Negotiating Your Contract

Once you’ve accepted an offer for the publishing rights to your book, it’s time to draw up and sign a binding contract.

Many of these contract details have standard provisions, but you can always ask about and negotiate for them. The more you understand about the implications and subtleties of these clauses, the more empowered you’ll be in your negotiations.

Bonuses

Bonuses typically come in two forms: bestseller bonuses and earn-out bonuses. They can be included in the contract and are simply added to the amount advanced that you have to earn out.

Bestseller bonuses usually revolve around hitting the mother of all bestseller lists: the New York Times. For this kind of bonus, the higher on the list you reach, the more you get paid. You typically get paid for the amount of time it stays there, up to a certain limit.

Here are some standard New York Times bestseller list bonuses:

1. $2,500 per week for each week the book occupies any of the #6-#10 positions
2. $5,000 per week for each week the book occupies any of the #2-#5 positions
3. $10,000 per week for each week the book occupies the #1 position

The earn-out bonus is given if your book earns out its advance or sells a certain number of copies within a certain amount of time (usually a year). For example, if you earn out your $25k bonus within the first year, you could be given an additional $10k advance. This can be a feasible addition to your contract since it doesn’t add risk for your publisher: They only pay if you outperform the advance.

Royalties

Royalties are payments made to you by the publisher as your share of the book’s revenue. They vary based on three main factors:

• Format of the book (hardcover, paperback, ebook, illustrated, four-color)
• Buyer of the book (independent bookstore, mass merchandiser, special sales outlets)
• Terms on which the book was bought

The format of the book impacts royalties because it changes production costs. For example, if you have full-color illustrations, the publisher will want to lower your royalty to absorb those costs.

Here are standard royalty rates:

• Hardcover: 10% for up to 5,000 copies; 12.5% for up to 10,000 copies; 15% thereafter
• Trade paperback: 7.5% for all copies
• Mass market paperback (cheaper paper, often sold through special distributors like magazines): 8% for up to 150,000 copies; 10% thereafter

An “escalator” is a provision in your contract that your royalty goes up if you hit a certain number of sales. For example, if you sell more than 50,000 copies your royalty rises from 7.5% to 8%. If you can get an escalator added to your contract, you should do so.

Unfortunately, escalators can also go down. If your publisher reprints a limited number of copies, your royalty could be reduced to make up for the higher printing costs of the smaller run. To minimize the impact of this, try to stipulate that:

• The escalator only applies to the smallest number of books possible
• It can only take effect once per year
• It only applies two years after publication

It might seem shocking that the author of a book only gets to keep 5% to 15% of the sale price of their own book, while the publisher keeps 85% to 95%. But they sometimes earn even less than the author. If a book has a retail price of $15, and the average wholesale price is $7.50, then the remaining $7.50 has to cover all the publisher’s costs. This includes your advance, your royalties, production costs, warehousing costs, shipping costs, any outside staff, and of course, their very large overhead.

In any case, fight for the highest royalty you can. Even half a percentage point can make a big difference if your book does well: For a book that retails for $20 and sells 100,000 copies, a half a percent higher royalty means $10,000 more in your pocket.

Royalties for ebooks have gone through major changes in recent years, partially due to some drama between Amazon, Apple, and the U.S. Justice Department. But the result is that most major publishers pay authors 25% of the amount actually received from retailers for your ebook, referred to as “net receipts.” This is because publishers now have only partial control of pricing in an age of Amazon domination. Independent publishers have much more variability, offering between 20% and 50% of net receipts.

Discount chains like Walmart and Costco account for a growing percentage of book sales. They typically negotiate deep discounts on their book purchases, but the upside is that they purchase very large quantities, and their stock usually isn’t returnable. The royalties for these sales usually run about ⅔ the standard royalty rate.

Delivery and acceptance

Your contract will stipulate when you will need to deliver a final manuscript for publication. Be sure to leave plenty of time to actually write the book. Though publishers are used to deadline drama and will usually give you an extension, if you miss your deadline and an extension wasn’t approved or you miss your extension, you are technically in breach of contract and they have the right to cancel your agreement.

Typically, you will go through at least one round of revisions before your manuscript is officially accepted. You may have to make anything from minor cosmetic changes all the way to radical restructuring. But once your manuscript is handed over to the copy editor, it is considered accepted and your acceptance payment can be processed.

You should also decide on a publication date, especially if your topic is timely or needs to be released in conjunction with a season or holiday. You should count on at least nine months between the time you submit your final manuscript and books shipping to retailers.

Because of these long timelines, you may need to finish writing your book before your contract is signed. This means that you put in all the work and deliver a finished manuscript long before the money promised to you is in your hands. So, if something goes wrong and your contract is cancelled, you’ll have nothing to show for it. To prevent this, be sure to get a deal memo (explained earlier) before you start writing, and don’t turn anything in before the contract is at least signed. Also, don’t be afraid to ask for a rush on your contract and check.

Your contract will state the circumstances in which your work can be rejected. You want to be sure the publishers can only do this for editorial or legal reasons. This means that they can’t cancel it due to changing market conditions, or a disagreement about the material itself, or because another book was just published on the same topic. They will need to have a due cause, such as the manuscript being editorially unacceptable or violating plagiarism laws. If not, you will have grounds to sue.

If your book is cancelled for legitimate reasons and you’ve already received part of your advance, you’ll have to pay it back by the date stipulated in the contract. In the best case, your contract will say that you only need to pay it back out of the proceeds if you sell the book to another publisher. But most current contracts now demand repayment within 12 to 18 months of cancellation.

Copyright

Always retain the copyright to your book. Some publishers will state that they “may” register an author’s book. Or that they own the copyright outright. Neither situation is acceptable. Under all circumstances, you want it stated explicitly that the publisher shall register the copyright in your name.

