Anatomy of a Publishing Agreement

Publishing agreements are complex and nuanced, and very much their own beasts. What makes them different from a standard commercial agreement or even a standard intellectual property licensing agreement? The acquisition of rights is wrapped heavily into both the production and distribution of a product in connection with the right as well as a resale/agent relationship associated with the sale of subsidiary rights (e.g., translation, motion picture, serializations, etc.) At its core, it is a hybrid agreement dealing with intellectual property licensing, services, distribution, and resale/agency matters.

What is a literary contract?

At its core, it’s a hybrid agreement dealing with intellectual property licensing, services, distribution, and resale/agency matters.

Alia Luria, attorney and author

From a practical perspective, literary contracts cover the following buckets: (1) rights management of manuscript, (2) author’s obligations regarding manuscript, (3) publisher’s obligations regarding publication, (4) economics of the agreement, and (5) risk mitigation. These categories broadly cover all of provisions you are likely to find in a standard publishing agreement. We will address each of these categories in turn and cover the basics regarding what provisions might be included in each category. Each publishing agreement is different, and there is no one way to approach each provision. Often, it’s a delicate balance between rights management and royalties, and what might be advantageous in one mix of provisions won’t be in another configuration. So, take each of these areas of discussion and consider them in the totality of the agreement, rather than provision by provision. What does that mean in English? What may not be good for Author A works for Author B based on the circumstances. There is no magic answer. Lawyers have a running joke. The answer is always, “It depends.”

Rights Management

The term “rights management” covers the provisions dealing with the universe of rights that are being acquired in the publishing agreement. This can include the publishing rights to the work, the distribution rights to the work, subsidiary rights that can be resold or licensed to third parties, such as translation rights, other media, and other types of content. It also can extend to the rights to use the author’s name and likeness in materials associated with the work. Rights management also addresses reversion of rights when the agreement terminates. Some of the provisions in play include:

1. Grant of Author’s Rights
   • Is the publisher getting exclusive rights to publish the work?
   • What editions are being acquired? (e.g., hardcover, paperback, special editions, ebook, audiobook)
   • Are abridgments and anthology or serial rights being granted?
   • What languages and regions does the agreement cover?
   • If there’s new media involved, this can also cover additional content such as photography, illustrations, multimedia, and web-based content.
2. Reservation of Rights
   • If you or your agent believe that you have a platform that needs to be protected and should be exempted from the agreement, you may want to address reserving those rights explicitly in the agreement.
   • The author or agent may also have connections to directly sell some of the rights listed above, such as television rights or certain territories or translations. These may also want to be carved out as well.
3. Reversion Rights
   • Reversion rights spell out when the rights granted under the agreement revert back to the author.
   •  It is in the author’s best interest to get these rights back as soon as it becomes clear that the publisher does not intend to offer or continue to offer the property for sale. 
   • Under agreements with large publishers, often the default is to allow for lengthy periods before the rights revert, but authors are pushing for reversion rights more quickly after books go out of print, and there is a lot of room for negotiation, particularly with small presses.
4. Author Likeness
   • Covers the ability of the publisher to use the author’s name, likeness, photograph, biography.
   • Can be for promotional purposes, advertising or other exploitations.
   • Can be broad or narrow depending on the publisher.

Author’s Obligations Regarding Manuscript

A publishing agreement covers a lot of mechanics regarding delivery of the manuscript, as well as what the author’s other obligations are to the publisher. You may think that once you’ve made the best book you can, your work is done, but this is not the case. There will invariably be deadlines related to submission, revision, proofing, and sometimes even third party permissions. You may have an agent helping you understand the publisher’s expectations, but the more you understand, the better you will be able to advocate for yourself based on your circumstances.

