royalties

Quick Link: Royalty Clauses in Publishing Deals: How (& How Much) Authors Get Paid

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Quick links, bringing you great articles on writing from all over the web.

Admit it, you might write because you have a story that must be told but there is some part of you that dreams about becoming the next J.K. Rowling.  Bu unless you are lucky enough to have a publishing contract, the details might be a bit fuzzy. Lucky for us,  Susan Spann over on Writers In The Storm shares what happens in publishing deals. Did she miss anything? Let us know in the comments below. 

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Royalty Clauses in Publishing Deals: How (& How Much) Authors Get Paid

May 13th, 2016
by Susan Spann
Money Money Money!
Money Money Money!

“Royalties” is the publishing industry term for money paid to an author (generally, by a publisher) on sales of a published work. Most authors receive the bulk of their writing income from royalties, which makes them a critical feature of publishing contracts.

How are Royalties Calculated?

Royalties vary from contract to contract, and across different publishing formats. However, industry-standard royalties are normally based on a percentage of either: (1) the money the publisher actually receives on sales of the author’s work, or (2) the sale price of the work. (Most commonly, royalties are based on a percentage of the publisher’s receipts.)

Royalty percentages are either calculated on a “gross” or “net” basis—but those terms can be tricky, because publishers and contracts don’t always use them consistently. Good contracts calculate authors’ royalties as a percentage of the publisher’s receipts – the money actually received from buyers or resellers (less refunds and returns). That’s a “gross” method of calculation.

Dangerous contracts allow the publisher to deduct certain costs (sometimes including marketing and advertising costs as well as publishing costs) from receipts before calculating the author’s royalties. This is “net” calculation, because the author’s percentage is calculated on “net profits” – meaning receipts minus some or all of the publishing costs. Traditional publishers don’t expect or ask authors to share the publishing costs, or the publisher’s marketing costs. No exceptions.

How Big is the Author’s Royalty Percentage?

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The Creative Apocalypse That Wasn’t

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This article by Steven Johnson originally appeared on The New York Times Magazine site on 8/19/15.

In the digital economy, it was supposed to be impossible to make money by making art. Instead, creative careers are thriving — but in complicated and unexpected ways.

On July 11, 2000, in one of the more unlikely moments in the history of the Senate Judiciary Committee, Senator Orrin Hatch handed the microphone to Metallica’s drummer, Lars Ulrich, to hear his thoughts on art in the age of digital reproduction. Ulrich’s primary concern was a new online service called Napster, which had debuted a little more than a year before. As Ulrich explained in his statement, the band began investigating Napster after unreleased versions of one of their songs began playing on radio stations around the country. They discovered that their entire catalog of music was available there for free.

Ulrich’s trip to Washington coincided with a lawsuit that Metallica had just filed against Napster — a suit that would ultimately play a role in the company’s bankruptcy filing. But in retrospect, we can also see Ulrich’s appearance as an intellectual milestone of sorts, in that he articulated a critique of the Internet-­era creative economy that became increasingly commonplace over time. ‘‘We typically employ a record producer, recording engineers, programmers, assistants and, occasionally, other musicians,’’ Ulrich told the Senate committee. ‘‘We rent time for months at recording studios, which are owned by small-­business men who have risked their own capital to buy, maintain and constantly upgrade very expensive equipment and facilities. Our record releases are supported by hundreds of record companies’ employees and provide programming for numerous radio and television stations. … It’s clear, then, that if music is free for downloading, the music industry is not viable. All the jobs I just talked about will be lost, and the diverse voices of the artists will disappear.’’

The intersection between commerce, technology and culture has long been a place of anxiety and foreboding. Marxist critics in the 1940s denounced the assembly-line approach to filmmaking that Hollywood had pioneered; in the ’60s, we feared the rise of television’s ‘‘vast wasteland’’; the ’80s demonized the record executives who were making money off violent rap lyrics and ‘‘Darling Nikki’’; in the ’90s, critics accused bookstore chains and Walmart of undermining the subtle curations of independent bookshops and record stores.

 

Read the full article on The New York Times Magazine site.

 

Revisiting the Long Tail Theory as Applied to Ebooks

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This post by Marcello Vena originally appeared on Publishing Perspectives on 1/8/15.

The myth of the Long Tail for ebooks may be fading away as the digital book market grows, and it is operated by few mega e-retailers.

In a limitless world of digital goods, powerful search and recommendation engines, near-zero marginal cost of digital production, storage and distribution, niche products shall get much more market relevance. “Selling less of more” is part of what the “Long Tail” theory has been preaching.

Does it apply to the creative industries too? And how? Should digital book publishers reduce attention on blockbusters and increase focus on the Long Tail as the source of the most profitable growth? Is there a space for unlimited growth of niche ebooks? Who is going to consume a potentially unlimited supply of creative goods?

 

Long Tale Theory is a Decade Old

It is interesting to note that the Long Tail theory was first published — by Wired magazine editor Chris Anderson — 10 years ago (October 2004), a few years after the dot-com bubble, when Internet was still in its infancy (it was 11 years old then). Amazon had not yet launched the Kindle (that came at the end of 2007) and the ebook market was still waiting to ignite. The digital music scene was nascent, as Apple launched its iTunes Store only in April 2003, and that was the single most important booster to the digital music market in the years following. When the Long Tail theory was first popularized by Anderson, detailed sales data regarding the digital music in USA was not available yet. It was not until 2005 that Nielsen Soundscan made first sales data available and only at end of that year did Billboard start to take into account paid downloads in the music charts in US. In fact, the first edition of the book (published in 2006) does present some examples of digital music sale, but it doesn’t address the digital market as a whole. No data from iTunes or the entire market (Nielsen Soundscan) was incorporated.

