Contracts: Cui Bono? (Patreon)

This is not a normal "Here are things to look out for in a publishing contract" essay. I am going to give some tips, but they're going to do double-duty as I lay some groundwork for larger-scale thoughts on the industry.

But let us set the table before we pull off the tablecloth with a magician's flourish.

DISCLAIMER: I'm speaking from my own experience, so we're mostly talking about adult SF/F books in English sold in contracts to publishers in the US/CAN and UK territories. Prices will be in USD. I am not a lawyer or an agent, but I do have nearly a decade of experience in the field. Maybe your experience with these details is different. Maybe you're correct and I have bad information on some of the specifics (again, I am not a lawyer or an agent). Or maybe we're both correct! The industry is confusing and inconsistent.

And as we talk through this, ask yourself: Cui Bono? Who benefits from The Way Things Are?

5 Quick Tips About Contracts

1) Get clarity about what counts as "Out of Print"

In my experience, rights reversion in SF/F contracts tends to be tied to the book going "out of print". With the rise of ebooks, the phrase "out of print" has to mean something different. Without a re-framing of what "out of print" means, publishers could leave an ebook on sale for $1.99 forever and the book is technically "in-print" even if the publisher doesn't support the book at all and the physical edition by the same publisher hasn't been available from the publisher or wholesalers for years. 

The new contract language that I am familiar with in terms of digital books and "out of print" usually sets a sales threshold per year or royalty period that the book must exceed to count as in-print. Sometimes this threshold only activates after a year or two years or something, giving the publisher some time to build up sales momentum. Please be very clear when negotiating to get language about whether the $ amount for that threshold is publisher revenue or royalties to the author. The reversion clause should also say how the author and/or their agent are to request rights back and what time period the publisher has to respond.

2) Pay attention to units of measurement in royalties

"12% of list price" is different from "12% of publishers receipts". Abd "12% of profits" might really mean something different from the first two. Royalties as a % of list price are the most common and (in my experience) standard for physical books. Royalties as a % of publisher's receipts/net are most common for digital formats. But in all of these cases, make sure the contract is very clear about what is and isn't counted before you get your %.

List price is the price written on the book aka M.S.R.P. That's often $14.99 to $17.99 on trade paperbacks and $25 or more on hardcovers. So your royalty is calculated as a % of the publisher-set price for the book. It doesn't matter what the retailer sells the book for, you still get your % of list price.

Publisher's receipts is often but not always called "net". It means "The money received by the publisher for the sale". The thing is, the publishers' costs here can vary - they give a discount to a retailer, but if the publisher is a distribution client for a larger publisher (like Penguin Random House Publisher Services), then the distributor also gets a cut for their services. So a 45% discount to retailers might not be the only chunk taken out of the sale before it becomes "publisher's receipts". There might be another 8% or so in those distribution fees. So instead of 12% of 55% (100%-45%= 55%), you might get 12% of (100-45-8 = 47%). And if your ebook is sold at discount, your % goes down because the publishers' $ goes down.

12% of "profits" is likely to be the worst unit for the author in terms of calculating royalties. Depending on the publisher's accounting, printing costs come out of profits. Salary/payroll comes out of profits. This is why "Hollywood Accounting" is legendarily sneaky - companies are cooking the books to make films appear to not be profitable when they really are.

Who does muddy/unclear language benefit? You, the author with limited means, or the publisher with the legal department? 

3) Check for special clauses about deep discount sales

A few years ago, there were some dustups about deep discount royalty rates. Deep discount sale royalty rates are often much lower than the standard royalty rate, so it's really important to be clear in the contract about what counts as a deep discount sale.

A deep-discounted sale of a physical edition might look like a remainder sale (where the publisher, believing that the book has reached the trade and wholesale audience it is going to reach at normal prices, sells the books at a very high discount to a remainder company and/or to retailers -- the remainder company than re-sells it at a slight markup, making money on volume), and the retailer sells the book at a fraction of the original price. This is why you see hardcovers from 2 to 3 years ago selling for $4.99 at bookstores. 

