Business Musings: The Grant of Rights Clause (Contracts/Dealbreakers)
I’m sure some of you have noticed that the art for this blog isn’t my usually snarky commentary on whatever topic I’ve chosen. I decided to use the photo header for this blog to promote the Storybundle that I’m in. Why? (Aside from shameless self-promotion?)
Because the Storybundle includes a book of mine that you might need to do half the stuff I mention in the contracts and dealbreakers posts. I’ve recommended How To Negotiate Anything before. It’s my biggest seller in nonfiction. (You can also find it in audio and free on this site in an earlier draft.)
However, if you get the book in the bundle, you also get nine other stellar writing and business books, plus you can donate to The Pearl Foundation, a charity that helps support adult education.
There. Ad over.
Now onto today’s topic.
I am revising the Dealbreakers 2013 book. I had hoped to revise it every year, but I get so discouraged looking at the contracts as they exist now. I actually started to revise in the hopes of having the new book in this Storybundle, and then discovered I had so much new material that I didn’t have time to finish the book by mid-May.
Why is there new material? Because traditional publishing contracts have gotten ugly (or should I say uglier?). And they’re not alone. Contracts for movie deals, gaming rights, comic books, and now works in translation are also getting more and more draconian.
Corporate entities have finally gotten a clue about the value of copyright and trademark. Now, those entities which own many of the companies you’ll deal with—even as an indie writer—want to own each piece of the copyright to any property they put their grubby little fingers on.
Before you read this post, make sure you have read the post titled “Know Your Rights” from a few weeks back. That’s a short explanation of copyright, which I am not going to recap here.
You need to understand copyright (even though it sounds dull) because you have to know what you’re licensing. If you don’t understand that sentence, then read the blog post. If you don’t understand the blog post, or you want more information, pick up The Copyright Handbook from Nolo Press. [link] And for the record, I have no financial interest in Nolo or in the Handbook. It’s just a great resource.
Since we’re going on the record for a few things, let me remind you that I’m not an attorney, and nothing I say here should be considered legal advice. I’m just telling you things to watch out for.
As I’m revising the old Dealbreakers book, I am finding a lot of material that no longer applies. 2011-2013 was a transitional period in the ebook revolution. Traditional publishers didn’t know anything about ebooks, and writers had a lot more leeway in what they could do.
Now, things are so different that some of the contracts I’m touching feel toxic to me. I want to wash my hands after holding them.
In Dealbreakers, I listed six places you, as an author, will want to hold the line in your negotiation with publishers. (I’m saying publishers here, but realize that I also mean people who want to license auxiliary rights like books in translation, audio books, movie rights, and so on.) I’m going to cover three of those areas today.
- The Rights You Plan To License.
- The Amount You Will Get Paid For That License.
- The Number of Books You License in This Contract.
Let’s start with The Rights You Plan To License.
In a traditional publishing contract, you’ll find that in the Grant of Rights section. I’m beginning to think that section should be called the Grab of Rights section, because it’s so very icky.
Let me show you an example of something you should never ever sign. This is from a real contract, offered to writers this year, which someone sent me a little over a month ago:
Effective immediately upon the execution of this Agreement, the Author hereby grants to the Publisher the following:
1) The sole and exclusive worldwide rights and license to print, publish, distribute, sell and sublicense, and generally exploit the Work, in all languages, whether in print, electronic, digital, audio, video, television, film, theatrical, or any other form or format now known or hereafter discovered or created, in all languages, including any and all editions and formats of the Work, in whole or in part and all revision of the Work and any edition thereof. As used herein, the term “editions” shall include worldwide rights: the term “formats” shall include all print, book club, and all electronic formats including download (whether over the Internet, through an “app” or otherwise), audio, disk, CD, or any other electronic or digital format known or to be invented, enhanced ebooks, mass market, large print, and any future formats/technologies for the duration of the contract term;
The Grant of Rights section goes on, with three more points that I’m not going to deal with here, because that clause all by itself is so squiggy that I shuddered as I typed it. Ugh.
