exploiting the rights in the agreement

Exploiting the Rights in the Agreement

Lynette Owen

The exploitation of a full range of rights is necessary to make many publishing projects economically viable. The publishing contract sets out the rights the publisher may exploit and the division of the proceeds between publisher and author. The categories of exploitable rights are reviewed, along with the methods of exploiting them. The impact of consolidation in the publishing industry on rights exploitation is discussed, along with rights issues in the provision of textbooks to developing countries.

T he question of contracts be tween authors and publishers is of course crucial to the question of the exploitation of rights. As matters stand, there are

still major differences in practice between Eastern and Western Europe in that in the West the range of rights granted to a publisher by an au thor - -o r perhaps by a commercial literary agent acting on behalf of an au thor - -a re the subject of negotiation between the two parties. In the East, local legislation often still prevents arrangements such as the assignment of copyright to a publisher, and may also restrict the rights granted to the publisher to publishing a book in its original language in the home market for a specified period of time, with no right to exploit other rights either at home or abroad. Unfortu- nately, recent changes in the domestic legislation of some eastern countries and proposed changes to legislation in others do little to alter this situation. As long as limitations exist in the range of rights which can be acquired by publishing houses, they greatly reduce the attraction for a foreign publisher to invest in an eastern publishing house, either as one of several shareholders or in a joint venture.

The acquisition of a broader range of rights in addit ion to the basic right of publication in the country of origin is of key importance in the capitalist countries. Indeed, without acquiring at least some at tendant rights, it wou ld be impossible to make publication of some projects economically viable. Here it is important to remember some very basic differences which have existed between markets in the East and the West, and which to some extent still prevail. The normal aim of a publisher in a capitalist country is to publish a book and then to keep it continuously available in the market for as long as there is a demand; only when declining sales show that interest is dying will the book be put out of print, and even then it may be revived at a later date by the

Lynette Owen is Rights and Contracts Director for the Longman Group UK Ltd. She is the author of Selling Rights: A Publisher's Guide to Success (Chapman & Hall, 1991). Address for correspondence: Longman House, Burnt Mill, GB-Harlow Essex CM 20 2JE, England.

42 Publishing Research Quarterly/Summer 1992

original publisher or under license to another publisher. While a book remains in the market the only obstacles to its being purchased are those of market interest and price.

In contrast, in the East print runs have been fixed by circulating details of proposed publications in advance to libraries and bookshops to submit the quantities they think they will sell. Many western publishers would regard this as "no risk" publishing; the market in the West is highly competitive, and the fact that a book is published does not necessarily mean it will sell well. Indeed, there is often "overpublishing," both in terms of the number of new titles p roduced each year and the number of copies printed; the vast number of titles which are remaindered or destroyed with considerable loss of revenue bears witness to this.

Publishers in the East have faced other difficulties: a l though the hunger for books is great and many editions sell out almost as soon as they are available, publication of many books has been delayed for years because of lack of paper or because of inadequate capacity in the state print ing houses; print runs are often inadequate to meet the demand, and once an edition has sold out, these same factors may make it impossible to reissue the book for a considerable period, if at all. The costing and pricing of books has been highly unrealistic because these aspects were controlled by the state. These factors are now starting to change; al though printing capacity may be improved, the price of raw materials has risen and book prices are starting to increase substantially, wi th an inevitable effect on sales.

I have said that publishing in the West is highly competitive, and I am referring here not only to books for the general reader but also in the area of academic publishing. For example, a British medical publisher must compete not only with other British publishers in the same field but also with publishers from other countries publishing in English, such as the United States, the Netherlands, Germany, and now increasingly countries such as Italy, France, and Japan. One might say that al though the growth of English as the major language of science has increased over the years, it has also increased the amount of competition we face. Even in our own home market, we have never had publishing houses with a monopoly in a particular subject area; this has of course been the case in the eastern countries, a l though this situation is starting to change as they move toward a market economy.

Because our investment in new projects is high and we often face strong competit ion both at home and abroad, we try to offset our risk by maximizing all possible ways of selling our books. This is w h y the acquisition of as broad a range of rights as possible is so important to us. Most western publishers employ specialist staff whose sole responsibility is to deal with the exploitation of those rights. The number of staff will vary according to the size of the publishing house and the saleability of the rights, but (as an example) in m y own publishing house I have a depar tment of eight people who are employed full time to promote and sell rights in our books.

Owen 43

Exploitable Rights

Our first task must of course be to establish what rights have been granted to us to handle, and the situation for each book should be clearly set out in the contract with the author, together with details of how the money earned from the sale of rights will be divided between the publishing house and the author. This may vary from book to book and from publisher to publisher; in academic publishing it is common to divide all proceeds equally between publisher and author, while in general publishing the author may receive a much higher proportion, ranging from 60 percent to as much as 90 percent. The amount of money retained by the publishing house finances the work of its rights staff--salaries, travel, and the general costs of providing material and dealing with licensees. The revenue from selling rights in academic titles and the range of rights that can be exploited are usually much smaller than that from books for the general reader, and this is one reason why academic publishers retain a higher proportion of the proceeds from rights sales. A 10 percent share of a rights deal on a best-selling novel may bring the publisher far more money than a 50 percent share on licensing a mathematics textbook.

