How Do Author Royalties in Traditional Publishing Work?

Understanding Author Royalties in Traditional Publishing

For many writers, the dream of seeing their work in print is closely tied to the expectation of earning (substantial)royalties from their sales. In traditional publishing, author royalties are a fundamental part of the author's compensation, but the specifics can often be complex and confusing and differ from house to house and territory to territory. In this post, I'll demystify how royalties work in the traditional publishing landscape where we have offered many traditional contracts over the years.

What Are Author Royalties?

Author royalties are a percentage of the book's sales that publishers pay to authors as their earnings - after they recoup their costs. These royalties are negotiated and outlined in the publishing contract. Royalties are typically based on either the retail price of the book or the net price, which is the sales revenue minus costs like discounts, returns, and distribution fees.

Types of Royalties

There are several types of royalties that authors may encounter:

• Hardcover royalties: These are usually the highest, often ranging from 10% to 15% of the book's retail price.
• Paperback royalties: Slightly lower than hardcover, paperback royalties typically fall between 6% and 8% of the retail price.
• Ebook royalties: These can vary widely but are often set at a higher percentage, sometimes up to 20%/25% of the net sale price.

It's important to note that these percentages can be subject to negotiation and may vary depending on the publisher and the author's bargaining power, which differs hugely from author to author, as one might expect. An international sports star with 100,000 social media followers will command more royalties than someone who isn't known at all, isn't on social media and is writing their first book. 

Advances Against Royalties

Many traditional publishing deals include an advance, which is a sum of money paid to the author before the book is published. This advance is essentially a pre-payment of royalties, which the author must then "earn out" through book sales before receiving additional royalty payments. If the book doesn't earn enough to cover the advance, the author isn't required to pay back the difference. Advances can range from a couple of hundred euros to thousands to over €100,000. Again, this depends on what potential the publisher perceives the author and book have in the market. And, it's all about the market. So many publishers (including us) have offered traditional contracts, done all the work associated with this and then lost money because a book doesn't sell.  

Understanding the Royalty Rate

The royalty rate is the agreed-upon percentage that determines how much authors will earn per book sold. This rate is crucial and should be clearly stated in the publishing contract. Authors should pay close attention to whether the rate is based on the book's retail price or net price, as this can significantly impact earnings.

Royalty Statements and Payments

Authors receive royalty statements from their publishers, typically on a semi-annual or annual basis. These statements provide a detailed breakdown of sales and returns, and the corresponding royalties owed. Payments are then made to the author based on the schedule outlined in the contract. It's vital for authors to review these statements carefully to ensure accuracy.

Subsidiary Rights and Royalties

Beyond the basic royalties from direct book sales, authors can also earn from subsidiary rights. These include rights for things like:

• Foreign language editions
• Audiobooks
• Film or television adaptations
• Mercandise

Each of these rights can be sold separately, and the royalties earned from them can be an important additional revenue stream for authors.

Common Royalty Pitfalls

There are common pitfalls that authors should be aware of when it comes to royalties. These include the potential for returns, which can eat into earned royalties, and the "reserve against returns," where publishers hold back a portion of royalties in anticipation of future returns. It's also important to understand escalators, which are clauses in the contract that can increase royalty rates after certain sales milestones are reached.

Tips for Negotiating Royalties

When negotiating royalties, authors should:

1. Research industry standards and comparable titles.
2. Understand the difference between retail and net royalties.
3. Consider the long-term earning potential, not just the advance.
4. Seek professional advice from agents or lawyers if possible.

Negotiating a fair royalty rate is essential for authors to ensure they are properly compensated for their work. With the right knowledge and negotiation tactics, authors can navigate the complexities of royalties and make the most out of their publishing deals.