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Feb 2008

Richard Curtis on
Publishing in the 21st Century

Mastering the Business of Publishing

by Richard Curtis

Originally published by E-Reads



A TERM COMMONLY heard in discussions of book deals is "escalator." For instance, "Her book was bought for an advance that, with escalators,could exceed $1 million." Escalators are additional advance payments made by publishers to authors if and when certain contingencies occur. What are those contingencies? How much are they worth? And what, if anything, is their real value?

Escalators were created, among other reasons, to bridge the gap between author and publisher when negotiations reach an impasse. You strongly believe your book will be a best-seller or will be bought by a major book club or made into a motion picture, and you feel that your advance should reflect the same optimism on your publisher's part. Your publisher, on the other hand, hopes and prays you're right, but has seen many a slip 'twixt the cup and the lip. He cannot afford to overpay authors on the strength of hope alone. Of course, if your track record justifies it—if your last five books have soared to the top of the best-seller list; been main selections of major book clubs, and been made into hit movies—he will be greatly disposed to pay you a lot of money up front. But let us say, for the sake of argument, that this is not the case.

The answer is for the publisher to offer you escalators. These bind him to pay you scheduled sums of money if, and only if, your optimism turns out to be justified; if it doesn't, he owes you nothing beyond whatever royalties your book may earn over its original advance.

Although the terms "bonus" and "escalator" are used interchangeably in Publishingese, and I'll use them that way here as well, these extra payments are not really bonuses in the usual sense. They are always recoverable from royalties and subsidiary income generated by a book; they are, in other words, additional advances. If your original advance was $50,000, say, and your contract calls for a $10,000 escalator to be triggered by the release of a movie adaptation of your book, then your advance becomes $60,000. The $10,000 escalator is, in effect, a prepayment of royalties that your publisher hopes your book will earn as a result of the movie.

It would seem, then, that you are being paid with your own money, and in certain cases that is true. Suppose you sold your book to a publisher for a $25,000 advance, and your contract calls for a $10,000 escalator to be paid if your book is sold to a paperback reprint house for $100,000 or more. Further suppose that the book is auctioned off and sold to a reprinter for $150,000. If the traditional fifty-fifty split on reprint money applies, your share of the reprint money will come to $75,000.

Okay, the reprint deal triggers your $10,000 escalator. Now you've received a total of $35,000: your advance plus your escalator. But it is no hardship for your publisher to pay that escalator to you, because you are guaranteed $75,000 as your share of the reprint deal!

Other escalators are riskier for publishers and can end up losing money for them. Take another hypothetical case where you sell your book for a $100,000 advance, and the contract calls for a $25,000 bonus if a movie is made from your book. Let's say that both book and movie flop, and your book doesn't even earn back its original advance, let alone the advance plus the escalator. This is a case where the publisher was not paying you out of guaranteed monies, but is genuinely out of pocket.

Escalators fall into a number of categories. The most common is the best-seller bonus. The best-seller list usually used to determine escalators is the one in the book review section of the Sunday edition of the New York Times,though sometimes the one in Publishers Weekly is also used. There are several ways to structure best-seller bonuses. One is the length of time that a book is on the list, another is a book's position on the list. It is desirable for a book to be on the best-seller list for a long time, of course; it is also desirable for a book to be high on the best-seller list. Bonuses can be structured to reward length or position or both.

A long run on the list, even at the bottom, can be significant, both because it means the book is selling strongly over a long period of time, and because it enables the publisher to boast, "—Weeks on the Best-seller List!"

Just as important is position on the list. The higher your book rises, the better it is, naturally. But the book that reaches the number one position causes a quantum leap in promotional value, even if it drops down or off the list the very next week. Therefore, many escalator schedules in book contracts are heavily weighted in favor of the number one slot.

The actual sums paid at the various stations of the list can vary widely. I have negotiated best-seller escalators for as little as a few thousand dollars and as much as high six figures.

There are a couple of other features of escalators I should mention. Almost all such provisions place a limit on the total extra money payable to the author, called a "ceiling." The other aspect is that escalators, or escalator installments, are payable within a short period of time after the event that triggers them. Thirty days is as long as it should take for most bonuses to be paid, otherwise the publisher will be taking back in interest what he owes you in bonus money. If a publisher waits until royalty time to pay you your escalators, that's not much of a bargain.

