Business Musings: Contracts: Traditional Publishing (The Year In Review 4)

Here’s a weird thing about businesses: When a business is rolling in cash, the people who run it loosen their grip on the details. Instead of solving a problem, they throw money at it. Often they don’t recognize the problem for the danger that it might be, until it comes back to bite them, years down the road.

However, when the business notices that its revenues are down, and nothing it does seems to improve them, the business tightens whatever belt it can find. It also gets draconian about the details. Before, when the business was throwing thousands of dollars at a problem, the business didn’t really care about hundreds of dollars or tens of dollars or the pocket change.

When that business realizes its revenues are down, though—and maybe down for a bunch of months or even years—then that business watches every single dollar that flows in and out. In fact, if it’s a publicly traded company and/or if it has a board of directors and/or if it has shareholders to answer to, the business also finds a way to inflate its bottom line.

Inflating the bottom line attracts investors. It also keeps the stock price up (for any publicly traded company), and it makes the folks running this slowly sinking ship look like they’re doing Just Fine.

I’ve been thinking about that principle a lot this past semester. I’ve been taking an Entertainment Law class. I love it. I really do. I was exhausted at the end of the semester from that class, from finishing a (surprise) novel, from a bunch of things, and I still find myself looking forward to the second half of the EL class in the spring, so much so that I couldn’t quite believe it when one of my classmates said she didn’t think she’d take the second part of the class, even though it has units on movies, television, and streaming, things she, as a wannabe screenwriter, needs to understand.

For me, the first two weeks of the class were a gimme—copyright law, the bedrock foundation of entertainment law here in the U.S. (and abroad). I got that stuff. But the rest of it showed me just how haphazard my knowledge is.

I’m not surprised. I didn’t learn any of what I know about copyright or contracts in a formal setting. I learned it at the seat of my elders or through the school of hard knocks or by reading books about these things and not always understanding what I read.

In class, we read a lot of cases, and that, more than anything, showed my why my book contracts morphed and changed over the years, why it became so hard to suddenly negotiate points that seemed small to me, but seemed very, very important to the person on the other side of the table.

Usually, the changes came about because copyright law changed in a major way (twice in the United States during my active career; three times in my lifetime), but sometimes the contracts changed because some publisher lost a big dramatic lawsuit, and everyone wanted to prevent the same kind of loss from happening to them.

Quite the revelation. I’m sure that will continue in the second half of the class.

We’re using several texts and a lot of recent cases as handouts. One of the texts, though, the main one actually, is from 2009. While it’s great on the basics, it’s woefully inadequate on industries that have gone through a major technological disruption, like publishing.

Mostly, the prof can handle the changes, but publishing is not her strong suit. She’s a practicing entertainment lawyer with a hell of resume, and this is the only course she teaches. She does so for the same reason I write this blog: to make sure that artists have at least some grounding in the law, copyright, and contracts, so that they can make informed decisions about their careers.

The last time she handled a publishing case was about the same time the main text was published. So we had a consult after class, and at her request, I sent her some materials from the past 12 years. (I had the help of two different IP lawyers who pointed out the essential cases.)

Even so, the publishing section of the course was either a trip down memory lane for me—I not only remembered some of the cases we studied, but I knew most of the principals—or the material made me laugh out loud when I was studying it.

Case in point was the sample publishing contract in the 12-year-old edition of the textbook. I have never, in my entire career, seen a contract like that one. Not a single one. And I have read maybe close to a thousand publishing contracts.

How have I read so many when I haven’t published that many books? Early on, I was in a group with young writers who shared contracts, even though we weren’t supposed to. That was a hell of an education in levels of contracts. Later, friends shared, particularly when they got high-end deals. And in the past thirty years or so, students have sent contracts, asking for help in understanding them. Or at least, students used to. Most of the people Dean and I teach now are indie.

The book contract in that textbook had a lot of clauses that were more favorable to the writer than I had ever seen. It also had some truly bizarre clauses that publishers seemed to think they wanted.

What caught my attention, though, was the advertising section of the contract. It went on for pages, with a suggested ad budget and an advertising plan as part of the contract.

You lawyers and the contract-savvy will understand this: If the advertising budget and the proposed plan are part of the contract, and the publisher reneges or somehow cannot pull off that advertising plan, then they are in breach of contract.