1. Manuscript Delivery
   • These provisions set forth the parameters under which publisher will accept a manuscript, often with due dates and termination rights associated with failing to make such deadlines. These are important deadlines to note, because failing to meet them can kill your whole agreement. Make sure you are comfortable with any deadlines for your submission.
   • Often, an agreement will also set forth responsibility for providing drawings, charts, cover art, and graphics. This responsibility can be divided between author and publisher, although if author is responsible for any of these provisions, the publisher will usually require assignments for any images or graphical treatments not created by author. Those permissions may take time and be a headache to obtain, so be sure you are confident in your permissions before you agree to any such provisions.
   • If delivery is timely but not acceptable to publisher, this will be addressed in this provision as well. The author should pay special attention to the time given to cure and defects in the manuscript and what is and is not deemed acceptable to publisher.
2. Editing Mechanics
   • A provision on permissions and clearances will likely be included in your agreement, and was briefly mentioned above. This outlines who has responsibility for obtaining any permissions for quotations, illustrations, photography, and other work created by third parties. If you plan to use any other work in your manuscript, it’s always a good idea to understand what permissions you might need to obtain and to reach out early for that permission, because you will likely be asked to obtain permission for any of these.
   • Editorial changes will likely be required, and this provision breaks down what right the publisher has to change the work after it has been approved as a submission by the author. Often, the publisher will reserve the right to make editorial changes, but the author will want to have the final say in any changes made to the book. This provision can be very important to both parties and a sensitive subject for the author. Sometimes wrapped into this provision is the ability of the publisher to have third party make revisions or revise for new editions of the work. If author has qualms about any third party revising the work without author’s express permission, the author should consider this provision carefully.
3. Copyright Responsibilities
   • Upon creating a written work, the author automatically holds a common law copyright associated with that work. So, the moment we typed this word, we held the copyright to this sentence. That said, copyright registration provides a framework on which authors can rely on established verification when defending a copyright.
   • Publishing agreements vary on who is responsible for obtaining the formal copyright registration for the final work. Larger publishers will usually obtain this right directly, but smaller publishers may place this obligation directly on the author and expect them to provide evidence of registration.
   • Copyright provisions also set forth who has the right to sue for copyright infringement. Smaller publishers will often require the author to assume prosecution of infringement against the work, but larger publishers may reserve the right to sue for infringement. The publishing agreement will also cover the rights related to author’s work infringing on a third party copyright, and the author needs to understand whether any costs of such suit may be deducted from royalties or even repayable via indemnity if the publisher is required to defend against such a claim, even if frivolous.

Publisher’s Obligations Regarding Publication

1. Publication Mechanics
   • The provisions covering publication always contain additional last-minute termination rights and escape clauses for the publisher. Just because your book has been edited, proofed, and finalized doesn’t mean that it will be published. Many high profile authors have hit the news with their books being cancelled due to the publisher’s right not to publish.
   • This provision also sets forth the obligations of the publisher to market and sell the book. The trend has been for publishers to expect more energy from the authors to market books and more out of pocket spending by authors on marketing and engagement. As an author, you should be prepared to have obligations related to publication as well.
   • As we stated in the article Economics Interests in Publishing, minimizing costs is incredibly important to publishers. Sometimes those costs may not line up with what the author is expecting, so be careful to read and understand what costs are included and ask for them enumerated as much as possible.
   • Publishing mechanics may also include whether a promoter will be assigned, who arranges a book tour, if any, and how those costs are allocated and what the set-off against royalties is.
2. Accounting and Payment Mechanics
   • Traditional publishers usually pay royalties semi-annually and will maintain detailed records relating to all revenues received from every aspect of the book’s publication.
   • Historically, these royalties are sent to the agent, who then distributes royalties less agent’s percentage to author. Some publishers will allow the agent and author to be paid separately, which I recommend you ask for even if your agent has not pushed for such a provision. This reduces your reliance on the agent to receive your monies and reduces the possibility of mismanagement of your royalties. Additionally, if you agent dies or the agency goes out of business, that is one less headache for you as the author.
   • The payment mechanics usually allow the publisher to reduce or set off royalties for books that are returned or destroyed, so pay close attention to how costs, returns, and other deductions are made. Sometimes publishers will ask for a right of set off as a risk mitigation strategy, and we always advise authors to be extremely wary of such provisions.
   • Record-keeping is done by the publisher and audit rights are usually limited for the author, and if author requests and audit and shows limited or no deviation, the author may be responsible for paying for the cost of the audit. These provisions vary and are also negotiable, so make sure you understand your audit rights and have your agent or an attorney help you if you don’t.
3. Author Copies
   • This section sets forth whether the author receives any free copies of the work and whether any discounted or “at cost” copies will be available for purchase by author. The author should push for freedom with respect to the use of author copies so as to maintain author’s independent sales capabilities, particularly if author has a platform to leverage in marketing the work.
   • For non-profit publishers, certain numbers of author copies may be available in lieu of royalties or as part of a royalty floor set by the publisher. This should be a financial consideration when deciding whether to accept a publishing agreement.

