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Publishing Contracts: Subsidiary Rights

Welcome, you superb beings made of star-stuff, to another blog post about publishing contracts!

Now that we’ve had a long conversation about advances and royalties it’s time to move on to subsidiary rights.

Yes, I’m sure you know it’s coming, but before we begin we must have our disclaimer (do you know it off by heart yet?): these posts reflect my own experience with contracts and are intended for guidance and informational purposes only. They should not be taken as iron-clad advice for all publishing contracts and if in doubt you should seek specific advice. There are organisations, like the Society of Authors in the UK, who will be able to help with this and if you have an agent they should also be able to help.

Right, now let’s start with the burning question…

What Are Subsidiary Rights?

In a publishing contract Subsidiary Rights refers to an additional set of rights that the publishers can license to other people to reproduce the book (or part of it) in different ways. Some are more commonly licensed than others, but I’ll give you a brief run down of the ones that commonly crop up in publishing contracts.

Throughout this post I will refer to ‘head contracts’ and ‘sublicences’. A head contract refers to the contract you have with your main publisher and the sublicence refers to the contract between your publisher and whoever they have sold the rights to. For example, if you have sold rights in your book a publisher called ‘Velociraptor Press’ then the contract between you, the author, and Velociraptor Press is the ‘head contract’. And then when Velociraptor Press sells Hungarian language rights to a Hungarian publisher (let’s call them Piros Books) the contract between Velociraptor Press and Piros Books is called a ‘sublicence’.

In a nutshell a head contract is: Author –> Velociraptor Press. And the sublicence is: Velociraptor Press –> Piros Books

I’ll go through the list in the rough order of how likely it is the rights will be sold (i.e. translation is most commonly sold, then maybe US or audio, etc) and then at the end we can have a brief talk about how the money will be split. It’s your book they’re selling so they should always be giving you money if they sell the rights in it!

A quick note before we dive in: although we’re talking about these rights in the context of the publisher licensing these rights on your behalf there is nothing to stop you from trying to license them on your own. The reason that you may want to let your publisher do these things is that they should have a whole team of people whose job is to sell rights – the Rights team! They will have contacts all over the world and head off to book fairs all over the world in an effort to sell the rights and make both you and them more money!

Okay, let’s get on with it!

Translation

This one is nice and straight forward! It’s the right to translate and publish your book in another language.

Many publishers will have direct contact with French, German and other publishers throughout the world (I couldn’t list them all here!) but they may also work with co-agents. A co-agent is an agent who works for the publisher to sell their books in their language so your publisher may have a Spanish co-agent or a Japanese co-agent.

A contract for translation rights is usually for a more limited time than your head contract would be. As we discussed most big publishers will ask for full term of copyright when they buy the book for themselves but when they’re selling to foreign publishers it’s likely that the term will be ten years or fewer. The terms will be limited to the specific language and often to specific formats so it is possible you could only licence paperback rights to a foreign language publisher.

As well as selling the language rights for a set period of time, there’s another kind of translation contract known as a ‘co-edition’. In the contract this will usually be defined as something like a ‘royalty-inclusive Translation Rights’. A co-edition is essentially when a publisher will print the translated version of the book for the foreign publisher and will charge the foreign publisher per copy and the price per copy will include all the printing costs and will also include your royalties! This is most common for picture books rather than fiction as it’s easier to swap the text in a picture book and reprint than it would be for a book filled with text.

US & Canadian Rights

Again, this one is nice and straight forward. This is aimed more at UK based publishers selling the rights to a US or Canadian publisher who will then be able to take the book as is (or they’ll make very slight tweaks to it like changing ‘colour’ to ‘color’ but this should be outlined in your contract and definitely can’t make any other changes without your consent).

This contract is likely to be for a longer period of time than a translation contract, and it’s common for them to be full term of copyright. This is, as far as the US/Canadian publisher is concerned, a head contract and they will want the rights for as long as they can get them. You will see similar royalties on this as we went through in the Money! post, and the US/Canadian publisher will likely ask for all the formats they can get as well.

