Business Musings: A Real Book Contract (Contracts/Dealbreakers)

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On the day I planned to write this blog, I got caught up in some other work that fried my brain. So I moved the blog to a different day, and am I glad I did.

In the interim, one of my readers forwarded me an article from Locus Online about Hachette suing one of their bestselling authors. It seems that for some reason, Seth Grahame-Smith did not turn in the second book of his contract with Grand Central for the follow-up book after Abraham Lincoln: Vampire Hunter. After two extensions of his deadline, and a threat from Grand Central, Grahame-Smith turned in something that Grand Central found terribly unacceptable. They claim he appropriated a 120-year-old manuscript as part of the book.

Considering Grahame-Smith also wrote Pride and Prejudice and Zombies, a book substantially based on a 203-year-old novel, I kinda had a yeah-so? reaction to the 120-year-old manuscript thing. So I went and read the lawsuit, and realized a few things.

First, the deal was made in 2010, before a lot of the major changes in traditional publishing occurred. The handwriting was on the wall, but back then, this Pride and Prejudice and Zombies thing was hot, so Grand Central ponied up a four-million-dollar advance, paid in $500,000 chunks.

Grahame-Smith received at least 1.5 million of those chunks, maybe as much as 2.5 million before the relationship soured.

Grand Central’s parent company Hachette is suing Grahame-Smith for $500,000, the advance on that second book of this contract.

Figure this: The publisher believes it’s better to sue the author than it is to leave that $500,000 outstanding. There are several reasons that Hachette could have made the decision to file suit.

For example, the time has long past for the second property to ever earn what the first properties did.

If you read the contract closely, you’ll see that there is some time-is-of-the-essence stuff buried in it, although that phrase is not used. The Delivery clause (p.5 of the contract) is unbelievably specific, and that has to be because of the timeliness of the property. (We’ll get to the contract in a minute.)

By 2016, it’s really clear that Hachette will lose money on this second book. Better to file suit and ask for the $500,000 plus interest than it is to pay out an additional 1.5 million owed through the contract. Legal fees won’t equal that amount, even if the case makes it to court.

The case is a pretty standard breach-of-contract suit, and from my glance, it looks winnable for Hachette. Even if it’s not, the contract will be canceled, and Hachette won’t owe Grahame-Smith another dime.

It’s pretty much guaranteed that Hachette wouldn’t have accepted a manuscript from Grahame-Smith for any reason in 2016. Hachette was looking at a major financial loss on the second book in this contract.

Expect more of these kinds of suits in the future. If the writers who got huge advances do not meet their obligations with the publishers, the publishers will cut their losses and run as fast as they possibly can.

But what does this suit have to do with the contracts/dealbreakers series?

This:

For the first time, I can share with you a complete publishing contract. Go here, and scroll down to the contract itself. (The contract starts on page 9.) Try to read the thing.

Have you done so? Good.

Because I’m going to tell you a few things.

  1. This is an agent-negotiated contract. However, the agency that negotiated the contract is William Morris. I can tell you from experience that William Morris has lawyers on staff. In theory, those lawyers advise the agents. So, in theory, William Morris had lawyers who talked to Grand Centrals lawyers while negotiating this contract.
  2. I don’t care what entity negotiated for the writer. Whoever the hell it was did a piss-poor job. I have had better contracts for novels paying me $10,000 than this multimillion-dollar contract. I have to admit: I’m shocked by this contract. It’s a midlist writer contract (for a writer with no clout) dressed in million-dollar clothing.

I scanned, but I didn’t see anything I would expect in a multimillion dollar contract. No escalators. No protections for the writer. Low royalty rates. Bad discount clauses.

Half the stuff I listed as dealbreakers in this series are better than many of the terms in this contract.

Plus there are some wrinkles here that I have never seen before. In the Termination Clause (page 17), for example, the writer must notify the publisher if motion picture or television rights options (or full-on licenses) exist.

I have never seen that. It means the publisher expected these books to get optioned for film, and that in such an instance, termination might end up being impossible.

