Some of these terms may sound obvious but if you’re a lawyer writing a book contract, “obvious” may be one word you don’t know. Here’s a primer on a few basic publishing terms.
Every author dreams of selling a book for a whole lot of dough. But the monies a writer receives in a publishing house contract is called an “advance” for a reason. It’s an advance against earned royalties. If you receive a book contract with a pleasing $100,000 advance and are paid a 12% royalty, your royalty account receives 12% of the book sales’ profits. When your royalty account surpasses $100,000, it “earns out,” and you start making even more money. That’s where you want to be.
Hard to believe, but a high advance can later spell trouble for some writers.
This is truer for fiction writers, I think. A non-fiction author’s book might be a one-off topic, and for them it’s generally desirable (understatement here) for them to get the largest advance possible. On the other hand, a debut fiction author garnering a huge advance had better hope they earn out, especially when it’s time to sell their second book.
If you don’t earn out a hefty advance, a publisher might consider your book a failure, even with decent sales and reviews. If you’re given a lesser advance and earn out and then keep on earning, making a new contract will be more attractive for the company.
Many writers and agents maintain that a higher advance brings with it a deeper commitment by the publisher. Striking the right balance is what smart agents do when negotiating contracts.
“Gross profits versus net profits”
Again, these sound like terms we already know, but the contracted-for specifics are critically important. In the above example, you got 12% of the profits, but are those gross or net profits? How are these figures calculated? The 12% share may come from the book’s retail price when it’s sold (gross), or the 12% might be instead based on all the income–less certain deductions–received by a publisher (net). Publishers have many ways to determine how they pay out that hypothetical 12% royalty rate, and writers are advised to understand (or pay someone to decipher) these complex terms.
Imagine your book being read in French…ooh la la. In general, publishers want to contract for “World Rights,” and sometimes that’s for the best, as major houses have subsidiary rights departments crossing the globe trying to sell publication rights to your book from London to Baku. If a foreign sale is made, author and publisher share profits by a negotiated percentage.
Limiting the territory
Some agents hold onto foreign rights, having an apparatus in place (generally, sub-agents) to sell publication rights abroad. Then they don’t have to share a percentage with the publishers. Contractual rights deals include, among a myriad of variations, “World Rights in English” and “North American Rights.” UK rights are often a matter of dispute because those literary Brits like our books, and need not translate them.
Let’s say you make an amazing two-book deal, for $100,000 per book. The first book comes out and is a smash. Let the good times roll. Your aforementioned 12% royalty has made much more than $100,000 so you should start getting royalty checks in the mail, yes? Not necessarily. If your two-book contract is joint-accounted, you don’t earn out until the full $200,000 earns out. Multi-book contracts are much coveted, of course, but agents don’t much like this “joint accounting” clause. Publishers feel differently, and nowadays these terms are not easily avoided.
A publisher contracting for a book is investing in an author’s career, and wants the option to continue that relationship. To determine if they want to bid on your next book, an option clause generally allows a publisher to have an exclusive look for a mandated period of time at a portion of or all of that work.
There are variations in option clauses, some controversial. A publishing house may have a matching option, which means that whatever deal you are offered by a different publisher, your original publisher can step in and match that offer. Some clauses may even demand your new book receives the same terms as the first.
Writers eager to move on to a new publisher may find certain option clauses inhibiting to both their career and freedom to write what they choose.
Wanted: an eagle eye
Electronic rights and no-advance/profit share contracts further complicate matters. It’s prudent for Career Authors to familiarize themselves with these terms but even wiser to consult experts. If you use a lawyer, make sure they’re familiar with book contracts. Literary agents do much more than negotiate contracts, and their 15% cut is well worth it.
Do any other book contract terms have you confused? Let us know on Facebook and we’ll do our darnedest to make them crystal clear.