The Business Rusch: Publishers (Surviving the Transition Part 2)
The Business Rusch: Publishers
(Surviving The Transition Part Two)
Kristine Kathryn Rusch
For the past two weeks, I’ve geared this blog toward established writers, writers who have been in the business for ten or twenty years or more, and have made a living from their writing during this time. My first post in this mini-series, “Writing Like It’s 1999,” got a lot of attention, with more hits than any other post I’ve ever written. That post showed established writers who’ve been busy with contracts, deadlines, and other details of their writing careers that the publishing business has changed dramatically in the past few years.
Last week’s post, “Surviving The Transition,” got fewer readers, which is too bad. Because so many writers read the scary post and either dismissed it or decided it didn’t mean anything to them at the moment. They would pull a Scarlett O’Hara and deal with it tomorrow.
Well, anyone who deals with a change this massive “tomorrow,” is bound to make some serious mistakes, mistakes that will hurt the writer in the long run.
The point of last week’s post was this: writers have time to learn this new world. Established writers should take the time before signing new contract addendums (which are showering us like rose petals at an expensive wedding), before committing their backlist to an estributor or to their agent, and before deciding how to independently publish their work—or even if they should.
If you haven’t read that post, please do, if for no other reason than I’m using some terminology in this post that I defined in that one. Now that you’ve looked up the terms, let’s move on.
Before we go too far, however, let me say two things about this week’s post. First, I’ll be discussing contracts here, terms that might mean nothing to most of you, but are essential for those of you who will negotiate your contracts in the next year. I’d suggest that if you’re in the position to renegotiate, you bookmark this post. If you’re not an established writer or you’re just learning about publishing, take this post as one more peek behind the curtain of the industry. You will have to know this stuff.
Second, please realize that I am not a lawyer. I am not giving legal advice here. I am stating my opinion throughout and, as usual, my opinion is strong. But it’s my opinion, and what I say may not be right for you.
Last week, I told you to take time to consider anything new that comes your way. Most established writers have a lot of time. Established writers have existing book contracts, relationships with editors and publishers (often of long-standing), and an agent or two or three.
Eventually, the established writer will fulfill her current contract, and then must decide what she’s going to do next. Many established writers aren’t cut out for publishing their own work. Many would benefit from hiring a flat fee service to put their backlist into e-books, but we’ll deal with that in future posts (just like we have in past posts).
However, many established writers are happy with their current publishers. Some established writers have never had a work go out of print or orphaned. A few haven’t had any problems with traditional publishing at all, and see no reason to abandon a system that has worked for them for decades.
Personally, I think established writers whose traditional publishers are doing a good job for them would be silly to abandon that route for a route the writer might not be suited for. The established writer can use short stories or collections or unpublished works under a pen name to try the indie publishing route. (And please note, by indie publishing I do not mean electronic publishing; I also include print publishing in that.)
However, I stand by my earlier post. Publishing has changed—and changed dramatically—in the past two years.
So what’s a traditionally published, established writer to do in this changing world? How can she protect her livelihood if she doesn’t want to venture on her own or abandon her publisher? What if she’s a bestseller, perhaps, who is benefiting from the publisher’s promotion, ability to get tens of thousands of books into airports and other non-book venues all at the same time? Should this writer ignore the changes?
This writer, more than any other writer, is in danger of losing money and copyrights, of in fact going from making a lot of money to making little or no money at all. How can she lose money when she will probably maintain her bestseller status, her sales will probably go up, and her work will go into more markets than ever before?
Simple. Her contract terms will change and she might not even notice.
Amazon announced last week that it now sells more e-books than print books. This announcement makes sense for two reasons: 1) Amazon is a mail order company, and it’s more convenient to order books electronically than it is to have them shipped (and it’s cheaper as well); and 2) Amazon’s e-reader currently dominates the market. It’ll be greater news when Barnes & Noble makes the same announcement.
