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Q&A: Timeline for textbook royalties: When should you get paid?

Q: “I am concerned about the length of time a publisher can hold onto royalties. Mine are due in April, four months after the close of the accounting period in December. This means some monies have been held from July 1 through April — 10 months! I would think interest should be paid or royalties sent out on a more continuous basis.”

A: Steve Gillen, Attorney, Wood Herron & Evans:

“The publisher’s obligation to account for and pay royalties is set forth in the publishing agreement. While the timing of payment and the nature of information contained in the reports may be negotiable, the time to negotiate these issues is before the agreement is signed. Once the deal is done, it’s too late for the author to complain. Historically, publishers have paid royalties on an annual or semi-annual basis (providing reports and payments anywhere from 30 days to four months after the close of the relevant accounting period). I suppose there was a time when this delay was justified by the difficulty in processing returns and credits and closing the books. Now, however, it persists as custom rather than of necessity. With modern financial systems, there really is no practical reason why publishers could not report more frequently and pay more rapidly. That said, most major publishers must account for sales on thousands of individual titles to hundreds (if not thousands) of authors. This process must necessarily be highly automated and so there is a limit to any publisher’s ability to accommodate the special requests of individual authors (particularly where these special requests require manual intervention). To the extent that a particular author’s wishes fall into the latter category, not only is the publisher likely to be reluctant to take on the burden, it is also more likely that those manually generated reports will contain errors. Nonetheless, an author with some leverage ought to be able to get at least semi-annual reporting and payment (and perhaps even quarterly or monthly reporting and payment) with no more than a 60-day delay after the close of the period.”

A: Paul Rosenzweig, Royalty Review Service:

“Your first longing is to be compensated for the ‘float.’  That can be negotiated to some degree by an author with clout at a particular publisher. We have never seen an author shorten a publisher’s basic float period, as embedded in the contract boilerplate. What can be done is to get all sub rights (translations, electronic rights, permissions, etc) passed through within the month following receipt, after the advance is earned out.

With a great deal of clout, we have seen authors negotiate quarterly royalty payments, which in reality are mid-period advances, since no publisher is going to stop the machinery to run a true royalty statement out of the regular processing sequence. Speaking of regular sequence, at least one publisher has now put all new titles on semi-annual royalty cycles beginning six months from pub date. That publisher intends to spread out the semi-annual crunch period, but I wonder if the effective payment date could be negotiated as, let’s say, two months after the statement date.

By the way, most contracts calling for April payment are mailed April 1, so the float is only three months. As for interest, we do pursue it in the case of publishers’ underpayments of royalties, but without a contract provision, there’s no payment of interest for float.

In the publishers’ defense, (isn’t that a novelty), authors royalties are based on the publisher’s billing date, not collection date. Thus, books sold for the fall semester may not be paid for by the bookstore until much later, yet the author sees the amount as part of a float period that hasn’t yet begun. And publishers have been known to counter the interest query with the argument that they don’t charge interest on unearned advances.”