Q. My publishing contract doesn’t define “net.” It’s used in both the royalties and subsidiary rights sections. What does it mean?
A. “Net” is one of the worst terms for authors to leave undefined in a contract.
“Net” – more typically, “net proceeds” or “net receipts” – is what is left after various expenses are deducted from a larger amount, e.g., the book’s list price (in the royalties section, for those royalties not based on list) or the total amount paid to your publisher by a licensee (in the subsidiary rights section). Since the amount an author will receive in such situations is a percentage of the reduced amount, it is important to specify exactly what the expenses are that may be deducted in computing net. If not specified, authors may discover that the publisher’s understanding differs from theirs.
In particular, with many publishers now paying authors a royalty of 25 percent of net on e-book sales, your contract should specify that the only permissible deduction from the e-book’s price is the commission to the online bookseller (typically 30 percent at the moment). Smart authors will also provide that if the commission to the online bookseller is at any time increased, then the royalty will still be computed as if the commission was only 30 percent.
(Originally published in the Fall 2010/Winter 2011 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 book.
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.