unless the book goes to auction and you have several publishers bidding against one another for the book) and on accounting issues. Royalty rates can be negotiated, as can the sales thresholds where royalty rates change for a particular edition. Lots of negotiation takes place over which rights go to the author and which stay with the publisher. It used to be that publishers would be fairly flexible on word counts. My first contract called for a book of 100,000 words. The book came in at 211,000. And that was the published length. These days that wouldn’t happen. As publication costs have gone up and as booksellers have begun to show a marked preference for shorter books, publishers have gotten far more strict on book length.

    Moira, as far as I know authors never have to return any portion of their advance because of a failure to earn out. That may happen with some smaller presses, but never with the big ones. The advance is a gamble that the publisher takes on the author. If the book doesn’t earn out, they will be less likely to give that author a future contract, and if they do, the advance will almost certainly be smaller. But I’ve never heard of an author having to pay anything back for that reason. I don’t know what that author was talking about.

    Jamie, thanks. Your question is sort of a continuation of Moira’s. Again, I’ve never heard that before. Earning out the advance is a good thing for all concerned. If a book earns out that means it’s selling, and publishers will continue to market the book as long as sales continue. Yes, authors earn royalties, but as you can see from the royalty schedules I give above, that’s a small percentage of sales revenue. And it holds that if authors are making money so are publishers (probably at a better rate). Now it is true that the publicity window for most books is very short — a few weeks, MAYBE a couple of months. But publishers would never do anything to discourage book sales. As for promotion, the publisher does some very important things (and this might be a good idea for a future “Writing Your Book” post). They send out advanced reader copies (ARCs) which garner reviews, they advertise in journals, magazines, newspapers, etc. For better known writers, they will arrange book tours and media appearances. For midlist writers, the publicity usually ends with ARCs and ads. After that it’s up to us. That’s where web presence, books signings (self-arranged), and getting to know people at local bookstores and libraries comes in handy. We can’t do a lot for ourselves. I’m just one person, and it’s a big country. But I can help myself by boosting local sales and getting the word out on the web about myself and my work.

  • Wow, A.J.! 25 languages! That’s more than I’ve ever sold, even for Robin Hood. Please, feel free to answer any of these questions. Faith, Misty, Stuart, Edmund, that goes for all of you, too. It’s not like I know any more than the rest of you! I’d welcome your perspectives on all of this.

  • Thought I should add a bit here about short story contracts. They tend to be far shorter (1 to 2 pages) and far more general in terms. And that’s where you have to be careful. Often times, magazines (especially small press and e-zines) are run by good-hearted, enthusiastic people with little to no understanding of contracts. I’ve come across many poorly written contracts that attempt to grab all the rights to a short story. Luckily, in every instance, I was able to talk with the publishers and re-write the contract to a fair and appropriate agreement. In all these cases, they weren’t trying to pull a fast one, they just didn’t know what to ask for, so they asked for everything. Since most agents don’t handle short stories, it’s up to you, the author, to carefully read and fully comprehend these little contracts. Because if you ever hit the big time, I guarantee, somebody’s going to start re-reading these old contracts and if you weren’t careful, they might discover they hold the rights to your characters, not you!

  • That’s a great point, Stuart. Short fiction contracts are something I’ve just started learning about recently, but it seems as though the well-written ones usually ask for exclusive North American rights for a restricted period — 1 or two years, maybe. After that, the rights go back to the author and the stories can be a) posted on the author’s personal website, or b) resold to another publication or anthology. Is that right?

  • At its most basic, that’s correct. Some contracts also want rights for “Best of” anthologies and such. Maybe I should do a post on this.

  • Well, that’s reassuring. He may have been referring to million-dollar Hollywood-style advances. But then, this author is one to typically earn them out.

  • David, like AJ, my first *Gwen* Hunter was different from teh norm too. The first book, BETRAYAL, sold overseas first, to France and Germany and Holland, all at the world book fair (can’t remember the name of it, but I’m on vacation and have given my brain permission to turn off) and at auction, and on an unfinished portion. It was unusual in several ways, because my agent sold these foreign rights himself. He then took the book off the market even though he had UK offers already. The early sales made the published Literary Marketplace in a big spalsh.

    So there was a lot of excitement back in the US when he brought it home. He had editors calling him asking to see the mscpt. I was totally psyched. It sold at auction in the US, the UK, and several other places when he put it on the market. I was advised to quit my day job. (Never listen to this advice so early in a career.) My publisher sent flower arrangements, cards, called. It was amazing.

    Then my US editor was canned in a pub *rearrangement*. I was orphaned even before the book came out. And while it went to bestseller in UK, my career here had to be restarted 4 years later with another press. Life in this business is a freaking rollercoaster. But I love it. I must be insane.

  • Stuart, yes, I think a post on short fiction contracts and the entire short story biz would be great.

    Moira, the size of the advance shouldn’t matter, but he may have been talking about a different kind of contract, or he might just have misspoken.

    Faith, I remember you telling me about that. Amazing stuff. And yes, the ups and downs will make your head spin. You’re right — quitting the day job too early is never wise. I did it, and we did without a lot of stuff for the first several years.

  • Young_Writer

    I’m not going to lie, I had to reread this to understand this. But now that everything in my mind’s cleared up, I want to thank you. This clarified a lot of thing s for me.
    Stuart, please do! I have a deadline for a short story coming up; I need it to get in a writing course. That would be a ton of help :)

  • It’s complicated stuff, Alexa. I often need to have my agent explain contract issues to me several times. I’m glad you found it helpful. Best of luck with the story.

  • So… I didn’t see this addressed, per se… but when it comes to Option rights/right of first refusal: this is really just the right of the publisher to get a first pass at your next work and make an offer, am I right? This doesn’t obligate you to accept their offer if it’s a crappy offer, I hope.

    I’m just thinking of this from a negotiating framework. If you’ve got something that’s really good, that they’ve decided they want then that’s a bargaining chip in your pocket. If they aren’t offering something you want in return, and don’t they budge, then the negotiation ends in impasse. Frankly, if the terms weren’t good, if I felt comfortable with all other things being equal (i.e. I’ve written a great book, got it published, written another great book, and my living circumstance is comfortable and I’m not starving**), then I’d have no qualms about saying “thanks but no thanks, my work is better than that, and if you disagree I’m happy to find another publisher who does agree”. I mean… in aggregate it’s a buyer’s market, but in individual cases, I assume a publisher doesn’t hold all the chips.

    (I may be a writer, but my higher education is a nearly-complete MBA, and yes, I took the course on negotiations)

    **The situation described being entirely hypothetical, in my case, obviously.

  • Stephen, I’m sorry to have left that point unclear. You’re exactly right: The option allows the publisher a first look at your next project. It does not obligate you to take their offer. And in fact, if your publisher is willing to leave their offer “on the table” it allows you to look around for other offers and perhaps get yourself into an auction, which is a very good thing. The downsides to the option are mostly that it can slow down the process of getting your next proposal out to a broader range of publishers, and that, if the option is broadly worded (for instance “next work of fiction” or “next fantasy work”), it can make it impossible for you to try to sell a new project while you’re still completing the old one. Of course some contracts also have “non-competition” clauses that already keep you from selling other works to other publishers while working on the first one.

    Great question and insightful points. Thanks.

  • Cool. That’s what I thought, thanks!