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How Not to Become a Banker: As an Author, Protect Your Revenue

May 13, 2022

Mitch Tuchmann - Copyright Lawyer Durham - Intellectual Property Attorney
Insight by Attorney Mitch Tuchman

A publishing agreement may call for royalties to be paid monthly, quarterly, semiannually, or annually.  The longer royalties accrue unpaid in an author’s account, the more that author steps into the shoes of the publisher’s banker.  While royalties accrue unpaid, the publisher is earning interest; the author is earning bupkis.  An author’s job is to write, not lend.

Publishers’ and authors’ interests are aligned in some, but not all, respects.  They share the goal of enticing the public to purchase books, but their interests diverge when it comes to the division of the resulting revenues.  Both want more.  The bases and computations of the author’s share in the form of royalties deserve careful attention

A royalty based on a fixed percentage of a book’s cover price—or access fee in the case of e-books—favors both parties with respect to certainty.  A division of net revenues (that is, income after certain permissible deductions) lacks such certainty.  An author should insist on comprehending each category of claimed deductibles.  Resist the inclusion of those that have nothing to do with the costs of distributing books.

Both sides can agree that the publisher may withhold a percentage of an author’s hard copy earnings as a reserve against bookstore returns.  That is reasonable as long as the reserve is fully reconciled in the following accounting.

An author should never be penalized for the value of a publisher’s unpaid invoices, so-called bad debts.  That is another way that the author can avoid becoming a banker.

This is the 8th article in a series intended to introduce readers to publishing agreements. Other articles in this series include:

New to Publishing Agreements? What You Need to Know
How Long Should a Book Publishing Agreement Endure
Understanding Book Publishing Agreements: Territory
Book Publishing Agreements: Copyright Ownership & Licenses
World Rights in Book Publishing Agreements
Reps and Warranties in Publishing Agreements
“Dibs on Your Next Book”, Advice to Authors Publishing Their Second Work