Royalties: What is the Typical Royalty Structure When Publishing Traditionally? - article

The first rule of thumb in negotiating a book contract with a traditional publisher is that the contract can be a veritable minefield for the author. So, step one, don’t sign anything until you are sure you understand exactly what you’re signing, which usually means consulting an attorney.

One of the key components of any publishing contract is the royalty structure. Here are some of the variables in royalty calculations to be aware of:

Royalties on gross sales: If you are being paid a 10% royalty on the gross, $100,000 worth of book sales gets you $10,000.00. Seems simple enough, but it’s important to read the fine print. Even contracts with the most straightforward royalty structures can have fine print that works only to the advantage of the publisher.

Royalties on net sales: If you are being paid on the publisher’s net sales, it’s a different story altogether. The publisher gets to subtract printing, distribution, retail discounts etc., which may leave you with only 75%, 50% or even smaller royalties on that $100,000.00. This will vary publisher to publisher, contract to contract. For the author’s purposes, gross is preferable to net. However, you most likely will have no choice on the terms in the contract. You desperately want your book to be published, so you pretty much have to accept the terms that the publisher offers. This is the price the author pays for the credibility and marketing power that traditional publishing houses provide.

Advances against royalties: Generally, if you’re a first time author, and your agent has managed to snare a deal with a publisher, you’ll get a small advance (usually $2,000 to $20,000.00). If you’re book is a paperback, you’ll likely be paid 5-7% royalties against that advance. If it’s in hardcover, the royalty rate is generally higher (between 10 and 15%.) If the book’s sales allow the publisher to make money beyond the advance, you’ll continue to receive royalties on future sales. But be careful: Some contracts call for the advance to be reimbursed to the publisher on a pro rata basis if your book sales don’t meet or exceed the break-even point.

Don’t forget your agent. Most traditional publishers today won’t even read your book proposal unless it’s presented to them by a literary agent. An agent does serve an important function besides just shopping your book; A good literary agent can advise you on contract negotiations, keep you from making costly mistakes, and provide important moral support as the negotiation process drags out. For that, expect to pay your agent 10-15% of what you earn. Although an agent is not an attorney, their advice on the contract will be invaluable to you and, in the end, you’ll feel that 10% fee was worth it.

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