Economics of the Agreement

When we refer to economics of the agreement, we mean the totality of the agreement, not just royalties. However, as we’ve covered many other areas of the agreement that have economic impacts, such as publishing costs, and permissions in other areas of this article, the breakdown in this section will focus primarily on advance against royalties, royalties, and subsidiary rights royalties. With many publishers taking new and interesting tacks, you may find that there are additional types of royalties available to you, such as for anthology publication and other areas that you hadn’t considered. One basic rule when considering royalties is that if you are a known quantity with a platform and readership, you should expect to be closer to on par with your publishing house versus if you are a new or unproven author. The other basic rule to consider is that the word royalties itself means nothing without closely examining the definitions that the publisher provides in the agreement. This is one area where it is extremely important to understand the publishers costs, the calculation of revenues (whether gross or net), and the interplay between investment and return. If you have an agent, they should be able to help you understand these concepts. If you decide to have an attorney review the agreement, I urge you to seek an attorney with experience in the publishing industry to give you an accurate understanding of the economics at play.

1. Advance Against Royalties
   • The first misconception about an advance is that it’s free money. An advance is just that. It’s an advance against the royalties you are expected to earn during the lifetime of the agreement. For some authors, they may not earn out an advance received from the publisher and thus receive no royalties from their book other than that initial advance.
   • The trend in publishing is to reduce the amount of the up-front advance paid to authors. This may seem like a negative to authors, but see the last point in this section to understand why it may not be. An advance can range from $500 up to $250,000 or over $1,000,000 depending on how valuable the publisher projects the property will be. Advances can be paid out at a lump sum on final acceptance or apportioned after milestones are reached. Advances are more frequently being used as tool to secure an author that publisher feels is highly sought out and as incentive to sign with them instead of another publisher rather than just as a projection of author’s earning potential generally.
   • Advances may need to be repaid if deadlines are missed, milestones are not reached, or other goals are not realized. If you receive an offer of an advance, make sure you understand in detail what the terms of that advance entail and what happens if you don’t earn it out.
   • Another misconception is that a huge advance means you’ve made it. This is also not the case. If you receive a large advance for a first project and fail to earn out the advance, the publisher may see your project as a failure, even if it sold plenty of copies other standards. Large advances mean a lot of pressure on the author, so keep that in mind when signing agreements that include large advances.
2. Royalties on Primary Publication
   • If there is an advance, royalties will not be payable until the author has “earned out” the advance, meaning that the publisher has sold enough books to be reimbursed for the advance paid to the author.
   • Like the advance, royalties can vary widely depending on format, the region, and the right being exercised. In smaller, independent and non-profit publishers, royalties may not be payable until a sales threshold has been made. This is often to allow the publisher to recoup costs on the property before beginning to pay royalties.
   • If your publisher has a sales requirement before royalties begin to be paid, you should expect those royalties to be split evenly between the author and the publisher. In this case, the publisher has completely mitigated its initial investment in the property.
   • Often times, royalties are extremely low on print copies offered by a traditional publisher. This is because the print industry has a lot of variables associated with it. That said, there is a continuing trend of offering lower royalties to authors on ebook and audiobook productions, even where the publisher has recouped costs on those properties. Because there is no marginal cost to ebook and audiobook production, these royalties should be an area where an author can negotiate to receive a higher royalty rate.
3. Royalties on Subsidiary Rights
   • Subsidiary rights is the term for the general additional rights captured by a publisher in an agreement including film rights, anthology rights, serialization rights, merchandizing, associated software applications, character licensing, foreign publication rights, and basically any right that the author can think of.
   • Subsidiary rights are licensed by the publisher to third parties with the publisher paying a portion of the actual monies received for such licensing to the author as royalties.
   • Often, the publisher will pay only a fraction of the royalties received to author, but there is room to negotiate here, particularly if the author has an extensive platform, existing readership, existing connections or opportunities related to those subsidiary rights. In that case, the author will do better to either carve those rights out of the agreement entirely or to demand a higher royalty right for any such licensing deals.