And then…and then…oh, my God, and then!

The agent clause (p. 19-20). It is the worst agent clause I have ever seen. Worse than the ones I warned you about. It has this lovely addition, which is new to me:

The provisions of this paragraph 25 shall survive the expiration of this Agreement and are specifically included for the benefit of the Agent which is hereby named as a third-party beneficiary.

Wow. Just—wow. Go back to the agent clause post I did, and scroll through the comments. See what the lawyers who responded said about the duties of agents and how these clauses are most likely illegal.

From one of the lawyers answering a question on the post: “Yes [the agent clause] is illegal. (1) “Agent” is a legal term for someone empowered to act on behalf of another person. (2) A conflict of interest occurs when a person acting as an agent benefits from the transaction. If a lawyer did this, the lawyer would be [disciplined]….”

So, here’s this week’s homework assignment.

Rather than read my wrap-up on the whole series, which you will get next week, go read this full traditional publishing contract.  Print the contract out first, and see if you understand it.

Then realize that this contract isn’t the worst I’ve seen, and it certainly isn’t the best. It’s a really crappy multimillion dollar contract—the author should have received protection from his representatives, but we all know how good that representation is. (Or, at least, you folks know if you’ve been reading my blog.)

Then realize that traditional publishing is not really giving these big advances any more. The big-advance books aren’t earning out. Which is why Hachette is cutting its losses here.

So your chance of getting this kind of advance is pretty slim. And even if you do, did you notice the lovely clause about promotion?

The Publisher shall have the sole discretion to determine what, if any, promotional services the Publisher may perform for the work…

(I added the bold for emphasis here and below.)

That’s clause 8(d) (p.14) and while there are other clauses that apply to promotion, the operative phrase here is “if any.” It means all those other clauses are wasted typing. If the publisher doesn’t want to promote these books, the publisher doesn’t have to. Ever.

Those of you, like CS from the comments last week, who believe you need a traditional publisher to make a go of your writing career, need to understand that I have seen that clause in almost every single traditional publishing contract I’ve seen over the last ten years.

Unless the writer actively negotiated a marketing plan for their book with the publisher and deleted that if-any clause, the publisher doesn’t have to do anything to promote any book.

Why would a publisher do that, you ask. You got me. But publishers really don’t want to be obligated to promote the properties they’ve purchased.

If you want to be traditionally published, and you do not understand this contract, then you have a lot of learning to do. You need a copy of the Copyright Handbook. You need to understand all the clauses here.

And you also need to understand that only two of the three parties to this contract will benefit from it. The first party to benefit is the publisher. If these books had been successful—and the first one was—the publisher didn’t have to do much of anything to rake in the dough.

In fact, there’s another scary clause that favors the publisher in this contract, a clause that I had never seen before. The royalty statements don’t have to be accurate. It says so right in the contract. It uses a phrase I’ve never seen in any contract before.

It says:

The Publisher shall render semi-annual statements of “estimated net sales” and net licensing revenues…

“Estimated net sales.” That’s new to me. The Publisher then defines “estimated net sales” as “sales less actual returns and less a reasonable reserve against returns of the Work…”

“Reasonable reserve” is not defined, and if the author wants to know what the publisher actually is withholding, the writer has to ask, in writing, for that information. The writer also has the right to audit the publisher—at the writer’s expense, of course.

Oh, and—there’s no cap on returns, and no time limit on the reserve.

I had the misfortune of mis-negotiating a reserve on returns twenty years ago on a work-for-hire project. I still get royalty statements—on a book published in 1995—in which reserve against returns continue to be withheld. Even now! Twenty-one years later.

You don’t think a publisher would do that on a book that they paid millions for? Think again.

The other entity that benefits from this contract is the agent. Who is specifically named as a third-party beneficiary of this contract. Who is agent, according to the agent clause, for the duration of the copyright.

What does the writer get?

Four million dollars, paid in seven installments…provided the writer lives up to the terms of the contract which, apparently, Grahame-Smith did not do. For some reason, he failed to fulfill the second half of this contract. So even if he wasn’t sued by his publisher, he wouldn’t have received the full four million.