The licensing prospects for a book may be discussed long before a contract is signed with the author. This is less often the case in academic publishing, but it could well apply to a book for the general reader, especially if the project is on a particularly topical subject or if the book is by or about a well-known person. Here the rights staff may be asked to make a realistic assessment of what different types of rights could be sold and the amount of money that could be generated. This information could be crucial when negotiations take place with the author or agent to acquire the publishing rights. If the book in question is to be "auct ioned'--with different publishers competing to acquire the book for publication--the assessment of possible rights sales and likely revenue may be a deciding factor in which publisher wins the book.

In the West, the range of rights that can be exploited has expanded greatly over the years as business between different countries has increased. Another factor has been the development of new technologies, so that books can now be exploited in a variety of different forms. In the archives of the older British publishing houses, one can find references to rights deals with American and foreign language publishers from before the beginning of the twentieth century, although much depended on the status of copyright recognition between individual countries. As the cinema industry developed, one begins to find applications to base films on books, followed by television deals when that medium became established. There are many references to merchandising rights even in the early years of this century, when characters from popular illustrated children's books were licensed to be reproduced on items such as wallpaper, writing paper, board games, and pottery items. The ways in which rights can be exploited are increasing daily: books and journals are available in the form of electronic databases, novels and autobiographies are available in


audio cassette form and can be played as we drive in our cars, and so on. All of these areas can generate revenue for both author and publisher, if the publisher is given control of the rights.

Let us look at the main categories of rights a western publisher will consider when negotiating a contract with an author. Of course, not all books will provide an opportuni ty to exploit all these rights; generally, a book for the general reader, whether fiction or nonfiction, will have wider possibilities than a school textbook or an academic monograph. It is also important to stress that al though in the West there is no legislation prevent ing the grant of all rights to the publishing house, the publisher may not be granted all the rights in his contract with the author. An academic publisher is more likely to acquire full rights, but there will be fewer possibilities for exploitation. For a general book- - particularly if it is by a well-established wr i t e r - - some rights may be retained by the author or by a commercial literary agent acting on behalf of the author. I will run through the various categories briefly and then return in more detail to translation rights and conditions of various types.

Same-language territorial rights. These are of particular importance to English- language publishers because we have a vast potential market for our books throughout the world; the two key countries are the United Kingdom and the United States. Many of the major markets may be covered not through the sale of rights but by the direct export of copies of our own edition, either to subsidiary companies overseas or through distribution arrangements. Many of the larger academic publishers distribute their own books through their own companies in the major English-speaking markets. Publishers of books for the general reader, however, have been more accustomed to supplying overseas markets through rights deals, and there is a considerable amount of rights business in both directions between the United Kingdom and the United States. These deals may either be on the basis of a coedition, where the originating publisher prints copies for the partner, or through the granting of a reprint license to enable the partner to manufacture a local edition. The number of such transatlantic rights deals may be reduced as more publishers are ab- sorbed into international publishing conglomerates: the giant Random House group is now in a position to publish on both sides of the Atlantic through its own companies. The sale of territorial rights is not of course confined entirely to English-language publishers; such deals may also take place between Spain and the Spanish-speaking countries of Latin America, or be tween Portugal and Brazil.

Book club rights. Publishers in the western countries do a substantial amount of business with book clubs. These are mail order businesses that advertise books in the press at greatly reduced prices; members receive a magazine regularly from the club and must usually buy a m i n i m u m number of books each year. The books offered range from novels to books on art, gardening, and history, and reference books such as dictionaries and encyclopedias. The United Kingdom, the United States, Western Europe, and Latin America all

Owen 45

have powerful book club operations. The clubs obtain the books they offer to their members either by buying copies from the original publisher at very high discount, or by manufacturing their own copies under license and paying a royalty. A sale of copies to a book club may enable the publisher to increase the size of a print run substantially and hence reduce the manufacturing cost; in addition the book will reach a much wider market than through traditional sales channels.

Paperback rights. In some capitalist countries books for the general reader may be published through a two-tier system: they are first published in a hardback edition, and then published later in a much cheaper paperback edition. The time lag is usually one year. Publication of the initial hardback edition may be a risk, unless the subject is particularly topical or the author is well known. However, if the hardback edition is successful, the sales of a paperback edition can be very large indeed, and the sums of money paid for paperback rights can be enormous; they are usually in the form of an advance against royalties. The record for the largest paperback advance is still US$3,208,875 paid by Bantam for the novel Princess Daisy by Judith Krantz. Publishers in Western Europe are less tied to this two-tier system of publication than the United Kingdom and the United States; they may often publish the book in paperback form from the beginning.

Other reprint rights. A number of other types of rights involve reprinting the book in the original language. These include educational editions, where a novel or a play might be reprinted with additional material for use in schools; low-cost reprints of textbooks licensed to developing countries where the cost of the original edition is too high; and large print rights, where the book is printed in a large type size for people with poor sight. Payment is usually made on an advance and royalty basis.

