Your Slice of the Pie Part II: When Do You Get Paid?

I haven't written anything about comics in a few weeks because I've been working on creating a independent artists merchandising platform (See Do You Want to Create Merchandise for Your Comics? ). I'm still testing the feasibility of that business, but I'd like to take a break from that and discuss the ways time impact a contract. This essay will focus on the most important short term impact; the time it takes for you to be paid.

Payment Timing

The most important thing to understand about working with a publisher is that payments are traditionally paid in lump sums at specific periods during the year. For instance, let's say your publisher reports sales on a quarterly basis (4 times per year) and pays royalties thirty days after each reporting period. Let's also assume that your new book hits the stores on January 1, 2014. This means that you'll see your first report on March 31st, 2014 (or the first business day after that) and the earliest that you'll see the first check is April 30, 2014. Payment cycles can be monthly, quarterly, bi-annually or annually. The rise of online sales can speed up the reporting process to almost real time, but the publisher might still delay payment for various financial reasons.

Not So Fast

Keep in mind, the earliest point where you might get paid won't always be the day you get the money. There are several factors that contibute to payment delays that have nothing to do with negative intentions from the publisher. A delay in payment can occur:

• 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

Watching the Clock

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.

The other thing you want to avoid is forgetting about your royalties entirely. In some extreme cases (large deductions from gross, annual reporting and rolled over payments), years could pass before sales reach a point where you start to collect royalties. In the majority of cases, the publisher will just send you the money even if you don't keep track. This is a nice surprise (the industry equivalent of finding money in the pocket of an old coat) but you don't want to get into a situation where you forget and the publisher forgets and you never get paid for your work.

While I often advocate for creators to negotiate changes to their deals, payment timing is something you need to understand not try to negotiate. The payment systems of most publishers are tied to their accounting systems and their overall business operations. It is worth asking for a change if the publisher seems flexible, but unless you are Stan Lee most creators will not be in a position to get this change (See David vs. Goliath: Negotiating Power in Comic Contracts). The best option you have is to set up some kind of long term reminder of the payment terms of all your books at the beginning of the deal.

Now that we've explored the short term effects of time on creator owned deals, next week I plan to look at the long term effects of tying up intellectual properties and the not so philosophical concept of eternity in the comic book business.

If you have any questions, please feel free to ask.

Have fun.
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 atgamalhennessy@gmail.com FOR A FREE CONSULTATION.

Get What You Give (Rights and Revenue for Creators)

By Gamal Hennessy

A contract is basically an agreement between one or more groups for the exchange of resources. The exchange could be time and skill for money, goods for services, property for future gains or any combination of those things. The best agreements exchange roughly equal resources. The worst ones have one side trading large amounts of resources for little or nothing in return.

This is the problem that artists run into with many of the contracts that I see. The most important service I provide is showing my clients what they are giving up in comparison to what they are getting. I’d like to provide an overview of the different types of rights and revenue streams as a general overview for creators looking to get their projects into the market.

Types of Rights

As discussed before, copyright law gives the creator of an original work the right to benefit from the distribution of that work. There are various types of ways currently available for creators to exploit their work, especially when we consider comics. Some of the major distribution methods include:

• 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)

As new forms of distribution are created, new rights are created for the artists. These rights are universal, but they can be divided or carved out by geographic area, time frame, distribution channel, language and other factors. (This division can be complicated, so I’m going to save that for another post)

Types of revenue

Just as there are different rights that creators can use to get their work into the market, there are various ways that they can be paid. Creators need to focus on three ideas:

• 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.

These are broad revenue concepts. They are often altered and refined by concepts like gross, net, recoupment, offsets and other variables. (This is another complicated subject that I can talk about later.)

Choices that Artists Must Make

In certain creative circles, the types and amounts of revenue are fairly straight forward. Writers for some mediums often get an advance. A work for hire artist for comics often gets a page rate. There is more confusion for creators pursuing creator owned deals. There is often no advance, no MG and a blanket royalty rate for all forms of distribution. This puts them creators in a dangerous position since the lack of up front money and the uncertainty of any profitable sales in the future means that the creators are really working on spec while at the same time giving up all their rights to their property.

From the publisher’s perspective, it is understandable why they would take this stance in their contracts. Publishers protect themselves from risk by limiting exposure to projects that might not be financially viable. At the same time, they maximize their potential gain by securing as many rights as possible for projects that are financially viable. Artists need learn the same lesson. They need to counter the publisher’s position by attempting to limit the rights that a publisher gets for projects that are financially viable and maximizing revenue for every project they do.

I know negotiating power is often limited for artists. But having a clear understanding of the relationship between revenue and rights and clear goal of where they want to go can help maximize their limited negotiating power and increase their chances of success.

Best

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.