Publishing contracts

There’s still a lot of uncertainty surrounding digital publishing contracts and understandable nervousness among both authors and publishers. You can go a long way toward ensuring that the partnership is a happy and productive one by clearly addressing digital issues. We look at some of the issues that will arise and how to address them.

Topics covered

Revising print contracts
New options for authors
Common issues in digital publishing contracts

Revising print contracts

Many older contracts didn’t deal with ebooks, or dealt with them in a very general way, typically as a subsidiary right such as an ‘electronic right’.

A subsidiary right is a right to use the book in a different way (serialized in a magazine, or as the basis of a film) or in a different territory or outlet from its original print run. As licence revenue, rather than royalties from a sale, they are usually pitched at 50% or more of the income received by the publisher.

Many publishers have now revised their standard publishing contracts to more comprehensively include ebooks. Royalty rates are typically in the range of 20-25% of net receipts, a little higher than print editions but lower than the royalty paid for most subsidiary rights.

Publishers argue this is justified because an ebook is akin to a new edition, with its own production, distribution, and marketing costs, rather than just a straight licensing fee collected from a third party. They might also have an advance that they need to recoup.

More options for authors

New avenues are opening to authors, from self-publishing to the emergence of digital-only publishers and authors’ agents offering their clients a digital publishing service. So pressure is increasing on publishers to improve terms.

The emergence of new publishing avenues raises another issue: Should authors assign their digital rights to the same publisher who holds the print rights? A famous example of an author who did not is J K Rowling. Rowling founded an entire publishing company, Pottermore, to exploit her digital rights for the Harry Potter works.

Most authors don’t have this amount of leverage with their traditional print publisher. Even if they do, they will often prefer to see the rights to both print editions and ebooks held by the same publisher to maximize publicity, promotion, and the overall success of their publishing partnership.

Before an author hands over rights, he or she will want to know that a publisher is capable of fully exploiting digital rights. Increasingly, digital publishing expertise is a prerequisite for printed book rights.

Common issues in digital publishing contracts

Publishers usually leave little room to vary their standard agreements, arguing that too many variations or complex exceptions can make their administration difficult. Here are a few areas that publishers and authors might review when they negotiate a new contract or revise an old one:

Click here to view some common issues in digital publishing contracts

It’s standard practice to base ebook royalties on net receipts rather than list price. This is reasonable, but the parties should carefully review any deductions proposed from income received to arrive at the net figure. In general, net receipts should be the full amount a publisher receives after ebookseller margins.
Electronic rights can include several different rights, for instance ebooks, apps, web, or enhanced ebooks. Rather than licensing everything under a general ‘electronic rights’ clause, the author could narrow the rights granted, leaving themselves with options for the future.
Rights for older works usually revert to the author if the book has gone out of print. Some older contracts appear to allow print-on-demand or ebooks to keep the book ‘in print’. Contracts should clarify when rights revert, for instance by stipulating a minimum level of sales.
With so much change, it’s common and in the best interests of both parties to limit the term of digital rights agreements or to add a review clause to the agreement.
Another way to ‘future proof’ an agreement and give both parties confidence to sign it is to add a ‘prevailing rate’ adjustment, which will increase the author’s royalty if the usual rate a publisher offers increases in new contracts (and vice versa).
Consider a higher royalty rate once the ebook has earned its costs. This might take effect once an agreed revenue or volume of sales has been reached and recognizes that the marginal cost of each extra ebook sold is small once the initial costs are recovered.

Resources

Find out more about this topic on our Digital Publishing 101 useful resources site.

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