He made, at most, two and a half million, minus agent fees and commissions, spread out over years.

And he wouldn’t have seen another dime on these projects, because they were jointly accounted (meaning one book could earn out and the other wouldn’t, so the publisher could apply all the earnings of the first book to the unearned balance of the second), and then there’s that crappy royalty statement thing, and then, and then, and then…

Folks, this is why I’m asking you over and over again why you would ever want a traditional book contract. Traditional print-only contracts (you indie writers) are just like this with the ebook stuff removed.

And so many of you indies want to hire an agent to handle your foreign rights. The publisher stuff here is bad, but the agent clause is ever so much worse.

Please, do your homework this week, and read this contract. Print it out. Try to understand it. Realize that all of the clauses work together to form a whole contract, that’s binding on the author.

Learn from this free information that has come from another writer’s bad situation.

This is how writers learn their business.

You have an opportunity here to avoid the mistakes I made, the mistakes that Grahame-Smith made. You have the opportunity to learn how—pain-free—to take control of your own careers.

Do so.

And next week, we’ll wrap up.

Wow. This wasn’t what I planned to write this week. But as I’ve said before, I couldn’t do this blog without all of you. And this tip came from a reader, pointing out the article and more. Thank you, thank you, thank you! This will help so many writers.

I’m wrapping up this series and am so ready to move on. I have pages of notes for the blogs for the rest of the year—if they don’t get nuked by more news. So, next week, one more, and then on into the future.

If this post or this series has been valuable to you, please leave a tip on the way out.

Thanks!

 

Click paypal.me/kristinekathrynrusch to go to PayPal.

“Business Musings: A Real Book Contract,” copyright © 2016 by Kristine Kathryn Rusch. Image at the top of the blog copyright © 2016 by Canstock Photo/greggsphoto.




 

17 responses to “Business Musings: A Real Book Contract (Contracts/Dealbreakers)”

  1. Suz Korb says:

    Do you have an example publishing contract? I’m an indie author and I’m going to ghost write a novel for a friend, based on her script treatment, and publish it for her, in her name.

    • I don’t, Suz. There are a million of them with a thousand variations. Have a lawyer draw up an agreement between the two of you, using the contracts book, in plain language. Make sure you use an IP attorney. Good luck!

  2. Although you can’t download documents without an account, you can follow the progress of this case as the parties file responses and such on Pacer at the following address:

    https://www.pacermonitor.com/public/case/18999528/Hachette_Book_Group,_Inc_v_GrahameSmith_et_al

    Sadly, documents for cases for this court are very expensive through the court’s information system, but if you have access to the Southern District of New York’s electronic filing system, you can find the case here:

    https://ecf.nysd.uscourts.gov/cgi-bin/iqquerymenu.pl?462077

  3. playnoevil says:

    Kris –

    There is a sensible reason for the vague promotion clause – it would be very difficult to track even if everything was done legitimately.

    Dollars spent? Blurbs in other books? Ad buys?

    If I had a totally legitimate publication contract (clearly on some other planet), I still wouldn’t want an explicit marketing clause because there aren’t good metrics that I could request or audit. I’d rely on my (clearly mythical) business terms in the contract to ensure that the publisher did its job.

    I might ask for a marketing plan as a milestone delivery (in this fantasy universe) from my publisher with a termination option, but if I’m not interested in marketing, I’m not sure of the benefit.

    • I’ve seen detailed marketing plans come from publishers and attached to the contract, with a promise of more. The plan is pages long, with specific things the company will do. In one instance, the company did everything. In most, the companies did not and the writers didn’t call that breach of contract which they should have. In fact, the companies ignored the marketing plans completely. It’s frustrating that traditional publishers do not want to promote what they publish, but the fact is that they don’t. Even when they say they are better at it than self-published writers (which publishers most decidedly are not).

      • playnoevil says:

        Kris –

        If the marketing plan was provided to indicate potential effort, it means nothing of course.

