Who controls electronic rights, when the contract was signed before eBooks were invented?
Contract Interpretation: What Did the Parties Intend? Language of the grant -Random House v. Rosetta Books – in book form -HarperCollins v. Open Road – computer, computer stored, mechanical or other electronic means now known or hereafter invented Was use contemplated by the parties? Industry standards; ambiguities construed against the drafter Digital downloads are licenses, not sales
The Cosmic Clause
Defining Digital Rights Today: -Verbatim conversion of text/images into eBook, adaptation (derivative work), or both -Apps, enhanced/interactive/multi-media, mobile, web-based content -Distinguish traditional film, television, or video in linear form, audio rights -Duration: reasonable period, use of options, reversions for unexploited rights
Royalties The evolution of e-Book pricing Standard industry rate for eBooks is a flat 25% of net receipts. In practice, rates vary widely. RH – sliding scale, up to 40%. Competitive pressures to increase eBook royalties are mounting: -Industry standards have changed -Technology reduces publishing costs -Digital only publishers, self-publishing options pay % -Bundling print and eBooks – hybrid market
Digital Royalty Rate Strategies Negotiate rate at the time of exercising the rights Right to renegotiate /prevailing rate clause Escalators – after costs recouped, rate increases eBook royalty floor tied to the highest print rate Right of first refusal, reversion for unexploited digital rights
Digital Royalty Accounting Net receipts vs. retail list price -What deductions are allowed: direct costs (trade discounts, commissions, taxes) Faster reporting, no reserve against returns for unsold inventory -Most digital publishers pay quarterly, sometimes even monthly -WSJ: Bookscan eBook sales data -NYT: Royalty Share verifies vendors sales data against publishers
Digital books and print on demand means books can live forever
The Changing Meaning of Out of Print Not available in any format through major online retail channels Better: sales for 1-2 successive periods are below a stated minimum Term of License: a reasonable period (2-3 years), instead of the term of copyright, subject to OOP clause? Look out for copyright issues on multi-media works
Permissions Does the author have the right to use the materials in an electronic version? Multi-media works: text, photos, illustrations, animation, video, music, film/TV Co-authors, ghostwriters, third party developers: written work for hire agreement, assignment, warranty and indemnification Permissions should cover broad range of formats Fee structure changes
Options What type of work is covered? Even greater need to specify. Where no advance is paid, less incentive to tie up future rights.
Non-Compete Clauses Are ebooks a competing or derivative work? Look for catch-all reservation of all non-specifically granted rights Non-compete clauses are strictly interpreted, and are unenforceable where too broadly worded.
Business Models for Licensing Digital Rights Agency model applies to the majority of eBook sales: 17.5% (25% of 70%) Digital Publishers/Distributors – Open Road, Carina Press, Untreed Reads, Entangled, BSTSLLR, Coliloquy - 50/40 Self-Publish through an aggregator (Bookbaby, Smashwords), or Amazon Kindle Direct, iBooks Author - 100/85/70 Crowdsourcing (Unbound, Kickstarter)
Other Possibilities Subscription model (Netflix/Hulu) – books as a service Freemium model (Spotify) - ad based -Issue of fee to author: license, 50%; but how to apportion it? StoryBundle – 5 books, pay-what-you-want; consumer chooses royalty Public broadcasting model, rightsholder sets price – Unglue.it Fractured/Aggregated Content – Amazon Singles, Bookriff, Byliner (buy a chapter at a time?) Service contracts, administration deals, co-publishing, 360 deals
Dana Newman Attorney and Literary Agent, Dana Newman Literary