Royalty step-down clause: Factors and formulas

Q: “I am trying to establish a royalty step-down clause for a very successful text. I proposed the three-edition step-down of 75 percent of contractual royalty to 50 percent to 25 percent, assuming this means, for example, when I do not participate at all, I would receive 75 percent of, say, 15 percent, then 50 percent of 15 percent then 25 percent of 15 percent. Is that correct?

My publisher astounded me by saying this means 75 percent of the full royalty, contractual rate, then 50 percent of the new, reduced, rate, and 25 percent of the latter vastly reduced rate!! Doesn’t this depart from common industry practice? It is my understanding from TAA discussions and other sources that the standard step-down is 50 percent of contractual rate, then 25 percent of the same contractual rate, followed by nothing. What’s up??”

A: Zick Rubin The Law Office of Zick Rubin, Publishing / Copyright / Trademark:

“This is a very important item. Here is a formula that is sometimes proposed by authors and that is sometimes acceptable to publishers for a successful textbook: 75 percent of the royalties (i.e., the contractual rate) in the first edition in which the author does not take part, 50 percent of the royalties for the second such edition, and 25 percent of the royalties for the third and subsequent such editions. [Read more…]

How to divide royalties when one author retires

Q: “I’m interested in information about the division of royalties, the typical percentages for members of the author team, and the percentage for the author who is retiring from the author team. Can anyone offer advice?”

A: Paul Rosenzweig, CPA:

“As far as I have ever perceived, there are no “rules” about how co-authors or a team, divide royalties. The co-authors negotiate their own shares among themselves. I recently saw a group that had different percentages for the main text vs salable ancillaries, with varying rates among the ancillaries, presumably based on the co-author’s contributions.”

As for the share allocated to a retiring author, that’s usually designated in that author’s (earlier) contract with the publisher. Typically, the retiring author retains a declining percentage as the editions continue.” [Read more…]

What is a fair royalty arrangement when taking on textbook co-authors?

Q: “I would like to phase out of my textbooks and take on co-authors to keep them going. What is a fair royalty arrangement?”

A: Michael Lennie, Attorney, Lennie Literary & Author’s Attorney:

“I usually deal with this issue in the revised editions clause by negotiating a 60/30/15 percent provision. Under this provision the retiring author receives 60/30/15 percent of the full royalty for the first/second/third and thereafter edition in which he does not participate. Higher percentages are available depending on the number of prior editions and the reputation of the retiring author.”