The Ingenium Books Podcast: Author. Publisher. Changemaker.

Publishing Contracts

November 24, 2021 Ingenium Books Season 1 Episode 44
The Ingenium Books Podcast: Author. Publisher. Changemaker.
Publishing Contracts
Show Notes Transcript

If you're an author, or you're working toward becoming an author, you can't get very far down the road before you encounter publishing contracts. Perhaps your eyes glaze over and you just sign what's in front of you, or your anxiety goes through the roof as you try to read and understand the legal language. There are some key concepts it pays to become familiar with, perhaps even comfortable. We're going to talk author and publisher contracts today to take you down this road. Super happy to have Joe Sisto joining us today. Joe is founder of Sisto Entertainment & Business Law Services — a boutique law office that provides legal counsel to media and entertainment industry clients in all aspects of the development, production, financing, licensing and distribution of film, television, book publishing, theatre, music and new media.

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Introduction (various voices) 00:05
Welcome to the Empowered Author podcast.
Discussion, tips, insights and advice from those who’ve been there, done that, helping you write, publish and market your nonfiction book. 
Being an author is something that you’ve got to take seriously. 
I’m proud I’ve written a book.
What does the reader need, first? What does the reader need, second?
What happens if you start writing your book before you identify your “why”? What’s the problem that?
You’re an indie author, you take the risk; you reap the rewards; you are in charge of the decisions. You’re the head of that business. 
Every emotion you’re feeling when you’re writing is felt by every other writer.
The Empowered Author podcast. Your podcast hosts are Boni and John Wagner-Stafford of Ingenium Books.

Boni Wagner-Stafford 00:59
Well, hello. If you are an author or you’re working toward becoming an author, you can’t get very far down the road before you encounter publishing contracts. Perhaps your eyes glaze over and you just sign whatever’s in front of you or your anxiety goes through the roof as you try to read and understand the legal language. There are some key concepts that it pays to become familiar with: perhaps even comfortable with. We’re going to talk author and publisher contracts today to take you down this road. And I’m super happy to have Joe Sisto joining us today. Joe is founder of Sisto Entertainment & Business Law Services, which is a boutique law office that provides legal counsel to media and entertainment industry clients in all aspects of the development, production, financing, licensing and distribution of film, television, book publishing, theater, music and new media. Joe, welcome.

Joe Sisto 01:59
Thank you, Boni. Thank you for having me.

Boni Wagner-Stafford 02:02
You’re welcome. It’s such a pleasure. So let’s just dig right in here. And, you know, why is it important that there is a contract between an author and a publisher? What is the purpose?

Joe Sisto 02:18
Well, I think we can ask that question even more broadly. Why is any contract important? When one arrives at a meeting of the minds with another person on any subject matter, putting it in writing can avoid – or at least minimize – misunderstanding and disagreement between the parties later. A written contract – assuming it’s well crafted, of course – provides a clear understanding of the parties’ respective rights and obligations: governs their relationship. And while you can’t anticipate every possible outcome, a well-crafted contract can anticipate the more predictable issues. The reasoning extends to author and publisher. What obligations is the publisher assuming? What rights is the author granting to the publisher and for how long? In what territories? What is the publisher undertaking to pay the author? At what frequency? Are there reporting requirements? Is there an audit right? Is the publisher undertaking to spend money on marketing? Does the publisher need to seek the author’s consent for anything? All those terms and conditions get fleshed out in a written contract. That doesn’t mean oral contracts aren’t valid. They are, with a few exceptions. The problem with an oral contract is an evidentiary one. If you can’t prove what was agreed to orally, then you’re not much better off than you would be without any contract at all. So it’s important to develop the instinct of getting it in writing.

Boni Wagner-Stafford 03:57
Yeah. And an oral contract: one of the – you know, practically speaking, it’s like, “Well, I remember it this way.” “And I remember it this way.” And if there’s no record of it, the oral contract can be conceived differently. Whereas if it’s in writing, there it is in black and white. No disputing what was written at the time. So you mentioned a whole bunch of really good things that I want to dig into a little bit more: rights licensing. This is something that, you know, we hear a lot about: “Oh, don’t sign your rights away.” Many of the author groups, you know, on social media will say, you know, be very careful. And of course, you do want to be careful about your rights. But let’s talk a little bit more about what those rights are and what it means to license your rights versus give them away.