(By the way, here’s Contracts 101. When you see a phrase like “for the duration of the contract term,” the thing you do immediately is thumb through the contract to find the length of the term. In the ideal contract, the term is stated in years. [Such as: This contract is for ten years, subject to renewal on the same or better terms should both parties agree.] In the icky contract, I had to search for the damn term of the contract, which is buried in the Out of Print clause. The parts of that clause are so favorable to the publisher that this book will never go out of print, and the contract will not terminate.)
Even though this icky contract that I’m quoting from doesn’t explicitly say so, this is essentially an all-rights deal. (Read that first sentence out loud. You’ll see.) The author is giving everything to this publisher, and the contract, bless its evil little heart, actually says so, in more than one way. This part of the clause is particularly pernicious:
or any other form or format now known or hereafter discovered or created, in all languages, including any and all editions and formats of the Work, in whole or in part and all revision of the Work and any edition thereof.
Any writer who signs this damn thing can’t even publish an author’s preferred edition with the text dramatically altered. Or compile an omnibus. Or publish half the book in Spanish, a quarter in Italian, and the rest in English. Signing this contract, with this one clause, gives the publisher rights to everything.
The contract goes on in terrible, awful, horrible ways. The noncompete is actually in a section called Author Rights (!) and says that the author cannot “publish or permit to be published during the Term of this agreement any book or other writing based substantially on subject matter, material, characters or incidents in the Work without written consent of the Publisher.” And then there’s another non-compete later, and a third even deeper in the contract. (For more on non-competes, see last week’s post.)
And this contract will never end. (Even though it pretends to.)
You should be. I am, and I am not an innocent victim who would blithely sign this thing. I can see what’s wrong with it, and could have as a teenage writer (yep, I was one). I would never sign this. I’m still scared, because the writer who sent me this contract—who was smart enough to run screaming when they saw the terms—says they know many authors who are signing it.
So…here’s the question:
What should you grant to anyone who wants to go into business with you with regards to one of your pieces of intellectual property?
As little as possible to benefit both of you.
Please note how I phrased that question. Most writers ask “What should I sell to my traditional publisher?”
That sentence means something completely different than the one in bold.
Since you are licensing copyright, you are not selling anything. So when you have a deal with a traditional publisher or some other entity, you should only license what you need to get the deal done.
So many indie writers dismiss my posts in this series, thinking the posts are only for traditionally published writers or hybrid writers. Whenever I see the dismissal, I think that poor indie writer is hanging out in dangerous country, waiting for someone to take advantage of them. Because someone will.
If you’re making a deal with a company that produces paper board games, then you need to limit the grant of rights to paper board games, maybe even of a particular type. If you’re making a deal with a traditional publisher to produce and distribute paper books, then make sure that contract does not include ebook rights. If you’re only making that deal to have a mass market edition of your work, then only license mass market rights.
And so on.
Anything more is unnecessary and harmful to you as the writer.
Remember you are licensing copyright, and copyright can be sliced in such fine layers that you can license mass market paper book rights to one company, trade paper book rights to another company, and hardcover book rights to yet a third, while hanging onto ebook rights, and everything else.
The other aspect to a copyright license is the territory in which you are licensing that copyright. The territory can be limited to North America. Or to Rhode Island, if you so choose.
Make sure you know who you’re dealing with when you license a slice of copyright to that company. If the company is based in France, and has no marketing reach beyond France, then there is no need to give that company the right to produce and market books in Canada or Algeria. The company will try to buy World Rights in the French Language, but why give up those rights? You might be able to exploit the rights better than the company can.
And here’s the thing: You might not be capable of exploiting those rights today, but three years from now, an opportunity comes your way that will enable you to publish a book in French throughout Africa—paying substantially more than the French company above would ever have paid you. If you threw in all French language rights to that company, you would lose the new opportunity.
If you were sensible, and only licensed what you needed to license, then you would be able to make French Language African deal.
Plan for the future. Do not license more than you need to.
If a publisher wants more than one thing in its license, the publisher has to pay for the additional rights. You, as the person licensing those rights, need to know how much those rights are worth to you.
For example, I would never sign that icky contract because they want everything. There is not a dollar figure, even in the tens of millions, that would entice me to license every right to one of my intellectual properties.
So you must consider…
- The Amount You Will Get Paid For That License.
Each slice of copyright is worth money. So every time a publisher wants to add another right to its license, that publisher should pay for the right.
