Royalties

Navigating Royalties

A royalty is the payment for the use of a copyrighted work. The amount is most often a percentage of the revenue made through its use. For writers, royalties refers to the portion of money that they receive for each copy sold of their work. Royalties are distributed in increments for the duration of the publication of a writer’s work.

Writers may receive a one-time payment prior to the completion of their work as an advance against royalties. This sum of money reflects the revenue that a publisher anticipates to earn from a writer’s work. An author will not receive royalties for their book until they exceed the amount that was advanced. Advances are most often given to writers in order to subsidize their living expenses while they work on a specific project. However, it is important to note that the amount of an advance will vary from writer to writer, and the norm is not generally very high.

Typically, a payment is given to writers who are writing for an established series, creating material for a book packager who does mass market series titles under a single pseudonym, is writing a novel based off a T.V or film script, or is working with licensed characters. Writers may also receive a flat fee for short stories and magazine articles.

If a writer has a choice of payments or royalties, royalties are preferable as they will continue to receive payment for their work for an extended period of time.

How royalties can be paid

Royalties can be paid out in a variety of ways, with each publisher having their own preference.

• Paid on list or cover price. Generally the best option for a writer is to receive royalties paid on list or cover price (this is the actual cover price for the work as it is sold in retail stores). Most large-scale publishing houses pay royalties in this form for domestic sales. In this case the writer will receive monetary compensation from the highest possible price from their published book and no deductions prior to payment.
• Royalty payments may vary. Some publishers will pay royalties according to net income (the money the publishers actually receive from the books). Many times large chain stores and book distributors will purchase a large quantity of books at a discounted price. Therefore, royalty payments may vary depending on the price a publisher is able to receive for the work.
• Net profit payments may also include deductions for a variety of expenses. A publisher may outline that expenses such as manufacturing, publicity, warehousing, and even editing may be deducted from a writer’s royalty payments.
• Royalties from Internet publishing. With the growth of the Internet, the publishing world has slowly gone digital, and writers are now able to publish their works in electronic format. Companies such as Amazon, Indigo, and Apple all have electronic book collections and pay writers royalties from eBook sales.
• Negotiating royalties can be a challenge for first time writers. Generally, royalty payments range from 4-15% for paperbacks, 10-15% for hardcovers, and 25-50% (sometimes higher) for eBooks. The higher percentages are typically kept for well known/established writers, these people have built a reputation and publishing houses can expect higher sales from their work. First time writers, however, can expect low royalty rates.
• Get a lawyer. As a writer, it is important that you understand the publishing contract you are signing and what terms you have agreed to. Some contracts can be extremely confusing and be saturated with difficult legal jargon therefore investing in a lawyer for consultation may be your best option, if you do not already have an agent. Both agents and lawyers will be able to help you understand how royalties are to be paid out and what terms are attached.
• Get a contract! Contacts will protect both yourself and the publisher should any problems arise over the course of your business together. Although most publishing houses are reputable and will pay writing royalties, there are some less reputable businesses that fail to fulfill their obligations leaving a writer without payment. Contracts should always be agreed upon by both parties and kept on file should any problems arise.

A writer-publisher contract should outline royalties:

• The exact percentages a writer can expect from the sales of their work. This will generally be broken down according to the format of the book (paperback, hardcover, eBook).

• If the writer can expect to see an increase in royalties as sales increase. This clause is called an escalator or sliding scale. This means that as sales increase the writer will receive an increase in the percentage of royalties they are entitled to. Escalating royalties should be set at specific increments or sales goals. For instance, a writer may receive 10% for the 1000 copies sold and then afterwards 12.5% up to 8000 copies.

• The contract should state when a writer should expect to receive their payments. Most often writers can expect to be paid royalties twice a year.

• What kind of royalties the writer is receiving. A contract should clearly state whether a writer is receiving royalties according to net income or cover price as well as any deductions that are being taken off.

If a writer’s royalties are being reduced by a variety of deductions, the publisher should be able to outline exactly which costs are being taken off but also be able to estimate the deduction costs.

Keep a copy of the contract. The contract will help you to ensure payment over the course of the run of your work.

Types of publishing and royalty payments

The types of work that a writer is looking to publish will dictate in part how much they can expect to receive from royalties. There is no set rate for royalties in the business therefore if a writer has multiple offers for their work, it may be important to check what kinds of royalties they can expect early on in the negotiation process.

