A: Stephen
E. Gillen, Authoring Attorney, Greenebaum Doll & McDonald, PLLC:
"Sales of the
US edition of books in countries outside the US are typically accomplished
through a foreign distributor -- i.e., the US publisher sells its
books to a foreign publisher which, in turn, resells the books to
bookstores and consumers in the foreign country. This adds an extra
step in the distribution chain . . . another participant that needs
to make a profit. The US publisher accommodates this by selling its
books to the foreign distributor at a deeper discount than it sells
to its domestic customers. Thus its margins on these sales are smaller.
In anticipation of this, the US publisher typically provides in its
contract that the royalty to its authors will be lower on foreign
sales than on domestic sales (often time the rate is halved).
The net effect
for the author is a much lower royalty on foreign sales -- half rate
applied to a smaller sales price. Although publishers claim they need
this arrangement in order to make foreign sales profitable, there
are circumstances when it seems excessive or unwarranted (e.g., when
the US publisher and the foreign distributor are affiliated or commonly
owned). At the end of the day, however, foreign sales on many US titles
are a very small part of the total royalty picture (often accounting
for less than 2% of total royalties) and so the issue takes on less
practical import."
