Writer's Resources

The Electronic Rights Clause
In Magazine and Newspaper Contracts
Prepared by the ASJA Contracts Committee

The Committee is frequently asked, by freelancers and publishers alike, to suggest a standard clause for electronic rights in periodical contracts. The unfortunate truth is, one size does not fit all. How an e-rights clause is written will depend on which electronic uses are required and how the rest of the contract is shaped. This short discussion should help by laying out guidelines. The Committee is pleased to provide further, specific recommendations on request.

There are two basic kinds of "electronic" use of editorial material.

The easier one to deal with is an enterprise in which the only revenues are user or purchaser fees, such as database use (whether online or CD-ROM by subscription) or sublicensed individual CD-ROM production. For these, the income attributable to each piece is best tracked to the extent possible and split between author and publisher. For some uses, such as typical library CD-ROM databases, "hits" on each article are not recorded. For those untracked uses of material, the overall authors' share of royalties may be divided equally among all contributing writers.

A 50-50 split between author and publisher is well on the way to becoming the standard, following the longstanding practice in the book and periodical worlds of equally sharing income from subsidiary uses. Some have suggested an 85-15 division favoring the author, arguing that publishers serve only to bring the material to the republisher and so are due just the usual literary agent's commission. Typically, however, a publisher has more claim than that. After all, database producers and computer users alike are attracted not only to the individual articles but to the compilation--the publication itself, which they value for its reputation and presentation. The enterprise, then, is a combination of author's property and publisher's marketing position--a joint venture.

Exact income sharing for online use is made possible by the kind of article tracking already being done in databases found on the key online services, such as CompuServe, Lexis-Nexis, et al. World Wide Web site databases, too, either now track by article or are preparing to do so. Since the online portion of the database business seems likely to grow and CD-ROM to shrink, as time passes the "rough justice" approach to apportioning untracked uses--dividing CD-ROM database income as though all articles are accessed equally--should be needed less and less.

The accounts-payable aspect of this income sharing--record keeping and check writing--need not be the nightmare many publishers have feared. The not-for-profit Authors Registry, created for that specific purpose and endorsed by writers' groups and literary agents representing more than 50,000 writers, is already handling royalty division for major magazines.

The other, more complicated kind of use is typified by Web sites and online versions of magazines on commercial services. Here, a variety of revenue sources and other benefits accrue to the publisher, including user time fees, download fees, advertising income, marketing lists, subscriptions, promotion, and sale of ancillary goods and services. The various gains can be troublesome to attribute, to apportion, or even--in cases of promotional giveaways of editorial material, for example--to quantify.

But unlike database deals, which yield pure (if often small) profit from the start, these other uses cost the publisher money for startup and maintenance and don't pay off immediately (or even, in some cases, ever). How, then, are freelancers to be compensated for contributions of raw material to the ventures?

At least one publisher is experimenting with setting a percentage of total revenues as a royalty pool and dividing it among all freelance contributors according to size of contribution. Although intriguing, this method will probably prove troublesome at best, because of the array of benefits mentioned above and the difficulty in quantifying some of them. Most publishers will find fee-based compensation easier to handle.

With the kind of electronic use discussed earlier, involving a royalty or revenue share, a broad license is acceptable; it might even last forever, if need be, because publisher and writer will always receive their agreed-upon allotments. But when the arrangement calls for a flat fee, the license should be specific, covering such-and-such a use for so-and-so many months or years. Options to renew and expand can easily be included in such agreements, precluding the need to negotiate from scratch for each new use, but each use and extension should be addressed separately and explicitly.

A typical clause might provide, for example, that the author is to be paid X dollars upon an article's inclusion in a Web site, to cover a period of one year, with an unlimited option to renew at Y dollars for each additional one-year period and Z dollars for each site added.

Often, if both kinds of electronic use are anticipated, an e-rights clause in a freelance contract will include both kinds of arrangements: a 50-percent share of database royalties and a fee schedule for other uses. When needed, the catch-all "on terms to be negotiated" is always available.

A one-time fee for all electronic rights forever would be, of course, the simplest way to pay. But that ultimate simplicity has drawbacks for both parties. Writers would lose the right to share in ongoing earnings of a work, which may continue for many years. Publishers would also lose advantages by buying it all upfront: A time-based series of fees spreads the cost out, and a royalty arrangement permits deferment of payment until money is actually earned.