All I can think is that this sample contract dated from the 1970s or was very specific to one author that the book’s authors were familiar with. Because I’ve seen contracts with a stipulated advertising section. That section is as vague as possible. (The Publisher will use all best efforts to run a full-scale advertising campaign in accordance with best practices for the period when the Work appears…)

The only time I ever saw an advertising plan affiliated with a contract was for a bestseller who got tired of that vague language. He requested—and got—as part of his book deal, a promised advertising plan. However, that plan was not part of the contract, but arrived in a separate letter, not referenced in the contract.

What that letter signaled to me was that the publisher did not want any promises regarding advertising anywhere near their contracts. Methinks this means that somewhere along the way, and not in anything I studied, some publisher got nailed for failing to provide the promised ad campaign, and publishers have been skittish ever since. (By the way, the ad campaign promised in that letter never happened. The bestseller was shocked; I wasn’t.)

Over the decades since the first edition of this textbook was published in the early 1980s, writers have lost a lot of their clout. Writers also stopped relying on knowledgeable people to help them negotiate their contracts and relied on literary agents instead.

With few exceptions, literary agents do not use the services of lawyers to help negotiate a contract. Some of the larger agencies do, especially if they’re affiliated with other branches of the entertainment industry, but most of the time a traditional book contract is being negotiated by a person without a law degree whose knowledge of contract law is more haphazard than mine is.

What this has done with traditional publishing contracts is make them exceptionally inequitable. The contracts favor the publishers and, in some cases, actively harm the writers.

I’ve been shouting about this for years now. The problem is that in the years since I last got a traditional publishing book contract, the destructive nature of the contracts has grown worse, not better. Major companies are trying to license as many rights as possible for the life of the copyright. These companies have a hand-waving termination clause in the contract—something like if the book can’t be found for sale somewhere then it’s out of print—which means nothing in these days of internet sales.

Even contracts that have a good termination clause negate that clause in a different section (usually in the warranties). And within the last two or three years, some traditional book publishers have gotten smart and added a clause like this:

This contract represents the entire Agreement between the Publisher and the Writer. If any part of this Agreement is deemed unlawful or unenforceable, the rest of the Agreement shall remain in effect.

Think about that for a moment. In the past, a bad clause or two would have caused a breach of contract. I’d like to say not anymore, at least with these clauses at the very end, but I don’t know. I suspect that clause has not been challenged in court.

However, it doesn’t matter if the clause has not been challenged in court. Clauses like that create a chilling effect on anyone who wants to sue for breach of contract. Even if the writer wins on the merits, will they get out of the contract? I honestly don’t know.

That clause added onto the clauses giving publishers the right to keep their license for the entire term of the copyright which is (in the United States), for those of you who never bothered to get The Copyright Handbook, the life of the author plus 70 years. Yes, traditionally published people. That’s what you’re licensing to your New York publisher, the one who doesn’t know how to maintain a backlist.

Holding onto IP for the life of the copyright inflates the value of a publishing company even if the publishing company does not exploit that IP. (Exploit, in copyright terms, means “use.”) At the valuation stage, at least right now, at the end of 2021, the potential of the IP is often worth more than any possible exploitation. In other words, the IP “might” sell to the movies, so there “might” be $500,000 in value right there. Not to mention the potential gaming sales (another cool million maybe?) or all the other possible rights vested in that one particular project.

That these things will never happen isn’t a concern for the valuation companies at the moment. That might change.

But traditional publishers are using contracts for things other than swallowing and holding other people’s IP. The larger companies, particularly the Big 5, are adding morality clauses.

I couldn’t find a good example of these clauses in the handful of contracts I have at my fingertips, but The New York Times a few years ago gave two good examples. The first is from Penguin Random House, which is poised to control even more of the traditional publishing industry.

At the time this article was written, four years ago, Randy Penguin’s clause read like this:

These clauses release a company from the obligation to publish a book if, in the words of Penguin Random House, “past or future conduct of the author inconsistent with the author’s reputation at the time this agreement is executed comes to light and results in sustained, widespread public condemnation of the author that materially diminishes the sales potential of the work.”

As of February, Randy Penguin did not require the author to repay all monies paid in that instance.