Serial rights. These are the right to print extracts from a book in a newspaper or magazine. First serial rights apply to extracts that start to appear before the book itself is first published; if the book is a major new novel by a popular author, or the biography or autobiography of a famous personality, the rights can be very valuable. In recent years, some newspapers have been known to pay as much as s million for first serial rights and may advertise publication of the extracts on television. However, payment will depend very much on the topicality of the book, the length of the extracts, and the eagerness of the newspaper; in 1991 the fall in newspaper advertising revenue drastically reduced the budgets for serial purchases. The appearance of the extracts can increase sales of the paper and will certainly provide huge advance publicity for the book itself. Second serial rights start publication after the book itself has appeared; they are less valuable but still provide welcome publicity for the book.

Translation rights. These involve granting licenses to foreign publishers to translate books into their own languages. The deal may be done as a coedition, where the original publisher prints the foreign language edition for partners;


this applies almost entirely to books heavily illustrated in color, where the increased print run will mean better prices for all the partners. Alternatively, licenses may be granted for foreign publishers to manufacture their own editions, usually paying the original publisher an advance and a royalty on each copy sold. Although the use of English has increased enormous ly in recent years, we still feel that granting translation licenses is an important way to make our books more widely available.

Digest and condensation rights. These are the right to publish an abr idged edition of a book (usually a novel) in a magazine or a compend ium collection of fiction; the main publisher here wor ldwide is Readers Digest.

Anthology and quotation rights. These are the right to quote extracts from works in the context of other works. These rights are usual ly charged for according to the length of material used. They are not normal ly actively licensed; rather, requests come in which must be dealt with, and many publishers in the West have special depar tments to handle this work.

Electronic publishing rights. This is one of the most exciting new areas of development in licensing and can include the adaptation of books into a variety of forms: a science fiction novel could be adapted into a game on computer software; a dictionary could be adapted for use as a built-in spelling checker in an electronic typewri ter or in the form of a hand-held electronic book; journals can be made available through an electronic database. The range of possibilities is expanding every day, and the main concern is to ensure that licenses are carefully limited so that the licensee cannot exploit the material more wide ly than the original publisher in tended wi thout further negotiation.

Mechanical and reproduction rights. These include various types of licensing: to publish a book on microfilm or microfiche, to record it on tape. Another very important area is photocopying, which has increased enormous ly as access to photocopying machines has increased. Many western countries now adminis- ter multiple photocopying of copyright material through collective licensing agencies.

Single-voice reading rights. These are the right to read undramat ized extracts from a book on radio or television; payment is normal ly made at an agreed rate per minute. They also include readings as a public performance.

Dramatization and documentary rights. These include theatrical rights, where a book is adapted into a play, and the right to dramatize a work for film or television. The method of payment will vary: theatrical rights are normal ly paid for as a percentage of the money taken at the box office; for film and television rights, payment is negotiable, normal ly in the form of a l ump sum. In the case of film rights, an initial "option" payment is made for a period of time (usually a year) in which the viability of the project is investigated. The majority of options are never taken up, but if they are, the sale of film rights in a best-selling novel can be very lucrative. However , very few authors have the power to demand creative control over the way in which their book is adapted.

Owen 47

Nowadays it is rare for film rights to be controlled by the publisher; they are likely to be retained by the author's agent.

Charitable rights. These include the right to produce a Braille edition for bl ind people, or to make a tape recording of a book on special cassettes for their use. Permission is normally given free of charge or for a very small fee.

Merchandising rights. These are the right for a character--or even a des ign- - to be licensed to appear on other products such as T-shirts, wallpaper, and bath towels. This is a very lucrative area of licensing. The characters do not always originate from books but may come from films or television series. A common sequence may be that a book is published which is then made into a film or television series and merchandising opportunities may then increase enormously. Payment is normally made on the basis of a royalty, and the important points are to limit each license very carefully in terms of product specification and the length of the license and to insist on approval of each product at prototype stage.

The range of rights possibilities in the capitalist countries is very extensive, and it is the job of the specialist rights staff to be both creative and active in finding as many ways as possible of exploiting the rights, provided that this does not harm in any way sales of the main edition of the book. We must find potential licensees and persuade them to acquire the rights; the financial arrangements will vary according to the types of rights being licensed, the topicality of the book, and the status of the author.

Many of the rights I have just listed will not be appropriate for all types of books. For example, a publisher of textbooks will have little opportunity to sell film and television rights or merchandising rights; however, he may well undertake a great deal of licensing of translation rights to foreign-language publishers or reprint rights to publishers in developing countries. On the other hand, the British publisher of a new novel by a successful thriller writer may be handl ing the sale of American rights, book club rights, serial rights to newspapers, translation rights, and even film and television rights if the publisher has been granted control of these. The earnings from such licenses on a particular book may be large enough to reimburse the whole or a large part of the advance payment to the author. Any form of coedition, where copies are printed for partners such as book clubs or overseas publishers, will increase the size of the print run and create a substantial saving in cost, particularly in the case of books heavily illustrated in color on topics such as art, gardening, craftwork, t ravel and so on.

