Not All Royalties Are Treated Equally

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    Sorry, all, for not posting recently.  Fall and winter are the times when I do most of my writing. That, combined with the fact that my current work in progress expanded from four books to five (and I have to make beta reader changes to the first book), means I’m behind on a lot of things.

    While I’ve been typing away, my wife has been busy pouring over my most recent royalty statement. Why? Well, we will be negotiating the new series soon, and it makes sense to look at how well the first one did. In doing so, she found some interesting information, which I thought I would share with you all as it points out an important contract issue.

    So, let’s pretend you just received your big break. An offer letter has come in (sometimes called a deal memo), and it outlines various aspects about the publication of your book.  Usually, it states things such as:

    • Amount of Advance
    • Expected Publication Date
    • A list of rights being sold (print, ebook, audio, etc.)
    • The territories these books can be sold in
    • Royalty rates

    Industry standard royalty rates usually go like this:

    • ebook – 25% of publisher’s net
    • hardcover – 10% for first 5,000 copies, 12.5% for the next 5,000 and and 15% thereafter (based on list price)
    • paperback – 6% to 8%, sometimes with an escalator like hardcover sales (based on list price)

    So, that’s all fine and good. Then, sometime later, the contract arrives, and you’ll see that not all royalties are treated equally. Publishers often have exclusions where the royalty rates stated in the deal memo are not going to be used. What kinds of things?  Well, you often see this for highly discounted books & exported material.

    Each publisher is likely to have a different way of calculating royalties in these “special case” situations, but every contract I’ve seen has indicated a lower percentage going to the author. For my contracts, exported books change from 7.5% of list to 7.5% of net. There is a big difference by changing that one little word, and some people might not even notice they aren’t the same.

    When signing my contracts, we did notice, and we tried to get these royalties negotiated higher. We weren’t successful. I’m not sure if it’s a matter of these being “industry standard,” or whether they represent an easy way for the publisher to increase their bottom line. Either way, we figured there wouldn’t be many of these “special sales,” so it would probably only be a few hundred dollars lost. That low expectation meant it wasn’t worth spending a large amount of time to negotiate further.

    Now let’s return to the analysis my wife recently completed. My Riyria Revelations books have been published for about three years now, and the last royalty statement (ending June 30th) shows income for about two and a half years. Well, it turns out these “special cases” brought in $204,290. That’s way more than I ever expected. So good news, right? Well, yes it is, but here comes the bad news. When we look to see how that piece of the pie is divided, we find:

    • $187,381 goes to the publisher
    • $16,16,909 goes to the author

     

    Ouch! That means for those types of sales the publisher is making more than $11 for every $1 I make. That kind of disparity makes me a bit angry, and it’s something I’ll try harder to negotiate in my next contract. Will I be successful? I have no idea, but if not, then I have to add this to any decision regarding whether to sign or self-publish.

    So, the point of this post is to (a) be aware that not all royalties are created equal, and (b) to try and negotiate the most favorable terms you can. It might not seem like an important point, but failure to pay close attention can result in a significant revenue loss. I hope this helps others in their own contract negotiations.

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