Book royalty scams?

I don't think it's possible for anyone to answer this except an agent who works for you, or an IPattorney who does the same.

I've received a lot of royalty statements, and it's really tough to judge anything from one statement. It's never as simple as "This many books sold, and my royalty percentage is X, so that's how many sales should be reported, and how much money I should receive this period". I wish it worked that way, but it really can't. Too many factors are involved.

It's pretty common for the numbers to appear nonsensical for any given period. One statement can be a LOT worse than you expect it to be, and the next can be much better than you think it should have been.

Foreign sales can be even more confusing, and how they're handled largely depends on what your contract says. Some contracts essentially give the publisher the right to handle foreign sales in any manner they like, and at any price they like.

Anyway, this shows the importantance of having an agent or an IP attorney standing between you and the publisher. Major publishers generally do not scam anyone, but they can come up with some "creative" ways of delaying or under reporting royalties, and sometimes handle foreign sales in a way that doesn't make the writer much, or any money. Sometimes this is not a bad thing, however, if it gets the writer into a new market.

But I doubt anyone on the outside can say exactly what's happening. You need to find someone, an agent or IP attorney, who can get an inside look.

Drachen Jager said:

Last year my wife published a university-level textbook with a major publisher.

Her first royalty cheque was for three months, because the book came out mid-accounting period. The second cheque, which just came today, was less than a third of the first one, even though this one includes foreign sales, and the previous one did not, and it covered a half year of sales.

On it are some glaring problems.

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Remember that royalties on "sold" books are held against returns.

Keep in mind that universities in North America buy most of their new textbooks in the Fall term, and then sell that stock out, and that they will re-sell used books back to their own students in the following terms.

In one university bookstore where I worked if the book is going to be used there in the academic year (fall through summer sessions) they don't return any—they sell down the new stock, and they buy back and resell the books their students purchased as new from those students and re-sell them as used to other students. She won't get a royalty on a used book.

It's possible royalties are being held against returns, the returns won't happen (because university book stores will sell all the new copies, and then re-sell them as used), and your wife will receive those monies in a few months.

So I'd hang tight until next fall's royalty report. But if she has an agent, I'd suggest calling and having the agent go over the royalties with her.

My textbook royalties are all over the place - there seems to be a big delay between sales and royalties because the big number comes six months after the traditional time that students buy books. I have had a deposit in the hundreds of dollars after the busiest period of the year, and then five figures six months later. Messes with my taxes a bit, but it all works out in the end. I always put it down to the shambling bureaucracy - I have written for one of the largest academic publishers in the world, and one of the smaller ones, and the bigger one is always much more difficult to deal with (but the payout is worth it in sales!).

I agree with those who suggested having a professional look over the statements though, it will give you piece of mind to know what's going on.

Are you sure there's no reserve against returns? What you're describing does sound pretty typical of that, but I agree that if that's the case it should be made clear on your royalty statement.

The issue with the different foreign sales generating the same amount of royalties might have something to do with joint accounting: I've seen it happen on a few royalty statements. I'm trying to remember exactly what led up to that, but I don't have them here to refer to. I think it was joint accounting, but can't be sure.

As others have said, this is a perfect example of how a good agent could help you. I know it's no help for you to hear that now, but I hope it'll be useful to others reading the thread.

Medievalist said:

It's possible royalties are being held against returns, the returns won't happen (because university book stores will sell all the new copies, and then re-sell them as used), and your wife will receive those monies in a few months.

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I was with a publisher a while back that held a substantial reserve against returns, but didn't report it on the royalty statement. So on my first statement, it looked as if 3,000 books had shipped instead of (as my agent found out for me) over 12,000.

- Victoria

These situations, no matter how clear cut they appear, almost always turn out to be a book-keeping or reporting period issues with no actual dishonesty or short changing. I would suggest clarifying what each report covers in terms of time period, distributors and actual proportion of cover due in each venue.

Also, check your contract to see what it says about accounting. There might well be a clue there.

I forgot to suggest calling your editor. If he can't answer your questions, someone else there might be able to. I've resolved a lot of issues by simply calling and saying, "Can you explain what's going on here?"

Drachen Jager said:

I suggested that to her. She's a little reluctant because she doesn't want to be a pest. I think we'll end up waiting out the next six months to see how it turns out.

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The very first royalty statement I ever got was for editing a chunk of an anthology used for teaching English comp classes.

It was pages long, in tiny print with numbers in columns that made no sense.

I didn't have an agent so I called the editor and said "can you explain what this means for someone who isn't an accountant?"

She did and she said she had lots of authors who asked.