That icky contract lists categories of rights as if they’re individual rights: print, electronic, digital, audio, video, television, film, theatrical…and more.
But as I mentioned above, print can be broken down in a wide variety of ways. Audio can be audio CDs, audio downloads, audio collections, audio performed by one narrator, audio performed by several narrators (with sound effects), podcast rights, and so on. Each of those things can and should be listed in any contract—and accounted for separately.
You know that television is no longer network television, right? It includes streaming shows, cable shows, network shows, shows for the British Market, the Canadian Market, the German market…and on, and on, and on.
Look at all this money that anyone who signed that icky contract had signed away.
I know this whole concept makes your brain hurt. I know it because it makes my brain hurt.
But each one of those subrights can and should be licensed separately, for a separate fee. Even if those fees run small, say, $1000 per subright on the audio or the book rights, I’ve listed six types of audio rights, and four types of book rights. That’s a small amount of $10,000, and that doesn’t include the video or TV or movie or theatrical rights or comic book rights or more.
So if you’re licensing all of those rights listed above for $5,000 plus possible royalties, the only person who gets hurt is you. Because many of these companies won’t pay full royalties on subrights sales. They’ll pay you a 50/50 split of the net revenues the publisher receives. The icky contract above only pays a 50/50 split of net revenues on a handful of subrights. On the rest of them, the author gets as little as 10% of the publisher’s net revenues.
Not gross revenues. Not the money received. The writer gets money received minus expenses. And because net is not defined in this contract (or in any publishing contract that I’ve seen of late), expenses might include anything from airplane tickets to Frankfurt to facilitate the foreign rights sales to a daily cappuccino for the editorial assistant’s assistant.
In other words, modern contracts issued through conglomerates and other grabby corporations are skewed so that the person who created the original product gets little to no money, and the corporate entity gets most or all of the money.
Before you license anything to anyone, make sure you know how much you will take for those subrights and slices of the intellectual property. Then imagine how you would feel if you sold, say, the TV rights (all of them) to XYZ Book Publishing Company as part of your $5,000. Sure you get a 50/50 split of net revenues (which are not defined). So your book becomes a TV show—a big one, ground-breaking. Everyone watches it. The show airs on network television. Then the cable rights sell. Then the rights to produce a different version for the Russian market. The streaming rights sell, and on, and on.
You get no money. You contact the original publisher, who reminds you that you get 50% of net receipts. They send you their accounting, which they have zeroed out. When they factor in all of their expenses, there is no money left over.
So people all over the world are making money off the TV rights to your book, but you have made…wait for it…$5,000. Period.
Oh, maybe you got some additional royalties on the book itself. But the way that the publishers are dealing with the discount clauses these days, you might not even see those. What’s a discount clause? you ask. A discount clause is something we’ll deal with in a future blog post.
Rather than have the publisher pay for each right they license, make sure they only license the rights they need to complete the deal. That way, you don’t have to figure out what all the extra rights are worth. You have to restrict the license and figure out what that one single license is worth.
But that’s hard to do. It means you’ll have to negotiate your ass off.
It means you’ll have to be prepared to walk.
Yes, you will have to do the negotiation yourself or through a lawyer. Because agents won’t walk. Agent Andrew Zack of the Zack Company made that point on the topic of contract negotiation just last week.
But when the [book] offer comes and it ignores that certain rights were on the table or it takes the position that getting World rights including Audio is company policy and those things are not negotiable, I think most authors end up feeling boxed in and bullied into giving up rights they would otherwise have hoped to license for additional advances and income elsewhere. Perhaps we should just be grateful that getting movie rights has not become “company policy” anywhere . . . yet.
And I understand authors can always walk away, but we both know that it’s not a realistic move.
When someone tells you that a piece of the deal is non-negotiable, that means they are willing to walk away from the deal. Publishers are doing that more and more (which is the very frustrated point of Zack’s blog). But when the negotiator on the other side, the agent, says the author walking away is not a realistic move, then the negotiator has no power at all.
Zack’s attitude is typical of most agents. Which is why I’m telling you that you should not hire any agent to make and negotiate deals for you. (I’ll write more about agents in the future as well.)