A less common but notable form of deep discount physical sales is including the book in a subscription box, where the subscription box company demands a higher discount (more like 70%+ than 45-55%) and a deep discount on ebook probably looks like a discount of 50% or more.

In my experience, ebook deep discounting is where some real trouble can happen. Ebook deep discount looks like Kindle Daily Deals, BookBub promotions, and things like that - discounting the ebook by 50% or more for a specific promotion and/or for some chunk of time after (with the hope of maintaining some rate of sale after the promotion). But what happens if your book is left at that deep discount...for months...or years? That's just the price of the book now. The publisher makes sales in volume, but you're earning 25% of 70% of 50% of the original price. Your ebook that launched at $7.99 (already a decently low price) earns you $.34 per sale vs. the $1.39 you make at the regular price. 

Chances are, your contracts will say that your royalty rate is *lower* when the publisher does a deep discount ebook sale. Then that $.34 you would have earned may shrink even more. Which is part of why you'll want the contract to be very clear about how and when a deep discount royalty % applies.

4) Be clear on scheduling and your obligations

Schedules are another important part of contracts. When is the book scheduled to be published, and how long does the publisher have from the signing of the contract to publish the book or forfeit the rights to do so? How much time are you guaranteed to review your editorial letter and apply changes? How much time are you guaranteed in time to evaluate and respond to your copy editor's notes? How long are you guaranteed to review 1st pass pages/page proofs? 

When delays happen on the publisher side, authors are often asked to make up for that delay, even when the contract guarantees them X much time to review/complete edits. Sometimes, as the author, you might decide that it's worth picking up slack for a publisher-side delay even though the contract says you are guaranteed X amount of time. But you should be able to assert that the publisher needs to honor the contract and give you X much time without it causing blowback. You're not the party that was late. And you're not a jerk for saying "No, I actually need X much time."

As an author, a book getting delayed may hurt you much more than the publisher, since they're releasing other books that month. Does that legally or morally justify putting the onus of making up for a publisher-side delay on the shoulders of the author?

Cui Bono?

5) Fight to keep your sub-rights

Starting a couple/few years ago, I saw more and more chatter from fellow authors and their agents about contract battles over audio rights. Audio was experiencing a substantial boom leading into the pandemic, though with many fewer people commuting, that seems to have been somewhat blunted. Major publishers have spun up in-house audio production divisions in order to be able to exploit audio rights directly, controlling cross-format marketing and more. Other publishers will license audio rights and turn around and sub-license those rights to major audio publishers.

But when you sell audio to the publisher and then they sub-license it, the publisher tends to get a % of the audio advance and royalties. Where you might get $5k USD (or more or less) selling the audio rights directly, if you sell audio to the publisher as part of a deal for print, ebook, and audio, and then the publisher turns around and sells audio for $5k, you will split that $5k with the publisher, even though they're not the ones producing the audio. Publishers insisting on more rights for the same or similar amounts of $ increases their profitability. 

A similar system applies for translation/foreign sub-rights. If the publisher gets world rights in all languages, they get to profit from translation sales. If you keep world rights and your agent sells them (or their co-agents sell them), you tend to get a larger % of that money. Strong sub-rights sales by the publisher may help you earn out your advance faster, which can be handy. But you might just be able to get more different advance $ up-front if you retail the rights and sell them yourself/through your agent. At best, good sub-rights sales might prove that there's a market for your book and encourage the publisher to invest more resources in your book. But they're not required to do so by most contract language. 

Contracts granting more rights to the publisher are great for the publisher. But not necessarily for you the author. 

Cui Bono?

Enforcement

Contracts are written to be binding agreements.

But let's think about an example.

You take two identical 20' lengths of rope and two chairs. With one length of rope, you tie an average-sized adult human (like, say, me) to one chair. Then you use the other rope and chair and the same knots to tie up Spider-Man.

