Negotiating Your Contract

Once you’ve accepted an offer for the publishing rights to your book, it’s time to draw up and sign a binding contract.

Many of these contract details have standard provisions, but you can always ask about and negotiate for them. The more you understand about the implications and subtleties of these clauses, the more empowered you’ll be in your negotiations.

Bonuses

Bonuses typically come in two forms: bestseller bonuses and earn-out bonuses. They can be included in the contract and are simply added to the amount advanced that you have to earn out.

Bestseller bonuses usually revolve around hitting the mother of all bestseller lists: the New York Times. For this kind of bonus, the higher on the list you reach, the more you get paid. You typically get paid for the amount of time it stays there, up to a certain limit.

Here are some standard New York Times bestseller list bonuses:

1. $2,500 per week for each week the book occupies any of the #6-#10 positions
2. $5,000 per week for each week the book occupies any of the #2-#5 positions
3. $10,000 per week for each week the book occupies the #1 position

The earn-out bonus is given if your book earns out its advance or sells a certain number of copies within a certain amount of time (usually a year). For example, if you earn out your $25k bonus within the first year, you could be given an additional $10k advance. This can be a feasible addition to your contract since it doesn’t add risk for your publisher: They only pay if you outperform the advance.

Royalties

Royalties are payments made to you by the publisher as your share of the book’s revenue. They vary based on three main factors:

• Format of the book (hardcover, paperback, ebook, illustrated, four-color)
• Buyer of the book (independent bookstore, mass merchandiser, special sales outlets)
• Terms on which the book was bought

The format of the book impacts royalties because it changes production costs. For example, if you have full-color illustrations, the publisher will want to lower your royalty to absorb those costs.

Here are standard royalty rates:

• Hardcover: 10% for up to 5,000 copies; 12.5% for up to 10,000 copies; 15% thereafter
• Trade paperback: 7.5% for all copies
• Mass market paperback (cheaper paper, often sold through special distributors like magazines): 8% for up to 150,000 copies; 10% thereafter

An “escalator” is a provision in your contract that your royalty goes up if you hit a certain number of sales. For example, if you sell more than 50,000 copies your royalty rises from 7.5% to 8%. If you can get an escalator added to your contract, you should do so.

Unfortunately, escalators can also go down. If your publisher reprints a limited number of copies, your royalty could be reduced to make up for the higher printing costs of the smaller run. To minimize the impact of this, try to stipulate that:

• The escalator only applies to the smallest number of books possible
• It can only take effect once per year
• It only applies two years after publication

It might seem shocking that the author of a book only gets to keep 5% to 15% of the sale price of their own book, while the publisher keeps 85% to 95%. But they sometimes earn even less than the author. If a book has a retail price of $15, and the average wholesale price is $7.50, then the remaining $7.50 has to cover all the publisher’s costs. This includes your advance, your royalties, production costs, warehousing costs, shipping costs, any outside staff, and of course, their very large overhead.

In any case, fight for the highest royalty you can. Even half a percentage point can make a big difference if your book does well: For a book that retails for $20 and sells 100,000 copies, a half a percent higher royalty means $10,000 more in your pocket.