Random House, HarperCollins Look to Lock In Low E-Book Royalty Rates: 5 WaysRandom House and HarperCollins are sending letters to authors and agents seekingamendments to contracts regarding e-book rights. These letters, although some suggestthat the author's work was "selected" for digitization, appear to be going to virtually allauthors who have no stated e-book royalty rate in their contracts. In some cases, theletters have gone to authors who have never granted e-book rights to the publisher.These amendments should be treated with extreme care.E-book royalty rates are low at the moment. Both publishers are trying to lock in e-book royalty rates at 25% of net receipts. As we've previously said, we believe this will proveto be a low-water mark for e-book royalties:Authors and publishers have traditionally split the proceeds from book sales. Mostsublicenses, for example, provide for a 50/50 split of proceeds, and the standard trade book royalty of 15% of the hardcover retail price, back in the days that industry standardwas established, represented about 50% of the net proceeds of the sale of the book. We'reconfident that the current practice of paying 25% of net on e-books will not, in the longrun, prevail. Savvy agents are well aware of this. The only reason e-book royalty ratesare so low right now is that so little attention has been paid to them: sales were simplytoo low to scrap over. That's beginning to change.Here's how to protect yourself:

1. Get the absolute right to renegotiate.

If you accept these low royalty rates, don't lock yourself in. Try to obtain the unconditional right to renegotiate the royalty rate after a period of, say, two years. If you don't get the unconditional right to renegotiate, then, at a bare minimum, you should have the right to renegotiate if industry standard royalty rateschange or if the publisher's standard royalty rate changes. We can help you with thecontractual language.

2. Negotiate for a royalty floor.

Insist that your royalty amount (in terms of dollars andcents, not percentage points) for e-books will never fall below the royalty amount for the print edition of the work. It's best to peg the minimum to the royalty amount for thehardcover edition of your work. If not, then have the minimum royalty tied to the royaltyfor the prevailing print version at the time the e-book is sold. This will keep e-book salesfrom eroding your royalties.

3. Double-check your reversion of rights clause.

This is critical. If your reversion of rights clause doesn't have sales thresholds in it, your publisher can argue that availabilityin any edition -- regardless of the number of sales -- means your book is "in print." (Wedon't agree with this interpretation of older contracts, but some publishers argue this witha straight face.) Take this opportunity to clarify your reversion of rights clause byinserting a minimum number of annual sales for a work to be deemed in print. Again, wecan help with the language.