The Mystery of Royalties

In the past, royalties were as mysterious to me as alchemy. Now I have some though, so I have undertaken a study of these arcane payments.  I’m here to report out to you what I have learned.

The Oxford Dictionary defines royalties as payments made to a patent-holder, author or composer of a work for each use of that work, or for each copy sold of that work in the case of books. For most writers this is a percentage of the cover price.

With books, writers usually get paid in two kinds of ways; royalties, and advances against royalties. The Big Five/New York publishers; Hachette, MacMillian, Simon and Schuster, Penguin Random House and Harper Collins, almost always pay an advance. As the name implies and the full name states, this payment is against future royalties. If you get $50,000 up front for your book, the publisher takes a bigger chunk of your royalties until they recoup the $50,000. Many advances are split into two or more payments; one (half) on signing the contract, the second when the book is delivered, or published, or whatever the contract says.

Legally, if the writer has met their part of the contract and delivered the book, the publisher cannot demand the advance back if the book doesn’t earn enough for them to recoup it. If the writer fails to deliver, they can (and have) demanded the return of the advance.

If a book doesn’t “earn out its advance,” though, the author is no longer considered a good risk. As a reader, have you ever found a series you liked, that ended abruptly mid-story (no, I don’t mean George RR Martin’s epic, but other ones)? That might be because the books were not good earners, and the Big Five publisher doesn’t particularly care that there are thousands of ardent fans waiting for Book Three.

Smaller presses and indie presses may choose to offer no-advance contacts. This is mainly a way to be sure they stay profitable and are able to pay their writers what they promised. A shoestring operation isn’t going to embrace the idea of fronting money for something they haven’t seen yet.

And how much is a royalty, percentage-wise? I think this can change from publisher to publisher, but in my case it’s something like this:

  • for hardcopy books, 10% of the cover price. For every hardcopy of Aluminum Leaves sold, I get $.69.
  • for electronic books (Kindle) I get 50% of the publisher’s proceeds. Amazon takes about 30% off the top (I assume that’s the same for hardcopy books) and the remainder goes to the publisher. I get half of that. Let’s say it’s 35% of the purchase price, which sounds awesome, until you remember that ebooks run between $.99 and $3.99, and Amazon chooses to set the price. I make (I think) 3 ½ cents on each $.99 cent Kindle sale. At $3.99 I’d a little better. I would make over a dollar! I don’t think Amazon has offered Aluminum Leaves for $3.99 yet, nor ever will.
  • add into that mix Kindle Unlimited. KU offers the first ten pages of a book for free. If you read them and you’re hooked, you can buy the Kindle book. Amazon tracks the number of pages read, applies a formula and uses that to give the publisher a figure and a payment that represents, in Amazon’s mind anyway, the number of books that were sold via KU. It’s probably not quite the actual page count of the book.

Royalty payments are made either quarterly or semi-annually, and the payments usually come at least a month (more likely two months) after the quarter ends. This is to let the publisher adjust for returned books, and, let’s face it, any business is going to hold on to Accounts Payable money as long as they can to squeeze out those few pennies of interest. In my case, the pay schedule is addressed in my contract, and so far, with one payment, they’ve followed the contract.

So, that’s what I’ve learned so far. This doesn’t address things like audio rights, about which I know nothing. Maybe I’ll have more to share later on. As for now, I got my first royalty statement and my first royalty check, and I can take Spouse and me out to dinner, as long as it’s at a food truck or the burrito place, and Spouse springs for the drinks.

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