There are potentially enormous changes coming about in the world of foreign publishing. American publishers should make every effort to stay abreast of these changes so that they may position their businesses to take advantage of the opportunity the change may bring.
In a previous article ("Foreign Publishing Deals-Further Issues") I explained about the growing phenomena in the world today called "common markets." In this article, I would like to expand upon the financial impact that such common markets may have upon American publishers, most specifically the European Union (EU).
Just to repeat some background information: there are 15 member states within EU as of today. Such a union represents a single market for social, agricultural and fiscal policies as well as the development of a single monetary currency. The EU allows for the free movement of products across what would otherwise be international boundaries. There are several sub-unions as well: The Benelux nations (Belgium, Netherlands and Luxembourg) started in 1948. There is also the European Free Trade Association (EFTA) comprised of Iceland, Liechtenstein, Norway and Sweden.
And more importantly, the "territory" that is defined must expressly exclude the rest of the world outside the EU as an "open market." Otherwise you also lose the practical ability to make a Spanish language deal everywhere.
And this becomes even more important with English language reprint deals. If you do not restrict the territory and you, as a publisher following the "standard" form you used without professional advice include this open market language, you could be losing substantial monies since now you have a competing book being sold, even if on a non-exclusive basis, everywhere in the world.
For more information about this "open market" provision and how you should not use it in your agreements, read the above article on "Foreign Publishing Deals."
This has a potentially major impact upon the nature of the deals United States' publishers may make with foreign publishers, as well as deals currently in existence. These deals involve both:
The primary issue comes up if your contracts provide that you are to be paid in the local currency, such as Pounds Sterling, German Marks or some other local currency, as well as if you are the subpublisher and pay your European counterpart in its local currency. And while the EU treaty provides that there should be no change in how currencies are handled under the new provisions, the provisions of your contract with the European publishers may have an impact.
If you have contracts now in existence or if you enter into contracts prior to January 1, 1999, and those contracts provide that you are to be paid or are to pay in a foreign denominated currency, the EU regulations provide that the local currency will be redenominated in the Euro at the rate of one to one unless otherwise specified in the contract. If you enter into a contract after January 1, 1999, and your contract provides either that you are paid or must pay in a foreign currency, there should be a provision included stating that payment may be made in Euros at the same rate of exchange as for the previous indigenous currency.
As with all contracts in which the American publisher is to be paid in a foreign currency, this can lead to a great deal of uncertainty as to precisely how much money the American publisher is going to receive. Each nation's currency fluctuates, often considerably, against the United States dollar. In addition, there is the cost of conversion of foreign currencies to dollar denominated currency. Thus the contract with a foreign publisher should ideally provide that all payments are to be made in United States dollars so that the American publisher receives its monies net of any such costs and in effect, gets paid on royalties computed "at the source." There are of course, often charges levied by the American publisher's bank for the cost of wire transfer if that is how monies are transferred, but those costs are often absorbed by the American publisher.
And if the deal is such that an American publisher is to pay the foreign licensor, the contract should also provide that payment be made in United States dollars and that the cost of conversion is borne by the foreign publisher.
To the extent that you, as an American publisher, are prepared for these coming changes and your foreign publishing contracts reflect that preparedness, you may be in a good position. To the extent, however, that you, as an American publisher, have tried to cut corners and use some sort of boilerplate, pre-printed, fill in the blanks foreign publishing contract form, you may now be facing the expensive task of paying for your attempt to save money in the first instance.
Value is almost always more important than cost. Cost sees only the danger in short term expenditures. Value sees the long term opportunities of proper preparedness.
It is the wise publisher that understands the differences.
© 1996, 1998 Ivan Hoffman