Question: What are the basic trade publishing subsidiary rights, and how should proceeds derived from the licensing of subsidiary rights be divided between publisher and author?
Answer: Subsidiary rights–those publication and related rights that are in addition to the right to initially publish a book in volume form–include some that are nearly always granted to the publisher and others that are negotiable.
Remember that 100% of subsidiary rights licensing proceeds are credited against the royalty advance (i.e., 100% of the licensing proceeds go to the publisher until the combination of royalties earned by the author and the author’s share of subsidiary rights and licensing proceeds “earn out” the royalty advance paid to the author). After the royalty advance has earned out, the author receives his or her percentage share of the subsidiary rights licensing proceeds.
The following are the basic subsidiary rights and customary licensing splits.
These are the rights to republish a book after it has been initially published. Therefore, most subsidiary rights editions of books are, in effect, reprint rights editions. Reprint rights include hardcover reprint, anthology, and large-print rights.
Most commonly, however, the term reprint rights refers to paperback reprint rights. Although some books, especially genre books (i.e., romance, Western, science fiction, and mystery), are first published as paperbacks, many are initially distributed in a hardcover edition. Publishers usually require the right to determine whether the book will be published first in hardcover or paperback. If the publisher decides on hardcover, it will also want the right to determine whether to publish later in paperback itself or to license reprint rights to another publisher. If the paperback rights are licensed to another publisher, the paperback rights become a subsidiary right. The licensing proceeds, including an advance against royalties and all subsequent royalties earned after the advance is earned out, generally are split with the author on a 50/50 basis.
When the publisher offers up front to publish both the hardcover and the paperback editions, this is known as a “hard/soft deal.” In a hard/soft deal, the publisher makes the publishing profit from both editions but does not get the advantage of mitigating its risk by obtaining licensing proceeds from a reprint publisher.
Book Club Rights
The publisher is always granted book club rights in a standard publishing agreement. Book club licensing proceeds are generally split 50/50 with the author. While the amount of the proceeds is determined by the commercial value of the book itself and by the size of the book club, even small book clubs can provide income to publishers and authors.
First serial rights grant the right to publish all or a portion of the book prior to the publication of it in volume form. Second serial rights grant the same right but after publication of the book. Because very few magazines and newspapers serialize entire books anymore, serial rights are less valuable than they used to be. Still, magazine and book publishers have a symbiotic relationship when it comes to serial rights. Magazines can save money by excerpting portions of books rather than commissioning original material, and by licensing the first serial rights for even a modest fee, publishers and authors gain free promotion for the book. Standard contracts always grant the publisher second serial rights but first serial rights are sometimes reserved by the author. If they are reserved, it’s important for the publisher to coordinate timing so that the first serial publication occurs just before book publication for maximum promotional value. The standard split is 90% to the author and 10% to the publisher for first serial rights and 50/50 for second serial rights.
Foreign Language Rights
Foreign language rights are the rights to translate a book into various foreign languages. Whether the publisher gets these rights is negotiable, and the usual split is either 75/25 or 80/20, in the author’s favor, but a 50/50 split when the author is unagented is not unusual.
Foreign English Language Rights
These rights grant permission to republish the book in English outside the United States, its territories and possessions. As with foreign language rights, whether the publisher acquires this right is negotiable. The split is generally either 75/25 or 80/20, in the author’s favor and, again, if the author is unagented, a 50/50 split is not unusual.
Most publishers like to acquire audio rights, either to exploit by developing an audiobook themselves or to license to an audiobook publisher. If audio rights are licensed, the split is usually 50/50.
These are the rights to make non-book products such as posters, toys, coloring books, and stationery derived from a book or one or more characters in a book. They are very rarely licensed, but when they are these rights can be extremely valuable. Whether the rights are granted to the publisher is negotiable but except in juvenile publishing they are usually reserved by the author. If the author is unagented, it is possible for a trade publisher to obtain them. The split is customarily 50/50.
These rights pertain to creating motion pictures, television/cable programming, theatrical productions, videocassettes, and DVD versions. The circumstances under which a publisher obtains performance rights is similar to the circumstances under which it obtains Commercial/Merchandising Rights. However, the split is generally 90/10 in the author’s favor.
The industry norm is that the publisher is entitled to create its own electronic version of the book (i.e., an e-book) and to license others the right to do so, but that interactive multimedia rights–which would be used to produce a CD-ROM, for example–are often reserved by the author. If the publisher licenses electronic book rights, the split is 50/50. If the publisher publishes its own electronic books and products, the royalty rate is negotiable, with between 25% (e.g., Warner Books) and 50% (e.g., Random House) of net receipts going to the author.
Subsidiary rights can be an important source of income to both publisher and author; sometimes making the difference between a profitable publishing venture and an unprofitable one.
Alan J. Kaufman has more than 25 years of experience as a Publishing Attorney and a thorough understanding of the business of publishing gained from serving for more than 20 years as Senior Vice President and General Counsel to Penguin Books. Kaufman practices law with the New York-based firm Frankfurt, Garbus, Kurnit, Klein & Selz, where he specializes in publishing, new media, corporate law, manuscript (libel) review, as well as distribution, author and licensing agreements. Contact Kaufman at 212/826-5579 or firstname.lastname@example.org.