Audio & Straight Reading

I’m lumping two sets of rights together here because they’re similar, although not the same, and both are considered ‘non-dramatic’. When we talk about dramatic versus non-dramatic it essentially refers to whether or not the rendition has been ‘dramatised’ rather than the person reading it just doing so with a certain dramatic flair. So if the reading is just one person reading it out, although they might give the reading some oomph, it should still count as a non-dramatic reading.

First we have audio rights, which – as I am sure you have figured out – is the right to create an audiobook of the book. Nice and straight forward. These contracts are often for limited terms, similar to the translation contracts, and it’s worth reading them through as it will be specified whether or not you have approval over the narrator of the audiobook.

You may have given your publisher the right to produce an audiobook – which is not uncommon – as publishers will appreciate the importance of the audiomarket and may well want to do their own. If you have that will be covered in the Royalties section with wording elsewhere in the contract with your publisher, but as a subsidiary right it gives the publisher the right to sell on the audio rights to a specialised audio publisher. You may or may not want to allow the publishers to do this. As I mentioned above, publishers have entire teams dedicated to selling subsidiary rights and they know their business so it is possible they will be able to get a tremendous deal for you. On the flip side of this is that you could go direct to the audio publisher and sell these rights yourself, although if you’re just starting your author career I imagine it will be harder to sell audio rights than it would be for your publisher to sell them. There are pros and cons to each so whether or not you want to allow your publisher to be able to sublicence audio is up to you.

The second right we come to is a non-dramatic straight reading, most often for radio or television. A good example of these will be the BBC Book of the Week, or the alternative for young children, CBeebies Bedtime Stories. A single person reading out the work for broadcast (or perhaps in front of a live audience) will fall under this.

Here’s an example clause that sets it out nice and clearly:

(x) Radio, Television and Public Performance Undramatised Readings (i.e., the right to read from the text of the Work or to show still illustrations from the Work, whether as a public performance or on radio, television, by Internet streaming or other broadcast other than provided for elsewhere in this Agreement)

Dramatisation

We’ve looked at undramatised rights, it seems only fair now we look at dramatised rights!

This is something you will be familiar with, even if you don’t know. Dramatisation is, in a nutshell, the right to turn your book into a film (or TV show, or stage show, or even puppet show!). As far as we’re concerned for this blog post it’s nice and simple and doesn’t really need any further explanation!

(i) Dramatisation and Documentary Rights on stage, film, radio or television thereof, including transmission by cable, satellite or any other medium.

First and Second Serial

Serial rights are essentially selling the right for a newspaper or magazine to publish a small chunk of the book either before publication (which is First Serial) or after (which is Second Serial). The likelihood of these rights being sold will change wildly depending on your situation. Many big newspapers would be happy to buy First Serial rights to a celebrity autobiography (and they may try and select a juicy portion to use) but if you’re writing in a niche market then it’s less likely a newspaper will buy Serial rights (but never say never!).

Again, I think popping an example clause in here to show how they might be defined in a contract helps define them a bit better:

(i) First Serial Rights (i.e., the right to publish one or more extracts from the Work in successive issues of a periodical or newspaper including in any online version beginning before the Publishers’ first publication of the Work)

(ii) Second and Subsequent Serial Rights (i.e., the the right to publish one or more extracts from the Work in successive issues of a periodical or newspaper including in any online version beginning following the Publishers’ first publication of the Work)

Anthology and Quotation

Where some of these other rights can bring in nice big chunks of money, Anthology and Quotation – or A&Q – is something that happens little and often. If you have ever asked for permission to use a quote by another author in your book/website/podcast/etc then this is the right that would wall under. This is also often called ‘permissions’ within a publishing house as a sort of shorthand to cover the wide range of requests that come in. A publisher will often have hundreds if not thousands of permissions requests in their queue (which is why there is often a hefty wait time). Big and/or quotable authors will probably have a variety of these requests sitting with their publishers at any given moment, so it can be a nice area to earn some money without much further effort on your part.

Anthology and Quotation are two different rights, although will most likely be lumped together. The right of Quotation is just that – the right to quote portions of the book in other people’s work. And again, the right of Anthology is just as it sounds – the right to include the book as part of a larger anthology of works.

