Writing isn’t easy. Editing and revisions are often even harder. But the business of writing and publishing? That’s a whole new challenge.
Navigating the complexities of the publishing business can be bewildering, but, with a little attention and a few explanations, you’ll be able to manage the business side of your writing career just as confidently as you approach the craft of writing itself.
In the first part of this series, we explored the basics of publishing payments: the advance and the royalty.
But how is your royalty calculated? You know you’re getting, say, 10%, but 10% of what, exactly? In this post, we’ll go over the basics of how a publisher figures out how much is going to be in your royalty check each time around and then go through a basic payment scenario.
List vs. Net
Most large publishers offer a royalty based on list price, which is the cover price of the book or eBook. So if your contract specifies a 10% list royalty and the publisher sets the retail price of your book as $20, you’ll pocket $2 for every book sold.
Some publishers, often small presses, instead offer a percentage royalty on net, which means that you’re paid a percentage of whatever the publisher actually receives after mandatory sales discounts and other considerations are taken into account.
Remember that publishers are required to give pretty steep discounts to wholesalers and distributors, meaning that they often don’t receive more than 40–45% of the list price of the book when one sells. Meanwhile, they still have to pay for printing the book and for the editorial and art staff. Many small presses simply can’t afford to pay royalties based on list price.
A typical formula here might be:
Net = List Price – (Vendor Fees + Discounts + Production Cost)
So in that scenario, let’s assume you’re getting a 25% on net royalty, calculated as above. For a $20 book, discounted at the industry standard 55%, the publisher receives $9. It cost $3 to print the book, so the publisher netted $6. You get 25% of that, or $1.50 for each book sold.
Understand Your Contract
This means you must always ask how net is calculated because there’s no single standard formula, and this can really affect how much you get paid depending on what fees the publisher is incorporating.
Offering a contract based on net is perfectly legitimate, as long as the publisher isn’t deducting for things like art and editorial work, marketing, or other services that should be included in the general publishing agreement. The fairest net arrangements should look something like:
Net = List Price – (Vendor Fees + Discounts)
Indeed, this may be worded several different ways depending on the publisher, so, again, always read your contract carefully and ask lots of questions.
Walking Through a Payment
So here’s how a standard publishing payment might work. You agree with a publisher to produce your book. You’ll get 10% of list on print sales and 25% of list on eBook sales, with a reserve against returns (or advance) of $10,000.
At $20 per print book, you’ll have to sell 5,000 books to “earn out” your advance. (Selling 5,000 books earns you royalties of $10,000.) So now you’ve completed your advance.
Next, you earn royalties for as long as the book is in print and keeps selling. Perhaps 15% of that money might be held for six months by the publisher, in case books are returned and can’t be sold. Every six months, you’ll get whatever portion of that money that wasn’t actually used to compensate for unsold books. So you’ll be receiving your money in staggered payments, but it’ll all eventually equal up to 10% on every book sold.
Confusing? Yup, but not too bad. Most of all, it is worth truly understanding the business side of the writing industry to make sure that you’re looking out for yourself and your best interests.
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