The 2017 article pointed out Condé Nast’s morality clause in its annual contract for regular magazine contributors, a clause which is infinitely worse than Randy Penguin’s was. The article says,

If, in the company’s “sole judgment,” the clause states, the writer “becomes the subject of public disrepute, contempt, complaints or scandals,” Condé Nast can terminate the agreement.

Um, what? What?  “Contempt”? “Complaints”? What do those things even mean? And does it matter, since those are determined only by Condé Nast, not by any objective (if there is one) source?

These clauses have been activated in 2021. Many of them hit conservative politicians and others involved in the January 6 insurrection. A few have gone after people involved in sex scandals. But there’s nothing to say that in some company’s “sole judgement” that a writer’s speech at a library event that takes a somewhat controversial position on, say, water bottles might offend someone in the publishing house—or give them an excuse to terminate a contract.

Again, clauses like this are designed to chill behavior, not to punish it. Sure, it will give the publishing company an out if the writer goes from, say, being the doctor to an entire gymnastics team to being outed as a serial rapist, but the morality clause could just as easily be frivolously used to break a contract with a prickly author who the replacement for the acquiring editor does not like.

Or as PEN America said in its opposition to the morality clause:

While the necessity of such clauses may be understandable where an author with a signed book contract is convicted of a crime or publicly admits to immoral behavior, PEN America is concerned that some clauses pave the way for publishers to cancel publication on the basis of speech that is controversial, offensive, or provocative, but legally protected. If writers are on notice that a provocative comment, quote, or social media post that stokes uproar may prompt the cancellation of a book contract, they may constrain their expression for fear of harming their careers. Morality clauses thus risk chilling speech and narrowing discourse among writers who fear a loss of livelihood based on their publisher’s response.

The morals clause and the copyright license are big issues in current contracts. A smaller, telling issue shows yet again how traditional publishers are trying to control the behavior of the writers they bring on board.

If the writer has a large social media following and, especially, if the book is purchased to capitalize on that following, then traditional publishers have started adding a clause that specify how many social media posts the author needs to make before and after the book is published.

Notice the trajectory here. That old publishing contract in my ancient textbook talks about an advertising agreement that binds the publisher. The advertising agreements I’ve seen that reference a plan do not bind the publisher at all. They are mere suggestions, often ignored.

But now, there are clauses in a publishing contract that control how much the writer needs to post on their own social media accounts to promote a book that, in theory, traditional publishing should be promoting.

The contracts are a mess, and that’s in the big traditional publishing companies. In the smaller ones, the contracts are a nightmare. Often cut and pasted from contracts that the owner of the company has seen, those smaller company contracts are a mishmash of ugly, and usually they hurt the writer even more.

Almost every year, there’s an example of those smaller company contracts gone wrong, and this year was no exception. In the erotica market, Blushing Books went from being one of the shining lights of small publishing, making a fortune for its authors by e-pubbing their books, to actual criminal charges against employees in the company (some of the complaints brought by the shady owner of the company).

The Blushing Books case is convoluted, including trademark squatting, actual copyright theft, doctored contracts, and original work incorrectly labeled as work made for hire. (If you want to know what happened, read this.)  In a normal business, this case would be considered extreme, but this is the third such case I’ve seen in traditional publishing in five years.

When writers blindly trust publishers, nightmares like Blushing Books become commonplace.

So let’s back up here and talk about what a contract should be in the arts.

The law moves slower than the changes in an industry. It took decades, for example, for parts of the growing music industry to have actual copyright protection. Right now, in publishing as in many other recently disrupted industries, the law is waaaay behind what’s actually going on.

Many writers believe that means they have no protection against things that go wrong. And if they’re naïve about business—and if they’ve hired an agent to do an IP lawyer’s job—then they’re right. The writer will have absolutely no protection at all against mishaps that aren’t covered in the law.

But savvy writers understand this: what the law fails to protect, a good contract will. The key word here is good. Writers in traditional publishing have for too many years completely given up their power. They receive terrible contracts which their agents negotiate into bad contracts. Look at the agent comments in the three New York Times articles that I reference here about contracts. You can essentially boil down all of the agent comments to: Well, it’s bad and we know it’s bad, but what’s an agent to do? We have to live with it.

No. They don’t. They can negotiate the clause out or mitigate its power. If those two things aren’t possible, then the writer needs to walk away from the deal.

