What Message Should You Take from the GoG Success?

At this point, the internet is saturated with reaction from the monster opening weekend of Guardians of the Galaxy (See Guardians Sets New August Record). Some see this as a new plateau in the golden age of comic book movies (See Films Based on Comics are Serious Business). Others assume saturation is just around the corner. Either one of those perspectives could be accurate. In certain ways, they’re probably both right. But as writers and artists, what should you take away from the breakout success of the latest Marvel film?

Answer: You never know which property is going to be successful and you never know when.

Consider the doubt many people expressed leading up to the release of GoG (See Guardians Will Be a Flop). A film based on a group of unknown characters created in 1969 and only loosely linked to the Avengers franchise didn’t have the established mainstream fan base widespread support of Spider-Man, Batman or even Hulk. I think quite a few people saw the “inevitable” failure of GoG as the beginning of the end of the comics based movie era, especially in the light of disappointments like Green Lantern, Amazing Spider-Man 2 and The Wolverine. But when an obscure property makes $94,000,000 in its first four days of release, people take notice. When a film opens as a historic success, as part of a string of top grossing film and merchandise campaigns, the potential of comic based entertainment can’t be ignored.

All this means you can’t afford to ignore the legal status of your property either.

• Yes you might be working on your first self-published book.
• Yes, you might still be looking for a creator owned deal.
• Yes, the vast majority of comics will not become movies or TV series or anything else.
• Yes, it might take decades before Hollywood (or in the future Amazon, Netflix or its successors) stumbled upon your little book.

Even if all of this is true, can you afford to be cut off from ownership and potential future earnings? In his new book Words for Pictures, Bendis suggests you treat your story like it’s going to be the next big thing when it comes to dealing with your contract. It might be optimistic to the point of being delusional, but it is still sound advice for anyone in comics, even if your book doesn’t have a talking raccoon character.

Have fun.

Gamal

Analysis and Results of the Great Independent Comic Survey Part 2

This post is a continuation of the Great Independent Comic Survey and covers distribution and merchandise rights.

Question 5: What percentage of your sales are hard copies?

Answer: 53% of the group makes 75-100% of their sale in hard copy.

Answer Choices	Responses
less than 25%	23.33%
25-50%	10%
50-75%	13.33%
75-100%	53.33%

Question 6: What percentage of your sales are digital?

Answer: 73% of the group claims less than 25% of their sales come from online distribution.

Answer Choices	Responses
less than 25%	73.33%
25-50%	16.67%
50-75%	6.67%
75-100%	3.33%

Question 7: How much of your sales happen at conventions?

Answer: 40% of the group sells less than 25% of their sales at conventions. This question had the most even distribution of all the survey questions.

Answer Choices	Responses
less than 25%	40%
25-50%	16.67%
50-75%	23.33%
75-100%	20%

Question 8: How much of your sales happen at comic book shops or other brick and mortar stores?

Answer: 60% of the group sells less than 25% of their books in comic shops.

Answer Choices	Responses
less than 25%	60%
25-50%	26.67%
50-75%	13.33%
75-100%	0%
Total	30

When these distribution questions are taken together, they suggest that there is significant room for growth in the digital sector, since both convention and bookstore sales do not appear to be robust. Reducing or eliminating the issue of shelf space, printing costs and shipping costs could have the effect of increasing sales and decreasing costs, but I don’t have enough information about fixed digital distribution costs to make a definitive statement about that.

Question 9: Do you control the merchandise rights to your title?

Answer: 73% of the group controls the merchandise rights to their titles. This is encouraging because there has always been a trend of certain publishers taking many other rights in addition to the publish rights needed to print the book (see Get What You Give). The downside to this is that 23% of the group learned to retain their rights after the rights to some titles were taken away.

Answer Choices	Responses
Yes	73.33%
No	3.33%
I control the rights to some properties but not others.	23.33%
I'm not sure who controls the rights to my titles.	0%

Question 10: Are you already selling merchandise based on your title?

