Wednesday, November 30, 2005

Licensing your work for fun and profit

Just over a year ago, I wrote a piece about the licensing of rights to publishers (and other parties). My essay was prompted by an article in the quarterly newsletter issued by the Fisher Organisation, the firm of accountants which does my tax return for me.

What the accountants in question had to say in 2004, essentially, was that, when you license rights to a company, you can confidently expect that the company will not pay you every penny that is due under the terms of the agreement. The accountants made this statement on the basis of numerous audits which they had carried out on behalf of licensors.

This year, the Forensic division of the Fisher Organisation has another article in the newsletter, and they have approached the question of licensing rights from a slightly different angle. They have presented readers with a list of the desirable features which any contract for the licensing of rights (as between, say, a writer and a publisher) ought to contain; desirable, that is, when viewed from the point of view of the writer, or licensor.

Here is a shortened version of the features which the perfect contract will contain:

1. The right to audit the licensee's books, such right to be exercised within two weeks of giving notice (otherwise the slippery bastards will keep putting you off. 'It's Christmas. Mr Jones is off sick. The files are in Belgium...').

2. Any unpaid sums found to be due should be subject to interest charges. It is 'not at all unusual' to find that a pattern of under-reporting goes back several years.

3. Royalties to be paid should be defined in terms of clearly defined gross/net selling prices, and not as a percentage of invoiced prices or money received.

4. There should also be anti-dumping provision. Selling goods dirt cheap tends to damage the perceived value of the brand, so the contract should stipulate a minimum selling price.

5. The contract should set out remedies if these measures are ignored. In particular, most contracts give a licensee rights to a certain geographic area, so any ex-territory sales should be regarded as counterfeit, meaning that the licensor is entitled not merely to royalties but to the net selling price.

And, finally, the Forensic division of this large and highly experienced firm says this: 'It cannot be said too often that any weakness or ambiguity in a contract will almost certainly be exploited by a licensee.'

Now, a few thoughts.

First of all, the firm of accountants referred to here does not deal solely, or even mainly, I suspect, with contracts in the publishing industry. And even when it does, those contracts are often between publishers in two different parts of the world, rather than between author and publisher. Nevertheless, there are some significant pointers here, I believe, when it comes to the kind of contract which the average writer is likely to be offered.

You don't have to be around the book world very long to discover that individual writers are in a very weak position when it comes to negotiating terms. Traditionally, two remedies have been propounded for this state of affairs. In fiction, most writers have to have an agent -- they are hardly likely to be offered a contract by a major firm if they don't work through an agent. And secondly, at least in the UK, there are two writers' unions, or trade associations, which have sought to negotiate minimum-terms contracts: the Society of Authors and the Writers Guild. (The WG web site is down at the moment but the link will lead you to the Guild's blog.)

As for minimum terms, it's a while since I had sight of one of those contracts, and in any case I seem to remember that they differed slightly from one publisher to another. But one thing I think can be said fairly safely. And that is that it is most unlikely that even the best of the minimum-terms agreements will come even close to meeting the template provided by the Fisher Organisation.

As for the agents -- well, no doubt they will do their best. But selling a new author is hard enough at the best of times. So you can expect that the terms available in your early contracts will be less than ideal; and not unless you acquire Dean Koontz/Nora Roberts status will you or your agent be able to tell the publisher what you will agree to and what you won't.

Many publishers are these days moving more and more towards remunerating authors on the basis of sums received rather than royalties on fixed prices. See, for instance, the lengthy discussion of this topic on the Akme web site. Here Andrew Malcolm describes how Oxford University Press, one of the largest and most powerful UK publishers, deals with royalties: a situation which he describes as 'the net-receipts swindle'.

The official story, says Andrew Malcolm, has always been that the switchover from 'published-price' to 'net-receipts' royalty agreements has been of no financial disadvantage to authors, and that the proper equivalences have always been maintained between the percentage rates in the two systems. However, Malcolm has tracked down a statement from the Warden of New College which, he maintains, 'constitutes a formal admission on behalf of a publisher that this is not in fact the case, and he carefully explains how the swindle works.'

As for digital rights... Well, C.E. Petit, of the Scrivener's Error blog, tells me that, since the mid-1990s, one major US publisher has adopted an 'electronic rights are a deal-breaker' approach to contract negotiations. That is to say, every agent/author's attempt to negotiate better terms than the standard electronic-rights grab gets rejected as a deal-breaker. Few agents or authors have been brave enough walk away from a deal on that basis.

Any writer who is offered any kind of a contract seems to regard it as a cause for celebration. The fact is, however, that if you examine the small print you are likely to find that it falls a long, long way short of being ideal.

Some years ago, a leading UK agent once said to me, 'You must always remember, Michael, that publishing is a very friendly business.' Later, when I knew her better, I came to understand that what she meant was this: Don't try to be too brisk and businesslike, because it won't go down very well in the book world. And don't think that you and I can dictate terms to these people, because if we do that we shall end up with nothing.

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