The Royal(ty) Lesson

How, What and When Book Authors Get Paid

I’m reposting this newsletter that I sent out over a year ago in case some of my newer readers missed it. I continue to get questions on the royalty system, both in traditional publishing, and in the newer forms from independent presses to hybrid to self-publishing. I hope this math lesson helps a little to clarify matters.

I’ve learned over the years that many readers, fans and beginning writers think that published authors get rich really fast especially if they produce a number of books. I thought this might be a perfect opportunity for a little reality check in the form of a math lesson. Now that I’ve looked closely at these numbers, I admit to feeling some sympathy for publishers.

Most traditional office workers are paid twice a month and if they’re lucky, they have benefits like health insurance. Writers publishing with traditional publishers are paid twice a year, April 1st and October 1st. (Amazon pays you monthly if you self-publish or if you publish with one of their book divisions.) Needless to say, you have no obvious job benefits although working for yourself from home has advantages (and challenges) as many workers discovered during the pandemic.

My memoir DAUGHTER OF SPIES, Wartime Secrets, Family Lies was published by a small award-winning, women-owned independent press. Always before, I have published with one of what we call in the “biz,” the big 5.  Names you’d recognize like Random House, Viking, Henry Holt, Macmillan and so on. Those publishers give you an advance and then pay you a royalty based on the list price. If the book costs $20 and you’re getting 10%, you’re receiving $2.00 per copy sold. In the end with high discounts to booksellers and freight pass through clauses (don’t ask!) and various other tweaks, many of the copies don’t deliver that kind of royalty to the author but we’ll leave that aside for now. One more note. The advance is an interest free loan that doesn’t need to be returned if you don’t “earn out.” (See this link for a post by Lincoln Michel on calculating when your book will earn out.) Every time you sell a book, that royalty is deducted from the advance. If you negotiated a $5000 advance and you’re getting $2.00 a copy, you’ll first need to sell 2500 copies in order to earn out and see any more income from the book. 

An independent press rarely pays you an advance which means you start earning money from the first book sold although you still get your royalty checks twice a year. In addition, independent presses usually pay you based on the net price of the book, not the price listed on the jacket. Therein lies a tale. And here comes the math lesson. 

It costs the publisher $3.48 to print the $17.95 trade paperback book. If the customer is ordering the book through Amazon or at an independent bookseller, those outlets get their copies through a distributor. The distributor passes the book on to the bookseller at a 51% discount ($9.17) because the bookseller needs to buy it at a discount in order to sell it for a profit. The distributor charges a distribution fee of $2.29 a book so the net to the publisher when shipping through the distributor is $3.40 ($9.17 -3.48 -2.29 = $3.40) of which the author receives a percentage, anywhere from 10 to 25% or $.34 to $.85 a book. 

 I always encourage my readers to order directly from the publishing house website because this is how the numbers work then. It still costs the publisher $3.48 to print the book, but without the distribution fee, shipping and handling per copy comes to $.82 per unit. So, the net to the publisher in this case is $13.65 (17.95 – 3.48 -.82 = $13.65 net.) Royalty to the author depending on the rate she negotiated in her contract runs from $1.63 to $3.41.  Big difference!  But we are all impatient these days and are hooked on Amazon’s swift delivery times so many more readers go that route rather than directly to the publisher’s website. And I’m always happy when readers order through an independent bookseller because I certainly want to keep them in business. Independent bookstores, run by people who really know and love books, represent a vital resource for any community. However unfortunately, buying a book from them doesn’t necessarily result in a better payment to the author. 

There are other ways to go these days from self-publishing to hybrid publishing where the author puts up most of the front money and gets paid back when the book sells. I’ve never signed with a hybrid publisher and I’ve only self-published two of my out-of-print novels and one short “kindle” single. Unless you publish regularly (by that I mean at least once a year if not more) and in a niche like self-help or genre fiction as two examples, it’s very hard to get yourself heard above the noise. To put it baldly, it is estimated based on the ISBN numbers sold by Bowker, that 2000 books are published EVERY DAY in the United States. As this article details, the sales of most books are shockingly small and still shrinking. The marketplace is saturated. Consumers are turning to media for their entertainment.

This comment by Courtney Maum, the author and educator, really struck home for me. “Publishers print books. Authors publish them.” How successfully books move in the marketplace now depends almost entirely on the author as publishers have cut their profit margins by reducing their marketing and publicity departments in order to focus their resources on the best-selling authors who bring in the most guaranteed sales.

As E.B. White said, “I admire anybody who has the guts to write anything at all.”

But if you’re a writer, you’re never not writing. You have a place you can go which nobody can take away from you, a world you’re creating that only you can visit. I wouldn’t give that up for anything. Whether you publish or not, whether you make any money from the words you throw down on the page is beside the point when you’re lost in the story. And every six months, that envelope arrives and if you’re lucky, a check falls out.

I’ll give E.B. White the final word.

"The whole duty of a writer is to please himself, and the true writer always plays to an audience of one. Let him start sniffing the air, or glancing at the Trend Machine, and he is as good as dead, although he may make a nice living.”