Answer: 67% of the group is not selling merchandise. This is encouraging for two reasons. First, the fact that a third of creator owned books has some kind of merchandise supports the idea that there is a market for these goods. Second, the results show untapped potential for more merchandise, especially when you consider that a majority of artists retain the right to sell it.

Answer Choices	Responses
Yes	33.33%
No	66.67%

Conclusion

Based on the results of the survey, the market does not have the necessary volume for my proposed merchandise platform to thrive. That doesn’t mean that there is no value in releasing a creator owned book. It doesn’t mean that individual creators can’t set up their own creator owned merchandise and make it profitable. It does mean that there is an opportunity in both digital distribution and merchandise that independent creators can use to enhance the popularity and sales of their books.

If you have any questions about this survey, please let me know.

Have fun.
Gamal

Deal with the Devil (How Comic Creators Get Their Rights Stolen)

When I started consulting private clients about licensing issues (See Client List), I thought it was going to be a low impact, secondary service. I planned to explain the finer details of contract language, so artists and writers could make informed decisions about selling the rights to their work. Now that I've been doing this for a few years, I can see that I was wrong. Some contracts that I've seen are prudent actions by publishers trying to protect their investment. But too many of these agreements are nothing more than blatant attempt to hijack intellectual property from unsuspecting artists.

The Double Edged Sword

Signing a contract with a publisher can start an artist down the road to professional recognition and lucrative opportunities far beyond comics. It can also strip you of everything you have worked so hard to create. There are a lot of potential pitfalls in creator owned contracts, but the major ones are:

• You agree to give the publisher complete control of the property, not just the actual comics, but the underlying intellectual property (See Image and Story: Copyright and Trademark)
• You agree to give the publisher control of the property in all media ever created, not just in digital and printed comics (See Addition by Division: Separating Rights in Creator Owned Deals)
• You agree to financial terms that are designed to keep you from ever being paid for your work (See Your Slice of the Pie Parts 1 and Part 2)
• You agree to give up your rights without being paid for them (See Get What You Give: Rights and Revenue for Creators)
• You agree to never get back the rights to your property (See Eternity is a Long Time in Comics)

Of course, not every contract is written this way. Not every publisher is a demon attempting to steal your life's work. Some relationships between creators and publishers are much more balanced and fair in reality than they appear in the contract. But the history of comics is littered with famous stories of iconic characters being given away by their creators for little or no money. The current litigation concerning Ghost Rider is simply the latest chapter in a long line of cases. But the answer isn't to avoid all contracts all the time. The key is to understand what you are signing and what you are and are not willing to give away.

Reality Check

It is obviously self-serving for me to make dire claims about the dangers of creator owned contracts. The more you are concerned about this legal problem, the more likely it is you will become my client and pay my fee. It is also clear that many creators feel compelled to sign away their ideas to get their foot into whatever door they have found into the ultra-competitive comic book industry (See David and Goliath: Negotiating Comic Contracts). Both of those concepts are true. I get it.

Here is my response to those facts; if you don't want to use me to review your contract, I respect that. By all means, use someone else with a background in contracts, IP or entertainment law, just don't do it yourself. This is not an insult to your intelligence or business savvy. It is recognition of your specialization. You are an artist or a writer. You probably didn't waste a lot of time in law school learning about contracts (if you did, sorry about the loans). It is unrealistic for you to be expected to understand the implications of contract language. Many of the most successful businessmen have several lawyers explaining things to them when they need to make a major decision. You should too.

And even if you do find yourself in a position where you “have to” sign a bad deal, do it with your eyes opened. Know what you are getting into, so you don't wake up one day without any claim or credit for what you worked so hard to create.

Have fun.
Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.com FOR A FREE CONSULTATION.

Eternity is a Long Time: License Terms in Comics Contracts

Western society is focused on the present. In business and in life, most of us are concerned with what's happening right now. Little thought is given to long term implications and outcomes. This can be a mistake, especially when it concerns your original stories and characters. A prudent creator will consider the length of time that their property is tied up when considering any deal.

