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How to negotiate the textbook royalty clause

All standard publishing contracts are enormously lopsided in favor of the publisher. In textbook contracts there is no such thing as standard royalty provisions. Having said that, a review of more than 100 TAA author contracts in my files does reveal some common “ranges.”

“Standard” ranges. The concept of “standard” royalties is less common in textbooks than trade books — so much so that it is almost counterproductive to state ranges. I am concerned that young authors may put too much stock in a so-called standard range, while more seasoned authors may find it contrary to their experience. Accordingly, view the following as indicators only, and don’t be afraid to push for royalties appropriate to your stature, leverage and revenue generation for your publisher — even outside the ranges discussed here.

Total revenues for a team of authors working on a text for grades K-6 might range between 4 and 6 percent of net receipts. For grades 7-12 the range is 4 to 10 percent. I have seen more than one contract for secondary textbooks with a flat 2 percent. A publisher of a basal text for grades K-8 might pay eight authors 1 percent each. A college text has a range of 10 to 18-3/4 percent. I’ve seen a low of a 7 percent basic rate, with an upward escalating scale with greater sales, and an occasional 20 to 21 percent. A 15 percent royalty for a college text is common.

Textbook publishers once paid royalties based on the list price. Now it is common to pay royalties on the publisher’s net receipts. Net receipts from sales of the student edition of the work minus only returns, exchanges, discounts. and other allowances, and excluding packing and shipping charges and sales or excise taxes. Assuming a 20 percent common discount rate, an 18-3/4 percent royalty rate applied to net receipts is the equivalent of 15 percent of list.

Negotiate Break Points. If you are unable to obtain an 18-3/4 percent basic royalty rate for your college text, bargain with the publisher for break points (also known as a “sliding scale”) that give a more generous royalty rate as sales increase. A publisher who has recouped his costs may be more generous in sharing the profits. By way of example, if your first edition calculus text is expected to sell 40,000 copies, a royalty rate structure with break points that allow the publisher to recoup his costs more quickly may ultimately favor the author over a flat rate:

First 10,000 copies x $32 x l2.5% $40,000
Next 10,000 copies x $32 x l5% $48,000
Thereafter (20,000) x $32 x 18.75% $120,000
Total Royalties $208,000
40,000 copies x $32 x 15 $192,000
Total Royalties $192,000

Advances. Although some people say advances are rare for el-hi publishing, don’t believe It. Negotiating a good advance is an important step in the negotiation of any textbook contract regardless of academic level. Advances depend on the bankability of the author based on prior publications, the anticipated revenue, whether it is a first or subsequent edition, negotiating skill, and fortitude.

Some people speak of one-half to two-thirds of the anticipated royalties from first year sales as a reasonable advance. While I consider that figure low, it nonetheless points out the importance of knowing what your publisher expects in the way of first-year sales. Your editor is a good source for this information since he or she had to put together projected sales to justify signing you to a contract.

Advances for a textbook author are particularly important. Since a textbook author is (at least initially) simply a moonlighting professor or school-teacher, it is often necessary to take a sabbatical leave to accomplish the rigors of authoring a text. At the very least, a reduced teaching load and passing up income from summer school are often necessary. Accordingly, negotiating an adequate advance is often a matter of economic survival.

The author who has several books in print or in second, third and fourth editions, of course, is not in the same economic position. Such a successful author has a stream of income from various publications.

Whether you are a young struggling author or an experienced and successful author, the advance — or an outright grant — is what keeps the standard author-publisher contract from being totally illusory. But for the advance clause, the author-publisher contract requires the author to perform the entirety of his or her part of the bargain before the publisher is in any way obligated. The publisher need simply say that the manuscript is not “satisfactory” and all of the author’s work is for naught.

The advance clause then becomes the equalizer, the insurer of good faith, your assurance that the book contract is not merely a cattle call to compete against several other authors signed by the same publisher to see who produces the book they really want.

The advance represents the publisher’s willingness to put forth venture capital, to share in the risk of a creative enterprise. The publisher who puts forth a substantial advance has a stake in expediting publication and making provision for adequate promotion.

So how much is enough? While there is no rule of thumb, I would urge you on a first edition to try for one-half the expected royalties from the first edition, or in the alternative, the total of the projected first-year royalties.

Advance For Revised Edition. Most contracts provide that the provisions concerning advances shall not apply to future editions. There are valid arguments for a reduced advance for revised editions, but it is not wise to allow the publisher to eliminate advances altogether. It is true that by the time a second edition is prepared, the author should be receiving royalties from the first edition, and thus the starving-professor argument loses some impact. it is also true that a second edition does not demand as much time as the first.

However, there are cosmetic revisions and there are substantive revisions, and the latter can be very time intensive. It is also my experience that what ultimately turns out to be a cosmetic revision (one with enough new razzle-dazzle to trick adopters or committees into thinking it is substantively different) may well have been worked up by the authors as a substantive revision. In any event, the arguments recited above for ensuring the publisher’s commitment to the revised work by requiring a significant advance remain just as compelling whether your text is in the first or the seventh edition.

There are basically two approaches you can take to ensure an adequate advance for revised editions. The first approach simply states that in second and subsequent editions, the author shall be paid an advance In the amount of some certain percentage of the advance paid for the first edition. Given the publisher’s arguments of increased cash flow for the author and reduced time commitment, 50 percent of the first edition’s advances may be fair.

The second approach is to preserve the matter of advances as an opener to be negotiated with each subsequent edition. The relevant clause might read:

“The provisions of this Paragraph shall not apply to subsequent editions, if any, of the work, and advances (and/or grants) for future editions shall be separately negotiated between the parties.”

Recoupable Advances. Advances are the author’s compensation for time and risk in writing a book. They should not be recoupable from the author except as a credit against royalties. This should be spelled out in the agreement. To protect both parties the clause might read:

“So long as a complete manuscript is submitted in a good faith attempt by Author to satisfy the prerequisites of the Agreement, advances shall not be recoupable against Author except as a credit against royalties earned by sale of the work.”

Grants. The author should make an effort to have a portion of the pre-publication consideration paid in the form of a grant. A grant is consideration in addition to royalties, whereas an advance is merely an early distribution of anticipated royalties credited against the future royalties. Grants can be given for any number of reasons: to cover the cost of required travel, to pay for needed equipment or software, to compensate the author for the development of ancillaries like photos and art, or to pay for income lost while writing the work.

Be skeptical of provisions that say the publisher will pay the cost of art and other things only up to a stated quantity or sum, particularly when the number or cost is either unknown or under the publisher’s control. This is not a grant but rather just a shifting of the burden of a portion of production costs from publisher to author with a limit on the publisher’s portion — and potentially no limit on the author’s. Some highly successful texts earn millions of dollars for publishers and very little for the authors because of such clauses.

Conclusion. The contract provisions for royalties, advances and grants, perhaps more so than other provisions in the contract, are meant to be negotiated. Substantial advances should be negotiated both to tide the new author through that period when no royalties are being paid, and to commit the publisher to publication of the work. Negotiate break point or sliding scale clauses that allow the publisher to recoup its costs at a relatively low royalty rate, and thus give the author a larger share of the profits once costs are recouped. With a little negotiating skill and fortitude, you will benefit both yourself and other authors with a royalty clause that properly compensates your creative efforts.

Michael Lennie is an attorney with Lennie Literary Agency & Author’s Attorney.