How do book royalties work?

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‍As a first-time author, there's a lot to learn when preparing to publish your book—like formatting your manuscript or designing a great cover. But when it comes to earning money from your book, understanding how book royalties work is essential. Let’s break down the basics so you know what to expect.You've probably heard the term book royalty mentioned a lot.

It's usually one of the first questions we get asked when we speak with new authors.

What is my book royalty payment going to be?
How do I get paid my royalties?
When will I get paid my book royalties?

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It's an important topic. In this post I will break down very simply how book royalties work.

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What Are Book Royalties?

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Book royalties are what a publisher gives an author in exchange for the rights to publish their work.

Royalties are are calculated as a percentage of book sales. An author might get paid 10% of of every paperback sold and 30% of every eBook sold. Those figures might be typical from a traditional publishing company.

Every publisher is different so spend some time checking what the deal is when it comes to royalties. With Publishing Push we don't charge authors any royalties. Yes, you get to keep 100% of your NET royalties.

It's worth noting that all royalties are always NET of the retailers fees. Retailers charge fees to the publisher or author every time a book gets sold through their platform.

There are lots of other ways for authors to make money of course aside from just book royalties. Lots of authors give talks, start businesses, offer consulting or sell a course related to their book.

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This is why traditional publishers only look at books with a very large appeal. They only care about the royalties that can be earned from a book. When self-publishing you have a lot more options to make money from your book in other ways.

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Remember you will be earning royalties from eBook sales, audiobook sales, and even licensed adaptations of their work.This opens up new opportunities for authors to monetise their intellectual property in various formats.

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What are the typical Book Royalty Rates?

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Royalty rates vary but if you were traditionally published then here is what that could look like:

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• Hardcover sales: 15%
• Trade paperback sales: 7.5%
• Mass-market paperback sales: 5%
• eBook sales: 25%
• Audiobook sales: 25%

Some contracts include graduated royalties.

This is where you earn 10% on the first 5,000 books sold, 12% on the next 10,000, and 15% on every copy after that.

Of course when you self-publish you get to earn 100% on all books sold after paying the platform fees.

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How do Publishers Calculate Book Royalties?

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Usually this is done based on "list royalties" or "retail royalties" - this means the gross sales price. So if your book is selling for £10.00 and your royalties is 10% of gross you will get £1.00 royalty from that sale.

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NET sales is the alternative. This means that is your book retails for £10.00 but the postage and printing costs £4.00 then NET revenue is £6.00 and if your 10% royalty is based on the NET you would keep £0.60 from the sale.

Now this is just for example purposes but if you are traditionally published this could be a good example.

Royalties are a big reason authors choose to self-publish with a company like Publishing Push. Using the example above but for self-publishing with us you would keep the entire £6.00 left over for your NET royalty. That means a 10x increase in your royalties.

If you are a traditionally published authors make sure your deal specifies LIST royalties. Or self-publish and you will keep a lot more of your royalties.

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How Book Publishing Companies Calculate Book Royalties

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When it comes to calculating book royalties, there are several factors to consider. One important factor is the royalty rate, which is the percentage of the book's revenue that the author will receive. This rate can vary depending on various factors, such as the author's reputation, the book's genre, and the publisher's marketing efforts.

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Another factor to consider is the book's sales volume. The more copies of a book that are sold, the higher the author's royalty payment will be. However, it's important to note that not all copies of a book count towards royalties. For example, books that are sold at a deep discount or given away for promotional purposes may not generate royalties for the author.

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In addition to sales, authors can also earn royalties from licensing their work. This can include licensing the book for translation into different languages, adapting it into a screenplay for a film or television series, or even creating merchandise based on the book's characters or story. Each licensing agreement will have its own terms and conditions, including the percentage of royalties the author will receive.

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Furthermore, authors may receive royalties from subsidiary rights. Subsidiary rights refer to the rights to publish the book in different formats or markets. For example, an author may sell the rights to publish their book in paperback, hardcover, and eBook formats separately. Each of these formats can generate additional royalty income for the author.

