Contracts: Traditional Publishing

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From Kristine Kathryn Rus ch:

Here’s a weird thing about businesses: When a business is rolling in cash, the people who run it loosen their grip on the details. Instead of solving a problem, they throw money at it. Often they don’t recognize the problem for the danger that it might be, until it comes back to bite them, years down the road.

However, when the business notices that its revenues are down, and nothing it does seems to improve them, the business tightens whatever belt it can find. It also gets draconian about the details. Before, when the business was throwing thousands of dollars at a problem, the business didn’t really care about hundreds of dollars or tens of dollars or the pocket change.

When that business realizes its revenues are down, though—and maybe down for a bunch of months or even years—then that business watches every single dollar that flows in and out. In fact, if it’s a publicly traded company and/or if it has a board of directors and/or if it has shareholders to answer to, the business also finds a way to inflate its bottom line.

Inflating the bottom line attracts investors. It also keeps the stock price up (for any publicly traded company), and it makes the folks running this slowly sinking ship look like they’re doing Just Fine.

I’ve been thinking about that principle a lot this past semester. I’ve been taking an Entertainment Law class. I love it. I really do. I was exhausted at the end of the semester from that class, from finishing a (surprise) novel, from a bunch of things, and I still find myself looking forward to the second half of the EL class in the spring, so much so that I couldn’t quite believe it when one of my classmates said she didn’t think she’d take the second part of the class, even though it has units on movies, television, and streaming, things she, as a wannabe screenwriter, needs to understand.

For me, the first two weeks of the class were a gimme—copyright law, the bedrock foundation of entertainment law here in the U.S. (and abroad). I got that stuff. But the rest of it showed me just how haphazard my knowledge is.

In class, we read a lot of cases, and that, more than anything, showed my why my book contracts morphed and changed over the years, why it became so hard to suddenly negotiate points that seemed small to me, but seemed very, very important to the person on the other side of the table.

Usually, the changes came about because copyright law changed in a major way (twice in the United States during my active career; three times in my lifetime), but sometimes the contracts changed because some publisher lost a big dramatic lawsuit, and everyone wanted to prevent the same kind of loss from happening to them.

. . . .

Case in point was the sample publishing contract in the 12-year-old edition of the textbook. I have never, in my entire career, seen a contract like that one. Not a single one. And I have read maybe close to a thousand publishing contracts.

How have I read so many when I haven’t published that many books? Early on, I was in a group with young writers who shared contracts, even though we weren’t supposed to. That was a hell of an education in levels of contracts. Later, friends shared, particularly when they got high-end deals. And in the past thirty years or so, students have sent contracts, asking for help in understanding them. Or at least, students used to. Most of the people Dean and I teach now are indie.

The book contract in that textbook had a lot of clauses that were more favorable to the writer than I had ever seen. It also had some truly bizarre clauses that publishers seemed to think they wanted.

What caught my attention, though, was the advertising section of the contract. It went on for pages, with a suggested ad budget and an advertising plan as part of the contract.

You lawyers and the contract-savvy will understand this: If the advertising budget and the proposed plan are part of the contract, and the publisher reneges or somehow cannot pull off that advertising plan, then they are in breach of contract.

All I can think is that this sample contract dated from the 1970s or was very specific to one author that the book’s authors were familiar with. Because I’ve seen contracts with a stipulated advertising section. That section is as vague as possible. (The Publisher will use all best efforts to run a full-scale advertising campaign in accordance with best practices for the period when the Work appears…)

. . . .

Over the decades since the first edition of this textbook was published in the early 1980s, writers have lost a lot of their clout. Writers also stopped relying on knowledgeable people to help them negotiate their contracts and relied on literary agents instead.

With few exceptions, literary agents do not use the services of lawyers to help negotiate a contract. Some of the larger agencies do, especially if they’re affiliated with other branches of the entertainment industry, but most of the time a traditional book contract is being negotiated by a person without a law degree whose knowledge of contract law is more haphazard than mine is.

What this has done with traditional publishing contracts is make them exceptionally inequitable. The contracts favor the publishers and, in some cases, actively harm the writers.