Not all these licensing opportunities yet exist in the eastern countries, and even when they do, control is not always granted to the publishing house. Certainly in the past many rights have been handled by the state copyright agencies on behalf of the author; the agencies are now being demonopolized, and authors may deal direct, al though this may in itself produce problems in terms of inexperience in dealing with western publishers and contractual matters. There is still no guarantee that the publishing house in the original coun-

48 Publishing Research Quarterly / Summer 1992

try will receive any share of the revenue. One of the most depressing examples of this was an underground Polish publishing house that had published a book by a member of Solidarity while he was on the run dur ing martial law. He then made a deal for an English edition direct with an American publisher for a substantial advance payment, but offered no share to the publishers in his own country who had taken a considerable risk in publishing the book.

Publishers in the West do not always acquire the full range of rights either, but this is a matter of negotiation rather than legislation. Many western publishers feel they are now being asked to pay such large advances to established authors that they must insist on at least a min imum package of rights to exploit in addition to the main publishing rights.

Methods of Exploitation

How then do we set about exploiting the rights we acquire? The range of methods will vary, but the first task of a specialist rights staff is to build up a very detailed knowledge of potential buyers in all the relevants fields worldwide. This takes both time and effort; there is no shortcut. Only a small number of the rights I listed are sold without active effort on the part of the publisher: these are areas where the application comes in to the publisher, such as anthology and quotation rights, charitable rights, and the right to publish educational editions. Some applications for rights such as film, television, and merchandising rights may also come in without active promotion, but the sale of most types of rights involves a considerable amount of market research and hard work. For example, the sale of serial rights will involve s tudying a wide range of magazines and newspapers, finding out which of them are prepared to publish extracts, and then approaching them at a very early stage with potential projects; many such sales are tied up a year in advance of publication. Rights staff also approach American publishers, book clubs, and paperback publishers at a very early stage, often long before the author has com- pleted the manuscript. An outline will be submitted, and the final decision may be made on the basis of sample material, the full manuscript, or proofs of the book.

In the case of overseas partners, we must build up appropriate contacts with publishers in all markets. In the case of British publishers, this means the United States, while many American publishers will need to identify appropriate British partners. We also identify appropriate foreign-language publishers wor ldwide whose interests match our own, al though not all of these may have a policy of buying rights from abroad.

There are several ways in which we build up our information. First, we study international publishing directories such as Literary Marketplace (listing American and Canadian publishers) and International Literary Marketplace (listing publishers in the rest of the world). We also study the trade press where this is appropriate: in the United Kingdom we have the weekly Bookseller

Owen 49

magazine; the United States has Publishers Weekly. Key overseas publications include the B&senblatt in Germany and Delibros in Spain. In addition, we ask every new contact to add us to their mailing list for catalogues, so that we can study their range of publication in more detail.

The importance of attending international book fairs cannot be overestimated. The range of fairs to be attended may vary according to the type of publishing and travel budgets, but the Frankfurt Book Fair is essential. The Bologna Book Fair is essential for publishers of children's books, although a number of school publishers also exhibit there. Many British and European publishers attend the ABA, the American Booksellers Association Convention. Although this is de- signed mainly for American publishers to show their new books to American booksellers, it has also become a rights marketplace, particularly for publishers of general books. Those of us with a strong interest in Central and Eastern Europe have regularly attended the Warsaw and Moscow book fairs, and some of us attend the new Prague Fair.

Book fairs provide an opportunity for meeting existing contacts to discuss deals in progress as well as new projects. They have become increasingly busy events, and nowadays most publishers have extremely full schedules with most of the appointments booked well in advance of the fair; this may make it difficult for them to see unexpected random callers. Publishers attending such an event for the first time should try to identify possible partners in advance of the fair and to write for an appointment several weeks ahead, enclosing a catalogue or information on a specific project for which rights are being offered. The optimum language for this information is likely to be English, which can be read by publishers in many countries other than the United Kingdom and the United States.

Book fairs also provide an ideal opportunity for market research to identify potential new partners; the book fair catalogue should be studied initially, followed by visits to the stands of publishers whose interests appear to be compatible. In some cases a quick look at the stand may show that the style of book is not compatible and the publisher can then be eliminated from the list of possibilities. The book fair catalogue can also be an important reference tool during the year after the fair; the Frankfurt catalogue is particularly useful because it provides a detailed description of the subject interests of each exhibitor. The most useful catalogues are those where the exhibitor can write the text of his own entry, rather than tick a checklist of broad subject categories such as "textbooks" or "reference books."

Publishers with a substantial amount of rights business may undertake additional travel in addition to attending book fairs. Publishers who specialize in producing color books as coeditions may visit key markets several times a year and may have close links with particular publishers in each market. In the past, it has been difficult for eastern publishers to travel abroad to book fairs or on sales trips for reasons both political and financial, but we are delighted


to see many more publishers from the East at Frankfurt and expect to see some at the London Book Fair.