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It's worth mentioning that royalty payments are not always straightforward. Authors often receive royalty statements from their publishers, detailing the sales and revenue generated by their books. However, these statements can be complex and difficult to decipher, especially for authors who are not familiar with the publishing industry. It's important for authors to review these statements carefully and seek professional advice if needed to ensure they are receiving the correct royalties.

At Publishing Push we offer a very clear royalty break down. We give you a dashboard where you can source all the data you need.

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The Importance of Understanding Book Royalties

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As an author, understanding book royalties is crucial for several reasons. Firstly, royalties serve as a primary source of income for authors. Having a clear understanding of how much money you can expect to earn from your book allows you to plan your finances accordingly and make informed decisions about your writing career.

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Secondly, understanding book royalties can directly impact your publishing decisions. Knowing the potential financial implications of different royalty rates and payment structures can help you assess and compare publishing offers from different publishers. This knowledge empowers you to negotiate favorable terms and choose the publishing option that aligns best with your goals.

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Financial Implications for Authors

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The financial implications of book royalties can vary significantly for authors, depending on the terms of their contracts. Higher royalty rates can result in more substantial payments, while lower rates may leave authors earning less from each sale. It's essential to carefully analyze the financial implications of potential royalties to determine the viability of publishing agreements.

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Furthermore, understanding how royalties are calculated and the specific terms of your contract allows you to estimate future earnings from your book. This information can help you plan your writing career, set financial goals, and make informed decisions about marketing and promotion strategies.

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Impact on Publishing Decisions

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Having a clear understanding of book royalties also influences your publishing decisions. If multiple publishers express interest in your work, analysing their proposed royalty rates and payment structures can help you assess the potential financial benefits of each offer. This knowledge empowers you to choose the publisher that offers the most advantageous terms for your writing career.

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Additionally, understanding book royalties allows you to evaluate publishing options beyond traditional publishing. With self-publishing platforms becoming increasingly popular, authors have the opportunity to retain more control over their work and receive higher royalty rates. Being informed about book royalties enables you to make an informed decision about the publishing route that best suits your goals and aspirations.

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Different Types of Book Royalties

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Book royalties can vary depending on the format of the book and the rights granted to the publisher. Let's explore some of the most common types of book royalties:

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Print Book Royalties

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Print book royalties are the most traditional form of book royalties. They are based on the retail price of the physical book and are typically calculated as a percentage. The exact percentage can vary depending on the author's negotiating power, the publisher's standard rates, and the book's marketability.

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For example, an author may negotiate a royalty rate of 10% of the book's retail price. If the book has a retail price of $20, the author would receive $2 for each book sold.

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eBook Royalties

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eBook royalties are becoming increasingly important in the digital age. These royalties are based on the sales of electronic versions of the book, which can be purchased and downloaded from various online platforms. eBook royalties are often calculated as a percentage of the publisher's net receipts from eBook sales.

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Say an author has negotiated a royalty rate of 25% of the publisher's net receipts for eBook sales. If the publisher receives $5 from the sale of the eBook, the author would receive $1.25 as their royalty payment.

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Audiobook Royalties

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Audiobook royalties are earned when an audiobook version of a book is sold or licensed. These royalties are typically calculated as a percentage of the net proceeds received by the publisher from audiobook sales or licensing agreements.

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For instance, if an author has negotiated a royalty rate of 15% of the publisher's net proceeds from audiobook sales, and the publisher receives $10 from an audiobook sale, the author would receive $1.50 as their royalty payment.

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How to Negotiate Book Royalties

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Now that we've explored the different types of book royalties, let's delve into how authors can negotiate favourable royalty terms.

