Monday, July 10, 2006

Agenting 101 (Royalties--part six)

STATUS: Today I was perky. How can I not be perky (isn’t that such a fun word?) when I get the news that Target has bought in for ONCE UPON STILETTOS. They are a hard market to capture so this is great news.

In fact, here’s a picture of STILETTOS on the Breakout End cap in West Hollywood. Go Shanna. And yes, I would love to fly to Hollywood and pop that baby up to the top shelf position.

What song is playing on the iPod right now? TUPELO HONEY by Van Morrison

Am I done yet with Agenting 101?

I have to say that I couldn’t really conjure up a whole lot of excitement to write about royalty structures and percentages. I mean, there are a million (okay, I’m exaggerating but it feels like a million) different royalty clauses in any given contract.

And it varies greatly if we are talking about the big publishers versus the small independents.

The biggest thing you need to know is that big Publishers calculate royalties from the list or cover price. Independent publishers (and smaller houses) often calculate royalties from net proceeds received (otherwise known as cash received).

Big, Big, very Big, and did I say Big, difference.

Calculating royalties based on Net isn’t bad or evil. It’s usually just because it’s easier accounting for the smaller house.

However, you have to figure out the equivalent of what a net royalty would be versus a royalty based on cover price.

Back to math.

Let’s say you have a hardcover book priced at $24.99 and the first 5000 copies are based on a 10% of cover price royalty.

This means, as the author, you would receive on your royalty statement (after you have earned out your advance of course), 10% of $24.99 which would be $2.49 for each book sold.

When a publisher operates on net proceeds received, then you, the author, would only get a royalty on what the publisher received after the discount.

For example, if the publisher sells the $24.99 hardcover to a distributor at a 40% discount, then you as the author would only be getting 10% of $15.00 (approximately—$24.99 - $9.98 = $15.01).

That would mean you would only be receiving $1.50 per book.

See the difference? Rather eye-opening.

So what you have to negotiate for is a royalty percentage that would be the equivalent of 10% of cover price.

That means if the upon net publisher is trying to get you to go for the standard:
10% to 5000 copies
12.5% to 10,000 copies
And 15% thereafter

They are getting a bargain.

In reality, if the publisher is operating on Net, you should ask for 16% (instead of 10%) for the first 5000 copies and then do the math from there on up. (Because 16% of $15 is $2.40 per book—pretty close on to the cover price royalty calculation.)

Need I say that most small publishers are quite reluctant to give that high a percentage?

More on royalties tomorrow.