April 8th, 2016

Merchandising Rights in Publishing Deals

Susan Spann

This is the third in a subsidiary rights series. If you missed one of the posts, click to read the first or the second article. 

In publishing, “merchandising rights” refers to the right(s) to create, market, and sell merchandise (products) based on a book or its characters and settings. “Jurassic Park” T-shirts and Bertie Botts’ Every-Flavor Beans (yes, they make them) are two examples of merchandising rights in action.

 The term “merchandising rights” covers everything from greeting cards to candy bars, from clothing to action figures—and every publishing contract allocates these rights to the author, to the publisher, or both.

Often, authors don’t realize that many publishing contracts contain an exclusive license of all merchandising rights to the publisher. (They also require the publisher to pay the author a royalty share (usually 50%) of merchandising income.)

However, there’s no legal obligation for authors to license merchandising rights to the publisher at all. Publishers don’t produce T-shirts, and merchandising licenses are a windfall for publishing houses. Authors, by contrast, can benefit from the ability to create, sell, and profit from merchandise based on their works—if they’re savvy enough to retain the merchandising rights.

The grant of merchandising rights is usually located in the “subsidiary rights” paragraph. Read the contract carefully: you’re looking for “merchandising” or “product” rights, and they’re usually found about halfway down the contract, in a list of subsidiary rights and royalty percentages.

Some things to consider before signing a grant of merchandising rights:

  1. Is the grant of rights exclusive?

Granting someone else exclusive rights to create merchandise prevents the author from making his or her own merchandise, or granting anyone else the right to do so. Think carefully before you deprive yourself of that right.

  1. Is the publisher (or other entity seeking the license) capable of exploiting the merchandising rights?  

Don’t license merchandising rights to anyone who cannot use and exploit them effectively. Few (if any) publishers have merchandising departments – in fact, few publishers have sales departments capable of licensing merchandising rights effectively.

Merchandising rights normally become important after a book becomes a bestseller (or a film or TV series). Most commonly, manufacturers either approach the author (or publisher), seeking permission to make a licensed product, or the author uses his or her own contacts to generate a merchandising deal. If you’ve licensed the rights to a publisher, you lose the chance to make that deal yourself, and the publisher gets a significant percentage of the merchandising income.

  1. Does the licensee actually plan to produce a product?

This might seem obvious, but … You wouldn’t sell your manuscript to a publisher who had no plan to publish the book, and you shouldn’t license merchandising rights to anyone who hasn’t got a plan to produce a product.

  1. Is the author’s royalty or payment percentage fair? 

Insist on an industry-standard merchandising contract (and a fair royalty percentage) when contracting with a company to produce merchandise based on your work. “Industry standard” varies depending on the type of product being produced, so hire experienced merchandising counsel to review any contracts before you sign.

Note: 50% of the publisher’s income from merchandise licenses isn’t the same as 50% of the proceeds received by the company making the products.

Normally, merchandising rights have little value at the time the author enters into a publishing contract. Consider Jurassic Park and the Harry Potter series. In both cases, the merchandising rights are much more valuable now than at the time of release. Managing your rights carefully now can help avoid regrets down the line.

Is it worth abandoning a publishing deal to retain your merchandising rights?

Only you, the author, can make that call—and today, I’m empowering you to make it any way you choose. Don’t feel intimidated if a publisher pushes back on the issue of merchandising rights. They’re your rights, and you, the author, get to decide whether or not to license them, and on what terms. Make the decision you believe is appropriate for you and for your work.

Remember: once you’ve signed the rights away, you can’t get them back as long as the contract remains in force, so get professional advice and treat it as a business decision.

Is it OK to license merchandising rights to a publisher?

Sure—and don’t beat yourself up if you’ve already done it. It’s not the end of the world. Sometimes it makes business sense to license merchandising rights (at proper percentages) to make a deal. Other times—especially when the contract over-reaches in other areas—it’s better for the author to walk away. The key is making an informed, reasonable decision based on your individual situation.

How do your contracts handle merchandising rights? If you don’t have a contract yet, do you feel better prepared to manage these rights when you get an offer?

Susan SpannSusan Spann writes the Hiro Hattori Novels, featuring ninja detective Hiro Hattori and his Portuguese Jesuit sidekick, Father Mateo. The fourth book in the series, THE NINJA’S DAUGHTER, will release from Seventh Street Books in August 2016. Susan is the Rocky Mountain Fiction Writers’ 2015 Writer of the Year, and a transactional attorney whose practice focuses on publishing and business law. When not writing or practicing law, she raises seahorses and rare corals in her marine aquarium. Find her online at http://www.SusanSpann.com, on Twitter (@SusanSpann), and on Facebook (SusanSpannAuthor).

14 comments to Merchandising Rights in Publishing Deals

  • Fae Rowen

    Thanks for an easy to understand and implement plan to help authors make career decisions to maximize income, Susan. This has been a great series!

  • Fascinating and so helpful! I wasn’t aware of merchandising rights being in a contract. I thought it was only movie rights and translation rights that would be included. Thanks Susan!

  • jamesr403

    Thank, you, Susan! I don’t really have merchandising issues — yet — but this info is great stuff! I will keep it in mind. I was lucky on my first story and only sold First North American Serial Rights, but at that stage if they had asked for a pint of my blood to seal the deal I would have said, “Sure!”

  • I never even thought about these clauses, as my books wouldn’t adapt very well to merchandising… but this is great info for everyone. Be aware – even if you DON’T think it could happen. Harlie the bullfighter doll? It could happen. I guess.

    Thanks as always, for your wisdom, Susan.

    • Never say never, Laura, for sure. With romance novels, there are also…other…types of merchandising. Let’s go with “scented candles” to keep it polite – but the truth is, the spectrum of merchandising options is often FAR broader (in any genre) than the author anticipates, which is one reason it’s so critical to keep those rights for yourself.

  • great info to know! Thanks so much for this Susan!

  • This is a great article. Thanks.
    Is it possible to contract with a publisher for merchandising rights such that they are clawed back after a limited period of time if not exploited? For example, could you structure a deal such that the rights would revert to the author unless, within 5 years, the author’s share of income reached a set minimum mark of, say, $25,000?

    • Absolutely, Ryan, and I often advise clients to do something like that if the publisher insists on taking the rights and the author doesn’t want to walk away from the deal. The publishers will probably ask for a lower threshold than $25,000, but that’s negotiable – and I think the author should start by asking for 2-3 years after publication, rather than 5 – but again, that’s very negotiable.

  • Victoria Marie Lees

    Thank you so much for this good advice, Susan. Once again, I’ve shared it on social media. Wow! Now all I need is a contract to look at to see how my rights are distributed.

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