Statements of Account.
Publisher must maintain complete and accurate books and records relating to its sales of the Work, as well as any licenses it has entered into with respect to the Work, and must furnish Author with a statement with each royalty payment indicating the sales proceeds received by Publisher during the period covered by the statement. These statements shall contain such data as:
the number of copies sold (and total sales to date), with a separate line for each Format;
- the list price or gross net, as applicable;
- the royalty rate and the gross amount of royalties per transaction, including any deep discounts;
- the amount of reserves against returns withheld and how the amount previously withheld has been applied to Author's royalty account;
- the number of copies returned;
- the gross amount received pursuant to each license granted by Publisher; and
- the number of copies in each royalty category printed, bound, and given away in that period.
Publisher shall prepare a statement of account semi-annually, in accordance with its regular accounting practices for all six-month periods during the term of this agreement, and shall send these statements, together with payment of the amount due, and regardless of whether there is a payment due, within three months following the end of the period. Author's share of amounts received from the disposition of licenses granted under this Agreement shall be computed after deduction of any foreign taxes withheld and bank charges. State, federal, and foreign taxes on Author's earnings, when required by law to be withheld and paid by Publisher, shall be proper charges against Author's earnings hereunder. If Author has received any overpayment or is otherwise indebted to Publisher under this Agreement, Publisher may deduct the amount due from any sum due or to become due to Author under this agreement; however, in no event shall an unearned advance be considered an overpayment.
The overwhelming practice among large trade publishers is to pay royalties and provide an accounting on a semi-annual basis. Some smaller presses and some ebook or print-on-demand publishers, however, offer quarterly royalty statements and payments. Many publishers make payments within three months after the close of an accounting period. Unfortunately, it is rare for the publisher to vary its accounting procedures for a particular title or author. In any case, the contract should specify when payments are due, and you should notify the publisher in writing immediately whenever payments are not received in a timely manner. An accounting procedure that requires the publisher to issue royalty statements and payments at shorter intervals works to your advantage, especially if it appears that the publisher might go bankrupt. The sooner you give the publisher notice of non-payment, the sooner you can terminate a contract for non-payment and avoid compromising your rights during lengthy and uncertain bankruptcy proceedings (we discuss this scenario in detail in our commentary to Section 27 of the Model Contract).
A second important point to note while reviewing the accounting and payments provision of your contract is the distinction between statements and royalty payments. One situation to especially watch out for is the publisher withholding statements and royalty payments until a certain amount has accrued (e.g., $50 or $100). The Model Contract provision envisages a scenario where the publisher will render timely statements regardless of whether any or only a small royalty amount is due. However, if your publisher's standard contracts include language allowing it to withhold statements and payments, be sure to negotiate for a change that will obligate the publisher to at least issue royalty statements even if the publisher does not owe you any money for that accounting period. You are entitled to know your sales figures, the status of your account, how much has accrued toward your advance, and other pertinent financial information.
Royalty statements should include the subsidiary rights income received in each rights category as well as the name of the licensee. If your publisher's standard contracts do not include a clause specifying reporting of licensing income, such as Section 13 of the Model Contract, try to negotiate for its inclusion. As an alternative, you might consider asking for a provision that allows you to obtain these records by sending the publisher a written notice. Below is a sample clause:
Upon Author's written request, Publisher shall furnish records of income received from the disposition of subsidiary rights and copies of sublicenses.
Some publishers might resist the requirements in Section 13(g) of the Model Contract that stipulates that the royalty statement indicate the number of copies in each royalty category printed, bound, and given away during that period. Most publishers' royalty statements do not report the number of copies printed, nor do they report the number of copies on hand. Publishers claim that their accounting systems are not designed to report this, arguing that factors such as the number printed or the number on hand do not relate to the royalties due. The Authors Guild believes that authors should be entitled to this information, and that publishers' accounting systems should keep track of it. Some publishers will agree to give such information to you upon request and, indeed, that information will certainly have to be revealed if you exercise your right to audit the publisher's records (see Section 20).
If the publisher refuses to include the details listed in Sections 13(g), then the contract should provide as follows:
Upon Author's written request, Publisher shall furnish the following information as to any specific royalty period: the number of copies printed and bound in each printing of the edition; the date of completion of reprinting and binding of each edition; the number of copies distributed free of charge; the number returned; and the cumulative total sales and disposals.
Publisher agrees to notify Author of the quantity of the first printing and the retail price of the hardcover trade edition of the Work. Publisher shall also notify Author of the quantity and retail price of all reprints and of all other editions Published by Publisher.
Many publishers will agree to provide this information. In any event, review your royalty statements carefully and do not hesitate to ask your publisher for any information needed to verify your statements' accuracy.