Copublication: Buying and Selling Rights
BILL HAMILTON, UNIVERSITY OF HAWAI'I PRESS
The United States book-publishing market dominates global sales of English-language books. Overseas English-language publishers crave a slice of the United States market and are eager to make arrangements to ensure that their publications are available for sale in the United States. In fact, many small, independent overseas publishers must sell editions of their books in the United States if their books are to be profitable. In turn, many U.S. publishers look to the overseas English-language markets as a way to increase the sale or profit of their English-language edition, and to foreign-language markets for translations of titles that transcend a specific language. Importing and exporting books has become an art and science unto itself.
Publishers import books to increase the number of books they offer, to add depth to a maturing list, or to enter new markets they are starting to explore editorially. Purchasing sales rights for a specified territory, for example, North America, is far more common today than it has ever been in the past. The rights purchaser generally has an established presence in the selected marketplace and is editorially attracted to a project, and the book involved often fills a need in an area where the purchaser's editorial department has been unable to find a suitable project. The reasons to import are many and varied, but the importing process itself is fairly straightforward.
The purchasing publisher, or rights buyer, is generally called the copublisher. The originating publisher, or rights seller, typically will handle all aspects of book production and manufacturing, providing the copublisher with a finished book bearing the copublisher's imprint and any other changes the copublisher has requested.
Once a publisher decides to secure the rights to a book, the rights arrangement can be made in one of two ways: (1) the U.S. publisher can join the overseas publisher's print run (copublish), providing imprint changes for its edition of the work; or (2) the U.S. publisher can be granted a reprint license. The method selected depends on the answers to several questions related to the timing of the deal, the print run, and whether the book needs to be adapted for the new market--for example, changing the spelling of words from British English to American English. In addition, the cost of printing overseas must be weighed against the cost of printing domestically.
Most scholarly publishers choose the copublishing route and join the originating publisher's print run. The economics of joining a print run are generally favorable for both the originating publisher and the U.S. copublisher. A joint print run is also the simplest way to complete a rights purchase. The originating publisher is responsible for all phases of production and manufacturing, including transportation of the books to the purchaser's warehouse. With the originating publisher responsible for the entire production process, the copublisher is able to obtain a new book for its list at very little overhead cost.
The typical scholarly copublishing venture follows a fairly conventional route. The originating publisher canvasses potential copublishers to determine interest. Interested copublishers request a manuscript or proof and evaluate it in-house; if it passes editorial and marketing muster, they usually send it to an outside reader for a scholarly evaluation. A positive evaluation is often followed by presentation to the publisher's editorial board for formal acceptance. At this point the copublisher asks the originating publisher to provide a unit (per copy) price quote on a specific number of copies. If the copublisher is unsure how many to request, most originating publishers are willing to provide multiple quotes encompassing several quantities: 1,000, 1,500, 2,000, and 2,500; or 500 cloth and jacketed copies and 1,000 paper, 500 cloth and jacketed and 2,000 paper, and so on.
The copublisher asks the originating publisher to include in the quote the necessary imprint changes--title page, copyright page, cover, jacket, ISBN and Library of Congress Cataloging-in-Publication (CIP) data; the author's royalty; a clear statement of who pays for transportation (see below); and in what currency the deal is to be made. The request for a quote would be phrased as follows:
Please provide me with a quote on The Search for Jane Austen's Past in "Pride and Prejudice", by Lenore Lemore. I would like separate quotes, in U.S. dollars, for 1,000 and 1,500 copies, cloth and jacketed, with our imprint, FOB (this might be Ex-works, CIF, or Delivered--all have different costing ramifications), and royalty inclusive. I plan to provide my own jacket copy, and would like 200 extra jackets. Should we reach agreement, our exclusive territory is to be North America, and delivery of the stock is anticipated to be March of this year. I look forward to receiving your quote.
Transportation costs are generally stated as follows: FOB (free on board) or CIF (cost, insurance, and freight) requires the originating publisher to pay for the cost of transporting books from the manufacturer to the port of shipping. The books become the financial responsibility of the copublisher at that point to get the books off-loaded, cleared through customs, and transported to their warehouse. Ex-works requires the copublisher to pick up all transportation costs from the originating publisher's manufacturing location. Delivered is an all-inclusive unit cost whereby the originating publisher pays for all transportation costs to your designated destination. The cost of transporting stock can be considerable, and the copublisher's book-pricing decision must accurately reflect this cost.
The originating publisher will respond rather quickly if the book is about ready to go to the printer. Its response will consist of a flat amount to be charged per copy. The amount quoted will include the originating publisher's manufacturing cost, a contribution toward the origination costs, a realistic profit mark-up, and the author's royalty. Let's use the above example as the one the publisher responds to as follows: "I can provide you with 1,000 cloth and jacketed copies at U.S. $6.89 per copy and 1,500 cloth and jacketed copies at U.S. $6.40 per copy, your imprint, royalty inclusive, FOB port of printer (Hong Kong). I will provide 50 extra jackets at no cost. One-third is due upon acceptance of the offer and the balance upon receipt of the books."
