Book Royalties 101 with Danielle Marshall
What are Book Royalties?
Book royalties are the payments an author receives from a publisher for sales of their book, after earning enough to “earn out” the advance – essentially paying back the publisher for the money they gave you as an advance against future earnings. They are typically calculated as a percentage of the book’s retail price or the publisher’s net receipts, depending on the terms of the publishing contract.
How are royalties calculated?
Royalties are calculated by multiplying the format’s applicable royalty rate by the book’s retail price or the publisher’s net receipts, depending on the contract. For example, if a hardcover book sells for $25 and the author earns a 10% royalty based on the retail price, the author earns $2.50 for each copy sold. Royalty rates vary by format, including hardcover, paperback, ebook, and audiobook.
What is the difference between an advance and royalties?
An advance is money a publisher pays an author upfront, before the book is published. It is an advance against future earnings, meaning the author must earn enough sales revenue to cover the advance before receiving additional royalty payments. For example, if an author receives a $10,000 advance, the book must generate $10,000 in earnings before the author begins receiving additional payments. This is called earning out the advance. Traditional publishing advances are generally nonrefundable, meaning the author does not have to repay the advance if the book fails to earn out, provided the author fulfills the terms of the publishing contract.
How would royalties work with self-publishing?
With self-publishing, authors generally receive a larger percentage of each book sale because they are not sharing revenue with a traditional publisher. For example, Amazon's Kindle Direct Publishing (KDP) offers ebook royalty options of between 35% and 70%, depending on the book's price, territory, and other eligibility requirements. For print books, the author's earnings are calculated after deducting printing costs and any applicable distribution fees. However, self-published authors are also responsible for covering expenses such as editing, cover design, formatting, and marketing. While self-publishing can offer higher earnings per copy, authors assume the financial risks and responsibilities traditionally handled by a publisher.
What are typical traditional royalty rates?
Royalty rates vary depending on the publisher, format, and terms of the author's contract. Typical rates for traditionally published books include:
Hardcover: 10% to 15% of the retail price, sometimes increasing as more copies are sold.
Trade paperback: 7.5% of the retail price, sometimes increasing as more copies are sold.
Ebooks: 25% to 35% of the publisher's net receipts, which is the amount the publisher receives from the retailer rather than the price paid by the consumer.
Audiobooks: Rates vary considerably depending on the format, distribution arrangement, and whether the publisher or a third party produces the audiobook. A common rate for digital audiobook downloads is 25% of the publisher's net receipts.
These are general industry benchmarks, and actual rates can differ depending on the publisher, the author's negotiating position, and the specific publishing agreement.
What is a tip or piece of advice for new authors trying to understand royalties?
Pay close attention to how your royalties are calculated, not just the percentage you are offered. A 10% royalty based on the retail price can be more valuable than a 15% royalty based on the publisher's net receipts. Authors should also understand when royalty statements are issued, how often payments are made, and what deductions or reserves (money held back in case of future returns of distributed physical copies) may apply. Most importantly, remember that a higher royalty rate does not necessarily mean higher earnings. The publisher's ability to distribute, market, and sell your book is just as important as the percentage you receive on each copy sold.