 

Read the full post on Publishing Perspectives.

 

Two Important Publishing Facts Everyone Gets Wrong

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This post by Hugh Howey originally appeared on his site on 10/27/14.

Almost everything being said about publishing today is predicated on two facts that are dead wrong. The first is that publishers are somehow being hurt by ebook sales. The second is that independent bookstores are being crushed. The opposite is true in both cases, and without understanding this, most of what everyone says about publishing is complete bollocks.

Let’s take the health of publishers first. Below you will see that profit margins at the major publishers are either flat or improving. For three of the top publishers, margins have improved quite a bit:

 

Read the full post, which includes numerous infographics and much further analysis, on Hugh Howey’s site.

 

May 2014 Author Earnings Report

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This post originally appeared on Author Earnings on 5/19/14.

Three months ago, we released our first full report on Amazon e-book sales and author earnings. Our goal was to look at unit sales and earnings by various publishing paths in order to help authors make informed decisions in this rapidly changing publishing environment. The results were eye-opening, but it was merely our first data point. Our long term goal has been to pull data every quarter to see if we can spot developing trends.

A quick recap on our methodology: Using a custom software spider, we can crawl every Amazon bestseller list and pull info from each book’s product page html. This data goes into a spreadsheet, which gives us the price, ranking, average review, and much more for every ranked e-book on Amazon. Using established ranking-to-sales data from numerous bestselling authors (including our own works), we are able to present author earnings by title and publishing type. As with our past reports, all the data has been anonymized and is available for download at the end of this report. And just like with past reports, any reasonable numbers entered for the power curve of the product rank-to-sales ratio reveals the same overall picture. That is, our conclusions are not dependent on our estimates but are borne out of the freely available data.

The exciting thing about pulling this data is that we have no idea what we’re going to find. Our conclusions since the last report might need rethinking. Our advice on what an author might want to do with a manuscript today could very well change as the publishing industry takes another swerve. My partner and I debated what we expected to see from this second round of data. We both predicted no more than a 2%-3% swing from any one publishing path to the other over such a short period of time. I wagered we’d see a 2% drop in self-publishing titles, offset by an increase in Amazon imprints, as the latter continues to snatch up high performing e-books and put more marketing muscle behind their own authors. My partner thought we’d see a 2% hike in self-publishing at the expense of traditional publishing. We bet a dollar on the outcome.

 

Click here to read the full post on Author Earnings.

 

Appeals Court Reinstates Lawsuit Against Harlequin

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This post originally appeared on The Passive Voice on 5/1/14.

Keiler v. Harlequin is a proposed class-action lawsuit by Harlequin authors against Harlequin for actions by the publisher that resulted in massive underpayment of royalties to authors for ebooks. Some authors report receiving as little as six cents in royalties for sales of each of their ebooks by Harlequin. PG has posted about the case previously here, here and here.

The trial court ended up giving HQ a win, but the authors appealed. Today, the Second Circuit Court of Appeals reversed the trial court on one count, allowing the HQ authors a chance to move forward with their case at the trial level. Here’s the appellate court’s summary of its decision:

 

Click here to read the full post on The Passive Voice.

Also see this coverage, from The Hollywood Reporter site – Appeals Court: Book Publisher Must Face Self-Dealing Lawsuit “Suing romance novelists believe that Harlequin used foreign subsidiaries to create artificially low net receipts on eBooks”

Click here to visit the Harlequin class action lawsuit website.

 

Just A Standard Contract…

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This post, by Alex Adsett, originally appeared on Writers Victoria on 12/13/13. Note that while the author is Australian and what she covers here are standard publishing contract terms from Australian publishers, much of what’s there matches the standard boilerplate in an American commercial publishing contract as well.  It’s a particularly noteworthy read for anyone who intends to sell foreign publishing rights.

I often have authors approach me for publishing contract advice with the almost sheepish disclaimer “this looks pretty standard”, with the usual follow up, “so it will probably be alright”.

I always want to ask, “how do you know?”, and unless you are an author who has done their research or published before, do not just trust that every publisher will send a contract that complies with industry norms. Even if the publisher tells you it is a standard contract, they (a) might be fibbing, but also (b) might be wrong. Just because it is perhaps that publisher’s everyday contract, does not mean it is in accordance with the broad industry standards that authors should expect to receive.

I am not blaming the publishers (except the fibbing ones) as many operate within their own bubble, and even if they wanted to, government regulations frown on any commercial competitors getting together to set commercial terms. So here are some of the key “standards” that are broadly accepted as the base commercial terms across the Australian publishing industry, and what every author should know before negotiating their publishing contract:

– 10% RRP print royalty. It is standard for the publisher to pay 10% royalty based on recommended retail price (Note: RRP is very different to net receipts) on all print editions (including the subsequent paperback edition that will go on to backlist for decades).

 

Click here to read the rest of the post on Writers Victoria.