H o w do we approach potential foreign partners? A great deal of work is under taken through correspondence. We add new contacts to our own mail ing lists for catalogues in appropriate subject areas; my own company maintains a computer ized mailing list of over 2,000 publishers coded by subject, because we publish in a wide range of subjects and produce many different catalogues. We also mail a great deal of specific information on titles that we feel have good rights potential; we use information sheets for our forthcoming books, and these highlight the main features of the b o o k information about the author and in tended market, and bibliographical details. We receive an excellent response to these mailings, with publishers asking to examine the book.

Publishers of general books may offer the same book s imultaneously to several publishers in the same country. For a new book by a best-selling author, or a very topical book, they may hold a competit ive auction for the rights well in advance of publication. For academic books, we also tend to line up interest from potential licensees well in advance of publication of our own edition, by discussing the book at book fairs and by mailing advance information. How- ever, we tend to work on an "option" system under which the book is offered to only one publisher at a time in each country, and they have a period of time (usually three months) in which to obtain specialist reviews of the book, to assess whether it can be published profitably there. In the case of a translation they may need to investigate whether an appropriate translator is available. If they wish to proceed with a translation, we normally need to know the proposed print run and local selling price in order to calculate appropriate financial terms; in the West, these are usually specified as an advance paymen t against a royalty for each copy sold, with the royalty rate rising after an agreed number of copies have been sold.

Of course, in the past we have had to take into account a variety of special circumstances in dealing with publishers in Central and Eastern Europe. In the Soviet Union, the rates of payment were set by the state and related primari ly to the length of the book rather than the size of the print run. In all these countries the edition tended to sell out quickly, and hence payment was made as a lump sum rather than as an advance against annual royalties on sales. In Poland, until the zloty became internally convertible, payment was often offered partly or whol ly in blocked zlotys, which posed problems unless there were possibilities for using them; academic publishers were perhaps more will ing to grant licenses on this basis, since some of us were able to use the money for expenses at the Warsaw Book Fair. It was harder to find ways to use blocked forints, crowns, or lei in Hungary , Czechoslovakia, and Romania, and in a number of cases licenses were refused because of the financial restrictions. Some western publishers decided not to deal direct but to use intermedi- ate agents specializing in business in Eastern Europe such as Gerd Plessl; in the case of illustrated books, some gave control of the market to Yugoslavian

Owen 51

publishers with printing interests such as Mladinska Knjiga. However many eastern publishers now want to deal direct to acquire rights in western books.

We have also had to deal in most of the eastern countries through state copyright agencies such as VAAP, Ditia, Jusautor, and Artisjus where licenses were concerned; for printed books we had to deal with state import-export agencies such as Mezh Kniga, Ars Polona, and Buchexport. Although the copyright agencies are now being demonopolized, there is still a considerable question over the acquisition of licenses in western books because the agencies were able to recycle their hard currency earnings for the purchase of rights, and relatively few eastern publishers now have direct access to hard currency. In the former Soviet Union, a number of licenses have been cancelled; VAAP's hard currency funds have been frozen, and many publishers can now offer payment only in blocked rubles.

In the case of books with coedition potential, it is vital that contact be made with potential partners at the earliest possible stage, whether the offer is from West to East or vice versa. Many such deals are for books heavily illustrated in color, since increasing the print run produces a real economy of scale. How- ever, it is not always necessary for the book to be illustrated; many coedition deals are undertaken between British and American publishers for unillustrated books, often specialized books at a high price where an individual print run on each side of the Atlantic would be uneconomical.

We identify potential coedition partners in the ways I have mentioned: by s tudying publishing directories, the trade press, and publishers ' catalogues, and by under taking market research at book fairs. We then make our approach at a very early stage. If the coedition is to be under taken together wi th our own first printing, we have no finished copy to show and must therefore have early sales material: a synopsis of the book, bibliographical details, and perhaps a sample chapter. In the case of an illustrated book we need samples; these may take the form of original artwork, photographs, or slides. Publishers specializing in color coeditions often produce d u m m y books to the correct size, with some sample pages included to show the general appearance of the book. Because the aim is to persuade the publisher to commit to buying an agreed number of copies, we need to be able to offer a range of prices, with a larger order justifying a lower unit cost. It is essential to make clear exactly what the prices quoted inc lude- - the royalty, any fees payable for the use of pictures controlled by other copyright holders, packing costs, and who will be responsible for insurance and freight, and to what destination.

If a project is being prepared especially for a particular foreign partner rather than offered to a range of publishers in many different countr ies-- for example, a bil ingual dictionary, a cookery b o o k or a tourist gu ide - - the buyer may wish to have some say in the format and appearance of the book, e.g., the jacket design. If the project is being offered more widely, all the partners will be tied to the same format, al though they may have some choice in jacket design at an addit ional cost. If the copies are to be printed in addit ion to the original


publisher's own print run, the exact product to be supplied will depend on the market. Copies may be run in the same language as the original (e.g., in En- glish for a British book sold to an American partner) in which case the only change required may be a change of imprint. However, in some subjects, such as cookery or gardening, a full Americanization of text may be undertaken. If the overseas partner requires copies in his own language, this will involve a change of the black printing plate for each edition. In most cases the foreign partner will translate the text and supply imposed film in his own language to fit the layout of the book. However, if an eastern publisher is offering a project to a western publisher, the eastern publisher may provide a draft translation in the western language (e.g., in English, French, or German); the text is then checked by the foreign buyer and the eastern publisher undertakes the type- setting and printing and then ships finished copies to the western partners.