How Long Is This Going to Take?
In the language of contracts, the Term is the length of time that a contract will be in effect. So if you license the publishing rights to the Greatest Comic Ever (GCE) for three years from the execution of the agreement, and the contract is signed on January 1, 2014, then the rights revert back to you on January 1, 2017.

In some cases, the starting and ending dates can be manipulated so that three years isn't really for three years. For example, if you license GCE for three years from the date of first publication of the book, you're looking at a longer deal, since GCE might not come out months or years after the contract is signed.

Forever and Ever, Amen
There are two types of terms in comic book contracts, finite and infinite. A finite contract has a term that lasts for a certain amount of defined time. Like the example above, the term could be months or years, but sooner or later, the rights revert back to you.

With an infinite term, there is no practical end to the license. You could die, humanity could be destroyed in the zombie apocalypse and the earth could be eaten by the sun, but as long as there are lawyers around the contract is still in effect. You can tell a license is infinite if the term contains words like perpetual or in perpetuity. Also, if you can't calculate when the term ends, there is a good chance that it never will.

There are also modifiers to standard term language that can make an infinite term look like a finite term. An in use license could be written so that as long as the licensee is actively using the license, then the license is still in effect. This is part of the difference between the X-Men and Daredevil movie franchises. Fox keeps actively making films with the X-Men universe, allowing it to keep the license. Daredevil reverted back to Marvel because Fox made no use of the license after the 2003 film.

An automatic renewal clause can be placed in term language so that the original term continues to restart as long as certain conditions are met. For example, I have seen publisher's contracts where the license term was valid as long as the book was in print. In today's world of internet comics, a book will always be in print if the book can still be downloaded, making a finite license infinite for that purpose.

Also, a license can convert from an exclusive license to a non-exclusive license (See Addition by Division: Separation of Licensing Rights for Creator Owned Deals) after the initial term ends. This can provide some protection for both parties upfront, but creates complications later on.

Think About the Future
Publishers have an inherent interest in holding rights for as long as possible for several reasons. First, it might take a considerable period of time before a property reaches its height of popularity. Wolverine has been a benchmark of popularity for the past ten years, but its celebrity status in comics has been solid for the past twenty years and it languished in relative obscurity for years after his first appearance in 1974. Second, IP assets, like characters are not perishable and they don't take up space. They are mental concepts that can be stockpiled at little cost. Finally, characters can prove to be powerful assets to whoever holds them whether the rights are resold as movies or games, or if the characters themselves used as assets to generate investment income.

The risk that a creator runs into in this scenario is signing away the rights to a Property for too long. What too long means will differ from one person to the next, but it is generally a mistake to sign away rights forever if the benefit you receive doesn't match what you're giving away (See Get What You Give: Rights and Revenue for Creators)

Not every Property is going to be as popular as Superman seventy five years after it is created. Your personal situation might prevent you from making demands about the length of your contract term (See David vs. Goliath: Negotiating Power in Comic Book Contracts). But anyone getting involved in a creator owned deal or some other type of licensing agreement should consider the length of the term in their contract term and strive to maintain some control of the property in the long run.

Have fun.

Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 at gamalhennessy@gmail.com FOR A FREE CONSULTATION.

Your Slice of the Pie Part II: When Do You Get Paid?

I haven't written anything about comics in a few weeks because I've been working on creating a independent artists merchandising platform (See Do You Want to Create Merchandise for Your Comics? ). I'm still testing the feasibility of that business, but I'd like to take a break from that and discuss the ways time impact a contract. This essay will focus on the most important short term impact; the time it takes for you to be paid.

