Wednesday, May 9, 2012

Like the Priceline Negotiator, but for Books!

Last week, I was invited to attend a contracts negotiation seminar sponsored by the Children’s Book Council and the Early Career Committee.  Sean Fodera, the Associate Director of Contracts at Macmillan, discussed the many components of a publishing contract—such as subsidiary rights, option agreements, royalty rates, advances—and how they vary depending on the publishing house and also on the negotiations done by the agent.

It was a very interesting night and I feel like I learned so much!  One of the finer points we talked about was ways authors can (or cannot) earn out their advances when it comes to money from subsidiaries, which I actually did not know about.  There is a provision called “flow through,” where the publisher will only pay the author money due from subsidiary rights if the author has already earned out their advance, and one known as “pass through,” where the author receives that money regardless of whether or not the royalties from their books sales are equal to the amount they received as an advance.

That hurt your head, right?  Contracts can definitely be a tricky area, especially for first-time authors who have never dealt with them before.  Sean told some horror stories about unagented authors he worked with who ended up signing contracts that were detrimental to them in some ways.  That is another reason why I think that self-publishing can be a dangerous option at times; unless you already are well- versed in publishing contracts, it can be a scary process to negotiate one on your own.  Also, agents have connections to foreign rights-, audio-, and film agents who can really help you make the most money possible with your book.

One of the subjects we tackled during the seminar was e-books, which as you can imagine, was a hot topic.  It made me wonder if authors really know why this is such a big debate issues nowadays, other than the fact that more and more people are buying them.

In the past, the standard e-book royalty was 15% of the list prices, whereas now it is normally 25% of net receipts.  This new standard is known as the “Agency Model.”  Before the agency model, agents sold e-books pretty much the same way they sold printed books. 

When Apple became an e-book retailer in 2010, they changed the way things were done by acting as a sales agent for publishers, which means that they took a 30% commission from each e-book sale but had the publisher set the price of the e-book.  Authors would take their royalty money from the 70% that went to the publisher.  So in the old model, an author would receive $1.50 for a $10.00 e-book, whereas now they would receive a slightly higher royalty of $1.75.  

The “ehhhhh” part of all this is that the publisher can pretty much determine how much they (and their authors) will get since they can set the list price, and the Department of Justice isn’t sure how good that sounds.  However, the Justice Department's proposed settlement, which allows Amazon to function without making a profit, will  prevent traditional bookstores from entering the e-book market and will create an Amazon monopoly.  Basically, blame Steve Jobs.

It’s all your fault!