In the strictest sense, royalties or a royalty paid to an author is a percentage of revenue earned on book sales. Most traditional publishers pay royalties to their authors based on a percentage of the listed retail price of a book. This percentage may vary depending on the format of the book sold (paperback, hardback, e-book or audiobook). Some publishers make it a little more complicated by setting whatever percentage is due to the author on net receipts (less the discount to a retailer, wholesaler or distributor). It can get even more complicated when the publisher bases the royalty rate on a percentage of net profit (what remains after a whole host of deductions are made like retailer discounts, print costs, publicity and warehousing costs; yes, I’ve even seen contracts where the cost of editing is lumped in here as a publisher expense to be deducted).
With that all in mind, remember that if a publisher agrees to pay an author an advance against expected royalties (an upfront sum of money paid once or staggered in smaller amounts over a period of time, usually before publication); this advance is also paid in lieu of future royalties. It’s not a publisher freebie or a loan that never has to be paid back! Think of an advance from a publisher as a loan to an author it is obliged to write off should a book not match its sales targets over time.
While advances usually don’t ever have to be paid back by the author (unless the author fails to deliver a completed book or breaks the terms of the publishing contract), the author is not paid royalties until the advance is earned out with its equivalent amount in book sales. Publishers have to write off a lot more advances paid out to authors than you might think. They rely on their biggest selling books to offset what they invest in other titles. Publishing is a tough business, particularly for smaller publishers. Many books published never earn out and it is why we are seeing a publishing climate where advances are getting smaller. Many small publishers no longer pay advances to authors or simply pay nominal amounts — as little as a few hundred dollars.
So how do royalties work with self-publishing?
You may need to be sitting down before you read the following, ideally with a strong coffee or stiff drink. Whisper it quietly…
In the strictest sense, there really is no such thing as royalties in self-publishing!
You are the author. If you are a true self-publisher, then you are also the registered publisher of origin. Authors get royalties. Publishers don’t! Publishers receive revenue and work out their profit on every single unit sold. Ideally, the publisher sets out to cover their initial investment (once all the production and marketing costs are paid for) and earn a little or a lot on top to make the endeavour worthwhile.
Stay sitting down!
A royalty IS the total amount paid to an author. In royalty universe, there isn’t any such thing as 10%, 25%, 50%, or even 99.9% of an author royalty. A royalty IS 100% of whatever is paid to the author! The only exception to this is when two or more authors have co-authored a book, or an author has agreed to split his/her royalty with an illustrator or translator directly contracted in the book project.
When it comes to self-publishing service providers, vanity presses, and DIY self-publishing platforms like Amazon KDP, you will still see this word bandied around in ways it was never meant to be used. The word royalty — in terms of the book industry — originates from a traditional model of business centuries old and it really has little place now outside of those businesses adhering to this model. Cast an eye on the websites of many self-publishing service providers and you will quickly see phrases like ‘authors earns X% percentage of royalties’ or ‘we split royalties on a 50/50 basis with our authors.’
It is the reason why some companies like to play a game of math with authors.
Try these examples on a typical book retailing at $10:
Our authors receive 100% of royalties on net (after retail discounts of 55%, print costs $3.50 and our tiny 5% commission).
Authors get 20% royalties on retail price.
We pay an incredible 100% royalty rate on net (after retail discounts of 50%, print per copy cost of $3.00 and an administration charge of 20% per sale).
In order, the author would receive a ‘royalty’ of $0.50, $2.00, and the last one would pay a big fat ZERO. I guess even 100% of nothing is still nothing when there is nothing left!
When you peruse royalty claims by self-publishing providers, carefully examine the math and how the word royalty is used and exactly what exactly it is based on. Be very suspicious of companies that use terms like ‘percentage of royalties’ or ‘share of royalties.’ Remember, you are footing all or most of the cost of publishing your book and the onus is on you to work out exactly how much you are earning from the sale of every book if you are in the least bit interested in making back what you have invested. Look for examples of the breakdown of book sales on the website of providers you peruse.
I’m even guilty of using some of those terms above in reviews over the years, but often I’m directly quoting or using a provider’s own terminology on their website or from marketing brochures. It’s an easy trap to fall into when you don’t do the math.
The term royalty used by self-publishing providers is something of a misnomer. It is a hang up from traditional publishing and really doesn’t belong in any paid-publishing model of business.
The word itself from the Oxford English Dictionary:
1.1 A member of a royal family:
‘she swept by as if she were royalty’
1.2 The status or power of a king or queen:
‘the brilliance of her clothes, her jewels, all revealed her royalty’
1.3 The most successful, famous, or highly regarded members of a particular group:
‘it’s not often you meet real Hollywood royalty, let alone chat to Angelina Jolie and Dustin Hoffman in one day’
late Middle English: from Old French roialte, from roial (see royal). The sense ‘royal right (especially over minerals’) (late 15th century) developed into the sense ‘payment made by a mineral producer to the site owner’ (mid 19th century), which was then transferred to payments for the use of patents and published materials.
As you can see, the word creates a connotation of status, power and entitlement. It’s a charming word self-published authors can too easily become seduced by. In future, treat what you make from every book sale as revenue or earnings, and always see it in light of what you have invested to be published.