Joe Sisto 04:45
Well, if we reduce the notions of a license and an assignment to their most basic propositions, I would say that a license is the permission or the authorization to do something. And then assignment is the sale or transfer of ownership of something to another person. So in the context of publishing relationships, the issue is going to be one of licensing or assigning copyright. And I think it may be useful to ascribe a definition of copyright before we continue. What is copyright? 

Boni Wagner-Stafford 05:23
Yeah, let’s do that. 

Joe Sisto 05:24
Fundamentally, it’s the exclusive right to produce, reproduce, publish or perform an original literary, artistic, dramatic or musical work. Those are the main categories. In the case of a manuscript, we’re talking about a literary work. Screenplays, by contrast, are dramatic works; not literary works. People often mistakenly categorize screenplays as literary works because they’re written on paper. But, in fact, they’re dramatic works; not literary works. So a manuscript is a literary work and the author of that work is deemed to be the owner. That piece of intellectual property is an asset. And the owner of that asset is, by virtue of copyright law, given the benefit of an exclusive right to copy it and to exploit it. That owner can also choose to sell or license rights in that work to third parties. So if I own a manuscript, I can grant you permission to reproduce it: reproduce excerpts of it. That permission is a license. I would be the licensor and you would be the licensee. That license can be revocable, irrevocable, exclusive, non-exclusive, limited on a territorial basis or worldwide and so on. The parties to the license negotiate the characteristics of the license. And as the owner of a manuscript, I may also elect to sell that ownership to another person. So I can assign the copyright to you rather than license it. And assignment of copyright is an outright sale: ownership switches hands. Now, there are obviously some instances by operation of law or by agreement where ownership can revert to the original assignor. That is probably beyond our scope. But there are instances not only in the Copyright Act but also contractually, where you can anticipate reversions of rights. I think that there’s one notion that we should probably address when we speak of licenses and assignments because it factors into these types of contracts immediately and by default. There’s this notion of moral rights. So copyright is something. Moral rights is something else. And the question often arises: can I license or assign my moral rights along with my copyright? Is it part of a basket of rights that I’m handing over to my publisher? The notion of moral rights is something one should be aware of. The best explanation of the concept – and incidentally, it’s a concept that exists in Canada; it exists in France; it exists in many other countries; it doesn’t quite exist in the United States: they have certain permutations of it in the US but not quite the way we have it in Canada or they have in many European countries. But I think the best example is to illustrate the concept. If you paint my portrait – so it’s an artistic work in that instance – you own the copyright in that portrait; not me. Even though I’m – it’s my image that’s ultimately on the canvas, you own it: you are the author and therefore deemed the owner of the work. But I can buy that ownership from you. If you assign your copyright in the painting to me, I then own it. And I can do as I pleased with it – to an extent. If you come to my house and see that painting hanging over the mantel above my fireplace and you notice that I took a Sharpie and I drew a mustache on my own image, you can make a legal claim against me for having violated the artistic integrity of your work. I may own the copyright but you’ve retained your moral rights because in our contract, when you assigned your copyright to me, you never waived your moral rights. The only way for me to guard against such a claim in Canada is to require a waiver of moral rights in the assignment agreement between us. That would mean that I own the painting and I have the freedom to alter it. And having waived your moral rights, you can’t object to those alterations. So the same applies to literary works. So in the context of a publisher and an author, I can assign the authorship of my manuscript to you but if you don’t get me to waive my moral rights in the publishing agreement, I can make a claim against you if you alter the manuscript to the point where I believe you violated my artistic integrity. So license agreements and assignment agreements of copyright, you know, reference to waivers of moral rights are essential in those instances.

Boni Wagner-Stafford 10:29
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Boni Wagner-Stafford 11:02
Now, it’s – I’ve just realized that I should have interjected something right off the top. But so if you’re listening to this and you’re thinking, “Well, I’m a self-published author and/or I’m planning to self-publish, so I don’t really need to worry about a contract,” I would just say, actually, anytime you go to upload your manuscript, you are – you will be required to submit to something and each distributor – whether it’s Amazon or, you know, Ingram or anybody else – will have something for you to digitally check, where you’re accepting the terms. So any interface where you are providing your book – the insides, the laid-out manuscript and asking somebody else to help you sell it – there is an agreement there. And many of these same concepts – most of these concepts – will exist in that agreement. So I’m not sure how many self-published authors bother to read those agreements. But of course, I would and I’m sure you would, Joe, encourage them to do that.

