**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**

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**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.**

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**No portion of this article may be copied, retransmitted,
reposted, duplicated or otherwise used without the express written approval
of the author.**

**Ivan Hoffman Attorney At
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