1) Double check that your contract doesn't stipulate that you'll be paid on receipt of payment. one of my publishers does this so when I got my first royalty statement (covering a month), it had like, 200 sales despite bookscan having it at 2,000 for that period. Turns out the stores hadn't paid the pub yet. Next statement all those sales pop up.

2) Remember the difference between bookscan and royalty statements. Your first royalty statement, even if it only covers 3 months, SHOULD be the largest one. You are paid on copies SHIPPED TO STORES. The biggest shipment is always in the first statement (unless the book really takes off and sales go up). During that second royalty period, all those books shipped during the first period could be selling quite nicely, but you won't see anything on a royalty statement uniless stores REORDER.

So if you "sold" 10,000 copies in that very first 3 month royalty period, and only 2,000 copies have sold to consumers, there are still 8,000 sitting on bookstore shelves all over. You could conceivably sell another 4,000 to consumers during the subusequent royalty period and have your statement show ZERO, becuase you already got credit for those books in the first period. (it would never be that clear/concise, but I'm suing these figures for illustrative purposes.).

So during the second royalty statemnt, yes, it's possible for your bookscan to actually be HIGHER than what your royalty statement shows for sales. What should NOT happen is the first two statements put together equal less than your bookscan total for the same amount of time-- unless, like one of my pubs, they only account for the sales upon payment.

Drachen Jager said:

3) Both of the foreign markets gave the exact same royalty amount, down to the cent. I know statistically that can happen, but we're talking five figures here (including cents) so along with all the other stuff going on this seems incredibly hinky.

Help, suggestions, or helpful suggestions would really be appreciated.

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Also, are you talking about export sales, or did you grant world rights and they sold them to foreign publishers? Becuase those are two different things.

If its export copies that's not that weird that the royalty amoutn would be the same. your pub is charging the same rates for copies.

Drachen Jager said:

but somehow I was going along with my wife's assumption that she was being paid for direct retail sales, not shipments to bookstores.

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This would be VERY Unlikely because the publisher then would be supplying books to stores and not being paid unless they sold the books (like consignment, in that way), and also they likely have no way of knowing/proving when the stores sold the books and thus triggering a payment.

They may cover retail sales if sold via their own website and what not.

Did your wife not receive an advance from the foreign publisher? There should, at the least, be a deal memo covering what the license period is (often 4-7 years, then it reverts), what the royalty rates are, etc. With the novels I work with, the pubs pay advances on signing and if you'd sold world rights, that would go toward earning out your US advance first.

Without the details of the contract it's hard to say what's happening. If the contract didn't go through an agent there's no telling what's in there.

It's possible that you have big reserves against returns. It's possible that subrights sales are flat-fee. Lots of things are possible.

Reading royalty statements is a job for an expert. Given that each publisher's royalty statements will be formatted differently, and may include different information ...

Without seeing the contract, and without seeing the royalty statement, I don't think anyone here can advise you. Live in hope that a major publisher won't try to cheat you, and, before selling the next book, try to talk your wife into getting an agent. You know how we keep saying that a good agent is worth her weight in gold? You're seeing a part of why that's true.

Drachen Jager said:

In the case where they sold copies of the American version it was discounted about 90% off the cover price.

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The original contract may include provisions that drastically cut royalties for deep discounts like this, which could be another explanation for the lower payment amount on the second royalty check.

- Victoria

Drachen Jager said:

Reading this royalty statement takes no expert. As I said, the only information is how many copies sold, where they sold, and the royalty payout for that market.

Maybe next time she'll take my advice on getting an agent. Last time she told me nobody gets an agent for textbooks, and this publisher is too big and stable to cheat their authors (this said in spite of the fact that one of her co-authors was stiffed out of about $10,000 in royalties when her publisher on a different textbook declared bankruptcy). Maybe this is the kind of experience she needs to at least look through the contract before signing it next time.

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Please tell her that is nothing else she can/should find a publishing attorney to look over and explain her contracts. There are quite a few out there and I know of a couple who charge VERY reasonable fees for this.

The Rosenberg Group specializes in repping textbook authors. Maybe they also do consulting work--perhaps they could help with figuring this out/straightening it out.

- Victoria

Well, there's cheating, and there are certainly scams, but there's also plain old look out for yourself first, which is what happens most often with large publishers.

If you don't have an agent or an IP attorney, do you really expect a business not to think more about how much money they make than about how much you make?

Why would a publisher give you a contract that helps you more than it has to, unless you have someone on your side who knows contracts, and who is willing to say, "Whoa, hold up there, pardner. This helps you, but hurts my client, so let's hunker down and talk this out."

Not cheating, and not a scam. Just plain old getting the best deal they can for themselves, just as you agent will try to get the best deal she can for you.

I don't know if there's anything you can do with this book, but next time around ask your wife to think about how business works.