Have you really bound the hero with the proportionate strength of a spider to the same degree you have bound me, a human bereft of superpowers?

What if instead of Spider-Man, you're using the same amount of rope, a chair, and knots trying to bind a humpback whale?

Most authors are average-sized humans, small-to-medium publishers are Spider-Man, and Big Five Publishers are a humpback whale.

A contract is only as good as its enforcement

Ask yourself: what do you do if a publisher just decides to ignore the terms of a contract they signed?

What happens if the publisher breaks the contract and then refuses to do anything about it when you call them on their breach?

For a big publisher, the disruption caused by breaking one contract out of a thousand isn't going to meaningfully impact their bottom line unless the author or contract is massive. For most authors, one book is the result of months or years of work. And say you do raise a stink, the publisher admits that they violated the contract. Your options are probably down to "ask for the rights back" or "just accept the violation and continue with publication."

But what about the blowback? When an author "causes a fuss" by insisting pushing back on a broach of contract, people at the publisher may remember what you did, how you were a "Problem author." You might wonder, can I or my agent really afford to swear off one of the Big Five entirely for the rest of my career? More consolidation means more pressure on authors to choose between a few bad options.

If the staff of a small publisher just vanish and don't return emails or phone calls, how long does it take after the contract terms are violated could it take you to get your rights back? How long does it take to get the money they owe you? You send a certified letter and they keep selling the book. Can you convince every retailer to take the book off sale? How much time or effort will that take? All because the publisher benefits from inertia.

Some publishing experiences are good. Many people at publishing companies act in good faith. But most corporations serve the whims of their owners, not their employees or their business partners.

The editor that your agent negotiates with at the publisher may be acting in good faith, and may insist that the contract language should be interpreted in an author-friendly fashion. If they say this, get it in writing, either in the contract or in an email. You might need that later if things break bad. But when push comes to shove, the editor probably answers to someone else, and may be ordered to change their tack.

A few years into my career as an author, I internalized this wisdom from colleagues: Always assume that your book contract will be interpreted/executed by an asshole. Maybe your publisher gets sold. Maybe your editor leaves. Maybe when push comes to shove, you or your agent are fighting with the publisher's legal team, not your editor. The initial good faith means nothing unless it results in better language in the contract AND the publisher continues to operate in good faith when interpreting the contract.

Sometimes publishers just decide to not honor the contracts they signed.

If you're a traditional author, you probably know more than a few of your colleagues that have had their publishers skirt or just straight-up break the terms of their contracts. And those colleagues may not really been able to do anything about it. Because even with a small publisher, when the publisher violates the terms of the contract, you still need to force them to do something about it. And again, the litigation process is slow and costly.

Since publishers are almost always going to be the party with greater power and scale of operation, you the author suffer far more than they do as the publisher. And even if you can force the publisher to honor the consequences dictated by the contract (usually coming down to "the contract ends"), you the author are back to needing another publisher for that book. And maybe you've shut the door on ever working with that publisher again. The penalty for a publisher failing to fulfill the contract almost never extends further than "the publisher no longer gets to sell this book". But if the book has been published and then the publisher violates the contract, the book has still hit the market. Re-selling a book tends to be hard unless the book has already sold very well or is very appealing for other reasons.

Cui Bono?

"What about self-publishing?"

If you're self-publishing, you do have more say and control over many aspects of the publication process. But you still have a vendor agreement with the self-publishing platforms, including Amazon. 

Amazon, who make Vader's "I have altered the deal. Pray I do not alter it further" their modus operandi as far as *insisting* on the right to change their terms whenever they want. Amazon who gets to set the payment rate for KDP based on their own discretion.

Amazon, who have shifted their algorithm so that nearly every active self-publisher I know is having to spend a lot of time and $ working within the Amazon ads ecosystem to keep their books in play. That's what we call a pay-to-play system. They're terrible.

