A Quick Guide to Royalties

January 18, 2016 by Word Alive Press


30% of retail. 20% of wholesale. 50% of publisher electronic receipts. Royalties can be an exciting, but confusing, aspect of being a published author. Here’s a simple breakdown of book sale lingo, and how to anticipate the royalties you’ll be earning per book.

Wholesale vs. Retail vs. Publisher Electronic Receipts

When you’re talking royalty percentages with your potential publisher, pay close attention to what you’re getting a percentage of; the type of sale matters just as much as the percentage you’re earning.

Wholesale

Wholesale is the price your publisher sells your book to vendors for. This is based on the retail price of the book, and industry standard is 40% to 60% of retail (the most common being 40%). For instance, if your book has a retail price of $20, then the standard wholesale price will likely be around $8 (40% of $20).

Most publishers base author royalties off of the wholesale price of the book, since this is what the publisher is being paid per book sold. However, there are a few cases where you may be offered a royalty based on retail:

Retail

“Retail” is the price the book is listed at in by vendors—the price a consumer, not vendor, would pay for your book. It’s rare for publishers to offer royalties based on the retail price of the book, unless they’re selling it directly to consumers instead of having a vendor as a go-between.

When a publisher sells your book to a bookstore, they get 40% of the wholesale price for it, and still need to cover the print fees and shipping costs of the book—once all the fees and costs are taken off, they’ll likely be left with just about 80 cents for a $20 book: the money they’re paying you as a royalty. However, when a vendor sells the book directly to your readers, they’re earning the retail price of that book: in this example, $20 for that book, not $8. That means when printing costs and shipping fees are taken off, there’s a larger chunk left over, and they can pass those savings on to the author as well.

If you have an agreement like this with your publisher, it’s in your best interest to encourage consumers who aren’t buying directly from you to buy from the publisher’s bookstore, so you can recoup your investment faster.

Publisher Electronic Receipts

This language is often used in eBook publishing. It is the amount the publisher is paid for an ebook, which is the listed price of the ebook, less any distribution charges, sales and use taxes, delivery charges and returns.

Huh? Delivery charges? For an eBook?

Yes—ebook vendors charge for the cost to “deliver” your electronic files to the consumer. This delivery fee is based on the size of your eBook file For a simple text-based book, the delivery charges are usually only a few cents, but for a book with images—especially a children’s book that’s almost entirely image-based—the delivery charges will likely be higher, since the file is larger.

So, say your eBook is listed at $4.99. With delivery charges etc, the publisher is paid $3.87 for that eBook. If your royalty is 50% of the publisher electronic receipts, your royalty would be 50% of $3.87, so $1.94.

The Best Way to Make Back your Investment

Royalties help bolster your sales, but the most effective way we’ve seen to make back your investment is through author-to-person sales. We affectionately call these the “gravy sales”, because authors usually get the highest profit from these interactions. Think about it: if you purchase copies of your book for $10, and the retail price is $20, you’d be earning $10 per sale for the copies you personally sell to others. This is why we encourage our authors to build up a good platform, sell their own copies through their websites, take on speaking engagements, go to fairs and craft sales, and other events where they can sell their own copies of their book: publishing a book is an investment, and we want to see you capitalize on that investment.

Keep in mind, though, that not every publisher has an author price setup like ours: since we are partnering with you, we keep your print prices as low as possible, so that you can make a profit and still sell those books at a reasonable price. If you’re talking to another publisher, and you’re planning to focus on author-to-person sales, make sure you get a quote from them on how much your own printed copies will cost before you sign up. For paperback books, you want to keep your retail price under $20 if at all possible, to make it more attractive to your readers. So, if your publisher charges you $20 per book, it would be difficult for you to recoup your investment through person-to-person sales, since you’d have to be selling those copies for such a high rate to make back what you’ve paid for them.

Which method should I choose?

All of them, of course! They’re all important, and in order to get your book out there you should be selling it via all these different options: author-to-person sales, vendor sales, publisher bookstore sales, and eBook sales, regardless of what royalty you’re earning from each.

Each of these options helps address a different need for you and your readers. Author sales help get the books into the hands of people who know you and people you network with. Physical bookstore sales help you make sales on a national level—you could be living in Victoria and have a bookstore in Toronto making sales for you. Online vendors help you reach everyone else—the people who don’t live near bookstores, have mobility issues and can’t get to bookstores, prefer eBooks, or just aren’t near a bookstore that carries your book.

Earnings Cheat Sheet

Sound complicated? Here are some quick breakdowns to help you determine your royalty percentage.
Retail royalties:
retail price x royalty percentage = your royalty

Wholesale royalties:
(retail price x wholesale rate) x royalty percentage = your royalty

Publisher electronic receipts:
( retail price – any distribution charges, sales and use taxes, delivery charges and returns)x royalty percentage =your royalty

Author-to-person sales:
retail price – print price = your royalty

About this Contributor

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Word Alive Press is a Christian book publishing company that provides professional book publishing, sales, marketing and distribution services all in one facility!

Kim Clarke about 5 years ago
Great article! I appreciate this information that helps explain and simplify this part of the publishing and marketing world. Thank you!
Amy Groening about 5 years ago
Glad you found it helpful, Kim! Thanks you!
Peter Kazmaier about 5 years ago
Amy, thank you for a valuable and instructive article. You mentioned "delivery charges" for e-books. Audio books are generally very large files. Does Audible also charge "delivery charges" and how large are they?
Amy Groening about 5 years ago
Hi Peter, Excellent question. Most audio books vendors (including Audible) don't have a delivery fee per se, but they keep a percentage of the retail price of the book. It varies from vendor to vendor, and we're always working on getting the best deals while still ensuring your audio books are available and accessible on a variety of platforms as well. I'll keep you posted on this.