FOREIGN PUBLISHING DEALS (Revised 2019)

Ivan Hoffman, B.A., J.D.

          Not every book that comes out in the United States is a candidate for a foreign publishing deal.  For those that are however, the overseas market is definitely worth exploring. Foreign publishing is a great marketing and promotional tool as well.  By “foreign” I mean a deal made by a rights owner in the United States with a publisher in another nation or territory.  You have to include “territories” as well as nations since there are economic and social blocs that are deemed part of a given area that may be the “territory” (the European Union, as but one example).  This article is written from the point of view of the American publisher and thus references to “you” or “your” are references to that party.

          There are essentially two and perhaps three forms of foreign deals.  The first is the right that the owner of foreign rights has to license the translation of the English version of the book into a foreign language.  The second is the right to license the reprint of the book in the English language and sell the same in a local territory.  There is also an export deal in which the American publisher sells the very same book that is distributed in the U.S. to a foreign publisher at a discount.  The foreign publisher merely is distributing the U.S. book in that territory.  While not traditionally considered a “foreign” deal, I have included in this paragraph to round out the picture. 

Some Initial But Fundamental Concerns 

          The question as to who owns the right to make these deals is the subject of the agreement between author and publisher.  Generally the right of copyright in the book initially resides in the author unless it is a work made for hire situation (read “Work Made For Hire Agreements.”) or unless the author has given away the right of copyright or parts of the right of copyright in the publishing agreement.  No matter which party is the copyright proprietor, the publishing agreement or other agreement will determine which party has the right to make foreign deals.  Part of the negotiation will involve foreign rights of the sorts mentioned above.   

          Keep in mind however, that there are often other parties who may have rights that may prevent the making of a foreign deal including but not limited to artists, illustrators, editors, parties that own rights to materials such as quotes contained in the book and even, in some instances, distributors and other parties.  (Read “The Cover Artist/Illustrator Agreement” and “The Book Editor Agreement” and “The Permission Form.”)  Therefore, the party seeking to make a publishing deal must carefully review all of  the agreements to make sure that party can actually make a foreign deal or whether some other party has rights that can prevent that from occurring.  And even if there is no agreement with these other parties, that can work against the author or publisher since if there is no agreement, the owner of the rights (artist, editor, owner of the work quoted etc.) may retain the rights to that material and this may prevent making a foreign deal.   Thus in order to make a foreign deal, you have to consider all these and other issues and will have had to have thought ahead so that these bases are covered.  (Read “What Can Happen To Your Project If You Don’t Plan Ahead?”)

         For simplicity sake in this article, I will refer to the party with the rights as the “publisher” but, as indicated, it can also be the author or other parties. 

Foreign Deal Structure 

          The normal kind of deal for a book that originally was published in the United States generally involves a royalty and in some instances an advance against that royalty.  The size of the advance varies depending upon the size of the market and the success or lack of it that the book enjoyed in the U.S., among other factors.  For example, reprint rights to a large territory, such as the European Union, might bring a larger advance than a similar deal for a smaller country or territory.  The same for translations.  And since all books are not interchangeable and all creativity unique, the rule of thumb for determining the size of the advance is generally based upon the “WYCG” approach.  “WYCG” stands for “Whatever You Can Get.”  If the buyer feels the book is going to do particularly well in the territory, that buyer may be willing to pay a larger advance for the rights.  In all negotiations, the end result depends upon the relative bargaining position of the parties.   

          Remember as well that a translation is a separately copyrightable work and thus it is essential that a party seeking to engage someone to do a translation have a valid, thorough, written and signed agreement dealing with all the issues including but not limited to the rights issues before any work for that translation is done and before any money for that work is paid. 

          The royalty rate varies and is likely to be based upon the retail price or cover price in the market.  However, there may be other royalty provisions for foreign book clubs, flat fee licenses made by the foreign licensee and so on.  The actual royalties in turn may be subject to other calculations that may reduce the effective royalty from the stated rate and these factors should be the subject of negotiation as well.   

          In the export deal, the American publisher sells the book directly to the foreign publisher at a discount from the cover or retail price, not unlike a sale to an American distributor.  Here however, the American publisher may seek payment in full in advance before shipping.  How the books will be shipped may be another issue.  In both the translation and reprint deals, shipping is generally not an issue as these are usually done electronically.  But when the transmission is made is a negotiable point.  Once the files are sent, there is little the publisher can do so all aspects of the deal must be negotiated and signed including payment of any advance before sending the files. 