• Educational/ Professional Publishing. For this type of publishing a writer can expect a wide range of possible royalty payments. If a writer expects a work to sell well negotiations for better royalties may be necessary. Typically royalties start at low rates for this type of publishing as works may have a limited market.
• Academic Publishing. Although many people believe that academics/university professors earn a lot of money from their research and publications, in reality they rarely do. A writer publishing an academic paper/work can expect very little revenue. This type of publishing normally does not see any advances to writers.
• Fiction/Non-Fiction. Depending on the writer’s experience and notoriety, they may receive high percentages of their royalties and/or even demand a flat rate per book sold. A first time writer or a writer with moderate success can expect a wide range of royalty rates. The percentage of royalties may also depend on the marketability of the work, the size of the publisher, and the format of the work.
• eBooks. Electronic book publishing has grown exponentially in the last decade. With more and more publishers producing both electronic and print versions of books, a writer can expect to receive royalties from both forms and at different rates. EBook royalties tend to be quite high by comparison to print books due to the lower costs of production and distribution. Generally, a writer can expect to receive between 25-50% of the sales, with some writers receiving up to 70% of royalties. Although a writer can expect a larger percentage of the revenue from their works, keep in mind that electronic books are generally much cheaper than their printed counterparts.
• Self-Publishing. Writers who self-publish can expect high royalty rates from their work as they are in charge of the project from start to finish. Depending on how a writer is planning on publishing their work they can expect to earn between 40-60% of the royalties from their books. However, as a self-publisher a writer is expected to pay the costs of having their work published, which can be costly and ultimately deduct from their earning from the sale of the book.

Tips

• Have a contract! A contract is required by the Saskatchewan Arts Professions Act for any business transaction made between an artist and client. Contracts will protect both parties in any dispute and should be kept for easy access.
• Understand your contract. A written contract is only useful to a writer if they understand the terms that they are agreeing to. Most writers are not lawyers, nor professional literary agents, therefore should they not understand the contract a publisher has presented them, seeking professional council is the best option. Remember a contract will only work for you if you understand all the terms/clauses that are outlined.
• Take note of any odd or ambiguous language being used in your publishing contract. There are certain terms that a writer should take note of such as “gross income” or “net income” without any clarification on what they mean. Some publishers deduct a variety of costs from a writer’s royalties; these deductions may not be specified but instead indicated solely by the terms mentioned above. Ask for clarification on any unclear or ambiguous terms.

Type of Publication	Minimum Royalties*	Maximum Royalties*	Explanation of royalty percentages
Hardcover	10%	15%	Typically a book will be first published in hardcover. This first run will most often be sold by the publisher for a higher price (even with discounts), and cover prices tend to be high for the quality of the book, meaning that the publishing house will expect to earn more revenue from this printing which translates into higher royalty rates for a writer.
Paperback	4%	15%	Paperback copies tend to be much cheaper than hardcopies and are often printed after the initial hardcopy run. Because of the lower quality associated with paperback printing as well as a publishing house’s tendency to sell paperbacks at a lower price to book stores and publishers writers are given a lower percentage of the profits.
eBook	25%	70%	Electronic books have become extremely popular in the past few years because of their easy accessibility and quick access for users. Electronic books cost far less than traditional print books as they require none of the normal printing, distribution and production costs. These savings mean that a writer can expect a higher percentage of the royalties. Note that the percentage is higher for eBooks; however they are often sold at a fraction of the price of print works meaning a writer may receive royalties on par with print books.
Self-Publishing	40%	60%	Self-publishing can be an extremely profitable endeavor for writers, if their work is successful. Self-publishing requires a writer to bear the costs of publication, editing, distribution and promotion, all of which can be costly depending on the approach a writer takes. Each of these costs is essential deducted from a writer’s potential earnings from their work, therefore self-publishing can result in a wide variety of royalties for writers.
Magazine	------------	-----------	Articles are typically paid for up front. Writers do not earn royalties from the sales of magazines containing their work. A magazine will pay a writer a set payment for their article, which is generally calculated based on word length type.

* These figures are a rough estimate taken from various websites that outline royalties for writers. The figures may change depending on the experience of the writer, the type/genre of work they are publishing, and the publishing house’s policy on royalty payment.

Resources on royalty information

• Writing Fiction: Provides general information concerning what royalties are and what to expect from a publishing contract.
• Writer Beware Blog: This blog is a useful tool for writers doing some research prior to publishing, giving general information on a variety of subjects including royalties and appropriate business practices.

Other sources of royalties

Royalties are also paid to authors who register their works after publication with two federal programs as noted below.

• Access Copyright: This website works with writers to ensure fair compensation for the use of their copyrighted works. 
• Public Lending Rights Commission: An organization established by writers, publishers and Canadian public libraries to fairly compensate Canadian writers for their works while in public libraries.

What is the Public Lending Rights Commission?

The Public Lending Rights Commission is a non-profit organization that is supported by the Canada Council for the Arts. The program annually distributes payment to writers/editors/illustrators/translators for their works in Canadian public libraries. The Public Lending Rights Commission will pay eligible writers according to a predetermined payment scale. The scale is determined based on various criteria defined by the commission, therefore writers will receive various amounts according to said criteria.

1. Visit the Public Lending Rights Commission website.
2. Check the application requirements to ensure that your work is eligible for the program. Also take note that applications are only accepted during the PLR registration periods - check their website for the upcoming dates.
3. File your registration form according to the guidelines provided by the Commission