17 Questions to Ask Yourself about Author Royalties

One of the most important things you need to understand as a published author is your royalty structure. It doesn’t matter if you are a self-published author or have a signed deal with publishing houses—whether large traditional publishing houses or smaller indie publishers—the structures and opportunities can differ. It’s imperative you understand how royalties work. Book royalties work by paying the author a percentage of the book's retail price, as specified in the publishing contract or book deal, with payments typically made on a set schedule after sales are reported.

If you do not understand the structure you are putting your livelihood and ability to be an author at risk.

The below self-assessment will help you determine how well you know your royalty structure.

1. What are my royalty percentages?

2. How much money do I earn if a book is sold at full retail price? What if it’s a discounted price? Royalties may be calculated based on the book's retail price, cover price, or list price, and this can differ between retail royalties, list royalties, and net royalties.

3. Are my royalties calculated based on the book's retail price, net sales, or list price? Do I understand the difference between retail royalties, list royalties, and net royalties?

4. What expenses are factored into the royalty?

5. Is the royalty based on a gross or net price? For net price, this usually refers to net sales, and net royalties are calculated after discounts and expenses related to distribution.

6. What is the royalty breakdown for bulk purchases?

7. Is there a tiered royalty based on how many books I sell over time? Note: Sales milestones, such as selling a million copies, a large number of copies, or even just one book, can impact royalty rates or trigger higher royalties.

8. How does my author purchase price impact royalties?

9. How often am I paid royalties?

10. Do I understand the royalty reports?

11. How do returns affect my royalty?

12. On average, do I know how much money I make per book?

13. If I was paid an advance how many books do I need to sell to earn it out? Consider the significance of selling a million copies or a large number of copies, as this can greatly impact your earnings and reputation.

14. Does my book contract or book deal specify how royalties are paid, such as in a lump sum or ongoing payments, and what rights (including subsidiary rights and intellectual property) are included?

15. Do I know if most publishers in my genre pay royalties based on retail price, net sales, or another method?

16. Do I understand how retail stores, a single store, or online platforms affect my royalty payments and sales tracking?

17. Am I aware of any expenses related to publishing that can be deducted from my royalties or reduce my taxable income?

If you were able to answer at least ten of these questions you are in a pretty good place. If you answered eight of them correctly, you are doing well but need to make an effort to find answers to the unanswered questions. If you could only answer seven or fewer, dive into your contract, check with your publisher, consult with an expert, and learn more about your royalties. First time authors often have more questions and should seek more detail about publishing royalties, book contracts, and how they can earn money from book sales.

Knowledge is power. Knowing the ins and outs of your royalties enables you to do more of what you love as an author. Understanding your book contract, subsidiary rights, and intellectual property can help you maximize your earnings and protect your work. Knowing whether your royalties are paid as a lump sum or ongoing payments, and whether you can negotiate for higher royalties, can help you earn more money from your book sales. Seek more detail about how book royalties work, how royalties are calculated based on different models, and how to maximize your earnings.

Introduction to Author Royalties

Understanding how author royalties work is essential for anyone looking to publish a book, whether you’re aiming for a traditional publishing deal or planning to self publish. Royalties are the payments you receive as an author for each copy of your book sold, and the structure of these payments can vary widely depending on your publishing path, the type of book, and your contract terms. Knowing the ins and outs of royalty rates, how they’re calculated, and what factors influence your earnings will help you make informed decisions and maximize your profit from book sales.

1. What Type of Publishing Path Am I Considering?

Before you publish your book, it’s important to decide whether you want to pursue traditional publishing or self publishing. In traditional publishing, you work with a publisher who manages the entire publishing process, from editing to distribution. The publisher pays you royalty payments based on a set royalty rate, but these rates are often lower—typically around 10% of the book’s retail price. On the other hand, self publishing gives you full control over your work and the publishing process. Self publishing platforms, like Amazon’s Kindle Direct Publishing, usually offer much higher royalty rates—sometimes up to 70% of the retail price. The path you choose will have a major impact on how much you earn from each book sold, so it’s important to weigh the pros and cons of each option before you decide.

2. How Are Royalty Rates Determined in My Chosen Path?

Royalty rates are set by either the publisher or the self publishing platform, and they can vary depending on several factors, including the type of book, its format, and the publisher’s policies. In traditional publishing, royalty rates are often negotiated as part of your publishing contract and may differ for hardcover, paperback, and ebook sales. For example, traditional publishers might offer a 10% royalty rate for hardcover sales, while paperback and ebook rates could be different. In self publishing, platforms like Amazon KDP typically have standard royalty rates for all authors, such as a 70% royalty rate for ebooks priced within a certain range. It’s important to review your contract or platform terms carefully, as royalty rates can vary depending on the publisher, the format, and even the sales channel.

3. What Is the Standard Royalty Rate for My Genre or Format?

The standard royalty rate you can expect depends on both your publishing path and the format of your book. Generally, traditional publishers offer royalty rates of 10% to 15% of the book’s retail price for hardcover sales, and slightly lower rates for paperbacks. Self publishing platforms, however, often provide higher royalty rates for ebooks—sometimes between 50% and 70% of the retail price. For example, if you’re a romance author self publishing an ebook, you might earn a 70% royalty on each sale, while a science fiction author working with a traditional publisher might receive a 15% royalty on hardcover sales. These rates can also vary depending on the publisher and the specific terms of your contract, so it’s important to research what’s standard for your genre and format.

4. How Do Royalty Payments Work?

Royalty payments are calculated as a percentage of your book’s retail price for every copy sold. When a publisher pays royalties, they typically do so after deducting any advance you may have received. For example, if your book’s retail price is $20 and your royalty rate is 10%, you’ll earn $2 for each hardcover sold. If you self publish, the platform will pay you royalties based on their set percentage, often after deducting distribution costs. Royalties are usually paid out on a regular schedule, such as quarterly or biannually, and you’ll receive a royalty statement detailing your sales and earnings. Understanding how your royalties are calculated and paid is crucial for managing your income as an author.

5. How Will My Book Sales Impact My Royalties?

The number of books you sell has a direct impact on your royalty payments. The more copies you sell, the more money you earn—especially once you’ve earned back any advance paid by the publisher. For example, if you received a $10,000 advance and your royalty rate is 10% on a $20 hardcover, you’d need to sell 5,000 copies to “earn out” your advance. After that point, you’ll start receiving royalty payments for each additional book sold. This means that strong book sales not only help you recoup your advance but also increase your overall earnings. Keeping track of your sales and understanding how they affect your royalties will help you plan for future royalties and make informed decisions about your writing career.