The copublisher decides that 1,000 copies at $6.89 per copy is the quantity to purchase, does its costing to determine a selling price, finds its selling price meets its gross margin requirement, and accepts the offer. The copublisher asks the originating publisher to send flap copy and back cover copy, if written, and a cover mock-up, if prepared. The copublisher sends a check for one-third of the full amount and begins to prepare the CIP application, front matter changes, and bar code. The copublisher also writes new flap copy and back cover copy if the originating publisher's copy is deemed inappropriate for its edition. For the cover and jacket design, the copublisher can either use what has been prepared by the originating publisher or de sign and print its own. Remember, however, that every time a small change is requested, it falls outside the original price quote and must be considered an add-on to the quoted price. Of course, the more that needs to be done outside the original deal, the less revenue the book will generate.
The second method of importing books is through a reprint licensing arrangement with the originating publisher. The agreement defines the rights being licensed (cloth, trade paperback, or mass market paperback), the exclusive sales territory (world, North America, United States, etc.), and the means by which the purchasing publisher will reprint (duplicate film, photo offset). The most common way is for the purchaser to offset the original book, paying the originating publisher an offset fee and a royalty on each copy sold.
Regardless of the method chosen, originating publishers are responsible for making sure that all clearances have been obtained from the holders of any copyrighted material. Licensees determine what changes they wish to make (imprint changes, cover design, spelling, jacket copy), the size of their print runs, when to schedule publication dates, and perhaps the addition of forewords, introductions, or new prefaces for their editions.
When analyzing a rights purchase, as with any book published, the costs and revenues should be calculated. The profit and loss statement should clearly show the book's contribution to the organization's bottom line.
If you have learned your lesson well in purchasing rights, you have also learned all the basics to selling rights. Selling rights is a zero-sum game. A publisher needs to spend considerable time and staff resources to develop an effective rights operation; selling rights effectively is a full-time job that should be staffed by a person with business savvy, skills in contract negotiation, and an understanding of the markets that books are intended for. Rights can be sold domestically on editions of works that publishers do not want for themselves, that is, trade paperback or mass market editions, generally a year or so after the book has been published. It is a good idea to discuss the selling of rights with the editorial and marketing departments before proceeding, since the original thinking about the book and its potential market might have changed since publication and the staff might want to reprint the work in-house rather than selling the rights. Foreign rights can encompass either an edition of the volume being published domestically or derivative editions. The rights contract should clearly define what is being licensed and the limitations of the license.
Once a publisher has developed a database of potential rights purchasers, it should send inquiries describing the project, book specifications, rights available, and expected publication date. Interested copublishers will respond quite quickly, asking for a copy of the manuscript or proof, or a reading copy of the book, if published. The earlier a publisher organizes the rights deals, the more likely it will be to run-on the edition and lower its manufacturing costs. It will also be better able to determine the book's long-term contribution to the organization.
Once a copublication quote is requested, the publisher must establish a per-copy price that works for the organization. The two most common ways to arrive at a selling price are: (1) to add together estimated manufacturing cost, the author royalty, an origination fee of approximately 10 to 20 percent to cover nonmanufacturing costs, and transportation; or (2) to establish the unit cost simply by discounting off the suggested retail price by approximately 65 percent, which is a standard figure industry-wide.
All the issues raised in the purchasing of rights apply equally to the selling of a copublication. Publishers should take into consideration imprint changes, author royalties, binding and jacketing, transportation and insurance, and any other expenses that will add to the cost quoted the copublisher.
If it is impractical, for whatever reason, for the other publisher to purchase an edition from the originating publisher, the originating publisher may wish to license the other publisher to produce its own edition at its expense. This is a much simpler procedure than a copublication; it is essentially a royalty arrangement. The other publisher agrees to pay a royalty based on either its edition's list price or net sales, annually or semiannually, in return for permission to allow it to legally publish the book under its imprint in a defined sales territory.
To prepare its edition, the other publisher will buy a copy of the originating publisher's typeset, either as a set of final page proofs suitable for reproduction or as a set of films. The originating publisher usually charges an offset fee for the use of the typeset; this fee is separate from the royalty payment and ordinarily is not shared with the author. If the other publisher requests duplicate film, the charge is usually the actual cost charged by the printer, transportation costs, and a small offset fee of approximately 20 percent added to the direct costs. Besides being simple to arrange, licensing has another advantage--it can create income from the backlist. Books already in print that are in emerging fields or fields moving in new directions may generate renewed interest. Constant vigilance of the marketplace and of other publishers' lists can provide licensing opportunities for your backlist.
The royalty rate and advance payment are always subject to negotiation. The broad parameters currently in use suggest that most royalty arrangements are 6 to 8 percent of the list price for the paperback edition and 10 to 15 percent of the list price for the cloth edition. In special circumstances a flat fee, in lieu of a royalty, can be negotiated and paid in advance. Advances against future royalty payments range from as little as $250 to several thousand dollars.
The usual license is a hybrid of copublication arrangement and royalty schedule that results from a specific negotiation. Naturally, the best deals are those in which both parties are satisfied with the terms and conditions.
The buying and aggressive selling of rights can add significant income, and institutional value, to an organization. A clear understanding of the economics associated with rights arrangements will often determine a press's ability to break even or to turn a profit on a particular title. As we move into more difficult economic times, whether from university budget cuts or market forces beyond our control, the revenue generated from rights deals will become more critical to future growth. All university presses should treat their intellectual property as an asset needing constant attention. Presses around the world are anxious to increase their income through profitable rights purchases and sales. University presses should conduct active rights programs in order to maximize their books' potential.