February 27th, 2008


more math : how royalties work

AKA Whoever Thought There Would Be This Much Math Involved in Writing Fiction

Earlier this month, I nattered about what advances are really made of and had another thought on the path of the break-down course in publishing math. It's ironic for me because I got my B.A. to get away from math and science (mostly because back then classroom math and science did not entice me -- though theoretical aspects of both did). Luckily, I inherited the math gene that is prevalent in my family so when my creative career in agenting yielded a significant financial factor, I could accommodate it. But, I digress...

In the aforementioned post, a book was purchased by a publisher for $10,000. Now, let's assume that we've gotten through the revisions (including hills to die on) and gotten lucky with marvelous art and design and the publication of the book has just occurred. As you may recall, the contract money was termed an advance. It's an advance against the royalty earnings of the book. So you have to "earn out" that advance in royalty percentages before you see any additional payments on the book.

Let's assume, the book comes out in hardcover -- this typically means the first 5,000 copies will earn a 10% royalty, and then the next 5,000 will get a 12.5% and the rest will be at 15% (for most regular trade publishers). Anne Bishop's Tangled Webs has a cover price of $23.95, so she'll earn $11,975 on the first 5,000 copies of this book and thus would see royalties on a 10K advance. That's net copies, by the way. It doesn't count returns for which the bookstore gets credit. This actually means that she will need to ship additional copies to realize that advance.

For trade-sized books, the average royalty rate is 7.5%, though this can vary depending on publisher and also have a gradiated schedule, sometimes starting at 6%. For the sake of simplicity we'll just go with a flat 7.5%. C.E. Murphy's House of Cards has a retail price of $14.95 so she earns roughly $1.12 per book. She'll have to "sell through" 8,929 copies to "earn out" the theoretical 10K advance.

For mass market, there is an even wider range of royalty rates, starting as low as 4% and usually going up to 10%. Most of my clients seem to start around 8% so I'm going to use that for a benchmark. Kristine Smith's Endgame comes in at $7.99 (oh, I remember the days when books were more often $3.99 - I can even still figure that with NY sales tax via my days at the local Waldenbooks -- good times....). She makes roughly 64 cents per book. Earning out at this level with a theoretical 10K advance will require net sales of 15,625 copies.

I'm working on coming up with some numbers for average print runs for debut/midlist authors, just to put this into persepctive.
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