Joe Sisto 12:01
Oh, definitely, they should. I mean, those are what we refer to as contracts of adhesion. In other words, they’re non-negotiable. They already exist. They – it’s a “take it or leave it” proposition, in most instances, unless you can actually get to the decision-makers behind that publishing company and negotiate an alternative to their standard form. But if you can’t do that, then you have to review that contract of adhesion very carefully because you may be giving rights away that you were never intending to give away.

Boni Wagner-Stafford 12:36
Yeah, that makes sense. So, I want to talk about geography now. So much of the – so much of everything that we do – not just in publishing – but geographic borders rarely are inhibitors anymore in the realm of commerce. And I say “commerce”, you know: you write and publish a book; you’re doing it to sell it, which means you’re engaging in commerce. But geography does play a role when it comes to legal contracts. And I want to explore with you, Joe, what an author should be aware of about those geographical realities. One of them that you referenced just a couple of moments ago was, you know, there are different rules around rights and copyright, depending on your country of origin and the country where the person who you’re signing the contract with resides. But let’s talk about geography for a little bit. What do we need to think about as authors hoping to sell our books in the US and Canada and the UK and Europe and Australia and all of that?

Joe Sisto 13:47
Well, every publishing agreement will make reference to territory. To the extent that we’re talking about a license of rights or the exploitation of publishing rights, you want to know where those are being exploited. So that’s often a question of negotiation. Publishers naturally want worldwide rights: in all languages, all media, all formats. Authors don’t necessarily object to granting worldwide rights if the publisher is in a position to adequately exploit worldwide rights and maximize revenues. Where concerns arise is where publishers are strong in some territories and weaker in others. They’ll then seek to secure sub-publishers in the weaker territories, which then increases costs and expenses and will result in less royalty revenue for the authors. So an astute author with sufficient bargaining power, mind you, and a knowledge of their publisher’s geographical strengths and weaknesses will often demand that those weaker territories get carved out of the grant of territorial rights to the publisher. And that allows the author to then deal directly with publishers in those different territories and secure better revenues than they would if another publisher were layered on to their existing one. And then that also sort of – you know, we can extend that concept to the grant of language rights. So often, we will combine territory with language. The publisher will say, “Well, I want worldwide English language rights; I don’t want other language rights, necessarily. If I get English language rights, those will be worldwide. Other languages? Those are not on the table.” Or they might say, “I want worldwide, all languages.” And then the same problem arises with the right to translate the manuscript. They may not necessarily have the capacity to do all languages. So they’re going to hire subcontractors in various territories that will handle it from that perspective as well. So territory and language will often go hand in hand in that conversation. 

Boni Wagner-Stafford 16:00
Right. That makes sense. So are you seeing trends in publishing contracts now? And if, like have you seen shifts in some, you know, approaches that are coming up more? And I’m thinking what your view might be, for example, on what the impact of the self-publishing – I’ll say boom – has been. I know, it’s been around now for a couple of decades. But have you seen that have an impact on what publishing contracts are including? Or being demanded to include?

