The Dark Side of Webnovel Contracts: 4 Red Flags Creators Should Know

Notes from a webtoon publisher.

I am not a lawyer and certainly not your lawyer. The opinions below are my own based on my experience handling contracts for publishers and platforms in the webtoon industry.

I should also state that in the Reddit post I linked below, the contract is linked to a webnovel publisher in the United States. But, it is a Reddit post, and there’s no way of knowing whether the contract is actually from that publisher.

This past week, I was on Reddit when I found a webnovel publishing contract that had been shared on r/ProgressionFantasy. It immediately set the subreddit on fire with multiple posts of writers, lawyers and other bystanders weighing in with their opinions on just how horrible the contract is.

You can check out the post in its entirety here, but I wanted to break down the most egregious red flags that immediately stood out to me.

So, let’s get on with the show.

The Publisher Asks for Rights They Should Be Paying For

a. Because the Publisher and Author have an established working relationship, the Author agrees to offer the Publisher the first opportunity to review and consider any new manuscripts created during the Term of this Agreement before offering them to other publishers or proceeding with self-publication.

b. If the Author receives interest or a formal offer from a third party for a new work during the Term, the Author will first share the details of that opportunity with the Publisher. The Parties will then engage in good-faith discussions for thirty (30) business days to determine whether they wish to proceed together on the project.

First Look is a term used to describe when authors or creatives are obligated to allow a company or publisher first look at a creative work. Now, this in and of itself isn’t a red flag, but companies usually pay for this priority.

The second second literally requires the author to share information about their competitors with the publisher. You’d essentially have to disclose to other publishers that you’re contractually bound to share their offers and hope they’re okay with it in order to receive the offer.

The right to First Look as well as First Refusal are both contract terms that can be found in publishing all around the world. But the fact that a publisher would include these terms without proper compensation is deplorable.

While the sample above is egregious, I’ve seen contracts like these floating around the internet and while they seem harmless, they reduce an author’s ability to market their titles and receive offers.

The Publisher Wants to Own Your IP

b. Creation of Derivative Works: In the event that the Author is unable or unwilling to continue the series for any reason—including, but not limited to, health concerns, personal circumstances, or death—the Publisher shall retain the right to produce derivative works based on the original Work and its universe. This includes, but is not limited to, prequels, sequels, spin-offs, adaptations, and other content utilizing the characters, setting, and intellectual property established in the series. This clause ensures the long-term stewardship and expansion of the intellectual property while honoring the Author’s contributions and ensuring ongoing benefit to their estate.

This might be the most disturbing clause in the contract and it’s a massive rights grab beyond the scope of traditional or modern publishing.

"Creation of Derivative Works (Unfinished Series Clause)” is (supposedly) a section intended to address the fate of titles left unfinished when an author can no longer complete their work by allowing the publisher to continue the series.

Except the rights allow the publisher to create prequels, sequels, spin-offs, adaptations and other content utilizing the characters, setting and intellectual property of the series.

There is no requirement for author approval definition or even a determination for the series to be deemed “unfinished”. In fact, the clause clearly states that the publisher retains the rights to produce derivative works if the author is “unable or unwilling ot continue the series for any reason”.

The idea that a publisher would essentially hijack an IP like this is unthinkable.

Yet, here it is. In writing.

The Worst Royalty Share I’ve Ever Seen

i. The only costs that shall be recouped in advance, and in full before any other payments are made to the Author, are Marketing Costs and Specialized Expenses.

ii. Internal Costs shall be tracked by the Publisher and recouped from the revenue before any royalty rate increases apply.

One of the most egregious things about this contract is how the royalty payments to the author are handled. Specifically, the publisher is reimbursed for Marketing Costs and Specialized Expenses before any royalties are paid to the author.

Essentially, the author pays for marketing and publisher expenses in addition to giving the publisher a percentage of the royalties.