Payment Timing

The most important thing to understand about working with a publisher is that payments are traditionally paid in lump sums at specific periods during the year. For instance, let's say your publisher reports sales on a quarterly basis (4 times per year) and pays royalties thirty days after each reporting period. Let's also assume that your new book hits the stores on January 1, 2014. This means that you'll see your first report on March 31st, 2014 (or the first business day after that) and the earliest that you'll see the first check is April 30, 2014. Payment cycles can be monthly, quarterly, bi-annually or annually. The rise of online sales can speed up the reporting process to almost real time, but the publisher might still delay payment for various financial reasons.

Not So Fast

Keep in mind, the earliest point where you might get paid won't always be the day you get the money. There are several factors that contibute to payment delays that have nothing to do with negative intentions from the publisher. A delay in payment can occur:

• if the publisher pays you any advance prior to the release of the book (See Your Slice of the Pie Part I: Net and Gross Profit). In this case, you won't be paid until your percentage of royalties exceed the money you were given up front.
• if the cost of producing the book and deducted from the gross sales exceed the actual sales, then you won't get paid until sales exceed costs (See Your Slice of the Pie Part I: Net and Gross Profit)
• if the publisher only pays royalties after a certain threshold is reached (normally $50 or $100) then you won't be paid until the pay cycle where your share of the royalties crosses that threshold

Watching the Clock

When you are thinking about the practical effects of payment timing there are two things to keep in mind. First, don't expect to see immediate payment for a new book unless there was an advance up front. Very few independent artists rely on just creator owned book sales to make a living, but it's worth pointing out that you don't want to count on paying February's rent with the money from January's book sales. That money might not come until April or May. The solution to this is to supplement your creator owned income with work for hire gigs (See Entertainment Contracts 101: Creator Owned vs. Work for Hire) that at least in theory are paid much faster.

The other thing you want to avoid is forgetting about your royalties entirely. In some extreme cases (large deductions from gross, annual reporting and rolled over payments), years could pass before sales reach a point where you start to collect royalties. In the majority of cases, the publisher will just send you the money even if you don't keep track. This is a nice surprise (the industry equivalent of finding money in the pocket of an old coat) but you don't want to get into a situation where you forget and the publisher forgets and you never get paid for your work.

While I often advocate for creators to negotiate changes to their deals, payment timing is something you need to understand not try to negotiate. The payment systems of most publishers are tied to their accounting systems and their overall business operations. It is worth asking for a change if the publisher seems flexible, but unless you are Stan Lee most creators will not be in a position to get this change (See David vs. Goliath: Negotiating Power in Comic Contracts). The best option you have is to set up some kind of long term reminder of the payment terms of all your books at the beginning of the deal.

Now that we've explored the short term effects of time on creator owned deals, next week I plan to look at the long term effects of tying up intellectual properties and the not so philosophical concept of eternity in the comic book business.

If you have any questions, please feel free to ask.

Have fun.
Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 atgamalhennessy@gmail.com FOR A FREE CONSULTATION.

Do You Want to Create Merchandise for Your Comics?

Much of the popularity for famous comic book characters doesn’t happen because people read comics. Only a small percentage of the people who are familiar with Spider-Man, Superman and the Hulk have ever been inside a comic book store. A lot of exposure comes from licensed media (TV, film and video games) but just as much of it comes from merchandise (clothing, skateboards and toys0. In the past, only the major companies could support a merchandising program. But times are changing. Is the independent comic book industry ready for independent merchandising?

The Opportunity

The key elements of a merchandising program are:

• Distinctive and popular images or characters
• Design and Production
• Marketing and Advertising
• Distribution and Fulfillment
• Revenue Collection

With an independent merchandising plan, the independent creator owns the characters and images. They decide what products fit their plan. Design and production, distribution and fulfillment can be outsourced to custom merchandising companies that can produce a wide variety of goods on demand without the need for warehousing or creating bulk orders. Marketing and advertising costs can be scaled to budget, with much of the main outreach occurring online or offline at conventions or local shops. Revenue collection can be funneled through a variety of sources including Amazon, Paypal and Kickstarter. The increased exposure of the underlying property supports the comic and vice versa. Ultimately, a larger licensing company could see the potential in your work (based on the sales) and provide you with a much larger platform (and potentially much more revenue).