I’ve been shouting about this for years now. The problem is that in the years since I last got a traditional publishing book contract, the destructive nature of the contracts has grown worse, not better. Major companies are trying to license as many rights as possible for the life of the copyright. These companies have a hand-waving termination clause in the contract—something like if the book can’t be found for sale somewhere then it’s out of print—which means nothing in these days of internet sales.

Even contracts that have a good termination clause negate that clause in a different section (usually in the warranties). And within the last two or three years, some traditional book publishers have gotten smart and added a clause like this:

This contract represents the entire Agreement between the Publisher and the Writer. If any part of this Agreement is deemed unlawful or unenforceable, the rest of the Agreement shall remain in effect.

Think about that for a moment. In the past, a bad clause or two would have caused a breach of contract. I’d like to say not anymore, at least with these clauses at the very end, but I don’t know. I suspect that clause has not been challenged in court.

. . . .

But traditional publishers are using contracts for things other than swallowing and holding other people’s IP. The larger companies, particularly the Big 5, are adding morality clauses.

I couldn’t find a good example of these clauses in the handful of contracts I have at my fingertips, but The New York Times a few years ago gave two good examples. The first is from Penguin Random House, which is poised to control even more of the traditional publishing industry.

At the time this article was written, four years ago, Randy Penguin’s clause read like this:

These clauses release a company from the obligation to publish a book if, in the words of Penguin Random House, “past or future conduct of the author inconsistent with the author’s reputation at the time this agreement is executed comes to light and results in sustained, widespread public condemnation of the author that materially diminishes the sales potential of the work.”

As of February, Randy Penguin did not require the author to repay all monies paid in that instance.

The 2017 article pointed out Condé Nast’s morality clause in its annual contract for regular magazine contributors, a clause which is infinitely worse than Randy Penguin’s was. The article says,

If, in the company’s “sole judgment,” the clause states, the writer “becomes the subject of public disrepute, contempt, complaints or scandals,” Condé Nast can terminate the agreement.

Um, what? What?  “Contempt”? “Complaints”? What do those things even mean? And does it matter, since those are determined only by Condé Nast, not by any objective (if there is one) source?

. . . .

Again, clauses like this are designed to chill behavior, not to punish it. Sure, it will give the publishing company an out if the writer goes from, say, being the doctor to an entire gymnastics team to being outed as a serial rapist, but the morality clause could just as easily be frivolously used to break a contract with a prickly author who the replacement for the acquiring editor does not like.

Or as PEN America said in its opposition to the morality clause:

While the necessity of such clauses may be understandable where an author with a signed book contract is convicted of a crime or publicly admits to immoral behavior, PEN America is concerned that some clauses pave the way for publishers to cancel publication on the basis of speech that is controversial, offensive, or provocative, but legally protected. If writers are on notice that a provocative comment, quote, or social media post that stokes uproar may prompt the cancellation of a book contract, they may constrain their expression for fear of harming their careers. Morality clauses thus risk chilling speech and narrowing discourse among writers who fear a loss of livelihood based on their publisher’s response.

The morals clause and the copyright license are big issues in current contracts. A smaller, telling issue shows yet again how traditional publishers are trying to control the behavior of the writers they bring on board.

Link to the rest at Kristine Kathryn Rusch

PG’s first rule of business relationships is:

Don’t do business with crooks.

This is PG’s shorthand vernacular for advice not to deal with people or organizations which are dishonest. Some publishers and some agents fall into this category.

PG regards some of the contract provisions described in the OP as substantial overreaching, an indication for him that whatever organization inserted them in its “standard” contract is, at a minimum, overreaching and not to be trusted.

Morals clauses or morality clauses originated, like a great many other one-sided contract provisions, in Hollywood contracts between movie studios and their major stars. Morals clauses first appeared there in response to a scandal involving silent screen star, Fatty Arbuckle.

Fatty was charged with the rape and killings of an actress in the St. Francis Hotel in San Francisco in 1921. He was tried for these alleged crimes three times. The first two trials resulted in a hung jury and the last resulted in an acquittal of Arbuckle on all charges.

