The Royalty Statement...Experienced scribes please step inside

Dreaming · Sep 1, 2010

Greetings fellow scribes!

Anyone up for a quick lesson on how to read a royalty statement? Agent already explained. But sadly, I didn't catch on, and didn't want to appear dim. Also, I think this lesson would be useful to others, so that's why I'm asking here!

I'm going to round off the numbers so that I can fully understand these numbers in simpler terms.

Book's Advance: $8,000
Book List Price: $10.00
Domestic Per copy: 7.50%
High Discount: 10%

Cumulative to date Net Units: 9,500
Cumulative Net Earnings: $5,800

Prior period balance forward as of 2009: -$2000
Total royalty earnings: $900.
Statement Balance: -$1,100.

Given these figures, I want to know the following:

1) How many books does one have to sell to "earn out" the advance?

2) How much does the author get per book?

3) What does the author get for a "high discount" book?

I suck at math and sometimes logic, so I'd love a break down from one of you erudite, experienced, excellent authors here. Thanks in advance...ahh, advance...my favorite word.

Irysangel · Sep 1, 2010

Is that all that was on your statement?

Does your Net units break out between how many were sold at the high discount and how many were sold at the full retail price?

Did you have reserves against returns on the statement?

What is the $-2000.00 from the prior pay period for?

1) It depends on your percentage of books sold at high discount vs full price, and factoring in reserves against returns.

2) 7.5% of $10.00 for regular, 10% of whatever the sale price was for high discount.

3) According to your statement, 10% of whatever the sale price was.

Dreaming · Sep 1, 2010

Dear Irysangel,

Thank you so much for your feedback! Yes, there's more info on the statement but the whole thing looks so complicated. Alas. I'm gonna have to sit down with someone and go over it in person. But thanks again!

Irysangel · Sep 1, 2010

Dreaming said:
Dear Irysangel,

Thank you so much for your feedback! Yes, there's more info on the statement but the whole thing looks so complicated. Alas. I'm gonna have to sit down with someone and go over it in person. But thanks again!

No problem! The tricky thing is that different houses bill different ways. And there's an absolute crapload of math on each statement. Just take it piece by piece and analyze each one.

One thing to also think about is that when you show 'sales' it's not necessarily sales at the cash register, but more like "What we shipped out and has not shipped back yet is counting as a sale". Which sounds confusing but it goes with the whole returns-oriented part of the business.

jana13k · Sep 3, 2010

Dreaming - I am an author and accountant, but there's not enough information here for me to explain entirely. You would need to know the price point and number of sales for each different sales type and also what the reserve for returns number is, which is what I'm guessing the 2k figure is.

I just started a website on writing info and don't have a lot of stuff up yet, but check out this post on how much money you can make writing, because it covers the breakdown of the flow of money and the royalty statement.

http://louisianaliar.com/business-o...e-business/can-i-make-money-writing-how-much/

ishtar'sgate · Sep 4, 2010

Interesting. My statement doesn't read anything like that. I get 10% of the original cover price regardless of any discounts the publisher may have given to booksellers. The rest is pretty much the same. Units sold, units returned, royalties earned etc.

jana13k · Sep 4, 2010

Some publishers pay a discounted amount if you are part of a book club. Others do not. I am not aware of any that pass bookseller discounts on to authors except in those cases, but anything's possible in the publishing world, I suppose.

CheshireCat · Sep 4, 2010

jana13k said:
Some publishers pay a discounted amount if you are part of a book club. Others do not. I am not aware of any that pass bookseller discounts on to authors except in those cases, but anything's possible in the publishing world, I suppose.

You're talking about the publisher paying "on net" rather than on cover price; they pay the author a percentage of what the book earns for the publisher.

That's the big argument/discussion in ebooks right now, as the major pubs try to carve out a larger piece of the pie for themselves, something that looks like is going to stick. (Note: "On net" isn't the same as the infamous Hollywood "on net," where the studios subtract all their expenses before arriving at an "on net" figure; in publishing, it's simply the amount received by the publisher from their accounts, due to discounts and whatnot.) A few publishers are also trying to get that written into print contracts; however, the industry standard has always been that an author's print royalties (on hardcover, trade, and mass-market) are calculated on cover price rather than the publisher's net income.

jana13k · Sep 5, 2010

CheshireCat said:
You're talking about the publisher paying "on net" rather than on cover price; they pay the author a percentage of what the book earns for the publisher.