Subsidiary rights

Your publisher has “primary” rights to print and sell it in hardcover, paperback, and ebook versions in North America (assuming it’s being published in the U.S.). Sales of the book in other formats – such as audiobook, large-print, or movie rights – or in other regions – like Japan, the United Kingdom, or Brazil – are considered “subsidiary” rights (sub rights).

The royalties for sub rights are open to negotiation but typically follow royalty conventions pretty closely. The first number represents your share of the pie:

• First serial (the appearance of an excerpt from your book in a magazine just before or coinciding with its publication): 90/10
• Second serial (the appearance of an excerpt from your book in a magazine after publication): 50/50
• Book club: 50/50
• Permissions (the use of part of your book by another author): 50/50
• Paperback: 50/50
• Special editions: 50/50
• Foreign-language translation: 75/25 (50/50 for illustrated books)
• United Kingdom: 80/20 (50/50 for four-color illustrated books)
• Textbook: 50/50
• Large-type edition: 50/50
• Ebook: current rate is generally 25% of net, but ebook pricing is very much in flux
• Multimedia adaptation of a book (which may use some of the text and/or illustrations, or additional text or illustrations as well as video or sound added): 100/0
• Audio recording: 50/50
• Commercial and merchandising: 100/0
• Performance (film, TV, stage): 100/0
• Storage and retrieval: 50/50
• Calendar: 50/50

You should try to retain certain sub rights in totality (the ones marked 100/0 in the list above). If granted to your publisher, these rights will likely die a sad and lonely death, but you and your agent could do something with them. If you can sell them, 100% of the proceeds go directly into your pocket. Many agents have contacts with foreign “scouts” who look for titles to bring to their country.

Returns

It may be hard to believe, but the sale of a book to a retailer isn’t final. If your books sit on the shelves and no one picks them up, the retailer has the right to return these books to the publisher for a refund. To compensate for this, publishers hold up to 25% of your royalty payments back as a “reserve against returns.” Try to limit this to 20%, and to stipulate that it cannot be reserved for more than two royalty periods (each royalty period equals six months).

Out-of-print clause

Books don’t really go “out of print” these days. Although your publisher may not do a giant print run a couple of years after publication, they will probably still make it available as print-on-demand or as an ebook, since that doesn’t require any overhead. But this means that if they don’t help market your book and the book is still deemed “in print” according to your contract, you cannot take back the rights.

To avoid this, set a “performance standard” for your book. This states that if the book doesn’t sell a determined number of copies (for example, 500) in any and all formats in a certain period (such as a year), the rights either automatically revert back to the author, or, more typically, the author can request a reversion of rights with a set time limit for the publisher to reissue the book or decline.

Warranties and indemnities

Most publishing contracts require you to “warrant” that everything you’ve written is yours. In case it’s not, you “indemnify” (protect) your publisher from damages in case someone sues. This applies even if you borrowed someone’s words by mistake, so be sure to cite every single source you use. Make sure that anyone assisting you does the same.

Author copies

Your contract will state how many free copies of the printed book you will receive as the author. This can be as few as 10. If you want to give additional copies of your book to friends, relatives, customers, or promotional partners, you’ll need to purchase them! Luckily, you get an author’s discount, which is usually 50% but sometimes as low as 40%.

Some publishers will also agree to give you many more free copies for promotion and marketing. Be sure to ask for this in your negotiation, and tell them to whom you plan to give them away. You could secure 250 free copies if you have a lot of media contacts. Sometimes you will need to send them a name and address and they will send the books directly.

If your company plans on buying a large number of books (over 1,000 copies), you may be able to secure a large discount. If you can make a direct sale to a company through your connections, you might be able to increase your royalty on these sales. Be sure to negotiate these terms upfront.

The cover

Try to secure “consultation rights” for your cover, meaning they have to run the proposed design for the cover, interior, flap, and catalog by you. Although this only gives you a chance to view it and doesn’t give you a right of refusal, at least this will give you the opportunity to fight for what you want. If possible, include a clause in your contract that you and your publisher will mutually agree on a cover.

One way of doing this is to collect visual examples of what you’re looking for: typestyles, other book covers, artwork, photographs, and palettes. But besides your personal taste, the cover has to accurately communicate what the book is about. The same is true for the spine of your book, which is often overlooked but has a dramatic impact on its visibility when it’s sitting on a crowded bookcase.

The title

When it comes to your title, you want to pick something you will be comfortable saying many, many times for many, many years. Be sure to include either “approval” or “mutual agreement” on the title in your contract.

If it comes down to advocating for or against a particular title with your publisher, here are some mistakes to avoid:

• Don’t say “but everyone I talk to hates this title”: Unless you are polling a very large number of people, or they are very influential people such as booksellers, this doesn’t carry much weight.
• Don’t fixate on one word or phrase: Even if it makes your hair stand on end, personal dislike isn’t enough of a reason to reject a title. You are not the audience for your book.

Options

Publishers often ask you to give them an “option” to buy future book projects before others have the chance to bid. To make sure you don’t sign away too much, include some limits:

• Only your next fiction or non-fiction book
• Only a book written solely by you, not with a co-author
• Only extend the option for a certain period that begins with acceptance
• Only for 30 or 45 days after showing them your next proposal, after which you’re free to shop the book around
• Only if you can agree on terms within 30 days

If you’re luckily (and skilled) enough to reach this stage, you’ve climbed the Mt. Olympus of book publishing. The vast, vast majority of writers never get close to this point. You’ve sold your book – now the only thing that’s left is to write it!

In the next post, we’ll talk about the process of putting pen to paper (or more likely, finger to keyboard) and writing the book you’ve already put so much effort into.