Royalties for authors. We work with words, not necessarily numbers. What’s the story behind these numbers? What am I seeing on my statement? What should I see? We’re answering these and other questions in this post.
Let’s be honest: you don’t spend months–or even years–of your life writing a book, getting it professionally edited and proofread, designing a cover, and doing marketing without hoping you’ll make some money. Even if the money isn’t your “why,” every author hopes to earn at least enough to recoup what they’ve invested on getting their book published in the first place. Regardless of your publishing route.
The pay you get for all your effort comes in the form of author royalties. So how do they work?
This post is based on a conversation, with John Wagner-Stafford of Ingenium Books, from The Empowered Author Podcast, episode #39. Listen here:
Want to be considered as a guest on our podcast? We’d love to hear from you.
What exactly are royalties for authors?
Author royalties are what a publisher pays you as an author for the rights to sell your book. Since they’re calculated as a percentage of your book sales, they’re similar to how a business owner will pay themselves from the profits the business makes. In other words, they’re not a set amount.
What percentage of royalties do you earn as an author?
According to John Wagner-Stafford, co-founder of Ingenium Books, the percentage of royalties you can earn depends entirely on your contract with the publisher. And royalty structures generally depend on the type of publisher you’ve opted for:
- Traditional publishing: With a traditional publisher, you generally earn between five and fifteen percent royalties. Paperback books normally earn a smaller percentage than hardcover books. Ebooks tend to earn a higher percentage: sometimes as much as twenty-five percent.
- Self-publishing: If you self-publish your book, you earn 100 percent of your royalties.
- Hybrid publishing: With a hybrid publisher, you typically get paid between forty and sixty percent royalties.
How are royalties calculated?
There are two ways for publishers to calculate royalties: on the retail sales and on the net sales.
- When royalties are calculated on retail sales, they’re calculated as a percentage of the retail price of the book. For example, if your contract states that you’ll earn ten percent of royalties on retail sales and your book sells for $20, you’ll earn $2 per copy of your book sold.
- When royalties are calculated on net sales, you earn a percentage of whatever earnings are left over once discounts and expenses have been factored in. This is the more typical scenario for hybrid publishers. Even in self-publishing, that 100 percent in royalties you earn is normally based on what comes in after distribution costs have been subtracted and your publishing platform has taken their cut. How much this is varies from one publishing platform to another. Amazon’s Kindle Direct Publishing – or KDP – generally pays between thirty-five and seventy percent minus distribution cost for ebooks and between forty and sixty percent minus printing costs for paperbacks.
Advances on royalties
You often hear about a politician or celebrity landing a book deal with an advance of thousands of dollars. An advance is an amount of money the publisher pays you upfront, before the book has been published.
Many new authors fall into the trap of thinking an advance is an amount of money on top of what they’ll be earning in royalties. However, the advance is really like a loan: once you start earning royalties, the publisher will first use them to pay back the advance amount. You won’t see any royalty payments until that amount has been paid off in full.
Holdbacks against returns
When a bookstore orders your book, they’ll order a certain number of copies and keep them in stock for a certain time period. They then may opt to return the copies that don’t sell within this time to the publisher, and the publisher refunds the money they’d spent on these unsold copies.
Traditional and hybrid publishers generally hold back a certain amount of money to cover returns. If you’re a self-published author, it’s a good idea to have a similar buffer so that you don’t have the scenario of looking at your sales for January, spending your money and then in February or March you suddenly have to fork out for returns.
How often do you get paid?
How often you get that royalty payment really depends, again, on your publisher. Amazon’s KDP, for example, pays every month, approximately sixty or ninety days after the end of the month in which your sales have been reported. For example, you’ll be paid at the end of March or April for however many books you sold in January. (Sixty days except if you’ve opted into expanded distribution, in which case it is ninety days.)
Traditional and hybrid publishers generally prefer paying either twice a year or quarterly. This way, you get a bigger lump sum rather than hundreds of small payments of only a few dollars throughout the year.
As with KDP and other online publishing platforms, there will be a significant period of time between when the books sell and when you actually get paid. For example, you may be paid at the end of the second quarter of the year for the books you sold during the first quarter: so, at the end of June you may get paid for the books you sold between January and March.
How important are royalty statements?
When you receive a royalty payment, you will normally get a royalty statement too: a summary of how much you’ve earned in royalties within that payment period. These statements can be very helpful to you as an author, and not just for the purposes of doing your tax returns.
Because the royalty statement tells you how many books you’ve sold and how many were returned, you can use them to tell whether your marketing strategy is working or not. If your statement shows a low number of books sold or a high number of returns, you’ll know that you need to ramp up your marketing efforts and maybe even change your strategy completely to try and sell more books.
Over to you
What’s been your biggest learning about royalties on book sales?
Are your statements making sense to you?
If you’re with a publisher, what’s the statement and payment frequency?