How Book Royalties Work

This is one of those basic topics about which you may be confused if you’re just entering the world of publishing. You’ve heard the terms advance and royalties but you’re not quite sure how it all works. I’ll try to explain as simply as possible.

The concept of a royalty is that the author receives a percentage of the revenue for each book sold. The exact percentage can’t be generalized because it depends on a variety of factors: the size of the publisher, whether it’s a CBA or ABA house, the author’s platform and saleability, and each publisher’s own criteria (of which you may never be aware).

Keep in mind that as technology continues to develop and publishing models change, this age-old royalty model is going to be changing, too. Very soon it may be out of date, but this is the way it has been for decades.

Most publishers pay the royalty based on the cover price (or retail price) of the book. CBA publishers usually pay royalties based on the NET price of the book, that is, the price at which the publisher sold the book to the bookstore.

Royalty rates vary widely, so keep in mind I’m generalizing wildly here, but just to give you an idea:

General market publishers, first time author:
Hardcover royalty: 10% to 15% of retail
Trade paperback royalty: 6.5% to 7.5% of retail
Mass market paperback royalty: 7.5% to 10% of retail

CBA publishers, first time author:
Hardcover or trade paperback royalty: 14% to 18% of net
Mass market paperback royalty: 8% to 12% of net

Here’s a hypothetical example for a general market (not CBA) hardcover, first-time author:

Cover price: $25.00

Royalty rate: 10% of retail = $2.50. You make $2.50 on every book sold.

Let’s say your advance was $15,000. That means you’ve already been paid the first $15k of your royalties. After you earn $15,000 in royalties, you’ll start seeing royalty checks.

How many copies do you have to sell to earn back your $15,000 advance?

Answer: 6,000 books. ($2.50 per book x 6,000 books = $15,000 advance)

After you sell 6,000 copies, you will begin to see royalty checks. $2.50 for every additional book sold.

Here’s a hypothetical example for a CBA trade paperback:

Cover price: $13.99

Net price: $6.30 (sold to bookstore at standard 55% discount)

Royalty rate: Let’s say your starting royalty rate is 16%. 16% of net = 16% of $6.30 = $1.01

You make $1.01 on every book sold.

Let’s say your advance was $5,000. You need to earn $5,000 in royalties before you start seeing royalty checks. How many copies do you have to sell to earn back your advance?

Answer: 4,951 copies. ($1.01 x 4,951 = $5,000)

After you sell 4,951 copies, you will begin to see royalty checks. $1.01 for every book sold.

**This is vastly simplified to help you understand!**

Your contract will specify royalty rates for hardcover, trade paper, and mass market paper as well as large print, book club, audio editions, electronic editions, etc. It will also specify the terms under which they’ll pay your royalties: how often, how much they hold in reserve against returns, etc. I’m not going to explain all of this right now; suffice to say, the royalties are not as simple as I’ve made them appear above.

.

Be Sociable, Share!
  • Sara ♥

    >Thank you for this! I've seen similar posts, but this is the most clearly written for those of us who are fairly new to the concepts.

  • Anonymous

    >Poor CBA authors (and agents)! No wonder you're branching out into mainstream publishing…

    Q: If an author wants to help sell their own books (lectures, readings, etc), how does that work? Is there a price break for authors who want to sell directly (say for 100 books)? Is that considered helpful or what do publishers think of authors pushing their own books?
    Thanks for all the great advice!

  • Katie Ganshert

    >Just one more reason why an agent is so important. I think, if I were to get a book contract, I would be so beside myself with excitement that I would sign whatever the publishing house stuck in front of me. That probably wouldn't be a very wise move on my part. :)

    All the business that goes behind that book on the shelf never ceases to amaze me.

  • Jessica

    >LOL Math is not my forte. Heh. Thanks for breaking this down though.
    My hubby is a realtor so I tried to explain how this stuff works, but it must've went over his head because just the other day he asked me if I'd be able to sell a book by February and start bringing in some money.

    Ahem.

    I busted out laughing.

    I do have a question though. Why is CBA different than ABA in the way they do their percentages, etc? Is there a specific reason?

  • Jody Hedlund

    >Wow! That's a LOT of books an author must sell to earn out the advance. For a debut author, I'd be curious to know how hard or easy it is to sell 6,000 books. And what is the biggest factor in helping debut authors reach their earn out level?

  • Lisa Jordan

    >Thanks for the explanation. I still find the whole process overwhelming, but that's why having an agent is so important. I've heard many people say most first-time authors don't earn out their first novels. Is this a red flag to future publishers?

