- Yes you might be working on your first self-published book.
- Yes, you might still be looking for a creator owned deal.
- Yes, the vast majority of comics will not become movies or TV series or anything else.
- Yes, it might take decades before Hollywood (or in the future Amazon, Netflix or its successors) stumbled upon your little book.
Filtering by Category: "understanding contracts"
Why Comic Creators Need Lawyers
You’ve probably already came to the conclusion that I'm only writing this post to get more work. After all, I am an attorney who represents comic creators. (See An Introduction to Creative Contract Consulting). If I scare you into thinking that you'll be cast off into the Negative Zone if you don't get a lawyer, then there's a good chance you'll hire me. To a certain extent, that's true. But there are three points to keep in mind before you dismiss me out of hand:
- The history of comics is filled with creators who lost all the rights to their characters and spent years in court trying to get those rights back. (See Newsarama: The Ten Major Creator Disputes in Comic Book History)
- Based on the survey I did over the summer (See Results of the Great Independent Comic Survey) 25% of current comic creators do not own (or they don’t know who owns) substantial rights to their books.
- Even if you decided to hire a lawyer, you may decide to not hire me
The reason you need a lawyer to help protect your rights is because legal contracts and legal principles are designed to be confusing. The language used in contracts is circular, opaque and dense. What the words mean and what you think they mean are often two different things. The implications of certain words are often unclear even to the person who wrote the contract. Without someone there to explain things to you, it is easy to sign something that will hurt you down the line.
Lawyers are not cheap. We have to pay off exorbitant loans and many of us have expensive tastes. We normally charge by the hour, so the best way to use a lawyer is to hire one for as short a period of time as possible. If you hire them before a deal gets signed, it might cost you a few hundred bucks. If you hire one after something goes wrong and you need to go to court, that number can rise exponentially. Court cases can take years and those billable hours pile up fast. It's better to bring us in on the front end and nip the issue in the bud.
I understand if you don't want to hire me. You might not like my style. I might not be attractive enough to be your lawyer. That's fine. I've been rejected before. All I ask is that if you're faced with a contract that involves you or your work, get a lawyer to review it before you sign it. And not just any lawyer. A criminal defense attorney might not understand the entertainment or comics market well enough to help you. Check the background of your prospective attorney, talk to your colleagues about who they use. Once you find the right one and you determine they have an acceptable level of attractiveness, retain them and put them to work. That will give you the time and the peace of mind to go back to making comics.
Gamal
Deal with the Devil (How Comic Creators Get Their Rights Stolen)
Signing a contract with a publisher can start an artist down the road to professional recognition and lucrative opportunities far beyond comics. It can also strip you of everything you have worked so hard to create. There are a lot of potential pitfalls in creator owned contracts, but the major ones are:
- You agree to give the publisher complete control of the property, not just the actual comics, but the underlying intellectual property (See Image and Story: Copyright and Trademark)
- You agree to give the publisher control of the property in all media ever created, not just in digital and printed comics (See Addition by Division: Separating Rights in Creator Owned Deals)
- You agree to financial terms that are designed to keep you from ever being paid for your work (See Your Slice of the Pie Parts 1 and Part 2)
- You agree to give up your rights without being paid for them (See Get What You Give: Rights and Revenue for Creators)
- You agree to never get back the rights to your property (See Eternity is a Long Time in Comics)
Gamal
PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.com FOR A FREE CONSULTATION.
Eternity is a Long Time: License Terms in Comics Contracts
In the language of contracts, the Term is the length of time that a contract will be in effect. So if you license the publishing rights to the Greatest Comic Ever (GCE) for three years from the execution of the agreement, and the contract is signed on January 1, 2014, then the rights revert back to you on January 1, 2017.
There are two types of terms in comic book contracts, finite and infinite. A finite contract has a term that lasts for a certain amount of defined time. Like the example above, the term could be months or years, but sooner or later, the rights revert back to you.
