You’ve probably come across the term royalties if you’re a reader or considering becoming an author.
In the simplest terms, a royalty is what publishers pay an author for the rights to publish his or her book.
But how do book royalties work? How do authors earn a living from royalties?
In this article, we will share everything you need to know about book royalties, how they’re calculated, and what advances are.
What Is a Book Royalty?
Let’s say you’ve submitted a book to a publisher, and they’re ready to publish. Before going any further, you (the author and copyright holder of the book) need to grant the publisher the right to publish your work for an agreed-upon fee. This fee is called a royalty.
Royalties are usually paid out as a certain percentage per sale. All of this will be outlined in the contract between you and the publisher.
Book publishers usually have standard royalty rates for different versions of your book. So the royalty for a paperback, hardcover, eBook, and audiobook will be different.
Royalties are common in traditional publishing, where you sell the right to your book to the publisher. Whereas self-publishing, you set the price and decide the profit margin.
How Is a Book Royalty Calculated?
Royalties are calculated and paid out to you based on a percentage of every individual sale of your book.
Let’s take an example. If you and the publisher have decided the price of your book will be $20, and you receive a 7.5% royalty on it, you earn $1.50 per sale. The remaining $18.50 goes to the publisher. Royalties like this, based on the retail price of the book, are called list royalties or retail royalties.
Sometimes, publishers pay you royalties on net sales when they sell your book to different outlets at different prices. For example, a publisher might sell more copies of your book to a bigger retailer (and therefore at a higher bulk discount) than they would to a smaller bookstore. Publishers then calculate royalties on net sales after taking the discounts into consideration.
Since list royalties mean that your book is sold at a higher price, it might be a better option.
What Are Some Typical Book Royalty Rates?
On average, traditional publishers offer the following royalty rates:
- Audiobook: 25%
- eBook: 25%
- Mass-Market Hardcover: 15%
- Trade Paperback: 7.5%
- Mass-Market Paperback: 5%
Some publishers may vary slightly with their royalty rates.
Other publishers might offer graduated royalties. In this contract, you’re offered your royalties only after a certain number of sales. For example, you could get 4% on your first 1,000 paperback sales, 6% on the next 1,000, and finally, 7.5% on every sale afterward.
On Book Advances
Royalties might seem like the best option for an author, but here’s the caveat: you don’t earn them right away. You only get your royalties once you earn your advance.
An advance is a negotiated upfront payment a publisher gives to an author. In essence, an advance is an advance on royalties.
For example, if your agreed upon royalty for a $20 book is 7.5%, and a publisher decides to pay you an advance of $1500, you’ll only receive royalties after 1,000 sales. That’s because your 7.5% royalty on a $20 book is $1.5, and $1.5 times 1,000 sales is $1500.
There’s no average advance in the market. Six-figure advances are mostly found in large publishing houses. Five-figure or smaller advances are quite common.
There are differences in advances based on how many sales publishers predict. So, if an author has made quite a name for themselves or they have a history of books with high sales, it’s more likely that they’ll get a comparatively larger advance on their royalty. Publishers won’t risk giving you a heavy advance if you’re a first-time author or if you’re writing on a niche subject.
Keep in mind that royalties aren’t a donation. Publishers expect to make back the money they paid you. So, if your book doesn’t meet their expected profit margin, they’re unlikely to publish your next book.
Selling Out a Book Advance
So let’s say everything goes well, and your book sells enough copies to match your advance. So, what’s next? Let’s take our previous example of the $1500 advance.
Your book has sold 1,000 copies in the first month. Then, over the course of the next eleven months, an additional 4,000 copies have been sold. What do you get?
Depending upon your contract, you get paid royalties per specific increments. So, if your publisher decides that they pay you royalties for every 500 sales, you get paid $750 for every additional 500 sales.
So, over the year you made $1,500 (Advance) + $750 (First 500-sale increment) + $750 (Second 500-sale increment) + $750 (Third 500-sale increment) + $750 (Fourth 500-sale increment) = $4,000 in royalties.
Amazon Self-Publishing Royalty
Self-publishing might be a better option because you get to keep the rights to your book. KDP’s royalties in that sense aren’t really royalties (even though they’re termed as such).
If you choose to self-publish with KDP, you have two royalty options for eBooks: 35% or 70%. There are certain conditions that come with either choice.
The important thing is that you have full rights over your book.
Are Royalties the Only Way to Go?
An author need not limit him or herself to only royalties and advances to make money. Sometimes, they don’t necessarily work towards the author’s best interest because they overemphasize book sales.
Authors can give talks, build a personal brand, offer coaching, or launch exclusive content to earn their living. Because let’s be honest, not every author is going to sell a million copies of their book.
So, if you’re thinking of publishing a book, weigh your options, make an educated prediction on your sales, and see what selling option works best for you.
If you want full rights over your book and control over pricing, self-publishing could be a better option. But if you know you’ve written a piece that will only sell with the right publisher, royalties are the best way to go.
