I am pleased that my blogs talking about the net sales clauses have generated discussion both on this blog and privately. I happened to receive a couple of contract clauses and questions and they gave me permission to use them in this blog (thank you), so that’s what I’m talking about today.

To start with, here is a royalty clause so you can see what a sample contract clause on GROSS electronic sales looks like. I’ve bolded the important parts.

For electronic formats Publisher will pay Author a royalty, in US dollars, of 35% (thirty-five percent) of the US retail download price for sales of the work at the Publisher’s website. For digital books sold through outlets requiring distribution discounts, Author will receive 40% of the net price after any such discounts are applied. For print books (paperbacks) Publisher will pay Author a royalty in US dollars of 10% (ten percent) of the US Retail Price for sales of Work at Publisher’s Website as well as any books sold through outlets requiring distribution discounts.

Note the use of the words retail price. This is the price the customer pays for the book. If the electronic book is priced at $4.99, then the author gets the royalty percentage of $4.99. Note that there are no discounts, other than the discounts for third party sales, mentioned here. There isn’t any talk of credit card processing fees or other charges.

Here is a pretty straight forward clause that happens to be on NET. This is an author unfriendly clause in several ways. Again, I’ll bold the important parts.

Publisher will pay author a royalty, in U.S. dollars, 30% of the NET download price for each electronic book sold. The Publisher agrees to pay the author a royalty of 7.5% of the NET price for each Print copy of the Work sold. Publisher-approved third party outlets requiring distribution discounts, Author’s royalty shall be paid on the NET price AFTER said discount.

This clause is especially insidious because of the inclusion of the print section. We’ll get to that one. Okay, so the first sentence presumably covers the publisher’s website, though it doesn’t explicitly say that. It also doesn’t say what constitutes the net price. Which means at the very least the publisher could include the credit card/merchant account fees. But really, with this level of non-disclosure, who knows what NET means to this publisher?

The last bolded line talking about third party sales sounds pretty straight forward and standard.

The print (middle bolded section) part worries the hell out of me. Why? Well, let me pull up my trusty excel spread sheet. Stay with me. I’m going to throw a lot of numbers at you.

You write an 80,000 word/224 page trade paperback print book. This book retails for $13.95.

If they print through LSI, then it will cost them $3.81. The publisher profit minus printing is $10.14. Oh, but this crafty publisher isn’t done yet. For brick and mortar stores, the preferred discount to them is 55%. That is $7.67, which means now the publisher profit is $2.47

The NET price of this book that the publisher receives? $2.47

If the publisher uses Createspace/Amazon.com then on the same book, CreateSpace/Amazon.com take $9.09 for each Amazon.com generated sale, leaving the publisher with $4.86

Tell me, which royalty would you prefer to have?

7.5% of $13.95 (GROSS sales, which is what you SHOULD be getting or $1.05 rounded up)
7.5% of $4.86 (net sales through CreateSpace/Amazon.com, or $0.36, a loss of $0.69)
7.5% of $2.47 (net sales through LSI/brick & mortar store, or $0.19 rounded up, a loss of $0.86)

I think those numbers, and the screw-factor to the author, speak for themselves.

The other clause I received is about as convoluted as a game of twister when all the participants are covered in baby oil. I’m not going to release this publisher’s name either, but after reading some reviews of this publisher’s work, well, let’s just say I am not surprised at what I am reading in this clause.

(a) The Publisher shall pay to the Author royalties on the amounts received by Publisher from sales of copies of the Publisher’s publications of the Work in the following percentage amounts.  As used herein, ”amounts received by the Publisher” or “amounts received” for purposes of this Agreement (and without limitation, for purposes of the royalty calculation hereunder) shall be defined as the net dollar amount received by the Publisher for sale of the Publisher’s publication(s) of the Work from the retailer or consumer, after discount, less actual returns or credits issued relating to prior sales; less shipping, mailing, insurance and handling expenses; less credit card, payment processing or collection costs; and less currency conversion costs; and excluding sales, GST, VAT or other taxes::

First of all. English, please. As I just told my friend, “this crap isn’t rocket science.” The first sentence, while sounding very pretentious, is pretty straight forward. Yo, here’s the money you’re going to get. The second “sentence”, and I’m going to use the term as loosely as they edit, says this as near as I can tell:

the NET amount received by the publisher for the sale of their work (doesn’t specify venue, so assuming this covers their site too) MINUS any actual returns or credits (okay that’s acceptable), less shipping, mailing, insurance and handling expenses, (hold your horses and stop the presses, this says that this publisher can DEDUCT the cost of mailing the books and shipping them from the author’s royalties.), less credit card, payment processing, or collection costs, (here’s the part about deducting the credit card merchant fees that I was talking about in earlier blog posts), and less currency conversion costs (payal doesn’t charge for this, but if other banks/places do, this ALSO comes out of the author’s pocket), and excluding sales, GST, vat or other taxes (well thank goodness they’re not making the author pay their taxes too, since they’re making the author pay all the other costs of doing business.).

Whew. So in a nutshell, for the “privilege” of being published by the publisher, the author has to pay the cost to take the order (credit card processing fees), the cost to ship, handle, and mail the book (I still don’t get this one), and the cost to convert currency if the bank charges one.

Let me be blunt… with this clause, it sure sounds like this publisher is nothing but a subsidy publisher. Thank goodness, they decided not to charge the author for the cover art and editing. Pretty darn nice of them, huh?

I am not a lawyer. I cannot offer contract advice. I simply had an email that said, “what do you think of these two contract clauses and do they fall under your definition of net?” When I told her I thought they did reiterating that I am not a lawyer and cannot offer contract advice, I asked if I could blog about them in order to help other authors, she said I could.

So that’s all this is. Sharing of information that hopefully will help an author from getting taken advantage of, because I believe that’s what both of these clauses represent: publishing houses who are taking advantage of authors by asking them to pay their costs of doing business. As authors we have enough things to take out of our royalties (marketing, promotion, conferences, basic office supplies). We shouldn’t let publishers take more than their fair share, either.

This entry was posted on Monday, April 20th, 2009 at 10:43 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.