Joe Sisto 16:41
I’m not sure we can speak of any specific trends in contracts, per se. But of course, contracts have evolved with the publishing industry, as the publishing industry evolves. I mean, the obvious example is, prior to the advent of the internet and various digital technologies other than print publishing: our contracts would speak of audiobooks as an alternative and you’ll recall – and I don’t want to date myself here – but we would be able to purchase books narrated on four-track cassette tapes. That was the extent of the types of publishing that you’d have other than print. But that was it. And contracts today need to anticipate the litany of electronic alternatives that exist: how to market publications differently by engaging in social media campaigns, for example, and other forms of modern exploitation. So as the industry landscape changes, our contracts need to keep up. On the issue of trends, for example, a few years ago, one would have predicted – probably quite reasonably – that printed books would be replaced almost entirely by ebooks. On the face of it, would have made perfect sense. Ebooks are more eco-friendly; you don’t cut down as many trees; they don’t take up as much space up on the shelf. They cost very little to deliver because these are electronic deliveries. There’s no inventory problem that bookstores have; there’s no supply chain issues, and so on. So it made perfect sense to think, “Well, it’s the demise of the hardcover or softcover hard copy.” But the metrics as recently as 2020 – not very long ago – indicate that consumers really still want to hold a hard copy in their hands: you know, holding a printed copy in one’s hands and the smell of the paper and the no low-battery warning on the screen and all that seems to be very compelling features of physical books. So it doesn’t look like that’s going to get displaced anytime soon. And I digressed a little from part of your question, which is, you know, to what extent does the expansion of self-publishing affect our contracts? I think it does affect contracts because the relationship between an author and a hybrid publisher or a vanity press is not the same as the relationship between an author and traditional commercial publishers. There isn’t necessarily going to be an assignment of publishing rights in a self-publishing situation. The author retains ownership and in most instances will retain almost all of the revenue that will be generated from the exploitation of the self-published a book, subject to any predetermined costs and expenses that may have been agreed to with the entity that is essentially acting as either a glorified printing company or, in the instances of hybrid publishers, there could be a series of services that are being offered, such as editorial services and sort of a selection of services that one would have expected to get from a mainstream commercial publisher but negotiated on a kind of pay-as-you-go basis. Or there’ll be a menu of services that will be available. But there wouldn’t be a transfer of ownership and there would be a much different treatments of royalties. So of course, the agreement will not – the agreement between an author and a self-publishing entity or a vanity press or hybrid publisher, for example, will not look the same as the agreement with a commercial publisher. A lot of the same concepts will be there: the granting provision, references to rights, references to territory and things like that. But the substance of those provisions will be different.

Boni Wagner-Stafford 20:47
So if we go back to rights for a moment – we’re moving forward on the issue of rights and we hear a lot about people saying, for example, “Well, I used to be traditionally published and I got my rights back. And now I’m self-publishing,” or, “Now I’m,” you know, choosing whatever other route. What would you say that an author needs to consider about contractual language when they decide they would like to try to get their rights back so they can do whatever else it is that they want to do with their book that the publisher is either no longer interested or isn’t doing, for whatever reason?

Joe Sisto 21:34
Well, I think the key question there is, “What can the author do to get their rights back?” So the implication is that there is a publishing agreement that is in force and is binding, presumably. And if the author is unhappy, for whatever reason, it isn’t – you can’t immediately conclude that there’s an automatic right of unilateral termination. An author may not be able to do that sort of thing. These granting provisions in these publishing agreements are usually for a term. And those terms are typically quite protracted. And the only time you can terminate an agreement like that, typically – there’s always exceptions, depending on the agreement – but typically, it will be in the event of a material uncured default: a breach of contract by the publisher. And that’s usually going to be failure to report revenues. Or there are a variety of other possibilities where a publisher can be held to be in breach of contract. But those are unlikely scenarios. And they’re also expensive scenarios to enforce because a publisher that does not believe it is in breach of contract will resist having rights ripped away from it by a disgruntled author. So there’s no obvious answer to that question. I think that you either wait for the term to expire – in which case the rights will revert back automatically – or if there’s a breach of contract and the agreement is terminated as a result, then there will be a reversion at that point. Or there could be a reversion by mutual agreement between the author and the publisher. So if there’s a discussion had – and this happens usually with smaller publishing companies, where maybe a literary work is not quite performing or one realizes that, you know, that small publishing company doesn’t have the reach or so on and there’s a relationship there and it’s a good one and the parties decide maybe it’s time to part ways. And then it’s done amicably. But short of that, once you sign a publishing agreement, if it’s properly crafted, you can’t really get out unless either the term expires or there’s a fundamental breach that goes uncured.

Boni Wagner-Stafford 23:59
Right. So speaking of when there is a breakdown, I think one of the reasons – I am totally projecting here – but I think one of the reasons people are uncomfortable with the notion of contracts: you know, you hear, “Oh, let’s just” – and I’m not speaking about publishing industry in particular – but, “Oh, let’s, you know, as soon as we have to talk about a contract, it means we’ve already failed in our relationship of deciding to do whatever it is that we’re doing together.” And I mean, I’ve been privy to conversations that include language like that. But I think one of the reasons that comes up is because there usually is language in a contract that talks about, you know, “Here’s what happens if there is a breach or a breakdown or a disagreement.” It really is a worst case scenario Notion. Tell us why it’s important that those worst case scenario options be given voice in a contract.

