I’ll admit it, I don’t usually read my book royalty reports. Sometimes I look at the total sales, but the rest is too complex and detailed to bother with. I deposit the checks. But today I received one and noticed something that I’d never really thought about before.

A bit of background. Most book contracts are insanely complicated in their specification of royalty rates and rules for different editions and sales channels. This can get very complicated vis-a-vis special sales, foreign sales, and so forth, but it usually looks fairly straightforward with respect to ordinary sales. Among those more comprehensible aspects, it is common for a contract to specify a step-scale royalty rate on net receipts. So, you might receive one rate for the first X thousand copies, another higher rate for the next X thousand, and a higher rate thereafter. Sounds good, right? The better your book performs, the more you are rewarded as an author.

But now I’m not so sure. Here’s an example from one of my last few contracts:

On sales of any hardbound edition through regular bookstore and wholesaler channels in North America: 10% on the first 2,000 copies sold; 12% on the next 2,000 copies sold; and 18% on all copies sold thereafter.

On sales of any paperback edition through regular bookstore and wholesaler channels in North America: 10% on the first 2,000 copies sold; 12% on the next 2,000 copies sold; and 18% on all copies sold thereafter.

Now, I’d always (naively) understood this to mean that after enough copies were sold, the royalty rates would rise for any edition. Well, let me be more honest: I’d never even thought about it at all, until I read the royalty report I received in the mail today and noticed that I was earning 10% on the paperback edition of a book that was earning 18% in hardcover. It just seems intuitive to think that after earning up into a higher rate that said rate would maintain itself for other editions. But that’s not the case. Instead, an author’s royalty rates reset once a paperback edition is published. And a paperback is cheaper anyway, thus reducing total receipts and thereby royalties.

I guess this is obvious, but I hadn’t even thought to ask or to negotiate for it to work differently. Is this what everyone else experiences? Or am I a moron? Or what?

published May 11, 2012

Comments

  1. Morgan Ramsay

    I like that you can quickly start earning 18%, but the reset would be a dealbreaker for me. My publisher pays the following graduated royalty rate: 10% of net receipts from the first 4,000 copies sold; 12.5% on copies sold between 4,001 and 8,000; 15% on copies sold between 8,001 and 12,000; 17.5% on copies sold between 12,001 and 25,000; and 20% on copies sold thereafter.

    However, they don’t identify each format (e.g., hardcover, paperback, ebook) as a separate edition, so sales from multiple “versions” of a single edition are included when determining the royalty rate. Furthermore, sales of nonprinted versions earn a royalty rate that is 1.5 times higher than the highest royalty rate earned for nonelectronic sales.

  2. Daniel Price

    I would imagine that this clause is to protect the publisher because of the realities of dead-tree format stocking. The problem is they do a print-run of a few thousand or however many on the paperback after the initial hardcover release, so the royalties are based upon the need to clear their stock.

  3. Ian Bogost

    @Morgan

    It’s interesting to know that such royalty mechanisms exist. Thanks for sharing.

    @Daniel

    In trade publishing, that’s true I think. The paperback is scheduled, more or less, and it’s up to the publisher to sell through the hardback or clear it because the paperback is due. But at university presses, things are different, at least for books that are successful enough to see their rates rise. Planning is possible, and they do it. In some cases they don’t even bother with paperback editions. Racing the Beam still doesn’t have one, presumably because it’s so cheap in hardback and selling well in that format.

  4. Borut

    Your royalty rate isn’t reset – there’s two different ones. Your hardcover sales should not go back to 10% now that you’re selling the paperback – if that’s what your royalty statement says you should look into the contract details more (standard not-a lawyer disclaimer, but that’s how I read it). It’s unclear from what you say if that’s the case though.

    Two paragraphs, two editions, two separate rates – the “all copies sold thereafter”, while potentially misleading, refers the edition being discussed in each paragraph.

  5. Paul Freet

    In which Ian Bogost becomes a capitalist.

  6. Ian Bogost

    @Borut

    Yes, that’s a more accurate description of what’s going on. I agree that it’s “potentially misleading” at most—and possibly not even that.

    @Paul

    I was always a capitalist.

  7. Nick Douglas

    I edited Twitter Wit, a 2009 authorized collection of other people’s witty tweets: http://www.amazon.com/Twitter-Wit-Brilliance-Characters-Less/dp/0061897272/

    I just checked my contract. For hardcovers, I would have gotten 10% for the first 5k copies, then 12.5% up to 10k, then 15%.

    But Twitter Wit went straight to paperback, where I got 7.5%. (Rack-size had its own staggered rates.)

    The e-book rate was pretty great: 25%. And over 300 people actually paid ten bucks for an e-book of *tweets*. That part kinda felt like a racket, but at least not one lucrative enough to keep me up nights.

    All told, we didn’t even sell 10k copies, so I never even made back my advance. The book has been remaindered, and Amazon has it used for a penny.