The following is an attempt to explain our new idea of author/publisher partnerships.
Author could be asked to partner with publisher by contributing one-third of the cost of producing his/her next book and, in return, receive one-third of any profit. Profit would be defined as operating profit, before overhead and before tax. In addition, in recognition of the author's work, even if the book loses money, author would receive a royalty of eight percent of net sales (after returns), but no advance on royalties. The author also would receive 50% of any sub-rights revenues.
For this purpose, operating profit would consist of sales revenues (after returns and distributor's fees) and the publisher's 50% of sub-rights revenues for the title minus editing, typesetting, proofreading, printing, marketing, author's royalties and incidental costs related directly to the book. Excluded would be salaries, rent, utilities and similar company-wide overhead--in other words, there would be no allocation of such overhead costs to individual titles, as practiced almost universally by book publishers, film producers and other companies. Interest expenses, depreciation and tax on any profits also would not be allocated, and thus would be excluded from the calculation of profit for the purposes of a 2/3-1/3 split with the author.
If a title ends up with a modest loss instead of a profit, the author still would receive royalties based on sales for his/her work, plus a 50% share of any sub rights sales.
These partnering specifics would be included in the author's contract. After the first year, the author would receive royalties, minus a 40% reserve against returns, as in our previous author contracts. The 2/3-1/3 profit split, assuming the book is profitable, would occur only after the second year, when, hopefully, an almost-final figure on returns could be determined and to guard against a first-year appearance of profit being turned into a later lowered profit or loss by an influx of second-year returns. Conversely, a first-year appearance of loss could be turned into a subsequent profit by sub rights sales.
Since the returns cycle is not always complete by the end of the second year, a reserve would be deducted from part of that first profit-sharing. And at the end of the third year after publication, there would be a final settling-up. (And subsequent sales, returns and/or sub-rights revenue would be cumulatively netted against each other and, if any further profit-sharing is due, those payments would be made at the end of those future years.)
Brilliant??? Let me know. firstname.lastname@example.org.