And good luck getting any kind of response from Amazon if they make a mistake or randomly decide to take your books off sale or withhold your money. 

Plus the other problems with distribution reach and having to do 100 jobs on top of writing the books.

Self-publishing is not a silver bullet for dealing with bad-faith actors in the industry.

Scale and Inertia

Here's a way of looking at this in total: power in publishing exists largely in scale and inertia. If the publisher violates the contract, they benefit from that violation and will continue that until made to do otherwise. You the author have to raise the fact that the contract has been broken, yourself or through an agent. The bigger the publisher, the less any given book disappearing into limbo will hurt the publisher. But for an author? Most write one book a year or fewer. Some write more, but not many. 

Publishers have designed their business to spread their investment and risk around and make money from a huge number of books. A major agency might have much more clout than a single author, but even the larger agencies may have a hard time successfully throwing their weight around with a Big Five house. 

Authors lose in battles of scale because authors cannot and/or are not allowed to organize the way that screenwriters can, the way tradespeople can, the way office workers can, and so on. Selling the license to publish our works the way we do means that we are not employees, even when publishers put in demands and strictures in contracts that sure look like an employer-employee dynamic, like a morality clause, a non-compete, an NDA. 

A major hurdle for authors in terms of organizing is that we are geographically disparate in a way that coal workers at a specific mine are not, in a way that staff at a media company all working in a specific set of offices are not. 

Our contracts vary, so three authors all licensing space operas of approximately 100,000 words to the same publisher may have very different contracts despite providing more or less the same kind of work in their partnership with the publisher. Authors are spread out over the world, and being in a creative industry, there are so many people looking to get published that mass actions of solidarity are almost incomprehensible to organize within the industry.

And while we're comparing selling rights in a license to being an employee, some parts of the contracts with publishers are worse than the kinds of clauses you'd get as an employee, like chopping up your advance into ever-more slices to let the publisher maintain working capital and use it on other things before having to pay you for your work. If I do work as an employee in January of 2022, my employer generally doesn't get to sit on 80% of my pay for two and a half years. With a four-section payout structure that some publishers are insisting on now, you might sell a completed book on January 1 of 2022, the book publishes on July 1 2023, and you get the final quarter of the advance on July 1 2024. Two and a half years after you turned in the book. 

There are upsides to the way we work. By default, when we "sell books," we are just selling a license and not outright ownership. (IP/work for hire is different). That means we maintain more control, especially in the long term. But we have to weigh that against publishers pushing for more rights for less $, getting squeezed on royalty %s by publishers and retailers, the chance of being forced to make up for publisher-side delays, and then having to do the lion's share of promotional work to help your book succeed unless you're one of a lucky few authors that *do* get substantial promotional/marketing push.

Put those on the scales side-by-side, it still points toward Bullshit.

Cui Bono? 

Not the authors. Think about how many contracts a big publisher signs every year. If they can wait another year to pay the final 25% of every single new advance, how much money does that free up for them to spend elsewhere and/or use to accrue interest?

But we can change things.

If authors could organize effectively, if there was an industry-wide consensus on contract terms from authors' perspectives instead of the publishers' wants, if authors were legally allowed to collectively bargain in a fashion equivalent to unions in other fields, then we would see a very different industry than the one we have today. Look at how the media world is changing with the GMG union, Kickstarter's union, and more. Look at what the WGA has done for its members compared to what things look like for prose authors.

The field of SF/F does have SFWA. But SFWA is expressly not a union. I have been repeatedly told that SFWA is legally prohibited from operating as a union in this fashion. SFWA does a lot of good things, and SFWA can *advocate* for better contract terms, but SFWA cannot collectively bargain. SFWA doesn't have strike funds for when authors walk away from contract negotiations or stop work to protest bad treatment.

And in SFWA, there's a ton of inertia fighting against a change of that scale due to the huge amounts of work and time it took for SFWA to re-incorporate in 2014.

