Royalties, the R-word
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Royalties, the R-word
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What Is POD?
A few notes concerning the 2011 update
Title: Royalties, the R-word
Author: Clea Saal
Summary: This will help you understand and compare the different systems used by publishers to describe what you can expect when it comes to royalties.

10%-30% from list, 10% of the wholesale price, 20% of the payments received by the publisher, 30% of the price as it's listed on our website, 50% of net receipts, 45% minus printing costs, 60% from gross... are you grossed out yet?

If you are, you are not alone. One of the most confusing aspects you must face when choosing a POD publisher is trying to figure out what they mean when they speak of "Royalties", and let's face it, as much as you may love the thrill of writing, your body still believes that food matters, and you can't eat your book... therefore, royalties are important, so let's try to untangle this mad web.

With those publishers that give you royalties that are in fact a percentage of the retail price you have the advantage of knowing where you stand and what to expect. You get what they say, usually 10% from wholesale sales, 25-30% from retail (or direct) sales. Is this better than what other publishers have to offer? I'm not sure, but at least it's clear cut.

There are other publishers who are a little less straight forward. For example, uPublish pays you 20-40% from your retail price, but they won't pay you any royalties at all for the first three copies sold each quarter. Is this a fair "hidden" charge? It depends on the number of copies you are selling each quarter. If you sell less than 10 books, then it's very high, if you sell 100 it becomes almost negligible. Keep this in mind, and try to keep your sales expectations within reasonable bounds before you decide.

Other publishers, such as 1stBooks used to do, pay you a fixed fee per book, regardless of where it's sold. In this case that meant 30% of the price as it appeared on their website. Now, 30% may seem a lot higher than 10%, but there was a catch: the price as it appeared in their website was far lower than the price as it appeared everywhere else so, while this may be better for you when it came to wholesale sales, you were getting a lot less when it came to direct sales (1st Books has recently modified their royalty payment system, but the details of this new system are sketchy at best).

While we are on the subject of publishers that give you a basic percentage, an important warning becomes necessary: some publishers may offer you a fixed percentage of the retail price that seems to be extremely attractive (30-35%)... before you jump on board, make sure that they work through Ingram and other distributors. If they can afford such royalties because they only sell their books through their site you could end up losing money in your attempts to market your title through bookstores yourself (or you could be forced into an uncompetitive retail price). Remember, even if you can buy your book at a discount in order to resell it you'll still have to pay S&H charges, and then offer bookstores a price that would enable them to turn a profit. Is the author's discount they offer enough to cover these expenses?

And another important warning: keep in mind that some publishers offer you a percentage of your retail price, but only on direct sales. When it comes to wholesale sales they give you a percentage of the wholesale price. The most clear example of this is Infinity Publishing. They will pay you 20% of your retail price on direct sales, and 10% of the wholesale price on books sold through other channels. Is this a fair deal? Well, for a $15.00 book with a 40% wholesale discount that would translate into $3.00 on direct sales and $0.90 on wholesale sales, not what I would call a good deal.

Other examples of a similar practice, though far less extreme, would be iUniverse and BookPublisher. Both of these pay you 20% of the payments received by the publisher (the previous example would translate into $3.00 for direct sales, $1.80 for wholesale sales).

In other instances, such as FirstPublish, your royalties are the full price of your book, minus 55% (bookstore discount, and remember that this discount is higher than what other publishers offer) and printing costs for wholesale sales. They pay you the full price of your book, minus 25% and printing costs on direct sales. In instances such as this you have the advantage that you can set your own retail price, however, you also have to take into account what they mean by "printing costs". Remember that, if those costs turn out to be higher than other publishers', that may force you to set a non-competitive retail price in order to turn a profit (using FirstPublish as an example, to get $2.00 in royalties from the sale of a 200 pages paperback through a bookstore, your retail price would have to be $18.00).

Up till this point, for better or for worse, you have been able to tell what you should expect beforehand. Now we'll enter into more dangerous territory: when your publisher offers a percentage of net receipts or gross you need to know a few additional factors, and you need to take other things into account.

Before going any further you must remember that the most important thing here is trust. You have to be able to trust your publisher to tell you the truth about all the costs involved in the process, and the bookstore discount they offer. You have to be able to trust your publisher not to inflate his costs to reduce the net receipts. What do they mean by net receipts? If it is price of the book, minus bookstore discount, minus printing cost, then it's OK. If they want to include any sort of operational costs, make sure those costs are legit. If they want to include royalties for cover designers (that shouldn't get royalties anyway) and dog food (to make sure that their office is protected, of course)... well, my advice is run and don't look back.

For the most part, royalties from publishers that offer you a percentage from net/gross are 50-75%. What this translates into varies according to a number of factors, so it can be difficult to determine, if you hate math, you'll hate this, but I'm afraid there is no way around it. The system is as follows:

-

Retail price

Bookstore discount

Printing cost

Operational costs (?)


x

Net / gross

. your percentage


Your royalties

Clear as mud, right? Unfortunately, you need to understand this in order to make an accurate comparison. I'll turn this into a real life, average, example that lists both wholesale and retail royalties, and what do they translate into percentage wise (who knows? It may actually make sense).

Wholesale

Direct
-
15.00
Retail price
15.00
06.00
Bookstore discount
00.00
05.00
Printing cost
05.00
00.00
Operational costs (?)
00.00


x
04.00
Net / gross
10.00
.50
. your percentage
.50


$2.00
Your royalties
$5.00

13.3%
Percentage
33.3%

In this example I used a $15.00 book with a 40% bookstore discount, a $5.00 printing cost, a 50% royalty and no additional operational costs, however all of those are variables, so you'll have to figure out your own numbers. You must also keep in mind that this does not include any S&H charges, or taxes (though both of those things are usually paid by the buyer anyway).

I hope this will help you figure things out so that you will no longer be tempted to strangle the next publisher that kindly reminds you that "you can't compare apples and oranges when it comes to royalties" (like we have a choice), only to tell you a couple of lines later that their royalties are "higher than the industry's standard". Well, for starters that's a double standard, if we shouldn't compare apples and oranges, we should also acknowledge that, because of the numbers involved, industry standards are totally irrelevant when it comes to POD, so choose one argument please. 8% of 10,000 copies amounts to a lot more than 10% of 100 copies.



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