Publishers have an inherent interest in holding rights for as long as possible for several reasons. First, it might take a considerable period of time before a property reaches its height of popularity. Wolverine has been a benchmark of popularity for the past ten years, but its celebrity status in comics has been solid for the past twenty years and it languished in relative obscurity for years after his first appearance in 1974. Second, IP assets, like characters are not perishable and they don't take up space. They are mental concepts that can be stockpiled at little cost. Finally, characters can prove to be powerful assets to whoever holds them whether the rights are resold as movies or games, or if the characters themselves used as assets to generate investment income.
Your Slice of the Pie Part II: When Do You Get Paid?
- if the publisher pays you any advance prior to the release of the book (See Your Slice of the Pie Part I: Net and Gross Profit). In this case, you won't be paid until your percentage of royalties exceed the money you were given up front.
- if the cost of producing the book and deducted from the gross sales exceed the actual sales, then you won't get paid until sales exceed costs (See Your Slice of the Pie Part I: Net and Gross Profit)
- if the publisher only pays royalties after a certain threshold is reached (normally $50 or $100) then you won't be paid until the pay cycle where your share of the royalties crosses that threshold
When you are thinking about the practical effects of payment timing there are two things to keep in mind. First, don't expect to see immediate payment for a new book unless there was an advance up front. Very few independent artists rely on just creator owned book sales to make a living, but it's worth pointing out that you don't want to count on paying February's rent with the money from January's book sales. That money might not come until April or May. The solution to this is to supplement your creator owned income with work for hire gigs (See Entertainment Contracts 101: Creator Owned vs. Work for Hire) that at least in theory are paid much faster.
Gamal
Catastrophe and Contracts (Understanding the “Act of God” Clause)
Meet with Creative Contract Consulting at New York Comic Con
Your Slice of the Pie Part 1 (Gross and Net Profit Concepts in Creator Owned Deals)
A couple of weeks ago I introduced the different types of rights you could license as a creator and the different types of revenue you can get from a licensed work. In that post I hinted that there were specific concepts that impact how much you’re paid on any given deal. This post (and probably the next few posts) will go into more details about the economics of creator owned deals.
Types of Revenue
As a refresher from the earlier post, I need to point out that the various ways that creators are paid in creator owned deals. The three major ones are:
A royalty is a percentage that the artist earns for every finished unit that is sold. For example, an artist might receive 30% of every one of their comics that is sold to the public.
An advance is money that is paid before the work is finished. For example, a writer of a novel might receive money up for her novel based on the proposal not the finished product.
A minimum guarantee (MG) is money paid up before the work is finished, based on anticipated sales. For example, if a toy company plans to sell a new licensed toy for $10 and the creator gets 10% of that sale, then the creator gets $1 per unit sold. If the company expects to sell 100,000 units, then the MG that the artist gets for this deal is $100,000.
Definitions of Revenue
In general there are two ways that revenue is calculated for your royalty or minimum guarantee. There are gross profit and net profit.
Gross revenue or gross profits is the pure income that a product or service generates.
Net revenue or net profits is the income that a product or service minus certain expenses.
In the vast majority of cases, publishing deals are calculated by net revenue. The key for a creator is to know what is being included in the definition of net revenue and avoid situations where the expenses are always greater than the revenue generated.
Examples
Question: Let’s say you produced a comic called the Greatest Comic Ever (GCE for short). A publisher says they are willing to make a deal with you to publish GCE. They offer you 50% the wholesale profits as part of the deal. The comic sells for $2 wholesale. Is this a good deal?
Answer: That depends. The truth is there is no way for you to know if this is a good deal or not until you understand how the contract defines profit.
If the contract says you get 50% of the gross profits then you get $1 per book sold.
If the contract says you get 50% of the net profits then you have find out what is deducted from the gross to calculate the net.
The Net Revenue Trap
It is a fairly common business practice to deduct the cost of goods sold from the gross to determine the net. Cost of goods sold means whatever the publisher has to pay to produce and distribute your book. Those costs can include editing, printing, shipping, advertising, returns and a few other items. Most publishers track their costs in a document called a profit and loss sheet, so they know what percentage of every book goes into the cost of goods sold. Many publishers will list exactly what goes into the net calculations. This is helpful for figuring out where the money is going.
