Book Club Clauses in Publishing Contracts

January 1998
by Ivan Hoffman, B.A., J.D.
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Ivan HoffmanIvan Hoffman (photo right) is a publishing, copyright, Internet law, recording, and music attorney as well as a published writer and author. He practices in the Los Angeles area. You may reach him at ivan@ivanhoffman.com or 818/342-1762.


Book clubs can be a source of additional and even substantial income to both the author and publisher. Book clubs can also provide opportunities for the author to reach an audience that might not otherwise know of the author’s work and, in the process, perhaps enhance sales at the retail level.However, the provisions in a book publishing contract that deal with the author’s share of such income are often overlooked during the negotiation with the publisher, with the author believing that such provisions are “standard.” In nearly a quarter of a century of deal making, I have no idea what that term “standard” means since all authors and all books as well as all creativity are different and unique. The power to make a deal and to change clauses depends primarily upon two factors: the skill of the negotiator as well as the marketing clout of the creator.

The Basic Deal Made to Publishers

The most common form of deal is where the club licenses the rights on a royalty basis, often paying the publisher an advance against the publisher’s share of the royalties. This royalty can be stated as a percentage of the price to the member or as a dollar and cent amount. (It is beyond the scope of this article to deal with how the price to the member is calculated since that is the subject of the publisher’s deal with the club and, as you might imagine, this price is often complicated having to factor in “free copies,” sign-up bonus copies and the like.)How the publisher-author agreement handles the author’s portion of a club deal may vary.

The Author’s Share

Generally speaking, in publishing agreements that are drafted to cover all the differing royalty categories of selling and distribution, the author’s share of royalties on sales to a book club is generally stated to be one-half of the author’s normal trade royalty rate. This would be covered in a provision dealing with sales by a club where the publisher is also receiving a royalty, as mentioned above.

However, this rate is not always that simple and certainly not carved into stone. And while the author’s attempt to negotiate changes may often be met with a response such as “this is standard,” the author should be aware that there are some areas of possible change available.

The author can bargain for more than the one-half rate, asking to be paid 60% or more of the author’s normal trade royalty rate. While the publisher is receiving a royalty rate from the club which is less than the amount the publisher might receive in a normal trade sale, the publisher has essentially no costs attendant with that club deal. Therefore, it is entirely possible for the publisher to pass along to the author a percentage of the author’s normal trade royalty greater than 50%.

The author can also negotiate in the author’s deal with the publisher that if the book club deal involves an owned or controlled club, that the deal between publisher and club be made at an arms-length basis or that the author is paid as though it were. In such an instance, the author would receive the higher amount of the actual deal or what the deal would have been should there have been this arms-length negotiation.

The author should also know that he or she can negotiate for the author royalty to include participation in any advance obtained by the publisher for the club rights to the particular book.

Addressing “Join Up Promotions”

The author may also negotiate to place restrictions limiting the publisher’s right to allow the author’s book to be used as one of those “join up promotions” where the new members receive a large number of books for very little money. The author should be careful that the author’s book not be used as one of those loss leader type books. The club benefits since it attracts members but the author does not since most often the publisher’s deal with the club will provide that no payments are made to the publisher from the club on such sales. To this extent, it is also in the publisher’s interest to limit such promotional sales by the club and if the author has obtained these restrictions in the author’s agreement with the publisher, obviously the publisher will have to do so in its deal with the club. To the extent that any units are “given away” beyond those that are permitted by the author’s agreement with the publisher, those excess units would be royalty-bearing units and would be paid at the author’s club rate.

Another Approach for Authors: Licensing Income

There is another category of royalty payments in most publishing contracts. That category involves the author’s participation in licensing income. Since a club deal is a license (unless the publisher is the actual club), the author can ask to define licensing income to include club deals. In such instances, the author is not paid at the one-half of the trade royalty rate defined above but rather at the author’s licensing participation rate. This rate is most often 50% of the income received by the publisher including advances received, but it can be higher, again depending upon the marketing clout and negotiating skills I mentioned above.

Conclusion

In any negotiation, the contract has to be viewed as a whole. It is the totality of the deal that really tells the story about the worth of the contract. The place where the contract ends up is generally based upon who wants who more. In other words, deal making is not only dependent upon the skill of the negotiator and the marketing clout of the client, but upon who wants the deal more. If the author is desperate, the publisher may end up with a better deal. If the tables are reversed, the author may be in a position to obtain better clauses, such as the one involving club royalty rates. The best deals are often made by those who can afford to say “No.”

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