          The owner of the foreign rights may elect to sell separate territorial rights to separate licensees or make an overall deal for several territories with one licensee.  In the latter event, the negotiation can include that the advance that is paid can be separately allocated by territory and provide that there shall be no “cross-collateralization” between or among territories.  This means that if the book does well in one territory and recoups the advance paid for that territory, the excess royalties due the American licensor may not be used to recoup any other unrecouped advance from another territory. 

          Obviously, having different licensees in different countries can be an accounting headache for the small publisher but it may be otherwise worthwhile not to put all one’s literary eggs into the basket of a single licensee.   

The Territory 

          As indicated above, this has to be clearly defined.  Additionally, it should be made further clear that the license to the foreign publisher does not include the right to export from the territory into other territories.  This is a subtle but important point since a local publisher may feel that because they own rights for the territory such rights include the right to sell to exporters in the territory even though the ultimate sales may take place outside the territory.    

          By including the “rest of the world is an open market” clause (which many “form” agreements or agreements submitted by foreign publishers provide), the publisher may be cutting itself off from opportunities to make other deals.  Example: if you sell exclusive Portuguese language rights to a licensee for Portugal and your agreement prevents “open market” sales, you can perhaps make an exclusive Portuguese rights deal for Brazil.  But if your agreement allows for open market sales by the licensee, it means that sales in that open market, which is, in this example, a Portuguese language version sold in other Portuguese-speaking countries such as Brazil or Macao, as a practical matter may cut off your ability to make an additional deal.  I say “as a practical matter” because although such “open market sales” are usually on a non-exclusive basis, that original licensee is already in print with the book in these open market countries and your ability to make a competing deal is unlikely.  Not only do you then lose the additional advance, but you often also receive a lower royalty on these open market sales since there may be a sub-licensee involved. 

          Now imagine if the deal were for Spanish language rights in Spain.  If you do not restrict the open market language in the deal with the Spanish licensee, you could be losing the practical ability to make other Spanish language deals in all of the countries of the world where Spanish is spoken. 

          If the territory involves a license of digital versions, then those digital versions should be “geo-locked,” meaning that only customers located within the territory can access those files. 

Other Issues     

          Among but not all of the other issues that should be covered in the sub-publishing agreement are:   

1.      duration of the license (for a number of years or conditioned upon the continued publication in the territory or minimum number of units sold each year or variations on those issues);

2.      nature of the edition, whether hard back or paper, or digital, and a fixed date of publication;

3.      reserves against returns;

4.      frequency of accountings;

5.      which party bears the cost of currency conversion and fluctuations as well as the cost of bank wire fees; and

6.      design and creative control, including approval rights to the translation if such is the nature of the deal.  

          Of course, once the book is in the hands of the foreign publisher, the American publisher runs the risk that the foreign publisher might proceed to publish the work even without an agreement and without paying the American publisher.  Therefore, an American publisher should be very careful and, in the ideal situation, the American publisher should not allow the foreign publisher to have the book until the American publisher receives the signed agreement and advance.           

Author And Publisher Issues 

          As between American publisher and the original author, the licensing fee (both the advance and the royalties) are usually split between the parties in a fashion that is subject to negotiation in the original publishing deal.  It is wise to make clear how these licensing fees are going to be calculated.  However, both parties are cautioned to read and negotiate the agreement carefully.  (Read “Is It A Sale... or a License.”) 

          And if the author has retained foreign rights to a particular book and is going to use his or her agent to negotiate the same, it is worthwhile noting that often agency agreements provide that the agent receives a higher commission in such an event.  That higher commission is to cover the agent’s responsibility for paying the local agent in the territory for securing the deal.  And even if the author retains these rights, the author may have a legal responsibility to pay to the American publisher a share of the income therefrom. 

Conclusion 

          There are many other issues that may arise in such deals.  This is an area filled with subtlety and nuance.  Since your rights and remedies are subject to severe geographical and, as a result, practical difficulties, your agreement must be as strong and protective as it can be. 

          You should not be representing yourself in such negotiations.  Cutting and pasting from form agreements can turn out to be quite self-defeating.  (Read “The Do It Yourself Publishing Attorney”)  Seek advice from an attorney with experience in these areas.        

Copyright 1996, 2004, 2019 Ivan Hoffman.  All Rights Reserved. 

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This article is not legal advice and is not intended as legal advice.  This article is intended to provide only general, non-specific legal information.  This article is not intended to cover all the issues related to the topic discussed.  You should not rely on this article in any manner whatsoever and you should not draw any conclusions of any sort from this article.  The specific facts that apply to your matter may make the outcome different than would be anticipated by you.  This article is based on United States laws but the laws of other countries may be different.  You should consult with an attorney familiar with the issues and the laws of your country.  This article does not create any attorney client relationship and is not a solicitation. 

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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.


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