Reprint

I’m going to bundle a load of reprint rights together for this one. The following are likely to be under separate rights in the clause, but they all amount to the same thing: various kinds of reprints with restrictions on the formats. So you may see ‘Paperback Reprint’ rights alongside ‘Hardback Reprint’ rights. Here’s a quick list of the most common ones:

Paperback
Hardback
Educational Reprint (this is likely to include notes to help students understand the text)
Large Print (often printed in size 14 font or above and aimed at the visually impaired)

Other Rights

Now we come to a bunch of other rights that are rarely sold so I thought it would be easier to bunch them together with a quick explanation so that you know what they are.

Book/Magazine Digest Rights: this is the right to publish an abridged version of the book in a single issue of a magazine, newspaper or other periodical.
Book Condensation Rights: this is similar to Digest rights, but it is the right to publish an abridged version of the book as its own smaller book.
One Shot Periodical Rights: again, this one’s similar to the above, but is the right to publish the complete work (i.e. unabridged) in a single magazine, newspaper, etc.
Graphic Novel / Strip Cartoon / Picturisation: This one does what it says on the tin. It’s had a few names over the years, but turning the story into a graphic novel or a version with pictures would fall under this right.
Electronic Rights: This is the right to reproduce the book in electronic form. This isn’t often sold on its own but bundled together with translation, or US rights.
Electronic Version Rights: Similar to the above, but electronic versions are basically ebook versions that include extra bits, like moving images or music that go along with it. This is rarely sold as it’s an expensive process to do and, I imagine, doesn’t make enough sales to warrant the expense. One example of this is Amazon’s ‘Kindle In Motion’ books, which includes Harry Potter and the Philosopher’s Stone and The Wind in the Willows. Maybe this will become more common as technology advances, but for the moment it’s a very rare thing.
Merchandising Rights: This is another one you might be familiar with. This is the right to exploit the characters and book with things like clothing, games, toys, calendars, drinks. All that good stuff. I’ve put this one in the ‘rarely sold’ category because it’s unlikely that a publisher will sell these unless the book lends itself to it (like a picture book) or is a pretty big hit. This one is an easy one to retain as a lot of publishers aren’t set up to make their own merchandise and as it’s not common they’re not too worried about losing it, which means you could make your own merchandise!

And that is pretty much it. Phew!

There’s a couple of other points I want to touch on before we move on from this topic: approvals and money!

Approvals

Now that you’ve seen these rights you might be wondering whether your publisher can run off and sell as many as they like without consulting you. Well, the answer to that is: maybe!

As part of the subsidiary rights clause, as well as setting out the split of the money (more on that in a moment) it should also set out whether or not you have approval over the sale of the rights. If you have approval over the sale of any and all subsidiary rights then the wording will likely look something like…

The Publisher shall have the right to license the following rights and shall pay the Author the percentages of their receipts as set out below. No such licence shall be completed without the prior written approval of the Author (such approval not to be unreasonably withheld or delayed).

Or alternatively, you may not have approval over everything but instead only some subsidiary rights. Sometimes this will be denoted by placing an asterisk by a particular subsidiary right and then having a note at the end of the clause that rights with an asterisk are subject to approval. For example:

(i) Translation rights *

(ii) Quotation Rights

(iii) Dramatic Rights *

* No such licence of this right shall be completed without the prior written approval of the Author (such approval not to be unreasonably withheld or delayed)

In my example above your publisher would need to seek your approval before finalising the sale of Translation or Dramatic rights but would be able to sell Quotation rights without your approval. This is the most common situation – i.e. that Quotation rights can be sold without approval – and this is mostly down to practicality. As I mentioned before, due to the sheer number of requests that a publisher receives it can often take weeks for them to process a request. If they then also have to seek your approval before they are able to give permission it could slow down that person’s request by another week or so.

Having said all this, in my experience a publisher will ask for your approval before selling most subsidiary rights as a matter of courtesy anyway. If you are worried about not being able to approve rights before they are sold be sure to check your contract and ask for the approval wording to be included (their Contracts team should have a template for this so you don’t need to supply it, don’t worry).

Subsidiary Rights Money

So, how much money are you going to get out of these sales?