Another form of escalator is book club or paperback reprint, wherein your publisher agrees to pay you additional advance monies if a book club or paperback reprint deal on your book exceeds a certain amount of money. As we've seen, such escalators are almost invariably of the pay-you-with-your-own-money variety, because your publisher is guaranteed recoupment of the bonus out of the money he will eventually collect from the book club or reprinter. The only thing he loses is interest on the prepayment to you of money he would otherwise have paid in the normal six-month royalty cycle.

Then there are movie bonuses, which are usually payable upon national release by a major distributor of a theatrical motion picture based on your book. There's a mouthful of contingencies crammed into that sentence, so let's analyze it. First, the movie has to be released. Of course! you say, but many authors believe that a movie deal on their book ought to be enough to garner them a handsome bonus from their publishers. I'm sorry to tell you otherwise. Although there is some promotional value for a publisher to be able to boast, "Acquired for motion pictures by Universal," it scarcely does a thing for sales. Thus, escalators are usually not payable when movie rights to your book are optioned, or when the option is exercised. In fact, they are not even payable when your movie goes into production. Publishers have seen too many movie deals fall through to get excited when a star actor or producer takes an option on a book property. They have learned to their sorrow that many movies that go into production are not completed or released. So, in order to trigger that escalator, the film must be distributed.

And it must be distributed by one of the big distributors, Universal or Warner or MGM-UA and the like, rather than any one of the thousands of little ones that service the movie community. And finally, the movie must be released nationally, as opposed to locally or regionally. The premiere of a film, even a high-budget one made by a great director with superstar actors and actresses, is not going to boost sales of the book from which it is adapted if it's shown only at a few elite showcase theaters in New York and Los Angeles. In order for the film to have impact on mass market book sales, it must be shown at hundreds or thousands of theaters around the nation.

Again, the prices for movie escalators vary widely, from modest—in the low five figures—to very large in the case of authors with long track records in the area of books made into hit films.

Related to theatrical movie bonuses are television-movie escalators. But while the market for television adaptation of books is a very active one, the stimulus to book sales is usually minimal. Even though the exposure is tremendous, far greater than that of a theatrical movie, it is also ephemeral: an evening or two (repeated once, six months or a year later) and it's gone. For publishers this presents serious problems of distribution and promotion. The books must be in the stores precisely on the day of or the day after the airing of the film, and the film must be so heavily publicized that consumers will be motivated to buy the book at the time of the airing. This is expensive, inefficient, unpredictable, and usually, therefore, unsuccessful.

For a television movie to mean anything in terms of tie-in value, it must first of all be an event, one absorbing a minimum of four hours, but preferably spanning a whole week of evenings. It should also be based on a best-selling book such as The Winds of War or North and South,so that viewer recognition of both the book and movie stimulate each other: you've read the book, now see the television movie, you've seen the movie, now read the book. Because very few books are converted into television events on the magnitude of, say, Shogun,the prices for escalators in this medium are considerably lower than they are for release of a major theatrical film adaptation of your book. The conditions are that the TV film be of at least four hours, run on consecutive evenings, and be aired originally on a major television network.

There are other contingencies that may trigger escalator payments. Some contracts call for bonuses to be paid if a book wins a major prize or award that has promotional value: Pulitzer, National Book Award, and the like. In some science fiction book contracts, I have negotiated bonuses for winning Nebula or Hugo awards, and in a few cases I even worked in bonuses for nominations for those awards. To science fiction fans the words "Nebula" or "Hugo" on the cover of a book are powerful inducements to buy that book, even if the word "Nominee" is printed beside them.

Obviously, not all books are suitable for escalators. Midlist books, most genre books, and books in category series seldom have escalation provisions in their contracts. For the occasional wunderbuch,the midlist novel that becomes a word-of-mouth best-seller and gets made into a hit movie, the author who did not have escalators in his contract can nevertheless look forward to royalties in the usual course of things. Of course, the next contract he negotiates will, you can be sure, contain more escalators than Macy's department store.