        If they had terms tied to completing the activities in the included marketing plan, then it is on the author to call them on it.

        No sympathy for that.

        I still think good business terms are the most important thing.

        All this is moot, of course, as it is virtually impossible for a publisher to compete with self publishing.

        I tend to think publishers WANT to do the right thing, they are simply unable to do so.

        Ironically, marketing might be the one area where a traditional publisher COULD justify their existence as pouring serious marketing dollars into a book COULD drive huge potential sales for an author…. But that is a real fantasy.

        Someone like you or Dean would likely gain a lot of benefit from a big dollars marketing push on a title or a series just due to the size of your back catalog.

        Back to the “just fine” reality we live in for authors today. No need for fantasy.

        • LOL. If only publishers actually knew how to properly promote. I wrote about that in the Discoverability series. And most book marketing is untested. I’m trying a few things with this new Kickstarter on Fiction River, to see if marketing for other venues works in books. I’m thinking it might… 🙂 But experimentation is the key now, and indies can do that so much better. (Except without the big $$)

  4. The full backstory on how these parties have decided that $500K is worth burning their relationship down to the ground will be fascinating to learn, if it comes out.

  5. Prasenjeet says:

    Thanks Kris for educating all of us. I follow your business blog regularly and must say that I have learnt a lot. (That would be an understatement). I have read many comments from people who say to you that writing such business blog posts are a complete waste of time. Don’t listen to them. 🙂 You are doing a great job!

  6. Teri says:

    The agency clause makes clear that the agent was not looking out for the writer. The agent was looking out for the agent. Anyone who signs a contract like this must have a lawyer read the contract–and not a lawyer who works for the agency or agent, but a lawyer who works for the writer. This agency clause should blow to pieces any pretense that a literary agent is an advocate for the writer.

  7. I’m impressed by paragraph 25b. Even if the guy had signed a reasonable agreement with his agency, the agent clause of this contract overrides it. Irrevocably. The WM lawyer must have been proud of that one.

    Anyone have a good guess which old novel he decided to work his tricks on this time? I’m going with Tess of the Zombies or An Ideal Zombie Husband.

  8. Sally says:

    I only scanned through the complaint part of it yesterday (before you posted this) and thought he was absolutely going to lose. He very obviously didn’t live up to the contract. He might as well just save his lawyer fees and give them the money now — or settle out of court somehow.

    I didn’t read the contract part carefully, but when I saw “net sales” instead of “gross sales”, I knew he was screwed on royalties.

    • A complaint is the plaintiff telling his story. The defendant’s version is undoubtedly different. So I’d be reluctant to say that Grahame-Smith is going to lose before I saw an Answer.

      But good lord, this contract is indeed a mid-list author contract with a couple of extra zeros. I’ve got a dozen almost identical versions sitting in my files right now. Kris has focused on a couple of her favorite issues, but read that termination clause definition of out of print and try to figure out how the author could ever get his rights back from the Publisher.

  9. Vera Soroka says:

    I’m one you don’t have to worry about signing a traditional publishing contract. I want to be in control of everything and I don’t understand why any indie would want to seek an agent for anything. Why did you go indie in the first place? I will read this contract a little later. I’m sure it will be quite scary to say the least.
    Thanks for doing this. I think every writer should read this.

  10. Jen Crane says:

    Just a quick note to say thank you for these thoughtful and informative posts. I read your stuff faithfully to educate myself about contracts…in the case I ever consider one.
    I’m indie and loving it, but I know there may come a time I consider traditional publishing, too. Thanks again!

  11. Reanne says:

    Thanks for the analysis. I’d read some of it and saw a lot of stuff that looked bad, but having you explain it makes so much more sense. What’s astonishing to me about that horrible agent clause–and the horribleness of the contract in general–is that it comes from one of the biggest names in agenting. If this is what the A-list agencies do, then what’s a newbie writer even to hope for with them? Dang, the more I read your blog, the more glad I am to have gotten all those rejections.

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