What It Means to Be a Writer, Part 4 => Negotiating Contracts

September 6, 2012
This entry is part 4 of 6 in the series What It Means To Be A Writer

So you’ve decided to try writing a book: you’ve come up with the idea, sold it to a publisher, and perhaps used an agent in the process. The next step is to negotiate the contract. For those entirely new to the process, and even to those that have been around the proverbial writing block a few times, contract negotiations can be intimidating. If you’re using an agent, the agent will take care of this for you. If not, it’s up to you.

When I took a class on getting published (many years ago), the instructor informed us that you can negotiate contracts offered by publishers. Great! Just one hitch: most people don’t know what to negotiate! In this post, I’ll explain exactly that.

Financial Terms

When it comes to negotiating a contract, the most obvious consideration is the money. But to understand how to negotiate that part of a contract, you have to understand how book writers get paid. There are two important numbers: the advance and the royalty rate.

The advance is the minimum amount of money you’re guaranteed to make, assuming that you finish the book. This amount will be paid to you in stages as you write: one-fourth once you’ve submitted the Table of Contents, marketing material, and first chapter; another fourth each time you complete a third of the book (or something like that schedule). Even if you never sell a single copy of the book, the advance is yours to keep, assuming that you do complete the book. Many writers and agents focus on negotiating the advance, but to me, it’s the royalty rate that matters. Here’s why:

Say your book has a list price of $40 (all prices in USD). This means that Amazon and bookstores will purchase the book from the publisher at $20. Your royalty rate is on that $20 (what the publisher made for selling a copy of the book). If your royalty rate is 10%, then you earn $2 when the publisher sells a copy. Note that your royalties are based upon sales to bookstores, not to readers. There is a correlation between the two, of course, but a book getting lost in a bookstore is the same sale to you as a person buying it in the store (except that, in the latter case, hopefully the bookstore will purchase another copy). But it’s not quite that simple either…

As your book sells and you earn royalties, the publisher begins by recouping the advance. If you had an advance of $8,000 and you sell 3,000 copies, earning $2/each, that’s $6,000, and the publisher will keep all of that. This means that, using a $40 MSRP and a 10% royalty rate, you’ll start making more money on the book (past the initial advance) once you’ve sold more than 4,000 copies.

Therefore, in terms of the economics, the advance is only important if:

  • You sell less than the number of copies needed to recoup the advance
  • You’d rather have more money now instead of later

Conversely, a higher royalty rate means you recoup the advance faster and make more money in the long run (assuming you sell enough copies). Some publishers offer higher royalty rates with lower advances and vice versa. For comparison of how this plays out, the following table runs through the total income for four different levels of sales based upon two different advance/royalty rate combinations.

Sample Earnings for a Book
Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6 Scenario 7 Scenario 8
Copies Sold 2000 2000 5000 5000 10000 10000 15000 15000
MSRP $40.00 $40.00 $40.00 $40.00 $40.00 $40.00 $40.00 $40.00
Advance $8,000.00 $6,000.00 $8,000.00 $6,000.00 $8,000.00 $6,000.00 $8,000.00 $6,000.00
Royalty 10% 12% 10% 12% 10% 12% 10% 12%
Total Earned $12,000 $10,800 $18,000 $18,000 $28,000 $30,000 $38,000 $42,000

As you can see in that table, the only scenario in which you’d make more money with a larger advance and a lower royalty rate is when you don’t sell many copies. And if the book isn’t going to sell that well, that’s no good for anyone.

In terms of negotiating these numbers, the publisher may have set, standard amounts and rates, or determine those based upon the particular book (i.e., how well they expect it to sell at what price). Again, some publishers will base the one number on the other: if you agree to a smaller, or no, advance, they’ll pay a higher royalty rate. Whatever the case, you can ask for more, but realistic requests would be in the 10-20% more range. For example, if offered an $8,000 advance and royalty rates of 10%, you could ask for $10,000 and 12%. Keep in mind, the publisher can and may say “No”, but I really don’t think there’s a harm in asking.

The most reasonable request you can make, which the publisher should agree to, is an escalating royalty rate: say, 10% for the first 10,000 copies sold, 12% from there on out. With such a deal, the publisher still makes enough money from the start, but if the book does really well, you get a bit extra.

For a basis of comparison, 8,000 – 10,000 copies sold is a good seller when it comes to technology books, as far as I understand it.

Rights

The financial terms are the most obvious contract term to negotiate, but the advance and the royalty rate are not the only two factors that can affect your income. Another big category are the rights: what, exactly, is the publisher buying? The contract may stipulate that the publisher is buying just the English language rights for the United States, or are buying all rights. All rights would include the ability to sell electronic versions, translations, and to publish parts of the book in various other formats (such as in excerpts online or whatnot).

When it comes to negotiating, the fact is you’re not going to make much of your money in these other areas and the publisher may require that you grant all these rights. But, again, they’re negotiable. Consider, though, that if you retain the translation rights, then you would need to find publishers to handle the translation and distribution of your book in other countries. You probably don’t know how to do that, and even if you do, it’s probably not worth your time.

What Else?

The financial terms and the rights are the two biggest considerations, but there are many other little details that are negotiable that you ought to take a look at before signing the deal:

Deadlines
The book is going to have at least one deadline–when the entire book is due, and possibly more than one (e.g., incremental milestones). Make sure the deadline is one you can make! If don’t make the deadline, the publisher will likely have the right to fire you and have someone else complete the book, or just not pay you the full advance even if they do let you complete it.

You can even request a bonus advance (e.g., an extra $1,000) for meeting the all-in deadline.

Who Pays for the Indexer and Technical Editor
The book will have an indexer and a technical editor, among the many people who will work on it. Some publishers take these costs out of your advance; others don’t.
Book Length and Color
The cost of manufacturing a book will be impacted by its number of pages and coloring. Shorter is cheaper, as is black and white. Partially color and full color are more expensive. As these decisions impact the book’s cost for the publisher, your advance and royalty rate will reflect the decisions made in these areas. But if you feel strongly about these issues, you can negotiate.
Number of Copies You Receive
The publisher should give you a certain number of copies of the book for free (specifically not for resale). That number may be 10 or 25, but it’s negotiable.
Receipt of Electronic Copies
The publisher will not necessarily provide you with electronic copies of the book unless you specifically ask for them.
Right of First Refusal on Your Next Book
The publisher may also request the “right of first refusal” on your next book as part of this book’s contract. This just means you’ll go to them first with your next idea. That’s not so bad, but it’s not something you have to agree to, either.

If this is another book with the same publisher, make sure this book’s sales and payments are not tied to any other book. For example, if your first book doesn’t do well, the publisher may want you to recoup that advance through this book before receiving extra payments. Don’t agree to it!

So there’s an overview of the key components of a book contract. Hopefully, knowing some of these terms and how they play out can help you negotiate your book contract, should you be fortunate enough to be in that position.

Let me know if you have any questions. In my next post in this series, I’ll walk through the process of actually writing a book.

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