Recently, a friend of mine, who wanted out of a traditional publishing relationship that had once been beneficial to him, decided that he would negotiate a new contract with the publisher for the next book in a series. My friend decided to ask for the same contract, except for one detail. He wanted the publisher to pay for each right licensed. My friend had originally been paid in the low five figures. He asked for mid-six figures.
And believe it or not, the publisher considered the offer quite seriously. In fact, for a while there, it looked like my friend might have negotiated more money, but continued the relationship he wasn’t sure he wanted any longer.
(When you make ploys like this, make sure that you can live with the deal if the other party accepts it.)
Which brings us to:
- The Number of Books You License in This Contract
In the past, every writer wanted a multi-book contract. It gave us security, and it made sure that the publishing house put an effort into publishing our work. The publishing house had a lot of money and future profits at stake, so the house worked harder on multi-book contracts.
Now, with things changing as rapidly as they are, multi-book contracts no longer provide security. They might harm us by locking us into contract terms that won’t be good for us in a year or two.
Always go with a one-book contract. It gives you flexibility to negotiate better terms for you in the future, terms we may not even be able to envision now. (Did you know what an app was in 2008? If you signed a multi-book contract that year, you are probably still fulfilling that contract. And it’s out of date.)
So, let me summarize this entire post.
When you make a deal with another party to license part of your copyright, make sure that:
- You Limit The Deal To Only The Rights Needed. Include nothing extra, such as rights that have nothing to do with the one thing the other party does best. Limit the territory you license the copyright in, limit the time the other party can produce the product, and limit the rights granted. If the other party needs more rights, you can amend the contract to include those extra rights…for extra money, of course.
- You Get Paid For Each License. Do not bundle bits of copyright together. Slice those rights very thin. Don’t license “book rights.” License mass market paperback rights in the United States. License Limited Edition Hardcover Rights in Germany. License Ebook Rights for a Translation in Italian in Italy. Each license is worth money to you. Make sure you get that money.
- You License One Book at a Time. Do not make a multi-book deal. The markets are changing so quickly that a long-term contract with one publisher or corporation will end up hurting you. For example, almost everything I wrote in the Dealbreakers book three years ago on the rights to sell to a publisher is out of date now. Three years later. Imagine if you have a five-book contract, negotiated in 2013, for one book per year. That contract will reflect those out-of-date terms, and hold you to them for five years. That means you won’t have a chance to get a better contract until 2018 or 2019—if you want to have a traditional publisher at all.
One book at a time, one narrow slice of copyright at a time. Think about the future, not about the present.
Finally, writers too often sell themselves short. Clearly that agent was doing so above. He figured writers should take what they’re offered because walking away “is not a realistic move.” Too many writers think that.
Yet walking away is always an option. And it’s an even better one now than it was in 2013, when I published the original Dealbreakers book or than it was in 1993, when self-publishing was hard and frowned upon. Writers have opportunities now.
Writers who aren’t tied to long-term contracts, writers who have retained the bulk of their copyrights, writers who know how to exploit those copyrights, are making a fortune on their writing.
Writers who haven’t reached the “making a fortune” part of their careers are reserving the right to make a fortune when the opportunities present themselves.
Here’s the clearest way I can say this:
If your writing is good enough to attract another company that wants to buy up your copyright for very little money, that means the company believes your copyright has value now and will have even more value in the future.
Why let them make money off you? Why shouldn’t you make the most money from your copyrights?
Don’t sell yourself short. Stand up for yourself and your work. License only those rights needed to partner with another company (if you want to work with someone else) and if the company balks, walk away.
You’ll get a better deal in the future. Heck, that better deal might simply be one you’ve created by doing the work yourself.
But I guarantee that the worst thing you can do is sign a Grant of Rights clause like the one above. Stop begging for scraps at the publisher’s table. Realize you hold all the cards. Negotiate from a position of strength.
You have created something valuable. Protect that asset. Treat it with respect. If you do that, others will too.
Well, speaking of value, these blog posts have value, not just in their copyright, but in the time it takes me to write them. If you get something out of the posts, please leave a tip on the way out.
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“Business Musings: The Grant of Rights Clause,” copyright © 2016 by Kristine Kathryn Rusch. Image at the top of the blog copyright © 2016 by WMG Publishing.