Part II: Payment Pitfalls and Experiences

A follow-up to Part I: About Royalties

Net Profit Royalty

Here is where the red flag begins to really fly. Net profit royalties (not the same as Net Income royalties described in Part I!) are calculated after payment of all the publisher’s expenses for printing, binding, warehousing, publicizing, distributing, and even sometimes editing costs have been deducted. One publisher whose marketing expenses were deducted from author royalties offered that they at least allow the author to be involved in the decision making about how the marketing money should be spent. That is hardly as good for the author, right? By the time all of the publisher’s expenses have been deducted, the payment to the author has been dramatically reduced.

Often these publishers will pay a higher percentage royalty than average, but the bottom line will depend on the extent of the deductions and the number of copies sold. This arrangement usually benefits the publisher not the author. Be aware of exactly what you are agreeing to. That is not easy since the language of some net profit contracts is remarkably difficult to parse. SCBWI, the Society of Children’s Book Writers and Illustrators is an advocacy group that offers good guidance to writers and illustrators. On their website (SCBWI.org) you can find a sample children’s book contract for purposes of comparison. Here is the link – http://www.scbwi.org/Resources/Documents/10-SampleChildrensBookContract.pdf

For some specific examples of Net Income and Net Profit arrangements, read this post: Contract Red Flag: Net Profit Royalty Clauses on the blog writersbeware.

For an additional list of current royalty paradigms, check out this Query Tracker blog post: http://querytracker.blogspot.com/2013/07/finding-reputable-agent-or-publisher.html

Profit share vs. advance plus royalty: A Hybrid Example

Authors in certain imprints of Random House now have a choice between two royalty formats for their books – a profit share royalty and a traditional one. According to a Publishers Weekly online article on Mar 12, 2013 http://www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article/56316-random-house-modifies-contracts-for-its-digital-imprints.html, the RH profit share model offers no advance against royalties and “profit” means net sales minus certain deductions. These include production and shipping costs. Random House will cover marketing costs for the book up to $10,000. Marketing above that amount will be decided upon with the author’s input. Profit remaining after these expenses is split 50/50 with the author. The other, more traditional, option is an advance plus royalty that pays the author RH’s standard 25% of net receipts e-book royalty. The RH imprints cover production costs, marketing and shipping just as a standard contract stipulates.

A Survey: what current authors actually getcheeky-monkey-clip-art

To get a better picture for this article of what kinds of contracts people are signing, I put together a 10 question anonymous survey using surveymonkey.com. I sent the link to 24 friends who have been published recently. I received 8 anonymous responses. That’s a 25% rate, which I guess is pretty good for a survey. However, since that was a small sample, I decided to open the field wider. I formulated a second survey using mostly the same questions, with a couple of new ones. The link for this Survey 2 went to everyone in the three children’s writers critique groups I belong to, was posted on my blog at http://constructions.joyceaudyzarins.com , was mentioned on Writersrumpus.com, and I posted it on Twitter twice. I would have posted it on Verla Kay’s blueboards, but did not have time. There were two responses from those efforts.

The following is a list of the Q and A from both surveys showing the number of respondents followed by the percentage of respondents. Where the same question was asked in both Survey 1 and Survey 2, answers for each are noted. In a couple of places the respondent’s answer was just “uk”. It has occurred to me that people who are unhappy with their contract arrangements have skipped questions or skipped the entire survey. It’s difficult to say, even anonymously, that you did not get a good deal.

SurveyMonkey also tabulates each individual’s answers to all questions, which clearly shows (anonymously) who has a better deal, but that would have been lengthy to include here. I chose instead to list summaries.

Q: Have you had books published for children in the trade field, educational or both?

  • Trade – 5 – 62.5%
  • Educational – 1 – 12.5%
  • Both – 3 – 37.5%

Q: In what genre do you write or illustrate?

  • Young adult
  • Picturebook to young adult
  • Non-fiction, picturebook
  • Picturebooks

Survey 2 responses:

  • MG fiction
  • Picturebooks, easy readers

Q: In what format was your book or books published?

  • Hardcover – 8 – 100% (of those who answered)
  • Paperback – 4 – 50%
  • e-book – 4 – 50%

Survey 2 responses:

  • Hardcover – 2 – 100%
  • Paperback – 2 – 100%
  • e-book 1 – 50%

 Q: Survey 2 only question:

Have your books paid enough royalties to cover your time in creating them?

  • Too soon to know.
  • Not yet.

Q: Do you feel your contract is fair? If not, please explain.

  • Yes.

educational book contract is a flat rate, no royalty PB contract is 5% author, 5% illustrator

  • Yes.
  • Relatively.
  • Yes.
  • Hard to say, but deep discount sales are so prevalent that you sell more books but make much less money.
  • Yes.

Survey 2 responses:

  • Yes.
  • One is. One doesn’t pay royalties on books I buy myself.

Q: In the past, traditional publishers bore all of the expenses of producing and marketing the book and offered at least 5% to the author and 5% to the illustrator for picturebooks and 10% or more for books that had few or no illustrations. These royalties were calculated from the retail price for each book. Do you receive a traditional 5% to 10 % royalty based on the retail price for each book?

  • Yes. – 6 – 85.71%
  • No. – 1 – 14.29%
  • Survey 2 responses:
  • Yes.
  • One contract is 5% the other company pays me %15 (on a paperback)

Q: Do you instead receive a percentage based on the net price for each book after the publisher deducts expenses?

  • No.
  • No.
  • No.
  • I try to avoid royalties on net whenever possible, because it’s difficult if not impossible to know what “net” actually means.
  • the majority of my sales fall into this category
  • No.
  • both depending on the way the book was sold (less money for books sold to diffeernt resellers)

Survey 2 response:

  • No…royalties are received on the price the book sold for.

Q: Do these expenses include costs for marketing as well as printing and binding?

  • Yes.
  • None that I know of.
  • Yes.
  • Don’t know.
  • Yes.
  • uk

Survey 2 response:

  • No.

Q: Survey 2 only question:

How many free copies of each of your books do you receive?

  • 10-20 – 1 – 100% (all who responded)
  • 1-10
  • None

Q: What other costs are deducted from your royalties?

  • None.
  • Reserves against returns, though if a book sells well, that income is passed on to me on a later royalty statement.
  • None.
  • uk

Q: Traditional publishers formerly offered advances that reflected their estimate of your royalty earnings for one year. Every six months the author received a statement of royalty earnings. Once the advance was earned back, the author would be paid poyalties. If the book did not sell enough copies to earn back the advance, the author did not have to return the difference. Did you receive an advance of this type?

  • Yes – 6 – 75%
  • No – 2 – 25%

Survey 2 responses:

  • No.
  • Yes. But one publisher pays me quarterly.

Q: Does your contract cover subsidiary rights like film, audio, radio, or translations, for example?

  • Yes – 6 – 75%
  • No – 2 – 25%

Survey 2 responses:

  • Yes.
  • I don’t believe any mention of any of these are in my contracts.

Do you have questions about royalty arrangements? Experiences to share? Leave a comment here a Writers’ Rumpus.

5 comments

    1. Hey, Marianne. Here’s what SCBWI says about that: “Some publishers hold a reserve against returns, which means a percentage of royalties is held back in case books are returned from bookstores.” They advise the author to find out what that percentage of total sales is and when he or she will be reimbursed for it. A reasonable time frame would be one year.
      Nail down those contract details before you sign! Obviously any first time authors out there have less negotiating power, but always be aware of what you are agreeing to!

      Like

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