You’ll be pleased to know that typically the author split on subsidiary rights income is much higher than the split of royalties (with the exception of co-editions which will be about the same). This is because you will be receiving a split of the total income your publishers receive and the publisher doesn’t have to produce any of the books (again, with the exception of co-editions).

The subsidiary rights clause will set out the percentage of the income you will receive for each licence they might make and it will be listed nice and clearly by each subsidiary right, like…

(i) Translation rights: 75%

Typically the share given to an author for Translation Rights, US rights, Dramatic Rights, Serial Rights, and Merchandising end up being in the 70%-85% range. Whereas the various Reprints and Quotations will be closer to, if not exactly, an even split.

You should be receiving at least half of this income, but there are fairly set industry standards that your publisher is unlikely to waver from, so they should be offering you a fair split from the off.

Any income that you make from the sale of subsidiary rights may also go against your advance. You should take a look at your advance clause to see if that’s the case, it will likely say something like that the advance is offset ‘against any and all income under Clauses 4 and 5’ where clause 4 sets out your royalties from sale of the book and clause 5 sets out what subsidiary rights can be licensed (and of course your share!). This means that is possible, although unlikely, that your advance is earned out before your book is even published!

And finally, your publisher may also pay subsidiary rights income on a different schedule to your royalty payments. Where your royalty payments will likely be paid through once or twice a year they may pay your subsidiary rights income through straight away (well, as soon as their Accounts team can process it, anyway), which means you could potentially have a nice steady income from subrights deals throughout the year!

That about sums it up for subsidiary rights. I hope that it all made sense as it’s quite a wide range of rights for a single clause in the contract. As always, if you have any questions please do let me know.

Until next time: be well, be kind, and have fun!

Publishing Contracts: Money!

Welcome to you wonderful sentient beings and to all other beings!

Today’s post is about money. Moolah. Dosh. The big bucks.

We’ll talk about advances and fees and what the differences are, what kinds of royalties you can expect, how they’re calculated and more!

Before we begin I have to recite the theme-song- I mean disclaimer for this series: these posts reflect my own experience with contracts and are intended for guidance and informational purposes only. They should not be taken as iron-clad advice for all publishing contracts and if in doubt you should seek specific advice. There are organisations, like the Society of Authors in the UK, who will be able to help with this and if you have an agent they should also be able to help.

First up…

Advances and Fees

A key distinction to get to right away is the difference between an advance and a fee.

In a nutshell a fee is a one-off sum that stands on its own whereas an advance is held against any other income your publishers make on your book and you only receive the royalties/earnings from your book once the advance has ‘earned out’ (don’t worry we’ll come to what that means in just a moment).

Usually a publisher would offer you an advance rather than a fee, but there are circumstances where a fee might be more appropriate. For example, if you are translating a book you would likely be offered a fee or if you are doing work on an assignment of copyright basis (as we talked about in the Grant of Rights post) you would get a fee. You probably won’t get any royalties if you are being offered a fee, but there’s many weird and wonderful deals out there so it’s not impossible and if you get a fee then you will start earning royalties right away.

An advance, however, is essentially the publisher paying you your royalties in advance (go figure). Your advance will be paid to you in whatever portions you have agreed with your publisher (more on that later) and then it will sit as an ‘unearned’ balance on your publisher’s system. This means that effectively your royalties are at a negative and need to accrue to the same amount as your advance before the publisher pays you any more royalties. The advance is almost a guarantee that your publisher is confident your book will earn at least that amount of royalties and is paying you those royalties ahead of time.

How does this work in practice? Well, let’s take a look at a simplified example:

Say you’ve been offered an advance of £500 and you have a royalty rate of 10% of the published price of your book. Your book is on sale for £10 so for every sale that you make you get £1 in royalties. To ‘earn out’ your advance of £500 you will need to make 500 sales. Once you’ve done that then the publisher will pay you the additional royalties at £1 per book sale.

Let’s say that you sell 700 copies in total in your first year and it’s time for the publishers to cough up. The first 500 sales go against the advance and whittle it down to nothing, then you start accruing those royalties so the publisher will pay you £200 in royalties. If in the year after you sell 450 copies then the you’ll get £450 in royalties as the advance has already earned out.