  • Krista Phillips

    >My math brain is appeased today, thank you:-) As much as I love words, I'm a math geek too so seeing the calculations is kinda fun.

    I like Jody's question too… how "normal" is 6000 copies for a newbie author in the CBA?

  • Richard Mabry

    >Thanks for making it simple. Although your examples are generic, it should be possible to change the figures to match an individual situation and get a pretty good approximation of the number of books it takes to earn out an advance.
    You've probably covered this in the past, but maybe it's time to talk next about the range of copies sold for first-time authors in CBA.
    Wish I'd had you for a tutor when I was struggling with algebra.

  • T. Anne

    >I love this breakdown. I've seen many agents/writers try to translate this info on their blogs but this is a great breakdown. I've always subscribed to the fact money is poison at the bottom of the well for writers, most of us thrive on sheer passion. However, passion is sort of hard to eat for breakfast so the dollar still rules the roost. ;) Thanks for making it so simple to understand.

  • Rachelle

    >Regarding number of copies a first time author would be expected to sell? Y'all are asking for generalities, and I guess, assurances. But there aren't any. Look at your break even point. How many units is it? Your publisher hopes/expects you'll sell that many in the first year, preferably in the first six months. We hope all books sell at least 15,000 units but that doesn't always happen. With other books, the expectation is much higher.

  • Homemaker, MD

    >Thanks for walking us through an overview of the process. Haven't seen this info as clearly elsewhere!

  • Jill Kemerer

    >Thanks for the terrific and understandable breakdown!

  • Camille Cannon Eide

    >Authors are expected to get out there and market all you can, but 'all you can' isn't a very clear goal. I should think knowing the number of sold units (it's a BABY, not a unit) needed to earn out helps give the author a much more tangible goal. For some of us, I think a challenge works best when you can measure your progress & sucess; that's the kind of challenge that motivates. Just mho.

    Thanks for the info!

  • Dara

    >All the more reason to have an great agent to help walk you through the steps of the process :) Thanks for posting this simplified version of royalties :)

  • Thaddeus Glapp

    >As a book seller, I'd jump for joy if I could find a place to get a 55% discount. Standard is closer to 40%…which is why it's incredibly difficult to make money selling books unless your name ends in Amazon, Noble, or Mart.

  • Reesha

    >I thought I knew all that, but it's even clearer now. I especially like the comparison between CBA houses and non.
    Thanks, Rachelle!

  • Carla Gade

    >Your posts are always so helpful! That was great to see it all laid out like that. Thanks!

  • lynnrush

    >Nice!!! This is helpful. :-)

  • Catherine West

    >"Generalizing wildly" got me interested, but my eyes glazed over at the sight of first percentage sign. Hives soon to follow.
    Just send the check. I really don't care how much it's for as long I can get me an Starbucks and something from Ann Taylor.

  • Lynnette Bonner

    >I find it intersting that CBA pays on the Net vs. ABA paying on the list price. I hadn't realized that before. Thanks for the great explanation, Rachelle.

  • Lynnda – Passionate for the Glory of God

    >Good morning, Rachelle.

    Now I see more clearly why agents and publishers are so careful in choosing the manuscripts to accept. The writer's work should be so good that 5,000 to 15,000 people must decide they want to read that one particular book more than they want to keep the price of it in their pockets. Am I right in thinking that reaching that goal would make the book marginally successful?

    The question that will hover in the back of my mind from now on is this: Do I think 15,000 people will find the book I'm writing interesting and valuable enough to buy? The answer to that question will certainly play a part in any thoughts I have on its readiness for submission.

    Thank you for breaking down the publishing world into bite-size pieces for aspiring writers to swallow.

    Be blessed,

    Lynnda

  • Aimee LS

    >Thank you so much! I realize it's just a picture, but it's good to feel like I know at least the basic mechanics!

  • Laura

    >Like all of the above, I love the way you broke this down. I had a general understanding of this, but you just answered any oustanding questions, except this:

    What is CBA and ABA? I'm guessing they are associations the agents/publishers belong to? Why would one agent or publisher choose one organization over the other?

    Am I completely off? haha.

  • Laura

    >Like all of the above, I love the way you broke this down. I had a general understanding of this, but you just answered any oustanding questions, except this:

    What is CBA and ABA? I'm guessing they are associations the agents/publishers belong to? Why would one agent or publisher choose one organization over the other?

    Am I completely off? haha.