The Problem

There are two main problems with launching your own independent merchandising program; time and expertise. Many independent creators have day jobs, families and they spend what little free time they have on their craft. There is no extra time available to decide on the cotton weight on a T-shirt line or whether iPhone cases need to be part of the product offering. Even if they did have extra time on their hands, few of them would be interested in dealing with the legal, financial and marketing duties that come with managing a merchandise line. They want to spend their time creating the next great comic.

The Solution

I was once the general counsel for a Japanese animation company called Central Park Media. After that, I was the international publishing manager for Marvel. Since then, I have been advising private clients for publishing and new media contracts. Finally, I have also run my own independent publishing company called Nightlife Publishing for the past six years. I think the combination of my skills and the current level of DIY technology creates an opportunity for independent creators to make money from the sale of their merchandise. The main question now is ‘does anyone want this service?’

What do you think?

Would you be interested in selling a line of clothing, posters and tech related merchandise based on your comics? I am in the process of developing the business model now, but if no one is excited about the idea, I might have to sit on the idea for a while.

Let me know what you think in the comments section.

Have fun.

Gamal

Ninja Turtles: From Comics Parody to $60 Million Dollar Property

I spend a lot of time on this blog talking about the importance of protecting the rights of creator owned properties. I discuss getting value for your creation and thinking long term about your potential licenses. The truth is that very few creator owned projects will ever become major characters on any level. But when you think about the potential of creator owned projects, one of the best examples to consider is the Teenage Mutant Ninja Turtles. The lessons that have come out of that title are ones that every artist should learn.

An Inside Joke

I first saw an issue of Turtles in my freshman year of high school. I distinctly remember rolling my eyes when I saw the cover and a guy in class explained the concept to me. In 1984, everyone who read comics knew the most popular comics were Daredevil, X-Men, Cerberus and Ronin. Kevin Eastman and Peter Laird didn’t agonize over trying to create something completely new. They combined all of the basic concepts behind all the most popular titles and came up with gritty, young, chemically altered, anthropomorphic martial artists. The idea was confusing to anyone outside of comics. To anyone who read comics, it was the best example of self indulgent parody. The book premiered at a small comic con in New Hampshire with an extremely small print run. Then larger publishers like IDW and Image got involved. Then the merchandise started to come out. After a short period, the inside joke wasn’t a joke anymore.

The Juggernaut

In 2009, Nickelodeon bought the rights to Turtles for $60 million dollars. Before that sale, the Turtles were the subject of four wide release movies, 175 hours of TV programming and 600 worldwide merchandise licenses. It has been one of the top ten toy franchises for years and has become a staple of youth pop culture. This fall, Nickelodeon is releasing a new CG version of Turtles that will coincide with 50 new merchandise licenses in the UK and Europe alone. Over the past 30 years, it is safe to say that Turtles have become one of the most successful character franchises in history. That is a pretty good result for a self published parody comic based on derivative tropes.

Secret to Success

As I have repeatedly said, there were a lot of factors that go into a successful creator owned program. Eastman and Laird had the input of licensing agents, advertising professionals and animators to help the project take off. Even with all that business support, there was still a considerable amount of hard work and luck that went into the growth of Turtles as a franchise. Obviously, not every character has the potential or support to sell for $60 million dollars. Even DC, Disney and Marvel have a ton of non starters in their character catalog. But each company protects the rights of each character as if it will be the next Spider-Man, Batman or Turtles because you never know what people will respond to. Eastman and Laird did the right thing from the beginning. They got the advice of professionals, protected their rights and adapted their creation to each new medium and market. As a creator, you need to take the same steps. Your character might not be worth $60 million, but if it is you need to put yourself in the best position to profit from it.

Have fun.

Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.com FOR A FREE CONSULTATION.

