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The Dangers of Royalties on Net
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Publisher’s perspective here: As Ilaria mentioned about, the practice of “net royalties” is calculated on the “net amount received by the publisher,” not the “net amount after expenses.”
Typical distribution/wholesale distribution cost for a printed (not e-book) is 55% of the cover price. Which means if they sold 20,000 copies at $10, they “netted” only $4.50 per book, or $90,000, which means the publisher is still underwater (if they spent $122,400). In this scenario the publisher would still owe the author the contractual “net royalty” amount, most typically 10% or $9,000. In this case the author makes $9,000 and the publisher still loses over $41,000. I don’t know many fat publishers…
I’ve never seen the model you describe above. If you can find me a way to get only 5% distribution fees – I want to know!
Patricia, your post can be misleading: in non-fiction the vast majority of serious publishers offer royalties on net not on cover price, which is clearly defined in the contract (always) and again in the vast majority it is the net of booksellers’ discount: so if a book has a cover prive of $10, the publisher sells it to the bookshop at e.g. $6 and the royalty is calculated on that amount. It is not misleading if this is specified clearly in the contract – and it has to be for the contract to be valid.
It all boils down to being able to read and interpret the contract clauses (which is why agents are important).
Calculating “net” as net of publishing expenses is vanity publishing in my view, and I am not aware of any “traditional” publisher who does that.
Ilaria, No-one begrudges publishers the right to offer royalties based on net, nor the sound logic behind it. Unfortunately, some are taking advantage. This post is simply a warning against those who abuse that right and trick the unwary writer by not defining in the contract what is included in the definition of net.
it should be pointed out that all though those costs are legitimate expenses it is entirely unfair for a publisher to take 75 percent of sales entirely as profit while all expenses come out of your 25 percent share. i don’t think anyone begrudges a publisher for making money and covering expenses because they are taking a risk by publishing your book.
Another reason to never (NEVER!) sign without an advance. There’s a whole new crop of ePublishers out there eager to sign anyone and everyone. Be cautious.
Cary, I am afraid this is not quite correct.There are quite a few epublishers on the market that are very good and do not give advances.
Thanks for sharing this. Scary. I’ll be posting a link to your article on my blog for writers (http://rasanaatreya.wordpress.com). I’ll also be tweeting it. Thanks much!
Thank you Rasana
That is totally scary. Thanks for sharing.
Well, Sherry, Better safe than sorry and, in the excitement of being offered a book deal, it is so easy to miss this little three letter word so a reminder every now and then cannot hurt, can it?
“Keeping in mind that a ruthless publisher could actually end up having all your royalties written off as expenses.”
Have there been cases of publisher writing all royalties off as expenses? Or doing what you mostly talk about(docking publishing expenses out of royalties)?
If so, they should be run out of business.
Well Noah, on Absolute Write forums, there have been reports of ripoffs by certain publishers – that shall remain unnamed in view of their reported tendency to sue -that did not quite get to 100% of the royalties, but close. So, to answer your question, I do not know about a 100% scenario, but over 90% is bad enough.