Before I talk about what you should pay particular attention to in a publishing contract, let me add a disclaimer here. My opinions here are general in nature and should not be interpreted as legal advice for any particular situation. Any recommendations or advice necessarily depends on the specific facts.
The Top 5 Things a Writer Should Look at in a Publishing Contract
Because a standard publishing contract contains pages of complicated language with confusing -- and sometimes incomprehensible -- legal terms and phrases, I recommend that an author hire an agent or an attorney to negotiate his/her contracts (unless it’s what the author does for a living. And even then, the author may not be objective enough to recognize the pitfalls in a contract).
1. Grant of Rights
This is where you grant, i.e., license, your work. You need to know exactly what rights you are granting -- the format(s) for your work -- and as to each one, the territory (geographical area) of the grant; the time period (duration) of the grant; and the language(s) for the grant.
This is how much you will receive up front and how it will be paid out. Obviously you want as large an advance as possible, and usually the publisher will negotiate the amount -- up to a limit -- as opposed to a take-it-or-leave-it offer.
Then, once you've agreed on the amount of the advance, you have to negotiate how it will be paid out. Here are three examples of pay-outs for an advance, which are unrelated to the size of the advance: a 50-50 split, where half of the advance is paid when the contract is signed, and the second half is paid on acceptance of the manuscript (in most cases, this is the author’s best choice); 40-40-20, where the publisher pays 40% of the advance when the contract is signed, the next 40% when the manuscript is accepted, and the remaining 20% when the book is published; and thirds, where the publisher pays one-third of the advance when the contract is signed, the next third when the manuscript is accepted, and the final third when the book is published. And just as you want to negotiate to get as large an advance as possible, you want as much of it paid up front as possible.
3. Royalties & Payouts
This provision includes how you will be paid for each right you have granted to the publisher, such as hardcover, trade paperback, mass market, etc. The royalty rates vary, so be careful.
The payout for a print book may include an escalation scale. For example, for a mass market book, you would get 6% for the first 30,000 copies you sell, 8% on the next 30,000 you sell, and 10% on anything above that. The numbers are hypothetical, but you get the idea.
Also be careful with contract language regarding monies earned and how they're paid out. For example, joint accounting and cross-collateralization both refer to a practice where a publisher lumps all your books together for accounting purposes. So if your first book didn't earn out, but your second one is a NYT bestseller, the publisher can use the profits on your second book to offset its losses on your first one. You want to have the accounting for each of your books done separately.
4 Subsidiary Rights
As an author, you want to retain as many rights as you possibly can. Examples of rights the publisher usually wants to keep are reprint rights, including paperback reprint rights, second serial rights, book club rights, and electronic rights. Examples of rights that can be negotiated are first serial rights, foreign language rights, audio rights. Examples of rights that you should always keep are commercial/merchandising rights, and dramatic/performance rights (movies, television, theater).
An option clause gives a publisher the right to publish your next work, subject to the negotiation of mutually-agreeable terms. Under the option, the publisher usually has a period of time within which it can exclusively review the work and make an offer – basically a right of first refusal. If the parties don’t reach an agreement or the publisher passes, your are free to take the work elsewhere.
If you grant an option, the language needs to be as specific as possible. The genre needs to be specified (particularly important if you write in more than one genre), the length of the work (word count), when the option period starts, the length of time the option is in effect, and that the parties agree to negotiate a new contract, not simply that you will accept the terms of your current contract. The idea is to keep getting better deals.
Finally, pay close attention to broad language anywhere in the contract and make sure clauses are as specific and clear in time, content, and definition as possible. You want to sell books, not litigate over what your understanding was of an obscure provision in the contract.
My thanks to Lady Scribes, and I will answer your questions or comments today and throughout the weekend.