Houghton Mifflin Harcourt Publishing Company (HMH) is asking image providers to agree to an addendum to current and new agreements that limits HMH's liability in the event more copies of a book are sold, or more online uses are made, than were initially authorized. It is expected that other publishers will follow suit.
Image providers should carefully consider the implications of this new language and adjust their prices accordingly. The HMH language is as follows:
"Since actual distribution will depend on demand for the program in the marketplace, we would like to establish fees for additional distribution beyond the initial clearance. The fees paid for images shall be based on the initial clearance amounts and package terms requested by Houghton Mifflin Harcourt Publishing Company (HMH). If HMH's use of images licensed hereunder exceeds the initial clearance amount or manner of use, HMH shall so notify the Vendor, and payment by HMH of the difference between the fee for the initial clearance amount or manner of use and the fee based on the actual use shall automatically increase the authorized clearance amount and manner of use under this Agreement to the amount and manner of additional use paid for.
"If the notice of additional use is given during the term of this Agreement, the additional usage rates will be based on the then-current prices hereunder. If the notice of additional use is give after the term of this Agreement, the additional usage rates will be based on the then-current fees charged by the Vendor to customers similar to HMH. This increased fee shall be HMH's sole liability and the Vendor's sole remedy for such additional use."
Implications and Recommendations
Given this language, it will be important to supply a schedule of prices for various circulations on your invoices and not include any language that gives a price for "over" a certain number of units.
For example, if the initial use is for under 40,000, it will be important to include a stepped pricing schedule that goes up to at least 2,000,000 copies. These steps can be rather large, but make sure the fees charged for each step are enough higher to be reasonable compensation for the number of books licensed. Twice as many books will generate twice the revenue for the publisher. See my previous story for steps and pricing that are reasonable, but much higher than most agencies currently charge.
Never use the word "over" in front of any circulation number as in "over 40,000" or "over 1,000,000. This used to be common, but it is the kiss of death today. If you have a 40,000 price and an over 40,000 price no matter how many copies they eventually publish, they only have to pay the total of the over 40,000 number.
HMH is not required to report actual use in any type of timely manner (for example yearly during the term of use, usually 10 years).
They are also saying, "Absent of our telling you, if you happen to discover that we've printed more copies of a book than we originally licensed, we will then tell you exactly how many we have printed. At that point we will pay you the difference between what we paid initially and ‘then-current fees charged by the Vendor (you) to customers similar to HMH'." This is the extent of their legal liability and you have no possibility of successfully suing for more for unauthorized use.
It is also important to remember that most textbooks sell for over $100 and probably the maximum number of pictures in any book will be 200. Do a little math and figure out what the company will earn from selling 250,000 or 1,000,000 books and the percentage of which will be spent for all the images in the book. That should be enough to convince you that you should be charging more for large uses.