Show Me the Money, Part 2: Royalties in Publishing Deals

Last week’s Wednesday post explored the issue of author advances – the money an author may (or may not) receive up-front in a publishing deal.

This week we’re looking at Royalties, but you’re only getting part of the post today – on Friday I’m guest-blogging at Writers In The Storm on the topic of Royalty Calculations (and the lurking dangers that hide in royalty terms) – a post no writer should miss.

A “royalty” (plural “royalties”) is the term for money paid to an author (by a publisher) on sales of a published work. Most authors receive the bulk of their writing income from royalties, which makes this a very important feature of publishing contracts.

Royalties are normally based on a percentage of sales or profits and paid to authors on a quarterly basis, in arrears. How royalties are calculated is the topic of Friday’s guest post, so today we’ll look only at percentages and timing – but authors should always be very careful to understand how those percentages are calculated.

The royalty percentage paid to authors varies widely, depending on factors that range from industry standards to an author’s prior sales. It’s impossible to tell an author (especially a new author) exactly what that percentage “should” be, which is another important reason for authors to obtain professional review of the publishing contract before agreeing to sign.

That said, a few standards do hold true. E-book royalties should be a higher percentage than print. Royalties on foreign sales are often higher, too. If the publisher asks for film and TV rights, and the author agrees to grant them, the royalty percentage should be substantially higher than the percentage paid on books.

As a general rule, authors should not try to negotiate royalty rights without professional assistance from an experienced attorney or agent. Royalty clauses contain some of the trickiest “legalese” in the publishing world. Even if the publisher isn’t trying to take advantage (and the legitimate ones are generally looking for mutually beneficial terms) royalty calculations can be difficult for inexperienced authors to understand.

Royalties are normally paid on a quarterly basis, in arrears. This means most publishers send out royalty payments and sales statements four times a year. Each statement covers a previous calendar quarter (sometimes the immediately preceding quarter, and sometimes two quarters ago).

The timing and contents of sales statements and royalty payments should be stated clearly in the author’s contract.

Many publishing contracts also permit the publisher to withhold a percentage of royalties to cover potential returns and to pay reduced royalty rates (or no royalties at all) at works sold at deep discount or distributed for review and promotional purposes. Those, however, are topics for another day.

Today’s takeaway point:

Always obtain professional review of royalty provisions (and publishing contracts generally) unless you are familiar with industry-standard language and capable of understanding the royalty terms and their legal implications.

For more about royalty calculations and withholding, tune in to Friday’s guest post at Writers In The Storm and next week’s post! As always, if you have questions about this or other publishing topics, feel free to ask in the comments or ask me on Twitter, @SusanSpann, using the #PubLaw hashtag.