News & Insights

A quick guide to publishing contracts

What makes a good or a bad publishing contract?

So it’s finally happened. After years learning to deal with rejections, you are finally about to become a published author and the glittering world of book launch parties and author tours awaits. But before you assume your rightful place on the bestseller lists, you have to sign a contract with a publisher, and this can contain many hidden dangers for the unwary.

A good agent will be looking out for your interests and arranging the best deal he can, but it always helps if you have at least a basic understanding of some of the negotiations that are likely be going on on your behalf – if only so you understand why your agent is worth that commission.

At the most basic level, the contract will determine who owns the copyright of the work and under what terms.

But what is ‘copyright’?  A ‘right to copy’ is the obvious answer. And in the UK this ‘right to copy’ lasts for the life of the author, plus 70 years, with no need to register it anywhere. But it is important to understand that this ‘right to copy’ is a right that can be sold and transferred, rented out and time-limited, just as you may sell or rent out your car or your house.

And just as there is a difference between selling your house and renting it out, there’s just as big a difference between ‘assigning’ your copyright to a publishing company and ‘licensing’ it out for a specific period. Some publishers will insist on paying you to assign your work to them permanently; some will purchase a licence from you allowing them the right to publish your work exclusively for a defined period of time (which means of course you cannot during the licence period issue another licence to another company and neither can you publish your work yourself).

Permanent assignment contracts are standard where the concept for the work has originated with the publisher and the author has written it for a commission. Media and television companies are also keen to require the assignment of the copyright to them outright and are often powerful enough to insist on it. Sometimes, an assignment contract just makes things easier, for example when a work consists of many different copyrights made up from different authors and illustrators. Also, many contracts of employment will contain clauses that automatically transfer the copyright of works, created by their employees in the course of their employment, to their employer.

Secondly, copyright only protects the expression of an idea, not the idea itself. If you think about it, this is a crucial distinction. After all, if the author who first came up with the idea of writing a detective murder mystery had been able to copyright his idea, we would never have had the works of Agatha Christie or PD James.

In practical terms, this means the same piece of work can have different ‘copyrights’ for different ‘expressions’ – a copyright for a book published in English, another for a French version, another for a film or TV adaptation, yet another for an audio book version or a serialisation in a newspaper and so on – and all these copyrights can be owned and transferred by different people in different ways with different restrictions placed upon them. And all of this is determined by what goes into a publishing contract.

So what makes a good publishing contract and what makes a bad one?

Take as an example a non-compete clause.  This type of clause will prevent an author from producing another work that competes with the title being contracted for without first getting permission from the publisher. These are particularly important in the texbook publishing sector, where a successful text by a known author can become much less lucrative for the publisher if the same author contracts for a similar, more up-to-date book with a rival.  More well-established authors might be able to negotiate a contract with no such clause but in any case there is usually scope to reduce the extent of the clause until an author is merely prevented from writing a substantially identical book.

Another example is indexing. Some contracts will require the finished book to have an index, perhaps produced by the author, perhaps by someone else. There’s nothing particularly burdensome in this, however, unless the contract requires that the author contributes towards the expense of creating the index. Many hundreds of pounds in royalty money can end up disappearing in this way.

Another important clause relates to editing. Most publishing contracts will have a clause that only allows the author to make a limited number of alterations or corrections at the proofing stage of publication. In itself this is not an unreasonable clause, but if the proof is delivered to the author full of errors made by the publisher, the author should not be penalised for having to correct more than the limited number of pages, and this needs to be reflected in the relevant clause.

Now the big one – what about the money? Provided you haven’t written the book for a one-off payment, you can expect royalties, which are a percentage of what the book earns. It sounds simple, but there are a lot of options within this. Royalties can be gross or net, which means your percentage can be taken either from what the cover price is in the shops, or from the profit the publisher has made after deducting all their costs.

What percentage you can get can differ wildly. Big-name authors can demand a large percentage, unknown ones have less scope for negotiations. Percentages also differ depending on which genre the book is in. For example a hardback academic textbook will often earn a larger royalty percentage for the author – perhaps 15%. But a paperback romance might only earn the author as little as 5%.

It’s also common to see contracts that will give the author different percentages based on how many copies have been sold. So an author would receive a low percentage for the first few thousand copies and then a higher percentage for the next few thousand and higher again after that. It’s worth pointing out that while publishers might be reluctant to negotiate with new authors on royalty percentages as such, they are often far more willing to negotiate over these transition points.

You should also watch out for book club sales. Often publishers will insert a clause stating that sales to book clubs will not count towards these ‘transition points’, meaning you’d still be earning the lower royalty percentage.

Advances are another key issue. If you are being contracted to produce a work for a publisher, then you can expect to be paid an advance to tide you over until the book is published and it starts making money. Of course, you won’t start getting your royalties until the book has earned enough to cover the advance you’ve already been paid.

Many authors never actually receive royalties because the book never fully pays off the advance.

Advances can be split into different payments, with part of it paid after submission, part after proofing and part on publication. There is often scope for negotiating these points.

There is a hidden danger in advances however. Many authors are seduced into signing contract with generous advances and decidedly ungenerous royalty clauses. This isn’t necessarily a bad thing if the advance is big enough of course, but if you are confident of the sales potential of your work, and your cash-flow isn’t too much of an issue, then you might wish to take a lower advance and a higher royalty.

Cross-accounting clauses can also be treacherous for the unwary. These allow payments due under one of your titles to be charged against losses from another of your titles. If you’re a new author this shouldn’t necessarily deter you from signing the contract, but if you are contracted for another book from the same publisher, that is definitely the time to re-negotiate.

A final issue that needs to be mentioned is the out-of-print clause. If you have licensed the copyright of your book to a publisher you will usually get the copyright back if the book goes out-of-print. Publishers therefore sometimes insert a clause allowing them to retain the rights to your book even if they’re only selling a few copies each year. They could keep the book ‘in-print’ forever. It’s crucial therefore, that the clause specifies a set number of book that must be sold before the book is considered ‘in-print’.

These are some of the main points to be looking out for in a publishing contract. There are other of course – the terms of foreign sales, reserves against returns, author’s copies, late penalties, option clauses, audit clauses, the list goes on – and you are strongly advised to take legal advice before signing on the dotted line.