The Changing World of Digital Rights and Publishing Agreements Presented by Dana Newman.

The Changing World of Digital Rights and

Publishing Agreements

Presented byDana Newman

The Basic Contract

©Publishing Agreements = Copyright Licenses

Rights Granted:

- Reproduce and distribute the work in exchange for a royalty; not a sale

- Author owns the copyright, reserves all rights not granted

Duration - term of copyright, or until work is “out of print”

- Life of the author plus 70 years (works created after 1978)

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 50-100%- 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

Accounting

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 publisher’s

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

http://about.me/dananewman

@DanaNewman