Risk Mitigation

If you’ve made it this far, congratulations, we’ve saved the most boring and often most painful part of the agreement for last. That is, legal risk. For publishers, an agreement with an author is an economic one entirely. Risk mitigation is part of the economics that both publisher and author need to consider when entering an agreement. By agreeing to publish and distribute a book, the publisher by default assumes a lot of risk, both financial and legal. The goal of the publisher in the publishing agreement is to mitigate as much of that risk as possible. We’ve already talked quite a lot about the financial risk mitigation strategies of publishers, so this section will focus on legal risk mitigation, and how author can be prepared to accept or counter the provisions demanded by publishers.

1. Representations and Warranties
   • Representations and warranties are the legal backbone on which legal disputes between publishers and authors often arise. A representation is a fancy way of stating that an author has agreed that a certain premise is true. If you are making a representation, you are stating that you believe a particular statement is factual. Those statements might be “I own the copyright to this manuscript” or “I received proper permission to use this person’s photograph”. That is a representation. A warranty is a fancy way of saying that the party making the warranty is making a promise as to the factual nature of the representation. That warranty might be “I promise to pay your costs to defend a claim if I’m wrong that I own the copyright.”
   • Because publishing agreements are written by publishers, most if not all representations and warranties in a boilerplate contract will be given by the author and focus heavily on authors representing that they are the owner of the work, and that the work is original, not part of the public domain, and does not infringe on any third party’s intellectual property rights.
   • Larger publishers may give limited warranties as to authority to enter the agreement and perform it, but most of the representations will fall to the author.
   • There is room to negotiate for a publisher to give its own representations and warranties, particularly where the publish is reserving sole control over editing, cover art, and other areas of publication. If the author has leverage, he or she may seek to have a mutual representations with respect to any work product provided by the publisher or done by the author at the publisher’s requirement.
2. Indemnification
   • Indemnification is a fancy way of saying, put your money where your mouth is. Indemnification is the obligation that party A pay the party B for any damages that party B incurs because party A was wrong about a representation it made. This is a contractual right to damages, although you will often have to sue in court to have it enforced.
   • In a publishing agreement, indemnity is given by the author in connection with the representations and warranties and is designed to protect the publisher from claims from third parties that the property is infringing on their rights, defaming them, or otherwise harming them. This indemnity is often aggressive and unlimited, but its practicality varies.
   • From a practical perspective, these indemnities may be of limited value to small publishers publishing works from midlist authors who are not heavy earners, and they should be paired with termination rights of the publisher and the right to cease publication of the manuscript and otherwise attempt to recoup costs from the author. This is where the rights of offset often come into play, although as an author, you should be very wary of any right to offset.
   • As an author with leverage, you should also seek indemnity from your publisher for any infringement of content they provide, any misuse of your identity, any defamation made on their part, etc.
3. Termination
   • Sets forth when the parties may terminate the agreement, and this varies widely depending on the size, scope, and profit-status of the publisher.
   • Certain provisions usually survive termination, including the indemnity rights, so just because the agreement is cancelled, doesn’t mean you are off the hook.
   • Often, this provision can also handle what happens to any books that have been published but not sold. They can sometimes be sold to the author under the termination provision or sold out using standard mechanics with royalties continuing to be payable. Sometimes the publisher reserves the right to destroy all of the books in inventory, and if so, author should consider whether they have the means to purchase the books instead. This is a provision to be carefully considered as you attempt to create a smooth transition.

TL;DR Takeaways

The primary thing to be aware of is that the totality of the agreement is in balancing the rights granted for the monetary consideration being received against the services being provided by the publisher. It’s not so much about what is market as it is about whether the author and publisher are having their relative expectations met. When it comes to large publishers where authors may have limited capability to negotiate, the goal may be to understand your obligations and to align your expectations with reality. With smaller publishers, you may have more leverage than you think, and you definitely should engage an attorney to help you maximize your earnings related to your publication.