Demystifying Contracts: What Every Writer Should Know

At the SCBWI 2010 Winter Conference, agent Edward Necarsulmer IV (of McIntosh & Otis) gave a presentation called "The Real Deal about Contracts." At McIntosh & Otis, Necarsulmer handles his clients’ contracts with publishers. Other agencies have contracts departments. Either way, both agents and authors should understand the ins and outs of contracts and the process of negotiating rights with a publisher. Donna Gambale blogs at the First Novels Club and is the author of a mini kit, Magnetic Kama Sutra. She’s currently revising her young adult novel, Multiple Choice.
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At the SCBWI 2010 Winter Conference, agent Edward Necarsulmer IV (Dunow, Carlson & Lerner) gave a presentation called "The Real Deal about Contracts." At his agency, Necarsulmer handles his clients’ contracts with publishers. Other agencies have contracts departments. Either way, both agents and authors should understand the ins and outs of contracts and the process of negotiating rights with a publisher.

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Donna Gambale blogs at the First Novels
Club and is the author of a mini kit,
Magnetic Kama Sutra. She’s currently
revising her young adult novel, Multiple Choice.

WHAT'S A CONTRACT?

At its most simple definition, a contract is a legal document saying what the publisher is going to say or do, and what you, the author, are going to say or do. It should be fair and clear on both ends.

Oftentimes, a publishing house will offer a basic contract to an author, and it’s the agent’s job to negotiate better (and more specific) terms. The agent explains everything to the author and discusses his/her options before continuing negotiations. With each revision, the agent goes through the contract with line-by-line vigilance, making sure the author has what he/she needs and what the publisher promised.

HOW MONEY WORKS

The most obvious part of a contract involves negotiating author advances and royalties. Of course! Check out this post for complete details.

PRIMARY RIGHTS

Primary rights include the original edition of the book and paperback reprint rights, but they may also cover foreign territories/translation rights. The standard grant of rights is for the publisher to print/publish/sell/distribute your book in the English language. Your agent would probably want to retain foreign rights, but that depends on a cost/benefit analysis. Meaning, is it worthwhile to attempt to sell your book to foreign markets?

SUBSIDIARY RIGHTS

Here's a post breaking down subsidiary rights. Necarsulmer believes that it’s preferable for the agency to retain as many subsidiary rights as possible in-house because then the writer only has to give 15-20% of earnings to the agent instead of also splitting 50% with the publisher.

These rights include the following:

Audio rights. Generally an agent also tries to retain these, but it depends on the earning potential for the author of the agency shopping the book versus the publisher.
Film/TV/dramatic rights. Should be retained in-house. These rights are important because of the possibilities to help boost the sales of your book.
Graphic novel rights. These should be negotiated as something entirely separate from your novel.
Commercial/merchandising rights. It’s also best for your agent to retain these rights. These include plush toys for picture books, Edward Cullen dolls, etc.
Electronic rights. Because this is ever-changing, Necarsulmer includes a clause to renegotiate the terms of electronic rights in one to three years, to keep it labeled as an ongoing discussion. Plus, he ensures that, as much as possible, he and his clients have the opportunity to approve electronic rights decisions before they’re made.

Other elements of a contract Necarsulmer mentioned include the following:

Publication timeframe. There’s also frequently a clause that a publisher must publish your book within a certain timeframe. With picture books, this can be slightly different because authors and illustrators have to be coordinated.
Author copies. Lists the number of free copies an author receives, plus discounted pricing for additional copies.
Warranty and indemnity clause. This covers the author under the publisher’s insurance (for libel, lawsuits, etc). Another clause under this includes bankruptcy—what happens if the publisher goes out of business?
The agency clause. This outlines the author’s and publisher’s relationship with the agent. For example, noting that all sums of money due goes through the agency (the author benefits when the agency’s accounting department double checks payments), or listing what percent of earnings goes to the agent. This clause possibly requires payment to the author from the agency within a certain number of days.

Necarsulmer’s presentation emphasized how an agent is a valuable ally who looks out for the author’s best interests during complex contract negotiations. A skilled agent keeps contracts from becoming intimidating so that the author can focus on what’s really important—writing.

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