Royalty Rates

bills-and-coinsAuthor royalty rates have often been the topic of heated debates, especially since the e-book revolution, so we thought we would blog about it today.

Royalty rates vary from publisher to publisher. They also depend on the format of the book (hardcover vs. paperback vs. e-book). Usually, established, well-known authors also get a higher percentage than first-time authors.

The royalty rates for paperback books can range from four to fifteen percent. The standard royalty rate for trade paperbacks is seven percent of the book’s retail price.

Sometimes, paperback royalties are paid on a sliding scale. This means that the royalty rate increases the more copies are sold. For example, the royalty rate might be seven percent on the first 1,000 books and increase to eight percent for any sale after that figure is reached.

Royalty rates for e-books should be noticeably higher than for print. They usually range from twelve to fifty percent. Right now, the standard royalty rate is twenty-five percent (on net) for e-books. Authors’ associations argue that e-book royalties should be fifty percent of the publisher’s net receipts.

However, much more important than the royalty rate is what the percentage is based on. Royalties can be calculated in a variety of ways. If you compare your royalty rate to the rate of another author, you need to be careful because you might not know what these percentages are based on.

Three ways to calculate royalties: 

  1. Based on cover price (list price/retail price): The royalties are based on the price that is displayed on the cover of the book. Regardless of what the retailer or bookseller pays for the book, the author always gets the same royalties for each copy. A royalty of 10% of a $10 book means the author will be paid $1 per copy sold. Publishing contracts with royalties based on list price are ideal for authors.
  2. Based on net price (net income/net receipt/net revenue/net sales proceeds/wholesale price/amount received): Royalties are based on the money the publisher actually gets from bookstores and distributors. Most publishers offer discounts of 30-65% to wholesalers and retailers, which means you’ll get only about half the royalties than you would if they were based on cover price. Net receipt royalty rates should be twice the list price royalty rate. A contract with net income royalty rates isn’t as desirable as a contract with royalties paid on list price, but it’s still okay, as long as the definition of “net” is clear.
  3. Based on net profit: Depending on how “net” is defined, it can mean that the publisher pays on whatever is left after subtracting discounts, production costs, advertising, shipping, storage costs, editing, and cover creation costs. If you sign a publishing contract with royalties based on “net,” make sure you know what expenses are included in the definition of “net,” or you’ll be left with next to no royalties.

By the way, Ylva Publishing calculates author royalties based on list/cover price.

So what are your experiences with royalty rates? We’re looking forward to hearing what you think.

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About the Author : Astrid Ohletz

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