Thursday, May 26, 2011
Lesson 5: For Love or Money
A royalty is the amount the publisher pays you for each book it sells. Unfortunately, dealing with royalties in your publishing contract isn't as simple as asking, "How much?" You also need to ask, "How much of what?"
Some contracts base royalties on the suggested retail price, also called the list price, of the book. Since the list price doesn't change, you receive the same amount for every sale, and that makes the math easy. While a royalty based on the retail price locks in your return, however, it makes the publisher's share less certain. This is because publishers have to cut deals with booksellers to get them to add your book to their inventory, and not all deals are done at the same price.
Some publishers deal with this problem by basing royalties on "net." This can refer to either the gross amount the publisher receives from the bookseller or to the amount the publisher receives after subtracting its expenses. If your royalties are net, make sure the contract spells out how they are calculated. Either way, the net price is quite a bit less than the retail price and makes the author's actual return vary from sale to sale.
While there is nothing intrinsically bad about net-based royalties, it takes a higher percentage--often twice as much--to make the same income you would receive from royalties figured on the retail price. So if your royalty is based on net, make sure the percentage is substantially higher than you would accept otherwise.
But what is the standard royalty percentage? There is none. Rates vary with the publisher and the type of book (hardcover, trade paperback, mass market paperback). Some contracts also increase the royalty rate at set sales levels.
Even though there is no standard royalty rate, you still want to know if yours is fair. Unfortunately, I can't tell you. What I can do is give you some typical rates paid by established publishing companies. Small presses and children's book publishers often pay less.
Hardcover: 10% of retail for the first 5,000 copies sold, 12.5% for the next 5,000, and 15% after that.
Trade Paperback: 6-8% of retail for the first 25,000 copies sold, and 8-10% after that.
Mass Market Paperback: 6-8% of retail for the first 150,000 copies sold, and 8-10% after that.
E-Book: Not only is there no standard rate, but it may be a while before the industry reaches a consensus on what is fair. If you sign with an e-book publisher or a traditional publisher that also does e-books, it may offer anything from 10% of retail to 50% of net. If it is licensing the rights to a third party, you should get at least half of what the publisher receives for the license.
Other Subsidiary Rights Licensed to Third Parties: 50% of what the publisher receives. The author's percentage may increase for subsidiary rights with a higher potential return, such as movie rights.
Writers also ask, "Should I sign a contract with a publisher that doesn't give me an advance?" Again, it's up to you. Advances are always nice because you get to keep the money if your book bombs.* But advances are not bonuses. As the name implies, they are advances against royalties. If the publisher pays you a $5,000 advance and you make a $1 royalty on each book, the publisher won't send you any more money until it has sold 5,000 copies.
This is already a long post, and I'm almost done. But I want to mention one other matter that fits better here than elsewhere.
Most publishers give you a few free copies and let you buy additional ones at a discount, which is often 40-50% of retail. (And no, you don't get royalties on these copies.) You can give these "author's copies" to friends and relatives or send them to reviewers. If you want to sell them at speaking events or book fairs, however, make sure the contract doesn't prohibit it. A clause that says the books you purchase at a discount are "for the author's own use, and not for resale" means that you can't sell them.
And even if you write for love, it's always nice to have a little extra money.
Kathryn Page Camp
* If your contract allows the publisher to recover any of the unearned advance after the book has been published, turn and run. (Before signing, of course.)