Crucial factors to be taken into account when planning a coedition are the appropriateness of the subject matter, quality in terms of content and production, pricing, and timing. In the past, western coedition prices have usually been too high for eastern publishers to afford, even when the western publisher was producing a large print run for several coedition partners. Looking at business in the other direction, it has often been the case that although eastern publishers could offer attractive prices to the West, there have been problems in quality of text, in production quality, and above all with printing schedules. A few weeks' delay in delivery may be less important for the publisher of an art book or a tourist guide, but academic publishers in the competitive western market are totally dependent on having stock available in advance of the beginning of the academic year, or they risk losing not only the market for that year but forever when a rival book is bought. There have been so many cases of late delivery from the East that many publishers in the West are understandably nervous about buying from this source. We hope that this situation may improve as printing facilities in the East are upgraded and the strains placed on printing facilities by the state publishing houses are reduced.

The question of rising prices in the East will also be a factor in the viability of printing there. My own company recently co:.ducted an exercise to obtain printing prices from four eastern countries and found that the prices in three were as high as if not higher than prices we could obtain by printing in the Far East and sometimes even in the United Kingdom. The fourth country has still failed to provide any prices to us.

If coedition business is to expand between East and West, both sides must resolve problems in content, quality, pricing, and delivery schedules. Western prices still seem high, although inflation means that eastern book prices are catching up; however, many of our books are on topics that would still be too much of a luxury item to warrant large sales in the East. On the other hand, eastern publishers often offer projects which do not have a sufficiently large market in the West; we are still woefully unfamiliar with much of the East European literary heritage, and writers who have been bestsellers in the East

Owen 53

may be almost u n k n o w n in the West. Although there is now enormous interest in the history, economics, and politics of the eastern countries, western publishers are still nervous about acquiring rights in books in these areas from the East because for so long the content of such books was affected by political restrictions. Western publishers might be interested in having one of their own authors writ ing on such subjects, particularly if she could have access to material not previously available. This could be an area for collaboration be tween East and West with material contributed to a project from both sides. It w o u l d be less a rights deal than a joint venture, and a contract be tween the two parties would have to specify clearly the nature of the input from each side, the manufactur ing responsibility for the end product, and the financial benefit to each side.

Some of us who in the past persisted in our efforts to maintain contact with publishers in the East (often in the face of resistance from our own publishing houses who felt that because of the difficulties and low financial return from these markets, our time might be better spent elsewhere) hope that the possibilities for trade in both directions will continue and expand. We recognize the difficulties the East faces in the need to restructure publishing industries, and we also know that publishers are facing radical changes not only in the economics of all areas of the book trade but also in the overall economic situation in their own countries as they move toward a market economy. On the other hand, we have seen in he last two years an unprecedented move toward free- dom in publishing which must improve the possibilities for collaboration between publishers in the eastern and western countries.

Current Issues

Rights has undoubted ly been a growth area in the last ten years, but will this t rend continue? The increasing consolidation of publishers into large groups is undoub ted ly affecting rights policy, in that many houses now seek to acquire rights that would otherwise have been licensed outside. The obvious example here is the "vertical" publishing deal, with hardback publication followed by paperback publication by an imprint within the same group.

For English-language publishers on both sides of the Atlantic, a major con- sideration will be whether their own English-language edition is to be marketed wor ldwide , either through their own companies abroad or through specific distribution arrangements for particular markets; or whether licensing arrangements should be made with an external publisher. In the field of academic publishing, many houses have their own subsidiaries or sister companies within the same group which will handle transatlantic sales; the larger houses will usually have subsidiaries in other key markets such as Australia, the Far East, the Indian subcontinent, and in some cases continental Europe as well. In trade publishing, the recent t rend toward large mult inat ional groups may also mean that the key markets of the United States and the Uni ted


Kingdom and Commonwealth countries can be covered by the group opera- tion, although there may be some modifications in presentation of an Ameri- can book for the U.K. market and vice versa.

Perhaps the most vexing questions at the moment are those of control of the EC and Australian markets. The problems are more significant to trade publishers (who may control only part of the world English-language market) than to academic publishers (who are more likely to distribute a single En- glish-language edition worldwide). In the past, American and British publishers were usually able to sell competing editions of the same title in those nonexclusive territories designated contractually as the open market, including the countries of continental Europe. British publishers have become increasingly concerned that American editions may be imported into their exclusive market within the U.K. itself; the prime area of concern is mass market paperback editions, where the American paperback could be cheaper than its U.K. equivalent. Although the free movement of goods across EC borders into the U.K. has been possible since the U.K. joined the Community in 1973, with the emphasis on a single European market from January 1, 1993, this type of "seepage" may become more common. This concern has led to attempts by British publishers to control the EC territories as part of their exclusive market (whether the book originates from the U.K. or rights are being acquired from an American house) and a corresponding resistance from American houses when acquiring or selling rights.