Meet with Creative Contract Consulting at New York Comic Con

I will be attending the New York Comic Con this year. If any artist, writer or comic professional would like to set up a meeting for business consultations or the inevitable drinking to discuss future projects, please contact me at gamalhennessy@gmail.com to set up a meeting.

I’ll see you on the Exhibition Floor.

Have fun.

Gamal Hennessy

Related Articles

An Introduction to Creative Contract Consulting

Gamal Hennessy Biography

The Current C3 Client List

Your Slice of the Pie Part 1 (Gross and Net Profit Concepts in Creator Owned Deals)

A couple of weeks ago I introduced the different types of rights you could license as a creator and the different types of revenue you can get from a licensed work. In that post I hinted that there were specific concepts that impact how much you’re paid on any given deal. This post (and probably the next few posts) will go into more details about the economics of creator owned deals.

Types of Revenue

As a refresher from the earlier post, I need to point out that the various ways that creators are paid in creator owned deals. The three major ones are:

• A royalty is a percentage that the artist earns for every finished unit that is sold. For example, an artist might receive 30% of every one of their comics that is sold to the public.
• An advance is money that is paid before the work is finished. For example, a writer of a novel might receive money up for her novel based on the proposal not the finished product.
• A minimum guarantee (MG) is money paid up before the work is finished, based on anticipated sales. For example, if a toy company plans to sell a new licensed toy for $10 and the creator gets 10% of that sale, then the creator gets $1 per unit sold. If the company expects to sell 100,000 units, then the MG that the artist gets for this deal is $100,000.

Definitions of Revenue

In general there are two ways that revenue is calculated for your royalty or minimum guarantee. There are gross profit and net profit.

• Gross revenue or gross profits is the pure income that a product or service generates.
• Net revenue or net profits is the income that a product or service minus certain expenses.

In the vast majority of cases, publishing deals are calculated by net revenue. The key for a creator is to know what is being included in the definition of net revenue and avoid situations where the expenses are always greater than the revenue generated.

Examples

Question: Let’s say you produced a comic called the Greatest Comic Ever (GCE for short). A publisher says they are willing to make a deal with you to publish GCE. They offer you 50% the wholesale profits as part of the deal. The comic sells for $2 wholesale. Is this a good deal?

Answer: That depends. The truth is there is no way for you to know if this is a good deal or not until you understand how the contract defines profit.

• If the contract says you get 50% of the gross profits then you get $1 per book sold.
• If the contract says you get 50% of the net profits then you have find out what is deducted from the gross to calculate the net.

The Net Revenue Trap

It is a fairly common business practice to deduct the cost of goods sold from the gross to determine the net. Cost of goods sold means whatever the publisher has to pay to produce and distribute your book. Those costs can include editing, printing, shipping, advertising, returns and a few other items. Most publishers track their costs in a document called a profit and loss sheet, so they know what percentage of every book goes into the cost of goods sold. Many publishers will list exactly what goes into the net calculations. This is helpful for figuring out where the money is going.

The problems occur when the creator has no idea what goes into the net calculations or the definition of net is so broad that it wipes out any potential profit for the creator. In the most unscrupulous contracts, the publisher will creatively expand the definition of net revenues to the point that the creator never gets any profit for his work even if it sells millions of copies. For example, if the wholesale price of GCE is $2 but the net deductions are $3 per book then the net profit is -$1 per book. That means you get $0 no matter how many copies the book.

Playing Your Position

It is unrealistic for an artist or creator to understand the nuances of licensing revenue, especially when they first enter the market. You need to focus on your craft and create the best property you can. You also need to have access to financial and legal professionals who can explain potential deals to you and allow you to make informed choices. That is why it pays to break down each contract and understand its implications before you move forward.

Next week, I’ll try to explain the concepts of recoupment and payment cycles to give you a better idea of when you can expect to get money from a deal.

Best

Gamal Hennessy

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.com FOR A FREE CONSULTATION.