But the relevant part of that news to the established writer happy with her traditional publisher is this: by the time the writer’s two-or-three book contract comes up for renewal, e-books will probably comprise 50% of the market. And while the writer’s contract terms for print books—especially if she’s a bestseller—are very good, her contract terms for e-books will have gotten worse.
Ten years ago, my midlist contract gave me 50% of the retail price for every e-book sold. Now, my contracts with traditional publishers give me 25% of the net price for every e-book sold. The different is significant, and it’s more than the 25% loss it initially looks like. As J. Daniel Sawyer points out in his excellent post on the meaning of the word “net” in contracts, “net” usually means nothing at all.
So far publishing has avoided Hollywood level accounting practices, in which anyone who signs a contract for the percentage of the net and believes he will get any money from that clause is a fool. Gaming companies do the same thing. They do a lot of creative accounting to make certain that there is no net—or, at least, no net profit.
Right now, publishing contracts do not include the word “profit” in their net promise. Right now, the contracts imply that the writer will get 25% of the net receipts that the publisher gets from the distributor (say Amazon). But many contracts do not explicitly state that.
So the established writer’s first task in renegotiating her contract is to make certain her e-rights pay her as well as her print rights do. That means she’ll have to do some hardcore negotiation. We’ll talk about negotiation a little farther down. (And if you want an in-depth piece on negotiation, see this part of my Freelancer’s Survival Guide.)
The writer should do her best to get a percentage of the book’s retail price. The retail price is a fixed price, from which everything else flows. Even if the publisher only receives payment for half of the retail price, the author should receive a royalty rate on the retail price.
Publishers have eaten away at this standard even in print contract deals with discount schedules built into the contract. But the discount schedule works off the retail price. (For books priced at 50% of retail, the author will receive x royalty, is often how the discount schedule wording begins.) Fight for that in the royalty rates for e-books as well.
Right now, no one seems to be arguing for this, instead trying to tinker with the rates offered by the publisher. One solution I’ve seen, which I seriously dislike, is this: the publisher offers to renegotiate the royalty rate every three years, to bring the rate in line with “industry standard.”
In the contracts I’ve seen that make this offer, “industry standard” is defined this way: “industry standard as used herein shall mean the royalty rate … that is routinely paid by at least two major publishers (such as Random House, Harper/Morrow…) to authors whose stature is similar to that of” the writer involved in this deal.
There are several problems with “industry standard” defined this way, the first being this: In the past ten years, “industry standard” as so defined (meaning what was offered by other “major publishers”) has declined. It used to be 50% of the retail price. It is no longer. In other words, you could ask for the current industry standard and get a much worse deal. So that part of this clause is a double-edged sword.
But as I mentioned last week, the part I really don’t like is the “to authors whose stature is similar” to that of the writer in question. An undefined term, such as “stature” means nothing. I might have equivalent book sales to another writer, but she might have won more awards or is the current Hot Young Thing, and a publisher could claim that our stature is not similar. And how would I argue this? In court?
These kinds of clauses, which look great at first glance, are actually much more harmful to the writer than the old-fashioned percentage of the retail price. This is simply a way of making a writer feel like she has control, when in effect, she is giving up control.
Another clause to beware of in the e-rights clause of your new contract is this one:
“The Author hereby grants to the Publisher…the exclusive license to produce, publish, sell, distribute and further license any Electronic Version of the Work…. ‘Electronic Version’ means versions that include the Work…in a complete, condensed, adapted, or abridged version and in compilations for performance and display in any manner whether sequentially or non-sequentially and together with accompanying sounds and images, if any, transmissible by any electronic means, method or device (including but not limited to electronic and machine-readable media and online or satellite-based transmission or any other device or medium for electronic reproduction or transmission whether now or hereafter known or developed…)” [Emphasis mine.]
Yikes! Ick! No. Never, ever, ever, ever sign this clause. Think about this: movies are digitized—they are performance, and they are often distributed online. Not only does that clause allow someone to monkey with your work, abridging it, taking it out of order, adding things to it, making it into a performance piece, adding sound effects, but it also is a backwards way of granting television rights, video display rights, and any other performance right, so long as that performance can be distributed electronically.