Despite the acquittal, the official motion picture censor banned all of Arbuckle’s films and Arbuckle’s career was over for a period of time. He never regained his former stature or compensation level.

Universal Studios placed the first morals clause in its contracts for talent in 1921:

The actor (actress) agrees to conduct himself (herself) with due regard to public conventions and morals and agrees that he (she) will not do or commit anything tending to degrade him (her) in society or bring him (her) into public hatred, contempt, scorn or ridicule, or tending to shock, insult or offend the community or outrage public morals or decency, or tending to the prejudice of the Universal Film Manufacturing Company or the motion picture industry. In the event that the actor (actress) violates any term or provision of this paragraph, then the Universal Film Manufacturing Company has the right to cancel and annul this contract by giving five (5) days’ notice to the actor (actress) of its intention to do so.

Morals clauses are most commonly found in contracts for actors or other performers, including television personalities and newscasters. Stars of reality television shows are also likely to have these clauses. Morals clauses are also common in professional sports contracts between players and team owners.

One way that PG has used to help deal with unfair contract provisions is to ask the other party for a reciprocal provision in the agreement that obligates them in the same manner as PG’s client is obligated.

If PG’s client is obligated to pay money to the other party on a certain date and the other party has the right to terminate the contract upon the failure to pay that money on that date, PG might suggest a similar provision that allows his client to terminate the contract if the other party fails to complete its promised actions at the time(s) set forth in the agreement.

This doesn’t always work but, when it’s rational, it’s a great way to cause the other side to become more realistic in its contract language.

The same strategy has been used in response to morals clauses. If an organization wants an individual to sign a contract including a morals clause that allows the organization to terminate its agreement if the individual commits certain acts, including saying or writing something offensive, a reciprocal morals clause could be proposed for the officers, directors and major shareholders of the company asking for the morals clause.

If a performer’s or author’s contract with an organization will be terminated for saying or doing something offensive, the officer or director’s relationship with the organization will also be similarly terminated if the officer or director says or does the same sort of thing and the performer wishes to exercise this contractual power. Major shareholders could be be required to divest themselves of their ownership interests in the company or put them in a blind trust with a large bank as trustee.

If you would like to read more about morals clauses, PG located a 2016 law review article on the subject that seems to be free of paywalls. You can find it here.

Here’s a link to Kris Rusch’s books. If you like the thoughts Kris shares, you can show your appreciation by checking out her books.

6 thoughts on “Contracts: Traditional Publishing”

  1. Contracts are negotiated all the time by people who are not lawyers. That’s because they know their business and what they want. The lawyers are certainly used to make sure the contract is written in a manner that actually does what the principals want, and to protect against unforeseen pitfalls the lawyers can avoid.

    I don’t at all diminish the place and value of the lawyer in getting a good contract. I’d never move forward without them. But the idea I often see that lawyers do it all is misleading.

    • Every major traditional publisher uses lawyers to write (note: NOT negotiate) its contracts with writers.

      When one side has lawyers and the other doesn’t, for a contract that will bind the parties for decades and possibly for life, the side without lawyers is pretty bloody stupid.

      • Tom, it’s even worse than that. Every commercial publisher also has its liability insurers writing other parts of its contracts, which are then nonnegotiable (specific example: warranties and indemnities; go ahead, compare the clauses used by each of the Big Five). As a condition of their own coverage, they must use — and have little, if any, ability to alter even so much as a comma — the clause demanded by their E&O/media-perils carrier… and there are, fundamentally, only two of those.

  2. I guess its one of the things to work on it when it comes to book writing services, we understand its kind of a hectic thing to do, but it really helping in ghostwriting work as well, I have been observing people and businesses making a huge shift towards this following publishing and writing work as its very impactful.

  3. If such provisions are still standard in Hollywood contracts, they appear to be invoked quite selectively – if at all. Other media do seem to be using them to at least shed the most egregious of their bad actors.

    I do like that proposed reciprocal provision. Though I would dearly like to be a fly on the wall when it is brought up in a negotiation with a Big 5 publisher.

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