Article by literary agent Giles Gordon reproduced with permission from The Author of Autumn 1988
Although written some years ago, many of Gordon's warnings here have been overtaken by events (e.g. see my An Ultra Short Run - link at end of file), and this is interesting in itself. Much else remains relevant and instructive. - A. M.
One of the results of recent conglomeration and vertical integration in British publishing is that authors' contracts are becoming sharper, tighter, more restrictive. It is generally assumed that this is always to the disadvantage of the author. I'd suggest that, if author and/or agent takes the trouble to understand the nature of the changes publishers are trying to implement in agreements, the author can benefit.
In this article I'd like to direct your attention to a few clauses which you should particularly watch out for, both because they are indicative of a publisher's attitude towards his or her authors, and because they may make the difference between an advance being earned and unearned.
First, the 'Export' royalty clause. I put it in inverted commas because 'export' royalties increasingly can apply to sales in the home market as well. Here is the clause in a recent contract with a distinguished literary house, recently conglomeratised (if the hideous verb be allowed): 'Of the price received by the Publishers on all copies sold outside the British Isles (excluding Eire) or in the British Isles (including Eire) for purposes of export;' - so far so good, up to a point, but the clause reads on: 'and on wholesale copies sold at a discount of 50 percent or more in the British Isles.'
And an 'Export' royalty clause in another recent contract: 'Of the price received by the Publishers on all copies sold outside the British Isles (including Eire) or in the British Isles (including Eire) for purposes of export and on all copies sold at discounts of 50% or more."
Publishers still try to maintain that their discounts to booksellers are rarely much above 35 percent and this may be true in the case of The Bookshop, Chipping Toad ordering one copy of nice Mr. Holroyd's biography of Mr. Shaw. These days neither author nor publisher lives off The Bookshop, Chipping Toad. They have to live off, substantially, the fashionable chains, the Waterstones, Hammicks, Pentos, Hatchards and the others; and the stolid Smith's and Menzies and their ilk. And they, the chains, are now in a powerful enough position more or less to dictate to publishers at what terms they'll display and stock a substantial quantity of copies of new titles. It is exceedingly difficult to prise specific figures out of publishers in this respect but 50 percent is a far from unknown discount.
As Michael Pountney, late of W H Smith and now of Unwin Hyman, has remarked, the new powerful bookselling barons hold the whip hand over publishers in that the latter, as ever, produce too many titles and booksellers can coolly decide both what to stock and what they'll pay for the expensive privilege; and when the publisher has to concede a higher percentage to the wholesaler than he or she would like, the author is as always the ultimate walking wounded. Some publishers are even trying to pay 'export' or lower royalties when sales are at a discount of 45 percent or more. One leading group tries to pay four fifths of normal royalties on sales at such discount levels, which is only marginally better than accounting on a receipts basis.
Come 1992 and 'harmonisation' in the European Economic Community, the Treaty of Rome will permit the US publisher, where the British publisher has not been granted continental Europe as part of its exclusive market (traditionally Europe is part of the open market), to sell its edition in the British publisher's exclusive territory (i.e. the United Kingdom). This is because the Treaty of Rome overrides any national agreement, including any contract between an author and a British publisher.
Thus if an author takes the view that his or her British publisher is likely to do better with a book in Europe than the American publisher, it is essential that the British publisher should be granted Europe exclusively, on condition that 'Home' royalties are paid. There should be no question of a reduced or 'Export' royalty. The Penguin Group has already agreed to this and other major Groups are in the process of following suit.
Next, the 'Returns' clause. For some years paperback publishers have insisted upon a reserve against returns, nowadays usually as high as 20 percent of the copies invoiced. (I was told in New York last week that this year American paperback houses are receiving more than 50 percent of books back, unsold, to be pulped.) In the last year or two, publishers have tried to infiltrate a similar clause into contracts with regard to hardback returns, the reserve figure usually being 10 percent.