There's no harm in your trying for escalators when you negotiate your next contract, because it's no skin off your publisher's nose to give them to you: he only has to pay them to you, as they say in Las Vegas, "onthe come." So what the hell; go for it. That way, you too will be able to brag that you have sold your book—with escalators—fora million dollars.



THE ACCEPTABILITY PROVISION of a book contract can be summarized as follows: A publisher engages an author to write a book, stipulating in the contract that if the manuscript is not acceptable in the publisher's sole discretion, the publisher may reject it and require the author to repay in full the advance he was paid on signing the contract. Until that advance is repaid, the publisher will not release the author from the contract, thus restricting the author from entering into a contract with another publisher for that (and perhaps any other) literary work.

Inherent in this provision are three potentially explosive elements. The first is that acceptability depends entirely on the arbitrary editorial judgment of the publisher. The second is that the author is required to repay every penny to his publisher when his manuscript is determined to be unacceptable. The third is that the author is restrained from selling his book to another publisher until his original publisher has been repaid, or at least until satisfactory provisions for repayment have been made. (And if there is an option clause in the original contract, the author may be prohibited from selling any other work to another publisher until satisfactory refund arrangements have been made with the publisher of the first part.)

This mixture has indeed exploded on numerous occasions, and with growing frequency as the stakes in our business have grown higher. But there is a qualitative difference between disputes over acceptability and those over most other items in publishing contracts. Whereas 99 percent of the quarrels that arise between authors and publishers end up being negotiated, settled, or compromised, those over acceptability often end up being litigated to final judgments. Now, publishers are loath to spend money on lawsuits, especially against authors, because it is expensive and makes for poor public relations. But when it comes to the question of acceptability, a publisher may be counted on to fight like the devil even though it looks lousy to dun and sue authors and the legal costs exceed the prospects of recovery of the money paid to the author. And authors who might otherwise shrink from the expense of prosecuting or defending a lawsuit have been known to dig in against all reason to wage war over the acceptability provision. Both sides seem anxious to make law on this issue. And when that happens, it usually means that a principle or precedent is involved that transcends money.

Authors frequently balk over the seeming right of life and death accorded in the provision that gives publishers the sole discretion to accept or reject a manuscript. But if the publisher doesn't have that right, who else should have it? The author? Of course a publisher is entitled to that right. As in any other business enterprise, the party that commissions a work is entitled to approval of the merchandise. It's only the potential to abuse the right that makes authors anxious, and there are enough instances of abuse to justify that anxiety.

In defense of publishers, it must be said that abuses occur less frequently than might be expected, and for two reasons. The first is that most publishers are extremely cautious about engaging authors to write books. Before contracting for an unwritten book a publisher will require ample evidence of the author's track record, writing skill, and reliability so as to minimize the possibility that the author will not deliver, will deliver late, or will deliver a problem manuscript.

The second reason is that most publishing companies today are run by committee. Just as the decision to hire a writer is not left to one editor, neither is the decision to accept or reject the finished product. Rather, the manuscript is circulated among members of the editorial board. This is particularly true when the sponsoring editor has doubts about the quality of the material. That editor's judgment is on the line, for he was responsible for advocating the company's investment in the project to begin with. If he rejects it, wasting his firm's time and raising the possibility that the money paid the author thus far won't be recovered, he loses face, prestige, and authority with his colleagues and employers. Sometimes he loses his job. Therefore, the editor who feels negatively about a delivered manuscript will seek backup from others on the editorial board, just as he solicited that backup when he acquired the book. And unless the manuscript is truly a stinker, the board may vote to go ahead with publication or revision despite its reservations. So there are fail-safe mechanisms operative at publishing companies that can reduce the potential for arbitrary rejection.

Nevertheless, abuses of "sole discretion" do occur. I can recall more than a few occasions when a publisher contracted for an unwritten book, then rejected the manuscript because the subject was no longer as timely or relevant as it was when the publisher signed up the author, or because the editor who commissioned the project was no longer there to lend support and enthusiasm to it. A notable example of this occurred when William Morrow rejected William Safire's manuscript of a book about Richard Nixon. Safire contended that the real reason Morrow found his book unsatisfactory was that between the time Morrow commissioned the book and the time Safire completed it, Richard Nixon had become persona non grata with the American public.