That's the big argument/discussion in ebooks right now, as the major pubs try to carve out a larger piece of the pie for themselves, something that looks like is going to stick. (Note: "On net" isn't the same as the infamous Hollywood "on net," where the studios subtract all their expenses before arriving at an "on net" figure; in publishing, it's simply the amount received by the publisher from their accounts, due to discounts and whatnot.) A few publishers are also trying to get that written into print contracts; however, the industry standard has always been that an author's print royalties (on hardcover, trade, and mass-market) are calculated on cover price rather than the publisher's net income.

I have heard of this, but I would never agree to it. As a former CFO and degreed accountant, I would have a hard time agreeing to write for some arbitrary figure that I get no say-so in determining. Writing is my passion but I am not in this to not get paid. If I can't make what I feel is a reasonable amount for my effort, I'll quit. Seeing my name on a book isn't why I do it, although I know, for many it is.

The bookclub discount is usually only for publishers that have an established and well-used bookclub b/c it's understood up front that the subscribers pay a SET discount amount. I could go along with a discount to be included in book club if it meant tens of thousands more in distribution as they pull you afterwards and then you've got more readers at full pop. When it's done right (Harlequin, for example) it can build a career quickly.

CheshireCat · Sep 5, 2010

jana13k said:
I have heard of this, but I would never agree to it. As a former CFO and degreed accountant, I would have a hard time agreeing to write for some arbitrary figure that I get no say-so in determining. Writing is my passion but I am not in this to not get paid. If I can't make what I feel is a reasonable amount for my effort, I'll quit. Seeing my name on a book isn't why I do it, although I know, for many it is.

The bookclub discount is usually only for publishers that have an established and well-used bookclub b/c it's understood up front that the subscribers pay a SET discount amount. I could go along with a discount to be included in book club if it meant tens of thousands more in distribution as they pull you afterwards and then you've got more readers at full pop. When it's done right (Harlequin, for example) it can build a career quickly.

Well, if you plan to refuse any "on net" royalties, good luck with that. It's becoming standard practice, which means it's often a deal-breaker. And I've seen it break deals with some pretty big names.

:Shrug:

The problem is that publishers have always offered differing discounts to some of their accounts based on various things like placement in the stores or length of time they shelve the books before returns, that sort of thing. And accounts that offer sheer volume orders -- such as Anderson Merch./Walmart -- get better discounts because they order tens of thousands of copies of a single title.

So, while I certainly agree with you that on-net payments when we have no say in -- or even knowledge of, usually -- what the net will be because of differing discounts suck, the truth is that they're likely here to stay.

The best thing an author can do, generally, is make sure they're fairly paid on the front end of the contract, and then negotiate the best royalty rates they possibly can.

I have some big name friends who honestly don't care what the royalty rates are because they're being paid so much up front that royalties are unlikely to come in for years -- if ever.

Of course, it would be nice if we all had that sort of deal.

jana13k · Sep 6, 2010

Cece - So far, I have not even been asked to do anything on net. I think my agent would probably have an exorcist moment if I were. It's a shame that the person who seems to constantly be taking less is the author. It's amazing how an entire industry seems to place little value on the very people who are responsible for its existence. (sigh)

Getting the most you can upfront is always the best plan, I agree. My agent is always pushing for more advance and I totally agree with all the merits of such a practice. So let's both hope for big advances!

Miss Plum · Sep 6, 2010

jana13k said:
I just started a website on writing info and don't have a lot of stuff up yet, but check out this post on how much money you can make writing, because it covers the breakdown of the flow of money and the royalty statement.

http://louisianaliar.com/business-o...e-business/can-i-make-money-writing-how-much/

Jana, that's a great little column and I hope you keep the site up. I'll be dropping by often.

jana13k · Sep 6, 2010

Miss Plum said:
Jana, that's a great little column and I hope you keep the site up. I'll be dropping by often.