Joe Sisto 25:10
Well, one should not be frightened by that sort of provision. I mean, dispute resolution provisions are exceedingly common in agreements across industries and clarity on what happens in a worst case scenario benefits the author and the publisher. Fundamentally, there are three ways to resolve the dispute. The first is to negotiate amicably. The second is to litigate before the courts. And the third is to identify a form of alternative dispute resolution, such as mediation or arbitration. Negotiating amicably, obviously, is the best of the three. But sometimes a relationship has become so adversarial or so emotional that any negotiation between the parties is doomed to fail. Litigation is typically protracted and expensive. But if that’s the only way to go, then there are certain provisions you want to see in the agreements, such as choice of law provision, choice of forum provision. For example, if the author is in New York and the publisher is in London, is it the laws of New York that apply to the agreement? Or is it the laws of England and Wales? And where do you litigate? Is it the courts of New York? Or is it the courts of England? And in what city? The answers to those questions have a direct impact on procedure, on cost and on how long an outcome is likely to take. The parties may elect to include a mediation or arbitration clause – and/or an arbitration clause, actually – in their agreement, to the exclusion of the courts. The cost–benefit analysis of what path you take on that issue is probably beyond the scope of our conversation. But in response to your question, you really mustn’t let it scare you: you want to have a clear understanding of where you stand on those issues in your agreement. It doesn’t mean you’ve already failed before you started. It’s considered a prenup.

Boni Wagner-Stafford 27:07
Right? That makes sense too. I skipped right over in my thinking about the process and thinking about a publishing agreement – reading it in my head: what’s going to come up first and second and third – and I skipped right over the formats notion. So many publishing agreements will say that the author will grant licensing rights or assignment rights, whatever it is, to – and I don’t mean whatever it is, it doesn’t matter: just that we’ve covered the difference between licensing and assignment a little bit anyway – but to all formats, known now or to come, what does an author want to consider about a clause that includes something like that? Where they’re talking about all formats?

Joe Sisto 28:04
Well, I mean, all publishing contracts should make clear what media and formats the work is going to be made available in, in my opinion. There are multiple implications for both the author and the publisher on this issue. Is the expectation that a manuscript will be published in print format only? Print and electronic? Just electronic? Do we break it down further into digital media, online publishing, ebooks, audiobooks, et cetera? Clarity on this is important in a publishing contract because you want to know the extent of the rights being granted to the publisher. Where’s the publisher allowed – sorry, what is the publisher allowed to do with the manuscript? The obligations being assumed by the publisher: how much is this going to cost the publisher? What are the marketing implications that the publisher is assuming? What about the rights being reserved by the author? If I don’t grant certain forms of exploitation to the publisher, am I entitled to exploit them myself? Can I find a competing publisher to do so? Is it commercially feasible to have multiple publishers exploiting the same manuscript in different media and formats? Is the publisher committing to publish and exploit the manuscript in multiple media and formats? And if so, which ones? And if so, how are revenues treated from every source of exploitation? They’re not necessarily treated in the same way. Will revenues from ebooks, for instance, be treated different than revenues from print? So spelling out in your publishing agreement precisely which media and formats are being targeted by the deal requires that sort of thought process.

Boni Wagner-Stafford 29:47
Yeah. Okay. So we are rounding the corner; I can see the 30-minute mark from here: our totally arbitrary, you know, point in the sand at which we say we’re going to stop talking. Anything that I missed – or that we missed – in the conversation that you want to add now before we wrap up and say goodbye?