This is why high advances can be both a blessing and a curse. Of course, it’s amazing that the publisher wants to buy your book for a load of money, but if it doesn’t earn enough royalties to earn out the advance then you won’t get any more money for that book (don’t worry you would keep the advance) and the publisher is likely to offer a lower advance next time.

Almost all publishers will use an advance/royalties model, although it is possible that some small presses may not be able to pay an advance as I imagine their budgets are very tight, but if you are offered an advance that’s how it will work and what a publisher will mean by things like ‘unearned’ or to ‘earn out’ the advance.

I hope that all makes sense, but leave me a comment or come and say hi on social media if anything’s not clear and I’ll do what I can to clarify.

Now, we’ve talked about what an advance is now let’s look at how it will be paid.

Usually an advance will be split up into separate payments, whether that’s into halves, thirds, or quarters, or potentially more (although that’s only likely for multiple book deals). Each tranche of the advance will be paid once a specific condition is met and most often these are:

the contract being fully signed
the book being delivered
the book being published

Let’s take a look at an example advance clause to see what this might look like:

The Publishers shall pay to the Author the sum of eight hundred pounds (£800) in advance and on account of all royalty and other earnings accruing to the Author under this Agreement payable as:

two hundred pounds (£200) upon signature of this Agreement by both parties hereto;

two hundred pounds (£200) on delivery and acceptance of the complete Work ready for press by the Author to the Publishers;

two hundred pounds (£200) upon first hardcover publication of the Work by the Publishers, or within eighteen (18) months of delivery and acceptance of the complete Work, whichever is the earlier; and

two hundred pounds (£200) upon first mass market paperback publication of the Work by the Publishers, or within twelve (12) months of the hardcover publication of the Work, whichever is the earlier.

Here the advance is split up into quarters, which is quite common, and you can already see how spread out these payments could be. It’s important to keep this in mind as when you hear that authors have massive deals for thousands upon thousands of pounds (and hopefully when you get a deal for thousands of pounds!) it will still be split up over a long period of time, potentially years.

This can get even longer if you have a multi-book contract. For the sake of argument, let’s say you’ve written a phenomenal fantasy book that’s the first in a trilogy. Your agent has managed to get an auction going between the best fantasy imprints going and you’ve just closed a three book deal for £600,000. Well done! But remember that this is going to be split up.

As it’s a three book deal that £600,000 is probably going to be split evenly between the titles, so the publisher will be paying £200,000 for each book. Let’s say that each of those is split up into quarters like we saw above. That means that each of those individual payments is going to be £50,000 each – still nothing to sniff at, but all of a sudden it looks a lot smaller than the £600,000 you signed for and each of those payments might be a year or more apart.

My point here isn’t to say that you should try to get everything paid at once (which, I’ll be honest, isn’t going to happen!) but that when your planning your finances and need to take the advances into account make sure you remember they can be very spread out. Although I completely understand that it’s exciting (and you should be excited, you deserve it!) to think of all this money you will have coming in you need to consider the timescale and also remember that if you sign up another book with that publisher they might not offer you that much next time (more on that later)!

If you take another gander at the clause you’ll see that it also says that the advance will be on account of ‘all royalty and other earnings’ that the Author makes under the Agreement. This is standard, and it would probably be the case in your contract too, and means that any other income that the book earns for example under the subsidiary rights clause (which is what our next post will be about) also goes against the advance. In a nutshell, if you’ve got the same £500 advance we talked about earlier and sold 300 copies (earning you £300 in royalties) there would still be an unearned balance of £200, but if the publisher then sold French language rights in your book for £300 that would also go against the advance, which would mean that £200 from the French deal earns out your advance and you’ll be paid through the remaining £100 and any more royalties you make from that point on. I’ve popped these into a table in case that’s an easier way to explain it.

A couple more notes before we move on from advances.

First, bonus advances. As the name suggests these are extra advances that you get on top of the advances we’ve talked about so far. Bonus advances will only be paid out if certain criteria are met. For example, you might have a bonus advance of £5,000 if you sell 10,000 copies in the first year, or you might get a bonus advance of £7,500 if you get longlisted for a coveted award. As with the other advances, if you have a bonus advance and it gets paid then it will add that amount onto your unearned balances, so it can be a double-edged sword. It may not be something you have to worry about though, as bonus advances are uncommon.

