SELF-PUBLISHING 101: How Are Royalties Calculated?

You would think the royalty calculation process would be straightforward and consistent from company to company. For example, if the royalty is 10% of the book’s price and the book sells for $10, the royalty would be $1 per book sold.

Unfortunately, even a statement that seems perfectly clear – such as “You get a 10% royalty for each book sold” – can produce different dollar amounts, because some self-publishers compute the royalty based on the gross sales price while others use the net sales price.

The gross sales price is the book’s list price, or cover price. You can think of this as the “official price.” The net sales price is the amount of money the publisher receives after certain deductions have been made – think of it as the “money-actually-in-the-publisher’s pocket-price.”

There can be a major difference in the amount of royalties you receive depending on which sales price is used as a basis. If, for example, the cover price of your book is $10 and you receive a 20% royalty on the gross sales price, you will get $2. But if the publisher deducts $4 from the cover price to cover costs, producing a net sales price of $6, you will receive only $1.20 in royalties.

So when checking a self-publisher’s contract to determine what your royalties will be, look to see whether they are calculated on the gross sales price or net sales price. And if it’s the net sales price, find out exactly what might be deducted from the gross sales price to produce this new, lower figure.

Here’s a sampling of the way royalties are calculated by different self-publishers:

  • WingSpan Press – pays on the gross sales price. According to their website (as of April 13, 2011): “With WingSpan, you earn 20% of the recommended retail cover price of your book on every sale….Retailers – Amazon’s a good example – can, and often do – sell books at a discount. Like any store, they sometimes have ‘sales.’ But your earnings are not affected. Your royalty remains the same no matter what they sell it for.” (The company has a different calculation for e-book sales.)
  • iUniverse – pays royalties on the net sales price. According to their website (as of April 13, 2011): “Royalties are based on the payments we actually receive from the sale of printed or electronic (e-book) copies of your book, less any shipping and handling charges or sales and use taxes. Also, we offer discounts to retail and wholesale customers, so the royalty amount you receive depends on what type of customer bought your book and any discount they received.”
  • Xlibris – pays royalties on the net sales price. This company has a complex royalty calculation that factors in whether the book is a trade paperback or hardback, is sold through a bookseller or directly by Xlibris, and is sold to the author, a bookstore, library or reseller. The “Author’s Royalties” section of their “Author Agreement” spells out discounts from the gross sales price ranging from 20-60%, depending on the situation.
  • Dellarte Press – pays royalties on the net sales price. According to their website (as of April 13, 2011): “Royalties are based on the payments we actually receive from the sale of printed or electronic (e-book) copies of your book, minus any shipping and handling charges or sales and use taxes. Also, we offer discounts to retail and wholesale customers, so the royalty amount you receive depends on what type of customer bought your book and any discount they received.” They give the example of a book with a “suggested retail price” of $11.99, from which they deduct a 48% retail discount and $3.81 for the cost of goods sold (the book itself), leaving $2.42. The author receives a 50% royalty on the $2.42, which is $1.21.
  • CreateSpace – varies the royalty according to several factors, including book size,  whether it is sold through Amazon.com, eStore or their Expanded Distribution, and whether or not the author has signed up for the “Pro Plan.” Fortunately, they have a “Royalty Calculation” on their site (https://www.createspace.com/Products/Book/;jsessionid=1DA8089424A3DF8E80A2B03B4EA9FF91.cspworker01) that allows you to enter the variables and see what the royalty will be for each book sold.

In short, royalty calculations can be simple or complex and your payment can vary in size, depending on the self-publishing company.

We can help you create your business book, health book, memoir, biography, inspirational book or other book and get it ready for publication. We’ve helped scores of people achieve their goals, and some of their books have landed on bestseller lists. Let us help you! Call us at 818-917-5362.

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