[Originally published in the magazine Romance Writers Report, May 2013.]

Over and over again we here the phrase:  We’re living and working and writing in a global world.  The books that we write in English and publish in the United States might well find their way to other countries.  But when we read our contracts and discover entire paragraphs devoted to “Foreign Rights”, what exactly are we discussing?

This article will demystify foreign rights for the romance author; however, it does not constitute specific legal advice for any individual’s situation. It does not create an attorney-client relationship or any other expectation of confidentiality, nor is it an offer of representation.

Foreign Rights:  It’s All Greek To Me

The typical publishing contract includes a “Territory” clause that specifies the geographic region where the publisher can perform specific actions.  Territorial geographic descriptions (e.g., “in the United States”) are often teamed up with language restrictions (e.g., “in the English language”).

Typical territory language might be phrased:

• “Author hereby grants to Publisher the exclusive right to print, publish, and sell the Work in the English language in the United States of America, its territories and possessions, the Philippine Republic, and Puerto Rico…” or
• “Author grants and assigns to Publisher the exclusive license to utilize all copyright rights in and to the Work throughout all countries in the world…” or
• “Author grants and assigns to Publisher [various rights] in the Work in the English language in all British Commonwealth countries, as defined in Attachment A…”

In addition to the territory clause, virtually all contracts include a discussion of subsidiary rights (e.g., movies, audio recordings, book club rights, and similar alternative markets for the published work.)  One subsidiary right is “foreign rights” – the right to publish and sell the book in markets other than the main territory.[1]

In a typical contract, an author receives less money for her subsidiary rights than she receives for her main rights; the publisher takes a cut as compensation for its work in exploiting those rights.  It is common for an author to receive 50% of her royalties for works sold pursuant to a subsidiary right; the publisher takes the other 50%.

This arrangement makes sense when the rights are difficult for an author to exercise.  Nevertheless, an author’s ideal contract arrangement would result in multiple contracts with multiple publishers, each of which is best positioned to print, distribute, and promote the author’s works in a specific language within a specific territory.  For example, an author who negotiates shrewdly might find herself with the following contracts, among many others:

• English language rights in the United States
• English language rights in Great Britain
• English language rights in Australia and New Zealand (two countries which are rarely separated by publishers)
• Portuguese language rights in Portugal
• Portuguese language rights in Brazil
• Mandarin language rights in China
• Cantonese language rights in China

In the course of contract negotiation, authors generally attempt to reserve as many foreign rights as possible while publishers typically attempt to acquire as many foreign rights as possible.  Some publishers (e.g., Harlequin) make foreign rights, at least in Commonwealth countries, a non-negotiable clause of the contract.

Why Bother?

As mentioned above, some subsidiary rights – including foreign rights – are difficult to develop.  Few authors have the capability of exercising those rights on their own.  (We tend not to have recording studios in our basements, even if we can read our books competently; therefore, we have trouble exercising retained audio book rights.  We don’t have access to the decision-makers at book clubs; therefore, we find it challenging to sell those rights.  And watching the film The Player is the closest most of us have ever come to making a pitch to a Hollywood mogul; therefore, we often cannot effectively exercise movie rights.)

So, why should authors attempt to carve foreign rights out of the laundry list of subsidiary rights in the standard publishing contract?  The answer, in a word, is “money”.  Foreign rights can be extraordinarily valuable; reserving rights creates the possibility of selling a single work multiple times.  Some countries (e.g., Germany and France) regularly pay as much for rights to publish in their territory as an author receives for her initial sale in the United States.

Authors should push particularly hard for foreign rights when a publisher only publishes English language books that it markets solely in the United States.  Otherwise, an author is likely to find that she has conveyed rights to a publisher who has no intention and no capability of exercising those rights. For example, if a publisher has no foreign distribution system, it is not likely to launch large-scale overseas sales, even for a title that has appeal to an international audience.