  • Terri Tiffany

    >Thank you for explaining this! I knwo the bookstore end of it but never that part:)

  • Anita

    >Good information explained in layperson's terms.

  • Kathleen

    >That was incredibly helpful and straightforward. I've read a ton of articles on royalties/advances and I still feel lost. Things are a bit clearer now. Thank you!

  • Lenore Buth at www.awomansview.typepad.com

    >One side note: At first glance it may appear the CBA author is at a disadvantage because of a lower selling price, but that's not necessarily true. Sometimes these books have a long shelf life, which may at least somewhat balance it out. I found that true with my last book, thanks be.

  • Mechelle Fogelsong

    >I have a blog topic for you, if you don't mind. At 42, I'm the young whipper snapper in my local writers' group, and other members have asked me to teach them how to design a blog.

    So I'd like to know what turns an agent off about writers' blogs? What makes agents go ga-ga over a writer's blog? Any tips or pointers would be helpful.

  • thatlovedflower

    >Very good article on royalty. I was not really aware of these things and came to learn many things.

    thanks

  • Prakash

    >cool posts dude

    thanks a lot

    http://www.savvyroyalties.com

  • Tami Boehmer

    >Very helpful. Thanks!

  • Romance

    >Good luck for you

    Thanks!

  • http://www.intervalstraining.net Hiit

    Great topic!

  • http://www.karoline-art.com karoline

    Very interesting read

  • http://retail-guru.com/ Retail

    Retail is not as uncomplicated as it looks. If you don’t know the fundamental principles, you are setting yourself up for failure.

  • http://meandyouinthisworld@blogspot.com Mabel Ngu

    Hi, I am a new author and a first timer on these things. Can i ask what do you mean by the advances? I dont really understand how does these book royalities work. But after your explaination i do understand it a little. Thank you very much but i want to know how does these retails comes by? Does it means that the money that is earn out of my books will be given to the publishers then it will come to me? Please reply me. I am not really sure about these things…

    • http://NoneonlyEmail W T Nelson

      I am new to this, I have been working on my autobiography for three and a half yrs.
      I use the hunt and peck system,with my faithful lab by my side I was raised in poverty an abusive father and a mother who said hurtful words I was in Navy 20 yrs and a disabled veteran,but never thinking I would ever leave the county I was born in in Ky,went from walking behind a mule dropped out of school about the third month of the school year to the Blue Angels for eight yrs as a mechanic,
      My one brother of nine children was convinced by my father he or the other boys would amount to anything(lived in a refer box on streets of Chicago most of his life,still living but no longer on street, I went on to start three Corps two sub-s and a C corp, Made candy for Modern Bride magazine and Harry and David in Medford Oregon. I have so far paid Xlebris over twelve thousand to publish book they are working with me and doing a great job,are they my best option, Book will be a mega seller. I send the copy edited transcript to them in a week, have been told maybe a movie based on the book (could have been hype, however I don’t believe so. Bill wtsagenelson@gmail.com P.S I am computer illiterate as you can probably tell Ha I believe this is more of a question than a comment. Thanks for your help

  • http://www.uscomponent.com/catalog/catalog10.aspx 0000974691

    USComponent.com is an electronic parts distributor selling parts such as 00000750MFD, 00002200MF25VDC, 000040000OH1, 00005294, 00007773, 0000926070, 0000D3L, 0000MPF, 00011003, 000103PF40, and other obsolete electronic components.

  • Pingback: How Much is a Writer Worth?

  • Pingback: How Much is a Writer Worth?

  • http://www.bing.com/5039908de1f6c5452e2f45326c3611cef962e395 click here

    Have you considered adding some videos to the article? I think it will really enhance everyones understanding.

  • Pingback: Earning Out as an Indie | Terah Edun

  • C Lovick

    I would like to know some other options if possible. Since 90% of the proceeds of my project will go to charity, I have a hard time with accepting .10 cents on the dollar, while the publisher gets the rest. So, for every book sold, the publisher will get 90%, my charity would get 9%, and I would get 1%. That does not sound like a good deal at all, especialy since the primary purpose of publishing is for charity.

  • Pingback: Why I Turned Down a Book Deal (And the Lessons I Learned), Part 3

  • EddysGal

    My head is spinning… I feel like I’m on a huge learning curve and under a time crunch to understand it all… There are so many things to consider. So. Many.

  • Smiley

    I agree. Working on my third book, I wish I would have known these things first. 2 of my books being published and I do not understand what is going on.

line
Site by Author Media © Rachelle Gardner.