How Is “High Discount” Defined?

Q. Is there a commonly accepted definition of what kinds of publisher’s book sales are “high discount” and result in a lower royalty rate than the basic royalty rate I negotiate in my contract for sales at the publisher’s standard discount?

A. No one definition is accepted by everyone in publishing. Indeed, rather than using “high discount,” “deep discount” or a similar term in the publishing contract, the situation is generally handled in one of two ways. The preferable way for authors, which many publishers accept, is to add a sentence saying that the reduced royalty rate “does not apply to sales outside ordinary wholesale and retail book trade channels.” This does leave some ambiguity of what “ordinary” channels (or “traditional” channels, a term sometimes used instead) are, an ambiguity that many people tend to overlook. If using this formulation, discuss with the publisher beforehand which of its customers or distribution channels fall outside the phrase’s ambit. This way, you will at least have a general understanding of whether sales to a K-Mart or Sam’s Club, for example, will result in regular or reduced royalties if that clause is included and you can negotiate your contract intelligently.

More typically, a contract will specify the exact discount from the book’s suggested retail price that triggers the lower royalty rate(s). These should generally be 51% or 52% for hardcovers and trade paperbacks and 55% or 60% for mass market paperbacks. Many publishers will accept these, although their preference for the hardcover discount will more likely be 50%. If agreeing to 50%, be particularly careful of the difference between a discount “of 50% or more” and a discount “more than 50%” when negotiating your contract. To the extent your publisher sells its hardcovers at exactly a 50% discount, you will receive less money if your contract says the reduced royalty applies to sales at a “discount of 50% or more” instead of at a “discount of more than 50%.”

(Originally published in the Fall 2006 issue of the Authors Guild Bulletin. © Mark L. Levine)

Answers to questions on this site are general in nature only. You should consult a lawyer for information about a particular situation. For more information about book publishing contracts and issues, see Levine’s new book.

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