And if that weren’t bad enough…

d. Royalty Rates

i. Ebook and Print Editions – The Author shall receive 40% of Net Revenue until Internal Costs related to the Work have been fully recouped by the Publisher, at which point the rate shall increase to 50%.

ii. Audiobook Editions – The Author shall receive 20% of Net Revenue until Internal Costs have been fully recouped by the Publisher, at which point the rate shall increase to 30%.

iii. Other Forms of Media (including but not limited to film, television, stage adaptations, or merchandising) – The Author shall receive 50% of Net Revenue after all Internal Costs, Marketing Costs, and Specialized Expenses have been recouped by the Publisher.

The contract lists three forms of expenses borne by the publisher: Marketing Costs, Specialized Expenses, and Internal Costs.

Until the publishers recoups Marketing Costs and Specialized Expenses, the author receives nothing. And once those are recouped, the author receives a reduced royalty rate until the Internal Costs are recouped.

This essentially minimizes all risk for the publisher and pushes the expenses onto the author.

Yes, you read that correctly. The author funds the publisher.

A lot of royalty share agreements actually require that the author’s share be reduced or redirected to contribute to production costs either related to the main work or even derivative works.

It’s beyond predatory, it’s reprehensible.

Whatever the FXCK This Is

c. Reversion Without Breach

i. All rights to the Work shall revert to the Author upon expiration of the ten (10) year term, excluding any rights and revenues from sublicenses granted prior to reversion, which shall remain in effect for their full term.

ii. If the Agreement is terminated early by mutual written agreement, reversion shall be conditioned on repayment of all direct, unreimbursed Publisher costs, multiplied by three (3), and application of the Future Earnings Obligation in Section 5(d).

The 10 year contract term is… horrible. But requiring authors to reimburse publisher costs by a factor of 3 to end the contract early is beyond the pale. There’s no reason for this to exist in the contract unless the publisher had had trouble keeping authors and is using this to prevent contracted authors from attempting to end their contracts early.

Also, if you were curious about the “Future Earnings Obligation”…

d. Future Earnings Obligation

i. If rights to the Work revert to the Author as a result of the Author’s material breach of this Agreement or by early termination, and the Work or any derivative works are subsequently monetized by the Author or any third party, the Publisher shall receive twenty percent (20%) of all Gross Author Revenue from such monetization for a period of five (5) years following reversion. For purposes of this clause, “Gross Author Revenue” means all amounts actually received by or credited to the Author (or any entity controlled by the Author) from the exploitation of the Work or derivative works, before deduction of any expenses or commissions.

ii. This obligation applies to all formats and channels, including but not limited to print editions, digital editions, audiobooks, translations, merchandise, adaptations, sequels, spin-offs, and performance or media rights, to the extent they are derived from the Work.

iii. The parties acknowledge and agree that this continuing participation is a fair and reasonable allocation of revenue in recognition of the Publisher’s original investment, editorial and marketing efforts, and the enduring commercial value created under this Agreement.

Authors who end their contracts early must not on reimburse the publisher triple their expenses, they must give the publisher 20% of revenue stemming from contracted books as well as sequels, prequels, translations, adaptations and so on for a period of 5 years.

This would include any work related to the series that was published after the contract ends, again, funding the publisher at the author’s cost. And remember, by this point, the author will have paid the publisher triple their expenses.

What the fxck.

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I will say that this is the worst contract I’ve ever seen in my professional career.

But, being a webnovel author myself, it’s not the only contract I’ve seen that attempts to hijack an author, their work or their IP without offering fair compensation.

One contract that I was offered a while back was slightly better, but only in the sense that the contract term was shorter and some of the clauses were fairer. The contract, as a whole, was still massively predatory and wasn’t worth the time I spent attempting to negotiate with the publisher.

Be careful out there. The only way to battle predatory practices in the publishing industry is to share information and ask questions to fellow authors.

A common set of clauses between this contract and one that I was offered were the inclusion of terms to trap the author into working with the publisher. There were multiple clauses that would extend the term length while also requiring authors to publish future titles with the publisher, even if they were separate stories.

To all the creatives and authors out there, the webnovel market is rife with publishers who prey on the goodwill of others so please be safe.