IVAN HOFFMAN, B.A., J.D.
What is the effect on the royalty when the book is bundled? The answer depends upon what products are being bundled, by whom and the total package price that the bundled package is sold for.
But the clause may also be a great deal more open ended and may look something like a provision whereby the publisher takes the amount it receives (the basis for calculating the royalty to the author) and multiplies it by a fraction comparing the price of the book with the total price of the package.
Under this version of the clause, the publisher then multiplies this $50.00 by a fraction represented by the price of the unbundled book ($50.00) divided by the total price of the bundled package ($100.00). Thus, $50 times ½ = $25.00. So the author's royalty is x% of $25.00.
Assume an author royalty of 10% of the amount received by the publisher [i.e. wholesale price]. Assume the same retail prices as above. The royalty is 10% times $25.00 [$50.00 times $50/$100] or $2.50 per book when sold in the bundle.
If the author had been paid the author's royalty on the book without it being included in the bundle, the royalty would be the same ($2.50) since the amount received by the publisher [i.e. the wholesale price] would be $25.00 on the $50.00 book.
Since presumably the publisher bundled the author's book with some other product or software because the book added value to the package, the author is not getting the ride off that value added. The author is getting only what the book would bring unbundled.
However, the publisher is receiving twice the amount on the package but only paying the same dollar and cent royalty as it would on the book alone.
Ordinarily, this is a money issue under any circumstances. But suppose that the original work is a book and a CD-ROM. Is this a bundle for the purposes of this clause meaning that the author actually gets half of the otherwise stated royalties? [Assuming the same prices even though I realize that adding a CD-ROM might not double the cost to the consumer but the simplicity factor is at work here.] The response is that this should be spelled out in the contract so that such an inclusion of a CD does not reduce the royalties to the author.
But suppose the contract is unclear and suppose for example that the publisher licenses the book to a third party who then sells the bundled package. The publisher may then receive a royalty per package in the neighborhood of 15% based upon the percentage that this book bears to the total package price. So the publisher receives a royalty of $7.50 in this example. [15% times $50.00 i.e. the wholesale price]. The publisher then has a couple of choices: it can read the clause literally and then multiply the $7.50 by one-half because the book represents only one-half of the total retail price of the package and then multiply that amount [$3.75] by the author's royalty of 10% so that the author receives 37.5 cents per unit sold. Somewhat of a drop from the $2.50!
But this appears to be a double reduction to the author since the amount received by the publisher has already been subjected to the fractional calculation by the license agreement. In other words, the amount received by the publisher is already reduced by the ratio of the price of the book divided by the price of the total package. To then use that same fraction in calculations with the author seems unfair and unnecessary.
So the other choice is that the publisher may read the clause a bit more generously and multiply the author's royalty by the amount received and not again in half. In that instance, the author's royalty would be 75 cents [10% times $7.50]. Still a rather significant drop in dollar and cent royalty to the author!
© 1996 Ivan Hoffman
This article is not intended as a substitute for legal advice. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. You should consult with an attorney familiar with the issues and the laws.
No portion of this article may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author.
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