A contract needs to be equitable to both parties involved. Right now, traditional publishing contracts—at all levels, from bestseller to beginner—are not fair or equitable.

They just haven’t been challenged in court. And frankly, I wouldn’t want to spend the money to challenge one of those contracts. What looks like a simple contracts case could cost as much as $50,000 in legal fees—and that’s just on the writer’s side. If the writer loses, she’s in hock for those fees.

It’s better to pay a good IP lawyer $500 for the hour of their time to examine a contract and find the pitfalls before the contract is signed than it is to try to get out of one of these terrible contracts in court.

I have written about contracts off and on for 12 years in this weekly blog. I have two reasons for making contracts my last post on traditional publishing in this year’s year in review. The first reason is this: a lot of indie writers are making deals with traditional publishers for auxiliary rights—rights the indie writers don’t have time to develop on their own.

Just because the indie writer is contracting for, say, audio rights doesn’t mean that these onerous clauses aren’t in the contracts. Often they are. And sometimes, the contracts for auxiliary rights are even worse than a standard book contract. Sometimes, the auxiliary rights contracts make a full rights grab for all the rights in a book, especially if the ebook has been indie published and there is no print component.

Ugly, ugly, ugly.

Traditionally published writers are used to having their hands tied by their contracts, as Kat Martin mentioned sideways at 20Booksto50K, in a quote I cited in the previous year in review post.

A few years ago, I had thought that traditional book contracts had hit rock bottom. I had no idea how much lower they could go.

The other reason I’m talking about contracts now is that in 2021, artists in other parts of the entertainment industry are using their contracts correctly, to fight back against abuses by a large corporation (in the case of Scarlett Johansson’s suit against Disney, for example) or in figuring out how to use contract terms to force inclusivity into industries that have avoided it (such as the recommendations for contract terms by the Dramatist’s Guild).

Contracts and copyrights have been in the entertainment news a lot in 2021—and most of the articles have been about occurrences that favor the artist rather than the large corporation. That’s unusual and a sign of changing times. That’s something I will explore in a different blog, because the changing times do not apply to publishing. Traditional publishing is still hidebound and old and fusty and very, very abusive of its writers.

The writers usually don’t figure that out until it’s much too late.

So, in my annual piss into the wind, I once again caution you wannabe traditionally published writers about your book contracts. The contracts are so bad now that I have no idea how they could hold up in court.

The problem is that these cases almost never go to court. And besides, whenever anything goes to court, the situation is already too late to repair.

I know most of you traditional publishing wannabes won’t listen to me. I know most of you indies are listening (and I’m grateful). So I’m just going to say this: A carefully drawn contract is a compromise between both sides. Each side has an agenda and each side has to give a little bit to achieve that goal.

A well-drawn contract should not control the behavior of another party in that contract, nor should the contract take more than necessary from either party. In the case of IP, that means the contract should only cover the single interaction between the writer and the company—not forcing one side only into a non-compete clause (the onerous addition of ten years ago) or forcing one side only into a morality clause or forcing one side only to do the marketing work.

Of course, no one forces anyone in a contract, unless one party has a gun to their head and is forced to sign. No writer ever has a gun to their head when they sign a contract.

As the sign in our in-person business classes used to say: You are responsible for your own career. That means you’re the one who signed the contract. You’re the one who made the choice to give up your freedom of speech or to let some big corporation decide if your marriage is “moral.”

I find all of this traditional publishing stuff to be dark and twisted and just plain sad. So I’m moving off this part of the year in review and heading into the fun stuff—the growth and changes in indie publishing for 2021.

See you with a lighter piece next time…

***

Part of me can’t believe we’re in 2022. That’s such a science fiction number! A couple of things: First, we extended the year-end writing workshops sale until late Thursday.

Second, I have finished all of the year-in review posts. I posted them all on my Patreon page first, and then I will post them here over time as 2022 progresses. If you want to read them sooner, then you need to go to Patreon.

If you liked this post, and want to show your one-time appreciation, the place to do that is PayPal. If you go that route, please include your email address in the notes section, so I can say thank you.

Which I am going to say right now. Thank you!

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“Business Musings: Contracts,” copyright © 2022 by Kristine Kathryn Rusch. Image at the top of the blog copyright © Can Stock Photo / andrewgenn