The change of circumstances in Australia has arisen from a revision in that country's domestic copyright legislation which permits Australian booksellers to import an edition other than that of an overseas publisher controlling the Australian market or that of his Australian licensee if the book is not available from either source within thirty days of publication elsewhere; this can also be done if the rights holder or his Australian licensee cannot confirm within seven days of receiving an order that the order can be fulfilled within ninety days. This could lead to a situation where a British publisher who had acquired the Australian market as part of an exclusive sales territory under license from an American house but had not yet published his edition (perhaps because coedition stock had not yet arrived from the United States) could find that copies of the American edition had been imported into the Australian market. This is also a source of concern to British publishers to whom Australia has long been a significant export market.

In academic publishing, the increasing number of requests from publishers in developing or newly industrialized countries for local English-language reprint rights has increased enormously over the years. It is vital that whoever is designated to handle such applications within the original publishing house neither grants nor refuses such applications without being fully aware of the implications of so doing. This necessitates a familiarity not only with the overall sales strategy for the book in question, but also with copyright and other legislation in the country of the license applicant.

Owen 55

At a basic level, an application for a local reprint license for a s tudent textbook from a publisher in a country such as India raises a number of questions. First, how is the original edition being marketed in India and on wha t scale? Is it selling at the full price in significant quantities? Is it perhaps being marketed in a special low-cost International Student Edition for sale to designated markets where the price of the original edition is considered too high? In both cases, the granting of a reprint license to an Indian publisher will immedia te ly terminate sales of those editions in the market, and if the original publisher has an agent in India he is unlikely to welcome this. It must also be remem- bered that key textbooks are often the targets for reprint license applications from a number of developing countries which may be significant export markets for the original edition or an International Student Edition; if licenses for the same book are granted to, say, India, Pakistan, and the Philippines, this will start to affect future print runs and hence the economics of cont inuing to publish the book.

British publishers must take other considerations into account. The British government provides a textbook subsidy for selected key titles through ELBS (Educational Low-Priced Books Scheme); titles accepted for the scheme have a distinctive ELBS cover design and may be sold only in designated ELBS territories. The subsidy enables publishers to price ELBS editions at approximately one-third the price of the original edition. Granting a local reprint license for a title already available in an ELBS edition to a publisher within the ELBS territories makes little sense, and it is arguable that a country whose publishers regularly demand reprint rights in titles available in ELBS should not be ben- eficiaries of the scheme.

There may of course be many valid reasons for reluctance to grant local reprint licenses, including the loss of control of product ion quality, slow remittance of payment or failure to pay, and seepage of the licensed edition into other markets, thus further impinging on sales of the original edition. (Even a requirement for a clear market restriction notice on the licensed edition may fail to prevent this, al though it does mean that legal action can more easily be taken against both exporter and importer.) However , before a license is refused, it is essential to be aware of the background of local legislation against which the application has been made. A number of developing countries have provision, either within their domestic copyright law or embodied in other legislation, which would enable them to acquire a compulsory license even if a license is refused by the original publisher.

In some cases the procedures that must be followed to obtain such a license are more or less in accord with the provisions for compulsory licensing of books required for educational purposes in t roduced in the 1971 Paris Revi- sions to both the Berne Convention and the Universal Copyright Convention. These specify that a book must have been publ ished for a specific period of t ime before a license can be sought; that the original edition must either be unavailable in the country concerned or unavailable at a price appropriate to


the market; and that the applicant must have attempted to contact the copyright holder and either failed to do so or been refused a license. Any compulsory license granted must be nonexclusive and can be withdrawn if the original publisher makes arrangements for the book to be available in the market at an appropriately low price.

Although countries such as India have introduced compulsory licensing which is broadly in line with the provisions of Paris, some other countries that are members of one or both of the conventions have introduced legislation that in no way complies with those requirements. The Philippines is still operating under the infamous Marcos Decree PD 1203, which permits local publishers to reprint any book required for educational purposes (and this is interpreted far too broadly) where the original publisher's edition is considered to be exorbi- tantly priced. The current definition of "exorbitant" is 70 pesos, or around U.S. $2.68. The Philippine publisher is required to pay a minimum royalty of 7 percent of the local price to the original publisher.

Pakistan also operates a compulsory licensing system under Subsection 2A of Section 10 of its domestic copyright legislation; this states baldly that copyright does not subsist in respect of any work reprinted or translated for educational purposes. Since the early 1970s, the government-backed National Book Foundation has reprinted substantial numbers of American and British textbooks, frequently without permission or payment.