And finally I promised we’d talk about what your publisher might offer you for your next book too, so let’s do that!

Given that the publisher is paying a big chunk of royalties ahead of time with your advance it’s possible that you never earn any more money from the book than that. If they paid you a £20,000 advance for the book and your royalties only earned you £17,500 by the time you come to sign the next book, the publisher may take the view that they ‘overpaid’ by £2,500 and so they may drop the offered advance down. You may have seen some authors online who get massive advances for their debut novels and there’s a lot of hype for them but then, for whatever reason, their books don’t sell as well as everyone thought. In those cases the publisher will probably drop their next advance to more properly reflect the sales that were made and that’s something else to keep in mind – you can’t necessarily rely on the same advance being paid for every book (whether that’s because you’re getting more money or less!).

Wow, that was a pretty long explanation of something that sounds quite straight forward on the surface! It’s high time we jumped into royalties!

Royalties

As you might well know your royalties will be whatever money you receive on the sale of each copy of your book. There are two main ways of calculating royalties: the first is as a percentage of the recommended retail price and the second is as a percentage of the publishers’ ‘net receipts’ (which is sometimes called ‘price received’ as well) which basically means the money they receive for the sale of the books.

We’ll look at a royalties clause in detail later, but for now let’s talk about the broad categories royalties can be broken down into:

what format that copy is sold as
where that copy of the book is sold
whether it was a special, one off sale or a standard sale

Let’s go through these then, shall we?

Number one: Formats!

As you may expect, there are different royalty rates payable for different formats. This is because of the cost of printing, shipping, storing the copies etc and will vary depending on the format and so the publisher needs to be able to vary the royalty they pay you to make sure its profitable to sell those formats for everyone involved. Typically, the formats you’ll see are: hardback, trade paperback (the paperbacks that are the same size as hardback), mass market paperbacks (the small ones), ebooks, and audiobooks.

Electronic formats, like ebooks and audiobooks, should always have a royalty based on net receipts, but the physical formats can vary between a published price royalty and a net receipts royalty which can change based on …

Number two: Where you’re selling!

In your contract you will have two markets defined. One will be the ‘home’ market, which will be where your publisher is based and has good distribution links. The other is the ‘export’ market, which is essentially everywhere else. The home market is easiest for the publisher to sell into and will probably be where most of your sales are. For UK based publishers the home market will likely be defined as the UK as well as Ireland, and potentially Europe as well. Home market royalties are most often based on the published price and export royalties are almost always based on the net receipts.

Number three: Is it a special sale?

There are certain kinds of sales that have their own special rules and royalties. Sometimes these are called special sales – which might be a one-off sale to book festival of 1,000 books – or it might be when the publisher is selling off your old books on the cheap to free up warehouse space (don’t worry they can’t do this right away and it would only be if demand for the book has slowed down). These sales are one-off kinds of sales and need their own rates, but they’ll be based on net receipts.

Now we’ve got that out of the way, here’s a simplified version of a royalties clause to show you how all these things fit together:

Subject to the terms and conditions set out in this Agreement the Publishers shall make the following payments to the Author in respect of sales of the Work, excluding such copies as may by subsequent provisions of this Agreement, or as otherwise mutually agreed in writing, be sold subject to a different royalty:

(a) Hardback Sales

(i) On copies sold in the United Kingdom of Great Britain and Northern Ireland and the Irish Republic (the ‘home market’) a royalty of: ten per cent (10%) based on the UK recommended retail price on the first 5,000 copies sold; and twelve and one half per cent (12.5%) based on the UK recommended retail price on all copies sold thereafter

(ii) on copies sold for export, except as otherwise specified in this Agreement, a royalty of twelve and one half per cent (12.5%) based on the Publisher’s net receipts

(iii) on copies sold at a discount of fifty per cent (50%) or more from the UK recommended retail price the royalty shall be four fifths of the prevailing royalty on sales in the home market.