And don’t believe that someone in your publishing house won’t use that clause down the road. The editor you trust may leave, the publishing company might change hands, and a clause that was designed for one thing will be used for something completely different.
Remember, I’m not a lawyer. This is not legal advice. But in my opinion, this clause is one of the most harmful to appear in the last year. Sign at your own peril.
What you want to grant to your publisher is this: “Electronic book rights” which should be defined as “the unenhanced verbatim text of the work.” And that’s it. Nothing else. Not anything yet to be developed, not any performance rights. Nothing more.
This is all very, very, very important, because we’re going to assume that your books will remain in print for the next decade. Which means that you will not get the rights back to them. Which means that the clauses you sign now might be exercised five years from now, and if you sign a clause that gives you (in effect) 25% of net, and your publisher moves to creative Hollywood accounting, and there is no net, and then e-book sales rise to 75% of the market—well, then, that cushy living you’re making on your royalties will evaporate. Notice I didn’t say might. I said will.
Contracts are super important right now.
You must also want your out-of-print clause to be extremely tight. One recommendation I’ve seen and have not yet tried to get on my own is this: Three years after the book’s initial publication, the rights to the book will revert to the author if the book is not earning for the author $500 per royalty period. Meaning if you’re not getting a royalty check three years after publication for the previous six-month period, then you may ask for your rights to be reverted.
In the current market, this makes the most sense to me.
In the past, I’ve argued that you have a speed limit: if the book doesn’t sell 300 copies in that time period (in any format) or if the book is not available for sale at all. But those are old-fashioned ways of thinking. The better way is to use that dollar amount. It will benefit you.
Make sure that a print-on-demand version of your book does not count as “in print.” Nor should any second-party books count as in print. Meaning if the book was licensed to another company to produce the audio because you licensed audio rights to your original publisher, and the audio version is still in print, but no version from your original publisher is in print, then that book should be counted as out of print. Only the actions by your original publisher should count toward in print.
Watch out for your option clause. Try to avoid signing one at all. In the past, option clauses were like job security, but no longer. Option clauses have now become a way to tie a writer to a publishing house and to prevent her from working for anyone else. So strike your option clause if possible.
If it’s not possible, limit the option to the next book in this particular series, under this particular name (or pen name). If the book isn’t in a series, then limit by genre. The next contemporary political thriller under Pen Name (or your Author Name—not your legal name). Give the publisher 30 days from the turn-in of your proposal to exercise the option, and nothing else.
Watch your warranty clause. Now, many publishers are reverting to an old practice. They want writers to warrant that the writer will not write anything until this particular book under this particular contract is published.
This used to be a separate clause, and very easy to find. It existed in a lot of contracts 20 years ago, then faded away. Now it’s back with a vengeance. It used to be that the writer guaranteed that the book she was had just contracted for would be her next book and no other book would compete against it.
Now she’s guaranteeing that she will not write another book until this one is published. And in many cases, the publisher enjoins her from writing anything.
This clause, which has been in every new book contract I have seen from traditional New York publishers in the past six months, is buried in the warranties. Which are the boilerplate part of the contract, the part that includes bankruptcies and acts of God. A lot of established writers stopped reading the legal gobbledygook in the boilerplate years ago, and have been snared by this clause.
Don’t you be one of them.
I can go on and on and on about contract clauses to avoid. Those are some of the big ones. When you get your new contract, compare it to your previous contracts. I’d even go back a few—maybe back to your contracts from the late 1990s—and try to reinstate those terms.
If you find a one-word change in your new contract, and you don’t understand why that word is there, find out. If the word has been changed, that word is important. And you can bet all the changes will benefit the publisher.
You find these clauses in your new contract. What do you do?
Before you do anything, you figure out what you can live with and what you can’t live with. You figure out what’s important to you in this contract and what isn’t.
