Thursday, July 19, 2012

Four last things to remember for now about net profits clauses

1. If your publisher is doing deals with related parties, they have to charge what are called "arm's length" rates. A good way to show this is with an example. If your publisher is charging you a marketing fee  is using a marketing firm in the same corporate family, there's a really strong incentive for them to make the fee as high as possible. The "arm's length" rule says that they can only charge you the same fee that a company not in their corporate family would charge. If your publisher is charging fees against your book that you think are totally crazy, look for some industry data to see if you can use this to change their position.

2. Unless the contract says otherwise, your publisher isn't under a legal obligation to publish the book. Your publisher has the right to reject the manuscript (I talked about this is a previous post: The fact that you might have agreed on a net profits clause doesn't change any of these facts. Yes, you agreed to take less money up front in return for this, but under the law your publisher can still choose not to publish the book.

3. Even though #2 above is true, once the publisher decides to publish the book they have an obligation to do things in a way that won't waste money. It's not quite a fiduciary obligation, but they have to make sure that they don't make poor decisions that cost you your net profits.

4. If they're selling your book in a bundle with books from other authors, they should get your permission first. If not and your book was the one that drove the sales, you should get more than an even share of the money.

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