How Do Book Royalties Work?

Sometimes there’s confusion about how book royalties work. Thought I’d clear up this mystery for you.

Generally in Christian publishing, the author earns a percentage of the NET price of every book sold. That is, the price at which the publisher sold the book to the bookstore. (Many ABA publishers pay a percentage of the cover price of the book.)

Here’s a hypothetical example:

Cover price: $13.99

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

Royalty rate: This is set in your publishing contract and can vary from about 12% to 20%. It goes up with the number of copies you sell. 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 any royalty checks.

How many copies do you have to sell to earn back your $5,000 advance?

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. Some publishers pay quarterly; others pay annually.

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!

You can get an idea of how many copies your publisher expects to sell by what kind of advance they offer. They hope to sell many more, of course, but they offer an advance based on what they can reasonably predict.

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  • Anonymous

    >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.

  • Mike Dellosso

    >Thanks for running down the numbers, Rachelle. It’s good to see how everything breaks down . . . and a bit intimidating.

  • Rachelle

    >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!

  • Richard Mabry

    >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.

  • Rachelle

    >Good idea, Richard. I’ll put it in the queue.

  • Pam Halter

    >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.

  • Katy McKenna

    >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

  • Melissa Marsh

    >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. :-)

  • Drabdesign

    >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.

    Thanks

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