This morning, I refused to sign a contract for a short piece that allowed the publisher to make any editorial change they deemed necessary. Which meant that they could rewrite the entire thing, change everything about the piece itself, and still publish it under my name.
If I can’t get clauses like that changed, I walk. I’ve walked from clauses like that for thirty years, including on one of the very first non-fiction contracts I was supposed to sign.
No one changes my words without my permission—and I don’t give blanket permission. Period.
Yet I may take a book contract with percentage of net price because I might not be looking at that book as a money maker for me. I might look at it as a way to reach new readers. I’ve taken flat fees on projects in the past. But I knew what I was signing. I knew the risks I was taking, and I was willing to take those risks.
So pick where your battles will be, then fight them. Figure out when you will retreat, what you will compromise on, and what you will fight to the death for.
And if you plan to fight to the death, then that means you might have to walk. Against the advice of your agent, against extra money your publisher might throw at you, against a guaranteed publishing deal.
When you say no to a clause, mean no.
I have walked from dozens of contracts long before publishing’s monopoly on distribution was broken, and without exception, I eventually found another publisher and usually a better deal.
The key word here? Eventually. I couldn’t always turn the project around and sell it elsewhere quickly. But I would sell it down the road.
And watch out for someone who will tell you that refusing this deal, turning down these contract terms, will ruin your career. Naw. See Dean Wesley Smith’s post on how writers can ruin their careers. Let me tell you quickly: there is only one way to ruin your career—and it isn’t by standing up for yourself. It’s by giving up writing altogether.
Someone who tries to pressure you into a deal with threats or with intimidation, by speeding you along or by telling you that you will destroy your career, doesn’t have your best interest at heart. That person has another agenda.
If you want to stick with your traditional publisher, then make sure that your contracts benefit you and will continue to benefit you in the future. Negotiate. Think ahead. Make sure that you understand what the contract in front of you says.
If you don’t understand, then ask for help—not just from your agent or an IP attorney, but other writers who’ve been in the same position. Get multiple opinions.
Never accept a promise that clauses in the contract will not get exercised. If those clauses are in the contract, then assume someday someone will put that clause into effect.
And double-check. Make sure that a clause which might benefit you if the book sells poorly doesn’t hurt you if the book sells well. Because a lot of contract clauses actually decrease the amount of money you will receive if a book succeeds.
Finally—and I will deal with this more next week—do not expect your agent to negotiate a good deal for you. You might have the most reputable agent in the world, but that agent doesn’t know what’s best for you. More and more I’ve been talking to agent friends of mine and discovering that they do not understand the changes that are happening in publishing. So these agents can’t protect you from those changes because the agents have no idea what the pitfalls might be.
If you hire an intellectual property attorney to negotiate for you instead of an agent (which is what I now recommend), that attorney will do his best, but he will only do what you tell him to do. If you fail to tell him to check the warranty clause, then he won’t negotiate that horrible write-only-for-this-publisher clause out of your contract.
Writers have always been in charge of their own careers, but in the past most established writers trusted their editors, publishers, and agents to work with them and not against them. These writers knew enough not to trust a Hollywood contract, but would sign a book contract after only scanning it.
Those days are gone. If you do that now—even if you’re a successful New York Times bestseller—you might lose every single dollar you make. You must negotiate your own contract and get the very best terms you can.
Your livelihood depends on it.
Will you get all of the changes you want? Of course not. You’ll have to compromise on most things. But don’t be the only one to compromise. Your publisher must compromise as well.
Be clear with your publisher: You want to continue working with them. But you also want to continue to make a very good living in this new world of publishing. If your current publisher can’t modify the new terms of their contract, then you might have to look for a new publisher.
Be prepared for that.
Be prepared to defend your work and your livelihood.
The best place to do that—in a traditional publishing environment—is with the contracts you sign. Make sure they’re the very best they can be.
“The Business Rusch: Publishers (Surviving the Transition Part 2)” copyright 2011 by Kristine Kathryn Rusch.