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Tips for Negotiating Royalties

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When negotiating book royalties, it's essential to be well-prepared and aware of your value as an author. These tips can help you navigate the negotiation process:

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1. Research industry standards: Familiarise yourself with the typical royalty rates for authors in your genre and market. This knowledge will help you gauge the reasonableness of the offers you receive.
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2. Build your author platform: Investing time and effort in establishing your author platform, building a loyal audience, and demonstrating your market potential can strengthen your negotiating position. Publishers are more likely to offer favourable terms to authors with a proven track record or a strong online presence.
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3. Consult with literary agents or lawyers: If you feel overwhelmed by the negotiation process, seeking assistance from literary agents or lawyers experienced in publishing contracts can be beneficial. They can help you understand the terms of the contract, identify potential pitfalls, and negotiate on your behalf.
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Common Mistakes to Avoid

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When negotiating book royalties, it's crucial to avoid common pitfalls that can undermine your financial interests. Here are some mistakes to steer clear of:

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• Accepting the first offer: While the excitement of receiving a publishing offer may be tempting, it's important not to jump at the first opportunity. Take the time to thoroughly evaluate the offer, compare it with industry standards, and negotiate for more favorable terms.
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• Neglecting contract details: Carefully read the fine print of your contract, paying close attention to royalty rates, payment schedules, and clauses related to the sublicensing of rights. Ensure that the terms align with your financial goals and protect your intellectual property.
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• Overlooking digital rights: In today's digital era, digital rights are an important aspect of book royalties. Make sure to clarify how eBook and audiobook royalties will be handled, especially if your book has the potential for digital adaptations.
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Case Studies of Book Royalties

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Lastly, let's examine some real-life case studies to understand how book royalties can impact an author's success and financial well-being.

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Stephen King - Early Career

Stephen King's early career offers an interesting case study:

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• His first novel, "Carrie," sold modestly in hardcover but became a bestseller in paperback.
• King reportedly received a $2,500 advance for "Carrie."
• The paperback rights sold for $400,000, of which King received half.
• This early success allowed King to quit his teaching job and write full-time.

King's case shows how paperback sales and subsidiary rights can significantly boost an author's income, even when hardcover sales are modest.

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Hugh Howey - Self-Publishing Success

Hugh Howey self-published his science fiction series "Wool":

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• Initially offered the first novella for free, then priced subsequent entries at $0.99-$2.99.
• As a self-published author, Howey kept 70% of each sale on Amazon.
• The series became a bestseller, earning Howey over $100,000 per month at its peak.
• Howey later signed a print-only deal with Simon & Schuster, retaining his e-book rights.

This case illustrates how self-publishing can lead to higher royalty rates and potentially greater earnings for some authors.

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Lessons from Failed Book Royalty Negotiations

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Learning from failed negotiations is equally important. Sometimes, authors make mistakes or encounter unfavourable terms that result in disappointing royalty payments. Analysing these case studies helps us understand the potential pitfalls and avoid making the same errors in our own negotiations.

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A well-known cautionary tale in the publishing industry involves author Philippa Gregory and her novel "The Other Boleyn Girl." This case highlights why authors need to carefully consider and negotiate their royalty rates, especially when dealing with potential breakout successes.

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This case study of Philippa Gregory and "The Other Boleyn Girl" serves as an important lesson for authors, especially those early in their careers. It demonstrates why it's crucial to consider potential success scenarios and negotiate contracts accordingly, even if a breakout hit seems unlikely at the time.

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You can read the full case study here.

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Some key takeaways from this example include:

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1. The importance of including escalator clauses in contracts to increase royalty rates as sales increase.
2. The value of working with an experienced agent who can negotiate favourable terms.
3. The potential long-term financial impact of royalty rates, especially for unexpectedly successful books.
4. The need to balance immediate benefits (like advances) with long-term earnings potential through royalties.

This case also highlights how the publishing industry can sometimes be unpredictable, with books achieving unexpected levels of success. Authors and their representatives need to be prepared for various scenarios when negotiating contracts.

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Publishing Contract and Book Royalties

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The contract that you sign with your publisher will play a huge role in the royalties you receive. We always recommend getting some legal advice before signing with a traditional publisher.

Yet another benefit of working with a self-publishing company like Publishing Push is that we don't make you sign any contracts.

You get to keep 100% of your royalties.

And if you want to learn more about the publishing options available check our this video:

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