Indie authors and publishers who produce audiobooks should make the decisions about payment to narrators and distribution independently of each other. Using a royalty share contract on ACX causes problems at the end of the 7-year initial distribution term....
Last updated 2/20/21
If you own the audio rights to your book, you are referred to as the rights holder (RH). The RH has many choices when starting an audiobook project. Two of the most important decisions you’ll make are the narrator’s payment and the audiobook’s distribution.
Make these decisions very carefully and INDEPENDENTLY because their long-term repercussions could be harmful to you in ways you don’t expect!
Payment Options
You basically have 3 ways to pay your narrator:
Per Finished Hour (PFH) — You pay $X times each finished hour of audio up-front to the narrator. For instance, a $300 PFH rate on an 8-hour audiobook would cost $2400 at the time the audiobook is completed. Royalty Share (RS) — Rather than you paying anything up-front to the narrator, you agree to share your royalties with the narrator. The narrator gambles that her narrator fee and production expenses for team members (director, editor, proofer) will earn out over time through the royalties. This contract can be structured so that the narrator receives ALL royalties until her fee is paid or, more typically, the royalties are split equally between the RH and narrator for the course of the contract. Hybrid/Royalty Share Plus (RS+) — You pay the narrator some up-front fee to cover their hard expenses and also have a royalty share contract.Recommendation: By using a PFH payment, you could contract with a narrator completely outside of ACX or any other distribution platform and upload your completed audiobook to the distributors of your choice as a DIY project.
You may want to download and modify one of the contracts on this page if you go this route.
ACX as Distributor
This article focuses on using ACX as your distributor since it is the most widely known and utilized site.
Many RHs find a Royalty Share (RS) contract with the narrator on ACX.com to be very attractive because they can get an audiobook made without incurring up-front costs. They often don’t consider that this kind of contract marries the narrator’s payment to the distribution agreement.
Narrators are reluctant to accept an RS contract because the narrator shoulders ALL of the risk for low or no sales. Narrators look for several conditions to mitigate their risk.
A narrator is much more willing to accept the ACX hybrid contract known as Royalty Share Plus (RS+). In addition to the equal royalty split, the RH pays the narrator an amount up-front to help offset the narrator’s immediate expenses. The amount is negotiated between the RH and narrator and can be a set fee but is usually priced per finished hour (PFH).
With either an RS or RS+ contract, you are forced to accept exclusive distribution, meaning your audiobook will only be sold on Audible, Amazon, and Apple Books for the initial distribution term of 7 years. You have no option to upload your audiobook to other sites for wide distribution or sell it on CD or from your web site.
As I’ve previously written, indie authors get frustrated with the RS option for a number of reasons, especially when they itch to be relieved of the 7-year distribution term.
Contract Language
You have 2 contracts in place: the Book Posting Agreement between you and Audible, and the Production Standard Terms between you, Audible, and the narrator.
The distribution language is contained in the ACX Book Posting Agreement.
Sections 5A and 5B on exclusive or non-exclusive distribution set the initial distribution term at 7 years and include this auto-renewal clause:
After the Initial Term [7 years], this Agreement will renew automatically for additional 1 year terms (each, a “Renewal Term”) unless either party provides written notice of termination to the other party at least 60 days prior to the end of the Initial Term or the then-current Renewal Term.
Section 13B about changing the distribution to non-exclusive states:
If you elect to pay the Producer who produces an Audiobook using the ACX royalty share option, you must grant Audible exclusive distribution rights to the Audiobook and you cannot change your grant to non-exclusive.
In Section 14, the RH agrees that Audible will pay the royalties to producers on an RS contract.
Section 5-1 of the Production Standard Terms discusses the royalty payments.
Suppose you decide to use an RS or RS+ contract. Can you cancel distribution before the end of the initial 7 years?
