What royalties are: a percentage of the retail cover price based on copies sold that’s paid to the author once she’s earned out her advance

 

What you need to know:

 

  • Three numbers to keep in mind: number of books printed, number shipped/gross (books sent out to book stores) and number sold/net (books actually purchased by consumers)
  • A book’s sell-through is the percentage of gross copies that actually sold.  Stores can “return” unsold books for a refund (really, they’re just sending the cover to save on freight charges).  You’ll often hear talk of high or low returns.  Obviously, the lower the return, the higher the sell-through. 
  • Royalties are calculated on number of books sold, but have nothing to do with the cost of producing the book.  So it’s possible for an author to earn money on a book where the publisher takes a loss. This usually happens if they have a high royalty rate on books sold, we ship out a lot of copies, and then get a lot of returns.
  • If an agent is listed on the contract, all money is sent to the agency. Typically, even if an author changes agents, the agent who originally sold the book continues to collect a commission and still gets the royalty check. 
  • To help mitigate returns, publishers hold a reserve on royalties for a certain length of time. Typically they’re designated as a certain percentage of the gross sales.   
  • Subrights, sales for things like foreign translations, audio books, large print books, and movie deals, are also included in an author’s royalty statement. 
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