Negotiating Author Payments in the Digital Age
When it comes to author negotiations, Florrie Kichler has it relatively easy.
“As a publisher, I do the reissues of classic children’s book series,” Kichler says. “Most authors are dead.”
Of course, even with writers who have shuffled off this mortal coil, there are still issues of rights and payments, and negotiations with families or estates. As the president of Indianapolis-based Patria Press and president of the PMA, the Independent Book Publishers Association, Kichler has an excellent vantage point on the challenges faced by publishers when negotiating contracts, whether with those living or dead.
“I don’t offer advances, but I do offer a percentage of royalties, as most publishers do,” she explains. “We sign contracts with an author or [a] family who owns rights to the book. We pay based on a sliding-scale percentage as sales go up.”
Kichler offers six percent of the net proceeds she receives for sales of one to 5,000 copies, eight percent for sales of 5,001 to 10,000, and 10 percent for sales over 10,000. She says her percentages are probably less than the industry average, but that this is necessary because of the risk she takes in reprinting books that may be decades old.
One Size Does Not Fit All
Kichler’s model highlights the fact that there is no one-size-fits-all formula for author contracts. Genre, print-run size, the extent of electronic rights involved and, of course, the notoriety of the author all come into play when deciding how much a writer should be paid and whether an advance is warranted.
Formulas for royalty payments no longer follow tried-and-true standards, confirms Jonathan Kirsch, a Los Angeles-based attorney specializing in publishing, copyright and trademark law who represents book, magazine, newspaper and electronic publishers, as well as authors and agents. He is the author of “Kirsch’s Guide to the Book Contract.”
“In the old days, people could speak about a standard royalty,” he says. “Those [standards] have eroded, and they’re really all over the map now.”
Royalties based on old business models and supply chain requirements are quickly becoming obsolete in an era of Internet sales and the rise of print on demand (POD).
With the savings in printing, storage and shipping made possible by POD, online sales and e-book devices such as the Amazon Kindle, “the argument from the author’s point of view is ‘we should get more money because your costs are going down and your risks are going down,’” Kirsch says.
One contract negotiated recently by Kirsch involved a publisher deducting from the net proceeds the cost of a POD vendor to create a book, and then paying an author 25 percent of the amount that was left over, an unusually high royalty.
“They gave with one hand and took away with the other,” Kirsch says, by agreeing to a higher percentage rate in exchange for essentially passing production costs on to the author. “The publisher’s argument is a very simple [one]: We’re in a brave new world, and we don’t know how this will shake out. So we’re not going to take a financial risk on the old royalty model, which would essentially be ‘off the top’ without any recoup for the cost of goods.”
Even publishers that do not factor in production costs have abandoned percentage payments based on gross receipts.
“Years ago, it was more common for royalties to be based on the retail price of a book,” says Rod Colvin, publisher of Omaha, Neb.-based Addicus Books. “If the book sold for $19.95, the author would get 6 [percent] to 10 percent. But many publishers have switched to a percentage of net.”
Negotiating in a New Media Environment
Lying behind these changes are the challenges inherent in adjusting to the new media environment.
“Publishers could, in the old days, predict with uncanny accuracy how many copies would be sold under the old [print] business model; it was so well-tested,” notes Kirsch. “We’re now in the unsettled frontier.”
Comparisons to the issues behind the recent Writers Guild strike are appropriate, according to Kirsch. Entertainment writers are concerned about getting a fair deal on potentially lucrative residuals for new content-delivery platforms, while producers worry about rapid change in consumer habits and the risks inherent in trying to successfully adapt to those changes.
It is the recognition of these risks, Kirsch says, that have led to a tightening up of contract provisions for electronic and other rights in recent years. His standard contract used to have an electronic rights clause that could be used two ways—a default clause that gave broad, sweeping electronic rights to the publisher, and a “fallback clause” in case the author balked at these terms, limiting the publisher’s rights to a “static display of text” that excluded repurposing of content for multimedia presentations.
Today, publishers cannot afford to sign away options such as bookmarking, hyperlinks and searchable content. “I think that, for a practical matter, that [fallback] clause is worthless now,” Kirsch says. “The publisher has to be able to slice and dice [content], to jazz it up” for promotional and other purposes.
The emergence of Google Book Search and Amazon’s “Search Inside the Book” feature has helped to bring such issues to the foreground. These are non-revenue-generating uses of content that publishers and retailers consider promotional.
“Publishers want to be able to participate in these programs without having to pay royalties,” says Kirsch. “I have been in negotiations with authors who are not so comfortable with having a book online [that is searchable] for free. They want to specifically not give away that right.”
Many times, authors take issue with unlimited electronic use because of legitimate concerns about piracy, says Amorette Pedersen, publishing director, media tech and security at Elsevier Science & Technology Books.
“Given our various lines of product, we find it interesting that authors also vary in their approach to e-product,” she says. “Some endorse it and want us to exploit every e-revenue opportunity we can. Others fear it and worry about copyright and piracy issues. We have had to address these varying concerns prior to contract negotiations, during negotiations and with our royalty reporting. This is an ongoing education process that involves ensuring them of the legal steps we take when it comes to piracy.”
Unlike larger publishers, who may compete with other companies for the right to publish certain works, Colvin rarely finds a need to pay advances to authors.
“We work with a lot of first-time authors who typically are not asking for advances,” he says. “In the cases where they do ask, we offer nominal advances. We will offer [authors] very good discounts on [purchasing] their books, and, if there’s a book we’re [especially] interested in, we may increase the size of the royalty considerably. We have done that a few times.”
Colvin says that he offers authors, many of whom are being published for the first time, a fair deal in light of the risks taken on the number of books he can expect to sell.
Joe Wikert, vice president and executive publisher in the professional/trade division at John Wiley and Sons Inc., has argued on his “Joe Wikert’s Publishing 2020 Blog” (www.JoeWikert.com) that offering writers a “bad deal” is not in a publisher’s interest.
“Publishers realize that author advances are just like any other part of a transaction: You get what you pay for,” he blogged last June. “No publisher wants an author to walk away from the negotiating table feeling like they’re not getting what they deserve on an advance. Why? The publisher wants—no, needs—the author to be properly motivated throughout the project. Anything short of that will compromise the results.”
In response, published author and blogger J.A. Konrath (“The Newbie’s Guide to Publishing,” http://JAKonrath.BlogSpot.com) commented on Wikert’s post that publishers are usually in the stronger position, and writers feel too intimidated to just walk away. “With best-selling authors, they use the carrot,” he wrote. “For midlisters, the stick is liberally used.” Wikert responded to Konrath’s comment that he knows of few, if any, publishers who approach a negotiation that way.
“The key to building and maintaining long-term partnerships is to engage our authors and involve them in the process of creating new business models,” Pedersen says.
Elsevier has invested heavily in new electronic content-delivery platforms in its Science Direct, MD Consult and Scopus brands, making it, according to Pedersen, the leading publisher of science, technical and medical content in electronic form.
“Our authoring and content licensing agreements continue to evolve to encompass these new opportunities,” Pedersen says. “Our editors are as innovative in their approach to authoring agreements as they are in their approach to new products. Our guiding principle is to make certain our revenue and royalty systems are as transparent and equitable to authors as possible.”