The problems occur when the creator has no idea what goes into the net calculations or the definition of net is so broad that it wipes out any potential profit for the creator. In the most unscrupulous contracts, the publisher will creatively expand the definition of net revenues to the point that the creator never gets any profit for his work even if it sells millions of copies. For example, if the wholesale price of GCE is $2 but the net deductions are $3 per book then the net profit is -$1 per book. That means you get $0 no matter how many copies the book.
Playing Your Position
It is unrealistic for an artist or creator to understand the nuances of licensing revenue, especially when they first enter the market. You need to focus on your craft and create the best property you can. You also need to have access to financial and legal professionals who can explain potential deals to you and allow you to make informed choices. That is why it pays to break down each contract and understand its implications before you move forward.
Next week, I’ll try to explain the concepts of recoupment and payment cycles to give you a better idea of when you can expect to get money from a deal.
Best
Gamal Hennessy
PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.com FOR A FREE CONSULTATION.
Addition by Division (Separation of Licensing Rights for Creator Owned Deals)
- Property: or what title or characters you are actually licensing. A license could be for all the characters and settings in a particular book, but it could also be limited to just one character or a group of characters or in some cases just a particular image from a particular book (like a cover image)
- Licensed Good: or what you are permitting the licensee to create. You can be as specific as you like with the type of license you are providing. For instance you could grant a broad license for “clothing” or make it narrower by limiting it to “T-shirts”, “men’s T-shirts” or “men’s short sleeve cotton T-shirts”
- Term: The time limit on how long the license will last. This is usually measured by years, but it could also be as short as a few months.
- Territory: The geographic area that the license is limited to. This could be something as broad as a worldwide license, or it could be limited by countries (i.e. USA), groups of countries (NAFTA or the English speaking world) or continents (Europe)
- Outlet: This is the type of venue that the licensed can be sold in during the term in the territory. It could be a broad concept like “retail outlets” or “online sales” or it could be a specific type of store (high end, mid market or discount chains)
- You might have granted the merchandise rights to the publisher, which means you get a portion of what ever he reports to you for a deal you had little or no input on.
- If you kept the rights for yourself, you could grant the T-shirt company a world wide perpetual T-shirt license for a $10,000 advance and an 8% royalty off the suggested retail price.
- If you split the rights up, you could grant the T-shirt company a two year, US only, mass market T-shirt license for a $5,000 advance and an 8% royalty off the suggested retail price. You could then go to a Canadian company and do the same thing. And do it again with a European company, and an Asian company. Instead of one advance of $10,000 you could be looking at $20,000 in advances from four companies for the T-shirt rights alone. You could potentially have dozens of clothing, toy, game, poster and other licenses for your property with licensees all around the world that generate revenue that dwarfs what you make from the actual book, all because you separated the licenses to increase the revenue.
Get What You Give (Rights and Revenue for Creators)
- Publishing (Print, novelization and Digital)
- Public Display (gallery displays and public performances of some of the methods listed here)
- Theatrical (Movies whether live action or animated)
- Television (including network, basic cable, premium cable, PPV whether live action or animated)
- Home Video (including DVD, Blu-Ray, etc.)
- Live Performance (including Broadway performances and theme park performances)
- Interactive (including console computer or mobile video games)
- Merchandise (as discussed in last week’s post)
- Audio (soundtracks and audio novelizations)
- A royalty is a percentage that the artist earns for every finished unit that is sold. For example, an artist might receive 30% of every one of their comics that is sold to the public.
- An advance is paid before the work is finished. For example, a writer of a novel might receive money up for her novel based on the proposal not the finished product.
- A minimum guarantee (MG) is money paid up before the work is finished, based on anticipated sales. For example, if a toy company plans to sell a new licensed toy for $10 and the creator gets 10% of that sale, then the creator gets $1 per unit sold. If the company expects to sell 100,000 units, then the MG that the artist gets for this deal is $100,000.