The author agreement is a publisher's most valuable asset. It is the foundation upon which their business is built and the framework for the author-publisher relationship. This article is about one costly mistake neophyte publishers make when contracting with authors - a mistake that can devalue their business and prevent its eventual sale.
A Common Mistake Made by Start-Up Publishers
When the owner of a publishing company decides to sell their company, they will need to establish the value of the business they have built. The sale price will be based on the discounted cash flow of the company, the goodwill associated with the company's trademarks, and the soundness of its author agreements.
A well-drafted publishing agreement allows for the sub-licensing of rights and the assignment of the contract itself. However, when starting out, some cash-strapped publishers rely on contracts found online, or slavishly
copy ones found in a book.
The biggest mistake start up publishers make is not paying attention to contracts.
Typically, the sale of business is structured in one of two ways; as a stock sale of the entire company, or an asset sale of individual assets. In certain states the acquisition of stock in the target company will not violate an anti-assignment clause. However, buyers prefer assets sales.
Aside from creating a unique brand, protecting your intellectual property, and insuring against media perils, the best way to add
value to your company is investing in a well-drafted publishing
agreement. Not only will it protect you against unnecessary legal risks, but it will allow you to reap what you have sown.
Lloyd J. Jassin is a publishing attorney and entertainment lawyer. He counsels clients on contract, licensing, copyright, trademark, unfair competition, defamation, right of privacy and general corporate law matters. His practice includes drafting and negotiating publishing and entertainment industry contracts, intellectual property due diligence, trademark prosecution, dispute resolution and litigation. A graduate of Benjamin N. Cardozo Law School, he is co-author of The Copyright Permission and Libel Handbook (John Wiley & Sons). He can be reached at 212-354-4442 or via email at Jassin@copylaw.com.
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