Joe Sisto 30:12
Well, I think the only thing I would I would probably bring to an author’s attention is in getting to know, publishing contracts – and there are so many different clients – but in sort of thinking about becoming committed to a publisher in writing, there are certain clauses – contractual clauses – that I think an author would want to be aware of. And, of course, this may sound self serving but you really must consult a lawyer. Because these agreements are complicated. They contain jargon that isn’t necessarily common knowledge, and so on. But if we focus on, say, the most important clauses of a contract from an author’s perspective as opposed to publishers perspective – because they’ll look at these agreements through different lenses – and assuming a traditional, commercial publishing agreement, the author should be most interested in a number of specific clauses. The obvious first one would be the granting provision. That’s going to be in the opening of the agreement. And it’s going to say, “I, the author, hereby grant to the publisher the following publishing rights in the following territory in the following languages,” and so on. There should be a reserved rights provision, a delivery of manuscript clause, a consideration clause, a reporting an audit clause. And if you consider those in order, the granting provision, which we just mentioned, establishes the extent of the rights being granted. If there are any rights not being granted, that the author is reserving, then we would have to have a properly fleshed out reserved rights clause. One of the most common reservations is for subsidiary rights, which, depending on the definition one uses, encompasses film and television adaptation rights, anthology, special editions, and so on. And you’d want to have those rights reserved to the author. There’s a specific clause to that effect. The delivery clause is important because it imposes on the author a positive obligation to actually do something, namely to deliver to the publisher a complete, legible, typewritten manuscript in English: double-spaced; properly margined; satisfactory in length, content and form. There are all kinds of rules that apply to it that’ll be imposed by the publisher. And it has to be done by a specific date. And if you miss the date, you miss your delivery deadline, you’re in material breach, so you have to make sure that it’s a realistic deadline. Sometimes the requirements will include the obligation to deliver photographs and illustrations, maps, charts, whatever, depending on the nature of the publication. The consideration clause is the money clause. And that’s usually the one that’s most interesting to the authors. What’s the publisher going to pay the author for these rights? In publishing agreements, we typically speak of advances and royalties. Advances are a fixed dollar amount applicable against future royalties and royalties are expressed normally as a percentage of sales. And the royalty amount will vary depending on the publisher, on the notoriety and pedigree of the author. It’ll depend on the extent of the territory and language restrictions and the genre of the book. The range we typically see, I guess, in traditional print publication is anywhere between eight and 15 percent of retail price. Sometimes the percentage changes on a sliding scale: for example, we’ll say 10 percent on the first 5,000 copies sold and then 12 and a half percent on anything exceeding 5,000, and so on. That varies and it’s a subject of negotiation. Paperback normally pays less than hardcover; ebook usually pays more. So these royalty clauses, you know, they can run a page or two in length in some instances. And they’re very important. And I think that authors should have some elementary understanding of what those look like. The reporting clause is the provision whereby the publisher undertakes to render periodic royalty statements to the author. And they’ll tell us the number of copies sold, returned during the preceding period, and so on. And that’s how you can monitor how the book is performing. The audit provision is how authors can keep their publishers honest. And that goes hand in hand with the reporting provision. The right to audit simply means that the author is given an opportunity to examine the publisher’s books and records to determine whether the reports that the publisher has been sending are accurate. And if an audit of publisher’s books reveals a discrepancy between the amounts reported by the publisher and the amounts actually owed, then the publisher is required to pay the difference immediately and, in most instances, assumes the costs of the audit. So I mean, there are so many important items, of course: you know, the right to terminate, which we spoke about. What happens if the author fails to deliver? Can the publisher demand revisions to a manuscript? Is the publisher committing to spending a certain amount of marketing funds? How extensive are the deductions that are going to be allowed for gross sales revenues before the publisher declares royalties, and so on? So there’s so much there but I think that those ones that we just sort of, you know, glazed over are the most important ones to be aware of. And I think an author would be well advised to seek professional advice on that, at the very least, and ask the publishers inspired questions during the negotiation process.

Boni Wagner-Stafford 36:09
Yeah. Excellent advice. Well, Joe, I want to thank you for taking the time out and chatting with us today. We have been speaking with Joe Sisto, who is from Sisto Entertainment & Business Law Services, the boutique law office that provides legal counsel to media and entertainment industry clients in all aspects of development, production, financing, licensing and distribution of film, TV, book publishing, theater, music and new media. You know your stuff. Thanks very much, Joe, and really appreciate you joining us.

Joe Sisto 36:44
It was my pleasure. Thanks for having me, Boni.

Boni Wagner-Stafford 36:46
We’ll talk to you again soon. 
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