Tuesday, March 1, 2011

Nine Must-Have Clauses for Digital Rights Contracts

By Michael Stackpole

Originally published at:

I knew it would happen. It had to happen. There is money to be made and, whenever there is money to be made, people will rise up to make it.

I don’t, in this instance, refer to hardworking authors, but the parasites who are looking to make a fast buck by making low-rent investments in properties they believe they’ll be able to exploit. To what am I referring?

Digital rights to authors’ backlists. There are a variety of individuals — traditional publishers included — who are buying up the rights to backlists for little or no advances against royalties, with no firm schedule for publication, with no distribution deals in place, and with little or no expertise in how to actually create an ebook. And yet, writers who have complained for eons about how badly they are used and abused by publishers are turning around and selling off these assets for a pittance.

This is what the landscape looks like right now:

Traditional publishers are offering 25% of the NET on electronic sales, zero for advances, with no pub dates attached. If any publisher made such an offer for a paper publication, they’d be laughed out of the marketplace, pure and simple. While the royalty might sound great, the lack of an advance and the lack of a publishing window means the publisher has zero investment in getting the product out in a timely manner. They’re snagging the rights so they’ll have something to sell at some point.

By way of example, three of my novels are now available for the iPhone: A Secret Atlas, When Dragons Rage and The Grand Crusade. Random House sublicensed the electronic rights to those books to ScrollMotion, Inc., the creators of the Iceberg reading apps. The App itself has several screen shots to help sell it, the first being a picture of the cover of my book. The next three screen shots show the interface and provide glimpses of text which I did not write — and would never have written on my worst day on the job. I hope no one mistakes it for text from the book.

The pre-2009 contracts with publishers grant authors 50% of the NET, which is a better deal, but this is still the NET. Let’s look at A Secret Atlas for a breakdown here, shall we? The App costs $6.99. This means that ScrollMotion, Inc. is paid $4.89 per copy sold (70% of retail price). I don’t know exactly what ScrollMotion, Inc. is making on the deal, but let’s assume 10%. They send $4.40 on to Random House. And then Random House sends half of that, or $2.20, on to me.

Under the new 25% royalty deals, I’d only be getting $1.10.

In three to nine months after the sale.

Conversely, selling the same book for $5 myself off my website, I’d make $4.55 per copy. Immediately. Selling it myself via the Kindle, I’d make $3.50 in 60 days. Selling through the iBookstore directly, I’d make the same as the Kindle deal and, selling through third parties, I’d pull at least $2.50. So, by controlling the rights myself, I’m going to make out better than the best deal anyone else is offering me.

Authors are now being faced with choices that are not easy, but they need to ask one question whenever offered a backlist deal: “If it is that valuable to them, how valuable is it to me?” By way of example, last month alone, ebook sales for Talion: Revenant via the Kindle, earned me over $400. That may not seem like much, but if someone is offering a token amount of money, like $1K, to snap up the rights to books, and yet one can turn around and make almost half that in a single month, you have to be crazy not to think about doing this stuff yourself.

If your reply to the above is, “But I don’t know enough about computers to be able to make an ebook,” stop and think about it this way. Making ebooks isn’t rocket science. It’s easier than dealing with copyedits on a novel, and you’ve done that. And this is a job that will pay you back. Instead of being happy someone is giving you a fish, this is your chance to learn to fish; and who’s going to be more motivated than you to let your fans know your books are available again?

If, on the other hand, your reply is, “I don’t want to learn how to make ebooks,” well, fine. Just don’t turn around and complain about how you’re being handled in the ebook realm.

Realistically, here are the things to demand in any ebook contract:

1) A cash advance equal to an estimate of the first two years royalties. (If this amount cannot be calculated because “this is a new market,” then don’t go for the deal. This person is speculating. Let them do that with someone else’s work.)

2) A six-month window for publication of each book under contract. (Estimated time to prepare a book as an ebook is 20 hours from scan to publication. If they do not have the staff or equipment for this, don’t go for the deal. It’s a hobby for them, not a business.)

3) A sunset clause on the contract, preferably two years, after which the contract will be renegotiated at the author’s option. (The technology is changing too fast for you to be locked into a long-term contract without hope of renegotiation.) It is a seller’s market and will continue to be so, as new formats and platforms develop, royalties to authors will increase, not decrease. Do not get locked into a longterm contract for peanuts.

4) Clearly define which formats are to be used. At this time there are three: Epub, Kindle/Mobi and PDF which should be provided. All other formats, including smart phone apps and gaming console applications, should be treated differently and negotiated for in good faith. (Think of formats as foreign languages and this all becomes very clear.)

5) Copies of all files, including source files, are to be delivered to the author for his use beyond the life of the contract. Copies of the books should be DRM free, and the author has the option to make “review” copies of said books available for the purpose of publicity.

6) Electronic rights to the books are limited to one language only (i. e. English). Translations and electronic publication of translations are to be negotiated separately.

7) Where there are multiple books in a series, the negotiations should include royalties on a per volume basis and on an omnibus basis, with the publication of an omnibus edition being mandated.

8 ) Royalties should be calculated and paid every 60 days (within the Amazon and Apple pay windows).

9) The files will be made available to the author to sell from his own webstore, with him paying the publisher the equivalent rate as Amazon, with accounting every 60 days. (Because electronic sales are inherently immune to audit, only by selling work directly can an author have any idea of a) true sales figures and b) failure-to-deliver rates which might address why bandwidth-per-file figures do not match sales perfectly.)

I’m sure I’ve missed out on a couple of provisions that should be included. I know many of these will be considered dealbreakers by publishers. So be it. If they want to sell ebooks, they have to have ebooks. I know they can get them from someone else, but if they want mine, they’ll find I’m not giving them away.

And, quite frankly, no other author with enough neurons to form a synapse should either.

Photo by: Michael C. Pearo

Michael Stackpole is a New York Times bestselling author of science fiction and fantasy and a game designer. He is the author of BattleTech and Star Wars novels, as well as original fantasy novels such as Talion: Revenant, the DragonCrown War series and the Age of Discovery series.


Meg Mims said...

Great info! Thanks!!

Lindsay said...

Definitely info to keep in mind for the future.

Sherry Gloag said...

Thanks for sharing this with us.

Deborah said...

I'm curious whether you know of any publisher who has agreed to these terms? I hope readers of this blog who are unfamiliar with digital publishing don't misunderstand and think these are common negotiating points. As you said, many of these will indeed be dealbreakers...

mary kennedy said...

Michael, this is a terrific article, I am so glad you posted it. Wonderful information to have. I shared it on FB.

Anonymous said...

Wow. Thanks for the break down. I did the self publish route. Just made better sense. Congrats on the $400 made in a month.

Karen E. Rigley said...

Great article. I have some books on Kindle & Barnes & Noble Nook and your info is excellent.

Anonymous said...

Thank you Michael!
My publisher just emailed be about amending my contract and acquiring the digital rights to my picture book. The book was first printed before digital rights were a consideration, and has done well for them (it's now in its 18th printing.) They offered 12.5% royalties, which sounded good, but now I see that's not so great. Just wanted to add my experience to the limited pool of data out there.
Thanks again!