While some publishers have strong international publishing arms (e.g., Random House (in the United States) and Verlagsgruppe Random House GmbH (in Germany)), publishers that do not typically sell their foreign rights to an unrelated third party.  Those sales might happen for any variety of business reasons, none of which have the author’s career and finances as a priority.  For example, the publisher might decide to sell all French language and geographic rights for a paltry sum.  It might sell all Portuguese language rights to a publisher equipped only to distribute books in Portugal, but no in populous Brazil.  It might agree to do business with a disreputable foreign partner who fails to bring the book to market because the publisher has other pecuniary interests that are met by that partner.  In any of these instances (or the dozens of others nightmares authorly brains can devise), authors have no recourse if they have not specifically reserved their rights.

Where in the World?

Some foreign rights deals get made during the ordinary course of business throughout the year.  Many others, though, are made at the three great book fairs:

• London Book Fair (held in mid-April)
• Book Expo America (held in New York City in late May or early June)
• Frankfurt Book Fair (held in October)

Of these three, the Frankfurt Book Fair is substantially the largest.  It is held in ten separate buildings, and it is estimated to be thirty times larger than the London Fair and fifteen times larger than BEA.

What Could Possibly Go Wrong?

Alas, not all publishers in all countries can be as generous as the ideal German or French sale described above.  Some countries have relatively small populations; their publishers can only offer small advances because they expect to sell a relative handful of books.  Other countries simply have not developed any robust publishing industry.

Moreover, most authors – along with many domestic agents – do not have the contacts to make regular international sales.  Therefore, it becomes necessary to work with agents who specialize in foreign markets.  Those agents, of course, do not work for free.  Typically, an author pays 20% for her international sales – 10% to her domestic agent who gets the ball rolling and 10% to the international agent who cements the deal.  (Indeed, in some cases, the domestic agent continues to take a standard 15% cut.  Those details are handled as stated in the author’s contract with her agent.)

Even if the stars align, and an author creates a strong team to approach international publishers, some novels may be extremely difficult to sell.  When faced with different cultural values, publishers might opt not to pursue certain types of novels.  (For example, spicy romance novels and erotica have not sold well in India and other relatively conservative countries.)  Contemporary romance novels that rely on numerous brand names might not translate well to a country that does not import those products.  Historical novels that carry great cachet in the States may not garner the same support in other countries.

A new author who has not yet developed a reputation in her field might be more difficult to market to foreign publishers than an established author.  In that instance, an author might choose to go with a large domestic publisher that has strong international ties (e.g., Harlequin) even if she receives less money than she would with a publisher who would agree to a separate foreign rights sale.  A less-than-perfect contract for one book or series might build an author’s reputation sufficiently that she can penetrate foreign markets effectively on future books sold to new domestic publishers.

One other factor might doom the sale of foreign rights:  the length of the novel in question.  Foreign publishers make a substantial investment to translate the works they acquire.  Longer works command a greater sum to translate.  Therefore, all other things being equal, foreign publishers prefer shorter books.

Finally, authors who are contemplating a foreign sale should consult with their tax advisors.  The United States has entered into tax treaties with many countries, eliminating costly dual taxation.  Not all countries, though, have entered into treaties with the United States.  Foreign income, especially large amounts of it, can have extremely negative consequences for some taxpayers.  Informed decisions are the only safe decisions.

(Of course, authors should also keep in mind the currency in which they will be paid.  Extremely volatile currencies may result in substantially different incomes than an author might expect, particularly if a contract has three or more payment points.)

What About Self-Published Authors?

Of course, self-published authors can enter foreign markets, just as traditionally-published authors do.  While many agents have been reluctant to represent self-published authors in the past, those traditions are changing as the economic model proves robust.

Amazon’s Kindle Digital Publishing and Barnes & Noble’s PubIt! program both include options for authors to distribute their books to international markets.  These options do not automatically include translated content; however, an author can hire a translator and then access the services.

As of the writing of this article, Amazon provides international sales outlets for electronic books in Brazil, Canada, France, Germany, India, Italy, Japan, Spain, and the United Kingdom.  Amazon’s terms vary by country.  For some countries (e.g., India), authors can only receive the top royalty rate of 70% if they enroll their book in Amazon’s exclusive-access Kindle Select Program.  Barnes & Noble currently provides access to the United Kingdom.

Knowledge is Power

Not every author will have the negotiation power to obtain the foreign rights she desires, and not every novel is equally suited to international publication.  Nevertheless, every author can study the terms of her contracts and trends in the international marketplace to structure the best possible deal in the current publishing environment.