Thanks, Miss Plum! I just started loading content recently, so the site's in its beginning stages. I plan on continuing loading content weekly as time allows and until the cows come home. LOL

I've been working the last couple of weeks on an ebook on how to calculate and make estimated quarterly tax payments. I get asked that question a LOT on other writing loops, so I decided to write an ebook complete with easier worksheets than the IRS provides. I will also be writing an ebook on tax prep for writers.

The writing content I will load as topics spark my interest. If there's anything in particular you want to know about, please ask a question. I'm going to keep a master list of questions and address them all as I have time.

Thanks for reading!

Jamesaritchie · Sep 6, 2010

CheshireCat said:
Well, if you plan to refuse any "on net" royalties, good luck with that. It's becoming standard practice, which means it's often a deal-breaker. And I've seen it break deals with some pretty big names.

The problem is that publishers have always offered differing discounts to some of their accounts based on various things like placement in the stores or length of time they shelve the books before returns, that sort of thing. And accounts that offer sheer volume orders -- such as Anderson Merch./Walmart -- get better discounts because they order tens of thousands of copies of a single title.

So, while I certainly agree with you that on-net payments when we have no say in -- or even knowledge of, usually -- what the net will be because of differing discounts suck, the truth is that they're likely here to stay.

The best thing an author can do, generally, is make sure they're fairly paid on the front end of the contract, and then negotiate the best royalty rates they possibly can.

I have some big name friends who honestly don't care what the royalty rates are because they're being paid so much up front that royalties are unlikely to come in for years -- if ever.

Of course, it would be nice if we all had that sort of deal.

On Net is not yet standard with print publishers, and should never be with and good print [ublisher. It's certainly something that's a deal breaker for me under any circumstances.

And every writer should care about royalty rates. I don;t care how huge the advance is. It make sno difference. In fact, a huge advance makes royalty rates more important than ever The advance needs to be paid off, and the bigger the advance, the more important it is for the book to earn out.

Axler · Sep 6, 2010

Nothing will ruin your relationship with a publisher faster than demanding an independent royalty review.

I know from experience.

CheshireCat · Sep 6, 2010

Jamesaritchie said:
On Net is not yet standard with print publishers, and should never be with and good print [ublisher. It's certainly something that's a deal breaker for me under any circumstances.

And every writer should care about royalty rates. I don;t care how huge the advance is. It make sno difference. In fact, a huge advance makes royalty rates more important than ever The advance needs to be paid off, and the bigger the advance, the more important it is for the book to earn out.

Oh, I agree -- on net royalties for print is definitely not standard with print publishers. But some have been trying to sneak it in, which is why agents and writers need to be wary and aware. It's a deal breaker for me too.

Also agree with you about caring about royalty rates. I care about every single clause in my contracts, and have from the beginning. Also care very, very much about fairness to all writers, not just what fairness my own agent has been able to carve out for me over a long career.

That said, I have several friends who earn multi-million-dollar deals, and while they all have backlist titles that did earn-out and consistenly produce good money for their pubs, the frontlist advances simply don't earn-out. Or haven't, in some cases a decade later. The interesting thing is that the lack of earn-out hasn't hurt their recent advances. They've seen their advances climb steadily, usually based on sell-through or on a building audience, but not based on earn-out of a stellar advance.

Which, to me, is confirmation of a theory I've always had that publishers make a profit long before a writer's advance earns-out.

I honestly don't believe that earning out an advance, especially a large one, is as important as sell-through and numbers that show a publisher that the author's audience is building.

jana13k · Sep 6, 2010

CheshireCat said:
is confirmation of a theory I've always had that publishers make a profit long before a writer's advance earns-out.

I honestly don't believe that earning out an advance, especially a large one, is as important as sell-through and numbers that show a publisher that the author's audience is building.

Absolutely agree.

The Royalty Statement...Experienced scribes please step inside

Dreaming

Irysangel

She of Many Names

Dreaming

Irysangel

She of Many Names

jana13k

Yep. I can.

ishtar'sgate

living in the past

jana13k

Yep. I can.

CheshireCat

Mostly purring. Mostly.

jana13k

Yep. I can.

CheshireCat

Mostly purring. Mostly.

jana13k

Yep. I can.

Miss Plum

jana13k

Yep. I can.

Jamesaritchie

Axler

CheshireCat

Mostly purring. Mostly.

jana13k

Yep. I can.