Here's another thing that's fucked: publishers aren't always at the top of the heap. Retailers like Amazon have succeeded in demanding better and better terms from publishers thanks to their market share and relentless negotiation. And publishers are forbidden from coordinating and setting industry terms to protect themselves from predatory retailers like Amazon, as seen in the DOJ suit settled in 2012 over ebook pricing. And those gains by Amazon are generally not our gains as authors. Each time Amazon takes 1% more, there's 1% less to be divided up into net/publisher's receipts.

Responding to pressures from Amazon and/or demands for ever-greater profitability, publishers chop up advances into more and more chunks. They spread out their production pipelines, they accept worse and worse terms from retailers. They insist on more and more rights for less and less money. They consolidate to reduce their costs and also reduce our options.

We Make the Roses in Bread and Roses

Authors from around the world push and work as hard as we can, hoping to be lucky enough to find a partnership with a publisher to get their book out into the world with some kind of support and reach. Authors are our own means of production in terms of writing the novels, but publishers hold the keys to the kindgom in offset printing, distribution, and relationships with retailers.

Every step of the way, the parties that benefit are are not authors, the people who create the work itself. It's not even everyone at the publisher, though! Very few publishers are unionized. Editors and publicists and salespeople and so on don't get a share of the publisher's sales through cooperative ownership, even though they are the people that turn a manuscript into a book that can be sold, the ones that convince retailers to take a big stand on books that maybe the buyer would have overlooked. Publishing staff are often as overworked and underpaid as people in any industry in the US. Editors are forced to take manuscripts home weeknights and weekends to do more work, publicists are given more titles per month without the resources to support them, consolidation leaves workers out in the cold despite years or decades of contributions to a publisher.

Cui Bono? Not the staff. It's the owners. Owners of the publishing houses, owners of the gigantic retailers. 

Same story, different tune. That's right folks. Once again, the crook under the mask is...capitalism.

Things don't have to be this bad. Books don't make money without authors to write them. Without editors and production staff and publicists and sales reps and the hundred other jobs that go into publishing at larger scales. They need us. They get away with bad behavior because practicing solidarity across the industry is hard. One person turns down a bad contract, someone else comes along and takes it, filling that spot in the publisher's schedule.

The rich are the ones that own the companies. As long as the companies are operated with an eye toward profit over all else, they will squeeze whoever they can to make just a bit more money for the same small # of very rich people.

The labor action and organizing of the late 19th and early 20th century was not nice. It was not clean. It was not entirely peaceful. It involved a lot of desperate people that had been fucked over and were dying due to exploitation. People bled and fought and died for better conditions. And over the past 60 years or so, workers in the US have lost an incredible amount of ground. The only question is what we do about it now, as more workers come into their power, as people see what can be done with mutual aid, as the pandemic drives labor demand and workers realize they have the chance to demand better pay and conditions. 

The bosses need us more than we need them. As long as we all stick together, we will win.

It's time for publishing professionals (staff, booksellers, reps, etc) to unionize their workplaces. Not just for better wages and conditions, but to have a say in company policies toward authors, retailers, climate and racial justice, etc.

It's time for the wistful chats among authors about organizing to move toward the next steps. It's time to talk together about where the law is and where it needs to be in order for us, the very beginning of the chain of production, to demand more, to fight and win more. It's time we can make the industry into one where being an author is a viable option instead of a crapshoot largely only available to those already privileged or the very very lucky few that strike it big.

It's time for people in the USA (and not just in the USA) to fight for stronger labor protections. We need to repeal "right to work" laws (which overwhelmingly benefit companies over workers), we need to increase the national minimum wage, we need better conditions and treatment of workers. People have been fighting all along, but we've got the opportunity to push as one, across industries, across communities, and across borders.

Publishing is not the only industry that needs massive change, but it's the one where I live and work, so it's where my mind goes. It's where I'll be putting more time and energy into creating a system that is more just, more equitable, and more sustainable for everyone that makes it function, not just the people at the top.

Will you join me?