In publishing contracts, “Retention” may have a number of definitions, but the most prevalent refers to the amount of royalties publishers can retain (or “hold back”) from payments otherwise due to the author for sales made in a given calendar period.
Most royalty-paying publishing contracts allow the publisher to withhold or hold back a certain percentage of royalties due to the author to cover potential returns. This sum is known as “retention” or “royalties retained,” and the contract should specify both the amount of royalties the publisher can retain (5-10% is standard) and also the length of time the publisher can retain the funds (typically 3 months to a year, depending on the publisher).
Retention should apply to hard-copy sales only. There should be no retention on e-book royalties, because e-books are not returnable.
If possible, ensure that your publishing contract differentiates between e-book and printed versions where retention is concerned. Many contracts do not – but not necessarily because the publisher wants to take advantage. Many contracts just haven’t been updated to differentiate between royalties due on printed copies (where retention is normal) and those on electronic books.
Publishers retain a portion of royalties to cover potential returns because industry practice allows bookstores like Barnes & Noble to purchase hard copies of printed works essentially “on spec” – and then allows those stores to return unsold copies for refunds. The publisher then refunds the purchase price to the bookstore – and since those copies didn’t actually sell to third-party consumers, no royalties are due to the author on copies the store returns. Retention is the publisher’s way of ensuring the author isn’t overpaid. As long as the retention clause specifies a reasonable amount and a reasonable hold back period, this isn’t a bad thing. It means you, the author, don’t need to disgorge (return) overpaid royalties. The checks you receive, you keep.
And for anyone still wondering: H is for “retention” because of the definition: a holding back of funds. I decided to set this topic at “H” because “R” is already taken…by Royalties.
*Extra points if you figured out the connection between “retention” and “H” before I told you.