Net Profits Screw Book Author

A studio taking advantage of an author - I know, it's hard to believe, eh? Thanks to a reader pointing to Sarah Weinman's blog, which pointed to this LA Times piece, we have a story of an author, Deborah Gregory, who wrote a popular line of books for girls: The Cheetah Girls. But when she signed on for a cut of net profits of the movies, CDs, DVDs, and even concerts that Disney has sold, she didn't realize she was also signing on for Hollywood accounting:

Her breezy, street-smart tales of five girls chasing pop music careers were turned into two hit television movies, and a third is now being filmed in India. Cheetah Girls CDs and DVDs have sold in the millions, and concert tours have hit more than 80 cities. Meanwhile, Disney's fabled merchandising machine flooded the market with Cheetah Girls shoes, dolls, toothbrushes, video games, backpacks, note pads, pillows, posters, T-shirts and the like.

Gregory expected to get a piece of the action when she signed a 2001 contract promising her 4% of the net from all of this activity. But like many other authors who have signed away dramatic rights, she says she never got a penny of the profits. Unlike screenwriters, who were backed by a strong union in their recently ended strike, most literary writers are at a disadvantage when negotiating with Hollywood. And it is difficult, if not impossible, for them to crack the safe.

According to the story, Gregory has seen $125,000 total in the last nine years. She's never gotten a "net profit participation statement" from Disney, although she's been asking. She lives in a studio apartment in Manhattan.

"This is an old, old story in Hollywood," said literary agent Nicholas Ellison, who has represented numerous clients in book-to-film negotiations. When studios are asked why an author has not received any net profits, he said, they often point to expenses that have grown larger than expected and contend that a hit picture has not, in fact, made money.

It's called "Hollywood accounting," and in some cases studios may be on solid ground, citing legitimate costs such as promotion and development. But in other cases, contracts contain definitions of "net profits" that make it all but impossible for an author to collect money that once seemed tantalizingly at hand.

No kidding. According to the WGA, 43 percent of Hollywood movies over the last five years were adapted from books, articles, and other writing. As Paul Aiken of the Authors Guild said, "The best advice we give is that you should try to get as much of your money upfront. You can't count on net profit deals for anything." And apparently the studios are ready to walk away from writers, including ones that aren't big names, because there are always other books available.

But don't think this is restricted to Hollywood. I've often found these "net profit" clauses in both book and magazine publishing contracts. Writers assume they're getting something real, rather than asking just what the hell gets taken out before you get to "net." It makes me angry - really angry - because this isn't some accident, or just a poor choice in wording, or even contract terms taken from some other kind of contract and assumed to be applicable, as happens often in publishing agreements. This to me reads as the deliberate intent to trick a writer into the assumption of getting one thing, while offering an opportunity to play with definitions to deliver a great big fat zero.

Let me ask you: Have you ever signed a contract that provided for participation in net sales through syndication, or licensing to overseas magazine titles? Now, I've known a couple of writers who have gotten extra money from Hearst, but other than those couple of cases, I've never heard of anyone getting money down the line.

This suggests that writers should absolutely push back on these net deals. Either the publisher isn't using the rights you grant and there is no money of which to get a cut, in which case this is opportunity wasted, or they do make sales and come up with ways of not paying. Do you ever get notification of other sales? Is there a clause, as in the book publishing business, where you could audit them? Nope, and I'm betting that's for a reason, though I cannot bring myself to calling it good. According to the story, Gregory wrote 16 novels in the Cheetah Girl series, sold 2 million copies, and got $180,000 in advances. Think that's good? Do the math: it's $11,250 per book. You could write how-to series titles and probably do better. As for the pittance she saw from what Disney got, I guess their expenses were inordinately high:

The first movie was broadcast in 2003, drawing an estimated 6.5 million viewers on its first night; the second aired in 2006, attracting 8 million. Two CD soundtracks sold a combined 3 million copies. National concert tours in each of the last three years have played to sold-out crowds. Merchandise made by a flurry of companies who leased the rights from Disney began flooding into malls across the nation.

Hollywood is again courting Gregory over a new series she's written. And this time she's not depending on just her agent, which is William Morris these days, but is independently hiring an experienced entertainment lawyer to represent her interests. You and I can't do that with magazine contracts, so maybe a "get this out of the contract" approach is what is necessary. And if the publisher insists that it needs the rights, then tell them you want something in there about being able to audit the results and to get notification of when these deals happen. Oh, and a definition of exactly what comes out between gross and net.