If you want to cancel the distribution before the end of the 7 years, you must obtain the narrator’s permission to dissolve an RS or RS+ contract. Almost certainly, the narrator rightfully will demand a termination fee at that point. While section 8B of the Book Posting Agreement specifies termination fees prior to the completion of production, the contracts are silent about the termination fee once the book is on sale.
You and the narrator therefore will need to negotiate the kill fee. Remember, the narrator is expecting to earn at least their PFH rate through the royalties. If the audiobook’s sales have surpassed the total of what the PFH rate would have been, the narrator may reasonably propose a kill fee that also includes the loss of expected royalties.
The ACX blog states:
Effective February 1, ACX Rights Holders of DIY or Pay-for-Production titles that have been on sale for 90 or more days can convert their distribution type from exclusive to non-exclusive. In addition, all ACX Rights Holders will have the option to terminate after 90 days of distribution, but Rights Holders with Royalty Share or Royalty Share Plus deals must provide Producer consent when making their request.
The contract language has not been updated to reflect this policy change.
What happens after the contract finishes its initial 7-year distribution term?
As you saw above, Audible’s contract language says exclusive RS agreements can’t be changed. The only way the RH can remove the narrator from the RS agreement is for them to terminate distribution with Audible, as confirmed in this section of the Contracts and Agreements Qs and As page:
Can I change my contract from Exclusive to Non-exclusive?
Changing the distribution rights to your audiobook depends on the payment option you have chosen. If the audiobook was completed as a pay-for-production deal, the distribution rights can be changed from exclusive to non-exclusive after it has been live in the store for one year. If this audiobook is in a royalty share deal, then the agreement can never be changed. For more information, please reference section 12.a. of the Book Posting Agreement.”
I’ve had a number of RS books I narrated pulled by the RH after the 7-year initial distribution term because they wanted to terminate the RS contract. The big downside to this approach is that the RH not only loses the income and visibility of the book being on Audible, but all of the ratings and reviews the book earned during the 7 years are gone, too.
At the point the RH terminates the RS contract, he then may republish the audiobook since he owns the copyright to the recording, and the producer has assigned all interest in the book to the RH, as explicitly stated in Section 10 of the Production Standard Terms:
Ownership. Subject to the restriction on audiobook production rights above and the distribution rights granted by Rights Holder to Audible, Rights Holder will retain all right, title, and interest in and to the Book and the Audiobook, including the copyright in the Book and the sound recording copyright in the Audiobook. Producer agrees that the Audiobook is a “work made for hire” to the full extent permitted by law, with all copyrights in the Audiobook owned by Rights Holder. To the extent that the Audiobook does not qualify as a work made for hire under applicable law, Producer assigns to Rights Holder all right, title and interest Producer may have in and to the Audiobook, including, but not limited to, all copyright or rights of authorship in the Audiobook. Producer will ensure that its agreements with any third parties Producer engages to assist in the production of the Audiobook establish Rights Holder’s sole ownership in the Audiobook. Producer will use the form agreements referenced in Section 2 above. At Rights Holder’s request, Producer will provide Rights Holder with copies of the agreements.
Be aware that ACX and Audible will not send the audio files to you. You would need to download them from your ACX Dashboard. Go to Completed Projects, select the book, choose Produce Audiobook tab, and download each file by pressing Download on the right side.
The cure for the ACX 7-year itch is available to you at the BEGINNING of the project: decide to pay the narrator per finished hour (PFH) instead of using an RS or RS+ contract.
When you pay a PFH rate at the outset, you can select non-exclusive distribution on ACX and then immediately distribute your audiobook to other platforms, including those that offer your audiobook to libraries. You also have the option of exclusive distribution for the first year and then changing to non-exclusive distribution as early as the 91st day.
As you can see on my RH info page, I ask new clients to pay a 50% deposit after approving the 15-minute sample. I invoice for the final 50% after uploading the completed audiobook. In cases where the RH and I contract independently of ACX or another platform, I withhold at least the end credits and retail sample until the invoice is paid. I encourage other narrators to adopt a similar policy.
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