Part I of this article, "Pre-Deal Tactics", discussed the initial methods and deal memorandum that could be employed by an English language publisher licensing translation rights to a foreign publisher. This article discusses some of the key terms that will need to be discussed and agreed upon by the parties before a licensing agreement can be successfully concluded.
As with any type of subsidiary rights deal, the governing principles in a foreign rights deal are normally the financial terms however, there could also be other important issues that will need to be considered. Although the primary objective for the English Language Publisher may be "how much can I get" this may not always be the controlling factor. Therefore, at the conclusion of the negotiations, if either party is not satisfied with the final terms that have been offered and negotiated, then the best advice for the dissatisfied party may be to turn down the deal.
Negotiating The Key Terms
The purpose of this article is not to discuss or elaborate upon all possible foreign rights deal points and their permutations but instead to provide an overview that should assist a publisher in negotiating this type of deal. It must also be recognized that every foreign country has its own particular market characteristics that will come into play when negotiating a licensing agreement.
It is recommended that the parties should first agree upon the specific language and territory grants that will be covered by the agreement before they negotiate the royalty advance and royalty rate. The importance of the language and territorial grants can be illustrated by the following examples. Assume that the English Language Publisher is negotiating with a publisher located in Spain. One of the first issues that must be resolved is whether the Spanish publisher wants to acquire "worldwide" Spanish rights or only the rights to sell the Spanish language edition in Spain. The English Language Publisher should also realize that there are Spanish language distinctions that may have an impact on its future royalty income when granting worldwide Spanish language rights. Although Castilian is the predominant language spoken in Spain there are also other spoken dialects such as Galician and Basque. Furthermore, a Castilian language edition may be more suitable for some countries such as Mexico and Argentina but less suitable for other Spanish speaking countries or locations. Therefore, an agreement upon the language and territorial grants is very important since the specifics of these grants could have a significant impact on the royalty advance and royalty income received by the English Language Publisher.
A second example where language and territorial grants are very important as well as complex involves the Chinese language. The problem regarding Chinese language rights is that "traditional written characters" are primarily used in Hong Kong and Taiwan while a "simplified character" system has been more universally used in the People's Republic of China ("PRC") and other Chinese speaking parts of Asia, including Singapore and Malaysia. Therefore, when negotiating Chinese language rights deals with potential licensees, whether in the PRC, Taiwan or another Asian country, it is important to specify the particular countries that will be included in the territorial grant as well as specifying which Chinese character system will be included in the language grant. One important caveat to remember when negotiating with the PRC is not to forget that the PRC recognizes Taiwan as a "territory" of the PRC.
As a generalization the largest foreign language royalty advances are usually obtained from Japanese, German and Spanish publishers. The typical advance for a non-best selling title is usually between $1,500 to $8,000, but the particular advance could certainly be lower or higher than this range. The size of the particular advance will usually be determined by a number of factors including the:
- size of the potential market,
- selling price of the book,
- estimated first printing in the foreign language and
- royalty rate.
The royalty rate, whether on retail list price or on monies received, usually varies on a country-by-country basis although it is usually between 6% to 10% for the first printing. The royalty rate will also depend on the subject matter of the translated title, the difficulty and cost of preparing the translation and any additional costs that may be required such as those for extensive illustrations or other production matters. It is also not uncommon for the royalty rate to be increased on second and third printings of the translated work. This occurs because the foreign publisher's translation costs have been recouped on the first printing.
Sometime during the early stages of the negotiation process the foreign publisher should present the English Language Publisher with a proposed royalty advance and royalty rate. The English Language Publisher in negotiating the royalty advance can then use this information. One method on how this can be done is as follows:
- develop an estimate for the unit sales potential of the title being licensed,
- obtain from the foreign publisher the minimum retail selling price of the book in their territory,
- obtain from the foreign publisher its estimated first printing,
- calculate the estimated royalty that the English Language Publisher will receive if the first printing is completely sold, and
- negotiate a royalty advance that is as high a percentage as possible based upon the royalty compensation the English Language Publisher would receive if the first printing was completely sold; the percentage is usually between 33% and 50%.
Example:
Retail Selling Price is $10.00.
First Printing is 5,000 copies.
Royalty Rate on First Printing is 7% of the Retail Selling Price.
Royalty Earned on First Printing is $50,000 @ 7% or $3,500.
Royalty Advance @ 50% is $1,750.
The bottom line for the English Language Publisher with regard to the royalty advance is that at a minimum it should cover the English Language Publisher's expenses that are involved in negotiating and implementing the deal. The only exception should be if there are other significant reasons for licensing the translation rights.
The advent of electronic and print-on-demand publishing is making it more important for the English Language Publisher to discuss the grant of these rights with the foreign publisher. In the past the foreign publisher has usually had the right to negotiate serialization, book club and excerpt rights for the foreign language edition. If any of these subsidiary rights deals were concluded by the foreign publisher then the foreign publisher would compensate the English Language Publisher with a percentage of the net receipts received from the sales or license of these subsidiary rights. With respect to the remaining subsidiary rights for the foreign language edition, these usually could only be negotiated and a subsidiary rights deal concluded after the foreign publisher received approval from the English Language Publisher.
Some of the other important contract issues that must be agreed upon include the following.
- Exclusivity or non-exclusivity. It is highly unlikely that a non-exclusive agreement can be negotiated for the foreign publisher's primary territory however, the issue of non-exclusivity becomes important for the "open territory".
- The term of the agreement. This is usually between five and twelve years with seven years being the most common period of time.
- Payment should be in United States dollars.
- The ability for the English Language Publisher to use or license the foreign language translation prepared by the foreign publisher. This consideration is becoming more important when worldwide language rights or electronic book publishing rights have not been granted to the foreign publisher.
Conclusion
Hopefully, the above information will provide the publisher licensing foreign rights with a basis for negotiating these deals. Finally, there are two caveats that the English Language Publisher should remember. First, the English Language Publisher should be the one who has prepared the licensing agreement and second, the English Language Publisher should not sign the agreement until the foreign publisher has signed the agreement and satisfied any financial commitments that may be required at the time the agreement is executed.