How Do Book Royalties Work?
Sometimes there’s confusion about how book royalties work. Thought I’d clear up this mystery for you.
Generally the author earns a percentage of the cover price of every book sold. In Christian publishing, authors typically earn a percentage of the net price (not cover price). That is, the price at which the publisher sold the book to the retailer. The royalty rates are set in your publishing contract, and there will be separate royalty rates for paperback, hardcover, digital, and all other formats of the book.
Here’s a hypothetical example:
- Cover price: $16.00
- Royalty rate: Let’s say your royalty rate is 10%. That’s $1.60. You make $1.60 on every book sold.
- Let’s say your advance was $5,000. You need to earn $5,000 in royalties before you start seeing any royalty checks. How many copies do you have to sell to earn back your $5,000 advance?
- 3,125 copies. ($1.60 x 3,125 = $5,000)
- After you sell 3,125 copies, you will begin to see royalty checks. $1.60 for every book sold.
Disclaimer: This is highly simplified!
What does the math look like if you’re with a publisher that pays royalties based on the NET price?
- Cover price: $16.00
- Net price: $8.00 (sold to retailer at 50% discount)
- Royalty rate: Let’s say your royalty rate is 18%.
- 18% of net = $1.44. You make $1.44 on every book sold.
- Let’s say your advance was $5,000. How many copies do you have to sell to earn back your $5,000 advance?
- 3,472 copies. ($1.44 x 3,472 = $5,000)
While it’s great to get as much money as possible up front, it’s also nice to start getting royalty checks in the mail! Lower advance means you start getting royalty checks sooner. Also, higher royalty rates mean you earn back your advance faster and start getting royalty checks sooner.
You can get an idea of how many copies your publisher expects to sell in the first year by what kind of advance they offer. Generally they ballpark it at $1 per book. So if they think they can sell 15,000 copies in the first year, a reasonable advance would be $15,000.
Great article, Rachelle. I really appreciate all of your posts. They are very helpful especially considering how I intend to start querying again later this year. Thanks and God bless!
Thank you for simplifying the burning question aspiring authors wonder about, Rachelle. Looking forward to your next week’s post about cost of publishing.
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>I have a team of Copywriters and had a plan to use them n quiet periods to create a book between them.
I needed to know how the system works in case we did it, thanks to your post I am wiser.
>I always wondered how this whole royalty thing worked – and seeing the numbers broken down like that makes it all crystal clear.
Thanks so much, Rachelle. 🙂
>Rachelle–Thanks for this! I have a related question, which might be a subject for a later post. I’ve heard it advised that a first-time novelist would do well to invest her advance in the marketing of her book, since the sales numbers for that first title may well determine her chances of placing the next book. Can you tell us a bit about HOW an advance might be invested in marketing? (Beyond spending it on attending a conference….) I appreciate what you’re doing here!
Katy McKenna http://www.fallible.com
>A disturbing trend I’m seeing in Sally Stuart’s Christian Market Guide is the words NO ADVANCE.
I’ve been getting the market guide for years and every year there are more publishing houses who have that listed.
Those who do pay an advance won’t accept unsolicited manuscripts.
It seems that if we want to try for a royality publisher, we may have to forgo the advance and pray for good sales.
Something I’d like your thoughts on is the up and coming “co-publishing” thing I’m starting to see, as well.
>Good idea, Richard. I’ll put it in the queue.
>Thanks for the continued “inside look” at publishing. You might want to further explain the situation in which the author is represented by an agent, and how that commission comes out of the various payments– a commission that is well worth it, I’ll hasten to add.
>Anonymous, I’m disappointed. I thought I was establishing a reputation of being a kind and compassionate person who loves to help writers. And here you are, afraid to ask me a perfectly legitimate question! I guess I’m going to work harder at this whole “nice” image.
The answer is, no, you don’t have to pay back your advance for lack of sales, or at least I’ve never seen such a case. Of course, everything is outlined in the author contract and I suppose it’s possible for a publisher to work that in (and the way things are going these days, it wouldn’t surprise me). You’re right, it’s part of the risk the publisher takes on you. I say “part” because in actuality, your book is costing them a LOT more than your advance before it ever makes a dime. (Watch for a post on my blog next week about “How Much It Costs To Publish Your Book.”)
Just FYI, there ARE cases in which you have to pay back your advance, specified in contract, so your question really wasn’t all that dumb. 🙂 This is usually if you don’t deliver your book on time or if it isn’t what you promised in your proposal.
Thanks for the question!
>Thanks for running down the numbers, Rachelle. It’s good to see how everything breaks down . . . and a bit intimidating.
>This is probably a really stupid question so I’ll be anonymous :)…Do authors ever have to pay back their advance? I mean, what if the advance is $5,000 but I only sell 2,000 books?–Do I have to pay that back, or is that just the gamble that the publisher takes?
See, I knew it was a stupid question. 🙂 And I call myself a writer.