Here is the 'Reserve against Returns' clause which a major vertically integrated publisher inserted into an agreement with an author represented by our agency the other day: 'The Publishers shall have the right to set aside as a reserve against returns 10 percent of royalties earned on any hardcover edition and 20 percent of royalties earned on any paperback edition of the Work as shown on the Publishers' first royalty statement after first publication or reissue of the Work during that period and to withhold this sum for a period up to and including the third royalty statement thereafter, following which all monies shall be paid in full at the time of the next royalty statement.'
Authors usually react with horror to such a clause. On the contrary, it seems to me that writers should welcome the intention of the clause which is to get their books to the point of sale, into the shops, and not to keep them gathering dust or mildew in the warehouse. Of course the quid pro quo has to be that the publisher does strenuously exhibit his or her wares in the market place. If the publisher prints 10,000 copies of a title and sees that most of them are in the shops on publication, he or she is more likely to sell more of those books than if only 1,500 were available. Also, with the sickeningly short life of a new title nowadays, most copies that are going to be returned from wholesalers and retailers will be back with the publisher within six months of being put on sale, and thus after the second bi-annual royalty statement the reserve against returns withheld by the publisher should be extremely small.
In a sense, a reserve against returns for hardbacks is more important than for paperback reprints as if - especially in a vertically integrated house - the hardback is a sales disaster there is likely to be, human nature being what it is, seriously diminished enthusiasm in the house for the subsequent paperback. In a sentence, any device to encourage publishers to sell more hardback books should be encouraged, and this clause should lead to higher print runs, bigger sales.
A comment on paperback royalties. Beware of the publisher acquiring volume rights who cheerily asserts that the author will receive 'a full paperback royalty'. There is no such thing, any more than there is a full hardback royalty, unless it is 100 percent of the book's retail price. Publishers like to suggest these days, especially in vertically integrated set-ups, that a 'full' paperback royalty is 7.5 percent but there is no reason, in principle, why it shouldn't be 10 percent or 12.5 percent, subject of course to the nature of the book, the print run, price and so on. Frequently it will be found, even when the author receives a 'full' royalty, that the hardback publisher - the originating imprint in the conglomeration - receives an 'override' royalty, usually an actual or paper (for accounting purposes) 2.5 percent.
I sometimes think that the only real growth area in British publishing is with Large Print Editions. As more of us grow older and our eyesight deteriorates, there is increasing scope for large print publishers to perform effectively, and visits to the library show that Ulverscroft, Magna and the others are grasping their opportunities. The week I write, a large print house paid an advance of £5,000 for (it would be, wouldn't it?) Jeffrey Archer's latest novel. There is no justification for publishers acquiring volume rights in a book to assume any longer that they should as a matter of course retain 50 percent of large print revenue.
The 'Small Reprints' clause should be watched, too. It can often appear to be in a publisher's interest to reprint modestly, say 1,000 copies or 1,500, to keep a book in print without occupying too much warehouse space, and thus pay the ,1 author a reduced royalty. The clause should restrict a publisher from undertaking more than one small reprint per annum.
Finally, in this pretty arbitrary selection of potentially hazardous clauses, 'Remainders'. Let me quote the clause from an agreement I negotiated this week. The author shall receive: '5 percent of the actual amounts received by the Publishers on all copies remaindered. The Publishers shall not be at liberty to sell copies of the said work as a remainder until two years after first publication without the written permission of the Author. The Author shall be notified in writing of the intended sale of the said work as a remainder and shall be given the option for 28 days of purchasing such copies at the remainder price.'
At least one leading publisher will pay 10 percent on all copies remaindered but they are a house that rarely remainders. What is to be avoided is a clause that stipulates that a percentage will be paid on books remaindered at 'above cost'. Rather like with percentages of producers' profits in the film industry, publishers don't readily admit that they have made a profit on a remaindered title, irrespective of the number of copies they've sold before that time.
Don't be frightened of the contract you are offered, but do be vigilant. Ask questions of your publisher or agent, and be satisfied that you understand why particular clauses are there, what they mean and what the relevance of the particular percentages payable to you is. Not least, bear in mind that most publishers (yes, most) still offer authors without agents infinitely less good terms than they do to agented authors.
Click for Giles Gordon's final article Down with Royalties and a collation of tributes. See also An Ultra Short Run (Print-on-Demand publishing).