Agents and authors can cite numerous instances of publishers using the acceptability clause to renege on high-priced agreements. These publishers will agree to whatever terms it takes to get a hot author or property. Then, when the manuscript is turned in, the publisher may decide for any number of reasons that it overpaid. The publisher then threatens to reject the manuscript unless the author agrees to renegotiate the contract. The real reason for rejection may be that the publisher doesn't have, or doesn't want to spend, that much money. Thus far the courts have favored the publishers' argument that they should not be compelled to publish a book that they are certain is going to lose money.

It is extremely difficult for an aggrieved author to prove in a court of law that his publisher acted in bad faith in rejecting his manuscript. The parties cannot ask judge or jury to read the manuscript, because this involves matters of taste that are beyond a court's jurisdiction. So it's incumbent on authors and their lawyers to demonstrate that the publisher was motivated by bad faith, and I'm happy to note a trend toward admitting good and bad faith as factors in lawsuits over the acceptability clause. Admitting those factors in turn opens the door to questions of a publisher's editorial responsibilities, its obligations to furnish authors with editorial guidance, opportunities to rewrite, second opinions by other editors, arbitration and appeal, and other procedures designed to insure that authors are not placed totally at the mercy of publishers whose motives may be impure.

This also means that the stipulation requiring authors to repay their on-signing advance if the publisher rejects their manuscripts is coming under closer scrutiny by the courts. For if it can be shown that a publisher acted in bad faith when it turned a book down, a court may decide that the publisher is not entitled to a refund, no matter what the contract may call for. This very thing happened in a dispute between author Julia Whedon and Dell, in which the court supported Whedon's contention that Dell had acted in bad faith by rejecting her manuscript without affording her the benefit of editorial guidance, rewrite instructions, etc. The court not only allowed her to keep the advance Dell had paid her on signing the contract, but even ruled that she had not breached her contract when she sold the rejected manuscript to another publisher before being released from her Dell contract. In fact, the court ruled that when Dell failed to furnish Whedon with adequate editorial help, Dell breached its contract and at that point the author was released with no further obligation to repay her advance.

These developments are extremely promising from the viewpoint of authors even though, at this time, they still have to fight and even go to court to gain protection that should automatically devolve on them in the boilerplate of every publishing contract. At the same time, all this legal wrangling over sole discretion only serves to obscure the real issue in the war over acceptability: Is an advance a loan? Or is it, rather, an investment?

As things stand now, publishing contracts are nothing more than free options on an author's time, talent, and services. If, after the months or years it takes for an author to produce a book, the publisher turns the manuscript down, that publisher is entitled to get its money back in full. The only sum the publisher is out of pocket is the cost of the money—the interest, that is—that it "loaned" to the author while he was writing his book. Now, money-back guarantees are fine if you manufacture soup, soap, or spaghetti sauce. But it's quite something else if you write books. The principle of repayment on which the acceptability clause rests is a thoroughly odious one and deserves to be fought by any means at an author's disposal.

An advance is not a loan. It is a nonrecoverable investment, no different from an investment in a stock or bond issue, a mining or drilling operation, a Broadway show. A publisher reviews an author's "prospectus," his writing credits, sales records, reputation for reliability, and samples of the proposed work. If the publisher determines that a book by this author is a good investment, he puts money on it. As we have seen, the publisher truly examines book proposals as carefully as if they were "at risk" investments. Why should a publisher be entitled to get his money back while investors in every other type of offering stand to forfeit theirs? If for any reason the manuscript is disappointing to the publisher, the company has the right not to pay the balance of the advance due on delivery and acceptance. But the down payment must be forfeited and the author automatically released from his contract.

I realize that this is a hard line, but only by taking it will authors force publishers to demonstrate good faith when commissioning books. The publisher who knows he can recoup his full investment is going to have too many escape hatches when the book is delivered. He will have far fewer if he stands to lose money.

To a small degree, publishers have conceded the fairness of this position by modifying the requirement that the author promptly refund his down payment. Many houses now stipulate in their contracts that the refund may be paid out of the "first proceeds" received by the author from the sale of the rejected manuscript to another publisher. This is scarcely better than having to repay the advance at the time it's rejected. All it means is a postponement of the day of reckoning, an extension of the date when the publisher's "loan" must be repaid by the author.

All the best,

Richard Curtis


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