With local legislation of this kind, anyone dealing with reprint applications from such countries must be aware that a blunt refusal of a license may result in a reprint edition appearing anyway, with inevitable effects on sales of the original edition to the market. It is, however, vital to react quickly as those compulsory licensing provisions which have a requirement for the original publisher to be contacted usually impose a tight time limit for a response. If the reprint applicant is felt to be unreliable, either financially or because of a proven track record of exporting local editions elsewhere, it may be preferable to seek an alternative licensee in the country concerned if a reliable partner can be located; in the case of some countries it may be possible to take swift action to forestall a compulsory license by making arrangements for a local subsidiary or a reliable distributor to produce a reprint edition. However, many such arrangements may still be subject to a much lower production quality than that of the original edition, slow remittance of payment because of local currency restrictions, and the imposition of heavy local taxation on royalties which may be extremely modest if they are based on a very low local price.

The disposition of English-language rights is of course of key concern in a world where English has become the lingua ffanca, particularly in the field of academic publishing. An increasing number of publishers in Germany, the Netherlands, Scandinavia, Japan, and Italy are now producing high-level academic titles in English, particularly in the STM field. However, there is still a strong demand for translated editions in many sectors of publishing. In the past, this need has been fulfilled by the licensing of translation rights to pub-

Owen 57

lishers in the countries concerned, but here again the growth of multinational publishing groups has affected the translation licensing policy of both trade and academic houses. On the trade side, groups such as Bertelsmann, Hachette, and Anaya have expanded their acquisition of publishing houses in other countries, and in this way each has been able to diversify into publishing in other languages under the umbrella of their own group. In academic and professional publishing, there have been similar moves through acquisition of existing companies (e.g., the recent purchase of the medical division of the Spanish publisher Salvat from Hachette by Masson) or through the establish- ment of local subsidiaries. U.S. houses such as McGraw-Hill and Addison- Wesley have long had overseas companies publishing in local languages; usually priority is given to the translation of titles from the parent company before establishing an original publication program or acquiring rights from outside sources. Of the U.K. academic houses, Blackwell Scientific has a German subsidiary, and Churchill Livingstone, the medical division of the Longrnan Group, now has publishing operations in Spain, Italy, and Japan.

Even when translation rights are licensed to independent publishers, the effects need to be carefully assessed. For an academic title, the time lag between publication of the original English-language edition and the appearance of the translation is normally sufficient to permit the English edition to be subscribed in that country well in advance; it is usually unwise to agree to a market bar on the original edition in favor of the licensee, and indeed within the EC this is outlawed as restrictive practice.

In some countries student texts are adopted in large quantities in the original English edition; in such cases the appearance of a local translation could have a very significant effect on sales. The economics of licensing versus direct sales therefore should be carefully discussed between rights and export sales staff, and in some cases it may be prudent to withhold rights. More units may be sold of a translated edition, but the resulting royalty income may well be less than the income derived from fewer sales of the English edition. Key markets here would include the Netherlands, Scandinavia, and India, where a Hindi edition of, say, a key medical text could have a major negative impact on adoptions of the English edition.

What kind of revenue can be generated from the sale of rights? Much will depend on the book in question, the potential market for rights, and the eagerness of the licensee. Trade titles surrounded by hype have been known to generate six-figure advances: the recent vogue for popular science has led to an increase in advances for translation as well as domestic rights, with the German publisher Piper recently paying an advance of DM 120,000 for Stuart Kauffman's Complexity: The Discovery of Anti-Chaos. A long-established text such as Gray's Anatomy can also generate substantial sums. At the other end of the scale, licenses to developing countries for translation or English-language reprint rights may be on the basis of minimal advances; royalty rates may also be limited by local banking regulations: for example, royalties higher than 15


percent from India must be approved by the Reserve Bank which is an extremely slow process. Such licenses should more properly be viewed as market protection exercises than as lucrative sources of income.

Royalty rates may vary greatly according to the book, the market, and the type of license. For English-language reprint rights, where no editorial work is involved on the part of the licensee, rates could vary from under 10 percent to as high as 25 percent if local regulations permit. Although there is undoubt- edly a need for books at appropriate prices for the poorer countries, there can be no valid justification for the double concession of a low percentage royalty on a low local price, particularly since the books targeted for such license applications are almost always key textbooks which have been established through many editions by the original publisher, thus minimizing the need for promotional effort by the licensee. For translation rights, initial royalty levels could vary from as low as 4 percent for a book included in an established pocketbook or children's series to 15 percent or more for a new novel by a best-selling author. Royalties for translations of academic titles usually start in the region of 7-8 percent with rates escalating after an agreed number of copies have been sold.

The sale of rights continues to be an important feature of the publishing process, from the point of view of generating revenue, establishing the author, and making a book more widely available than would otherwise have been possible. The current trend toward consolidation of publishing houses into multinational groupings may, however, mean that overall, fewer licenses are granted to publishers outside the original publishing group; the tendency is to exploit as many aspects of a property as possible "within the family."

Note

Parts of this article were adapted from a presentation at the seminar "East Meets West: Copyright and the Publisher in a Market Economy," Hamburg, March 1991.

exploiting the rights in the agreement

Documents