(b) Trade Paperback Sales

(i) On copies sold in the United Kingdom of Great Britain and Northern Ireland and the Irish Republic (the ‘home market’) a royalty of: ten per cent (10%) based on the UK recommended retail price

(ii) on copies sold for export, except as otherwise specified in this Agreement, a royalty of twelve and one half per cent (12.5%) based on the Publisher’s net receipts

(iii) on copies sold at a discount of fifty-five per cent (55%) or more from the UK recommended retail price the royalty shall be four fifths of the prevailing royalty on sales in the home market.

(c) Mass Market Sales

(i) On copies sold in the United Kingdom of Great Britain and Northern Ireland and the Irish Republic (the ‘home market’) a royalty of: seven one half per cent (7.5%) based on the UK recommended retail price on the first 10,000 copies sold; and ten per cent (10%) based on the UK recommended retail price on all copies sold thereafter

(ii) on copies sold for export, except as otherwise specified in this Agreement, a royalty of ten per cent (10%) based on the Publisher’s net receipts

(iii) on copies sold at a discount of fifty per cent (50%) or more from the UK recommended retail price the royalty shall be four fifths of the prevailing royalty on sales in the home market.

(d) Special Sales

On special sales (i.e. sales outside of normal trade channels) at discounts of greater than fifty-five per cent (55%) the Publisher shall pay a royalty of ten per cent (10%) based on the Publishers’ net receipts

(e) Audio Sales

(i) On physical sales of the unabridged recording of the Work the the Publisher shall pay a royalty of ten per cent (10%) based on the Publisher’s net receipts

(ii) On digital download sales of the unabridged recording of the Work the the Publisher shall pay a royalty of twenty per cent (20%) based on the Publisher’s net receipts

(f) Ebook Sales

On sales of ebook copies of the work a royalty of: twenty-five per cent (25%) based on the Publisher’s net receipts.

You can see that even this simple version of a royalties clause is pretty long as it needs to take into account all of the different formats that might be sold. I’ve tried to be both reserved and optimistic with the royalties that I’ve put in the clause above. They’re not crazy generous but neither are they massively stingy. If you’re working with an agent then they should have their own set of terms with a publisher that they get for every deal and will try to negotiate a better one if they can. Always ask your agent if you’re not sure about the terms and they should be able to explain it to you.

You’ll also notice there’s something in that clause that we’ve not talked about yet that: high discounts which you can see in a(iii), b(iii), and c(iii).

High discounts mean the discount that a publisher sells to a particular distributor or book store and should only apply to royalties that are calculated on the published price. The intention with the high discount rules is to make sure that, if copies of the books are sold to a distributor at a steep discount, the publisher doesn’t make a loss if they still have to pay you the same royalty as though they’d sold it without the discount.

Let’s say your hardback book’s RRP is £20. Your publisher sells it to a book store at a 40% discount then you still get your 10% published price royalty and get £2. However, if the publisher has to sell at a discount of 55% they’re margins are slimmer and so you would only get 4/5th royalty (which means 8% published price) so you would get £1.60 instead.

It’s a strange quirk of publishing and if you’re signing with a publisher it will most likely be in your contract. You will notice that there’s no high discount provisions for export sales or ebooks, and that’s because you’re getting a percentage of the money the publisher receives for the sale so no one needs to worry about the discounts it’s being sold to.

Talking of quirks of accounting there’s a few more things we should talk about…

Miscellaneous Quirks

Joint and Separate Accounting

First off, let’s talk about separate versus jointly accounted contracts, which will only apply if you’ve been contracted for more than one book.

Basically, if something is jointly accounted it means that your royalties for all your books go against all of the advances, whereas if it’s separately accounted the royalty for each book can only earn out that particular advance.

Let’s look at a simplified example.

You’ve just sold two books to your dream publisher – congratulations! The twist is that one’s a full length standalone work and the other one’s a novella. The publisher has offered you £5,000 for the full length novel and £1,000 for the novella.

If these are jointly accounted then you will need to earn £6,000 in royalties across both books to start earning royalties, but if they are separately accounted then you will need the novel to earn £5,000 and the novella to earn £1,000 before you can start earning royalties.

For example, if you had a jointly accounted contract and the novel earned you £7,500 in royalties but the novella only earned you £500 then you would still £2,000 royalties in total because you earned over the £6,000 threshold. If they were separately accounted you wouldn’t have earned out the novella and so that would still have an unearned balance of £500, but you would get £2,500 in royalties from the novel. There are pros and cons to both sides, but a publisher will push for separate accounting so they can have a better idea of how each book did (especially if the advances are different amounts).

Reserve Against Returns

Now we got onto something called ‘reserve against returns’. As with most of these quirky publishing specific things it sounds a bit strange but also does what it says on the tin, so to speak. In the publishing industry book shops can return copies of a book if they don’t sell them (and provided that they’re not ruined of course), it’s one of the many parts of the business that it has inherited from bygone days and has yet to change. Publishers make concerted efforts to make sure that this doesn’t happen as it is a pain for everyone involved.

Unfortunately it can still happen so in contracts with big publishers there will be a clause that says they can withhold a certain amount of royalties for a certain period of time. This is to guard against paying our royalties on copies they have sold that are then returned, which means that they’ve paid royalties on something they haven’t sold… All a bit confusing, but here’s an example clause:

The Publishers shall have the right to set aside as a reserve against returns a sum representing; (i) in the case of a hardback edition ten per cent (10%); or (ii) in the case of the paperback edition twenty-five per cent (25%) of the royalties earned under Clause 7 at the first accounting period after publication of the first edition or version of the Work, and to withhold this sum for a period up to and including the third royalty statement following publication, after which all monies due shall be paid in full at the time of the next royalty statement.

You should be able to see the restrictions already. The publishers are only allowed to hold a certain amount of royalties back (and I’ve picked pretty standard percentages there) and they can only hold onto them for a certain amount of time before they have to pay them over. As I’ve mentioned, the publisher also wants to keep returns down to a minimum and as it’s money they have to pay you over in the end this clause should not keep any money from you.

I know it’s a strange thing, but it’s a way for publishers to try and cope with some of the oddities of the publishing world and make sure they don’t go bankrupt in the process!

Audits

Finally, let’s have a quick word about audits. You should also have a clause in your contract that says you – or someone you’ve appointed – can go in and inspect the records of the sale of your book to make sure that the sales are being accounted properly. The reason you can send in someone you’ve appointed is because, let’s face it, this is a job for an accountant!

Here’s an example clause:

Upon reasonable written notice and during the Publishers’ normal business hours the Author or their appointed representative shall have the right to examine the Publishers’ records of account, insofar as such records relate to sales and receipts in respect of the Work. Such examination shall be at the cost of the Author unless errors shall be found, to the disadvantage of the Author, in excess of 3 per cent of the amount due to the Author, in which case the reasonable cost of such examination shall be borne by the Publishers. Any amount thereby shown to be due to the Author shall be paid to the Author. No more than one such inspection shall be made in any twelve-month period.

I think this one is fairly straight forward, it confirms you have the right to check your publisher’s books to make sure they’re giving you all the money they should do and accounting the royalties correctly. It also sets a threshold for any normal errors that might occur during the course of business, in this case 3%. We’re all human, after all, and one of the publisher’s employees might have logged something incorrectly by accident. But, if your royalties are drastically different to what your (or your agents) accountant say they should be, then they need to pay that over to you as soon as possible.

Whilst there is a limit on the amount of times you can do this – once per year in the example above – this is because it’s incredibly time consuming for a publisher’s royalties team to facilitate this and if everyone could do an audit once a month then they would grind to a halt and no one would get paid!

This clause is a safeguard for you to make sure that you’re never screwed out of your royalties. I hope you will never need to use this clause because if you do need to go and audit your publisher’s accounts then it’s highly likely something has gone wrong.

And there we have it!

I know this post ran a bit long (over 4,000 words!) but I wanted to make sure you got a detailed run down of the clauses and that they were all kept it all in the same place for ease of reference. As ever, if this raises any questions you can get in touch on social media and I’ll see if I can answer, but if you have an agent or a publisher don’t be afraid to ask them questions about any of this and they should be able to help too.

Next time, we’ll take a look at Subsidiary Rights which will give you a quick outline of all the ways you can sell your stories other than to a publisher!

Until then, be good to each other!