4 Different Royalty Models that Authors Should Know About

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Royalty Models for Authors

A key component in becoming a successful author is understanding the various publishing models available to you and how each determines the payment or royalty that you will receive.

In this article I will discuss four different models that you should consider as an author before jumping straight into one without understanding what you are actually getting yourself into. Spending a little time now in learning about each one could just save you a lot of money down the track.

When we talk about ‘royalties’ we are talking about the actual money you will get with a specific publishing contract from when someone buys your book.

What you must also do as an author is carefully read the entire contract as there will be many more key points that you will need to discuss and potentially negotiate with that publisher such as the length of your contract or how often you will get paid. If you are not happy with the terms of the contract then I would recommend talking to other publishers.

Four Examples of Author Royalty Agreements

1. ‘Net Receipts Percentage’ Royalties Model With Publishers
This type of agreement is the ‘Net Receipts Percentage’ model. This model is has or is being used by many well known publishers. With this agreement, the royalty is calculated as a percentage of the net sale, not the list price.

As a general rule an author will often receive up to 25 percent of the net proceeds.

For example:

  • Your agreement is for 15 per cent of net sales.
  • Retailer gets 40 per cent of net sales
  • Your book’s list price: $30.00
  • Net sales for the publisher is 60 per cent.
  • As the author you would receive:
  • 0.15 x .60 x 30 = $2.70 per book sold in royalty payments

2. ‘List Price Percentage’ Royalties Model With Publishers
This type of agreement is the ‘List Price Percentage’ model and is often used due to its simplicity in calculating the publishers and authors royalties. This has been used by some of the major publishing houses for eBook authors so be prepared to be presented with this type of agreement.

Although, I would say that there is a move away from this type of model but you still need to be knowledgeable in what is on offer.

This agreement is mainly comprised of two key components:

  1. The list price.
  2. The author’s percentage.

With this type of agreement the author will generally receive up to 20 – 25 per cent of the list price.

For example:

  • Your agreement is for 15 per cent of net sales.
  • Your book’s list price: $30.00
  • Author royalty would be .15 x 30 = $4.5

3. ‘Flex-Price Net Receipts Percentage’ Royalties Model for Those Authors Who Self-Publish

This type of agreement is the ‘Flex-Price Net Receipts Percentage’ model and is often used if the author wishes to publish their eBook themselves but still seek the services of a publisher to assist in marketing and selling the eBook.

With this agreement the author will receive a certain percentage of the net proceeds of their eBook and even potentially receive higher royalties if the price of the eBook is sold for more than just a few dollars.

One major benefit of this model is that as it is the author who is setting the price of their eBook and therefore they will have more control with how much they make in royalties compared to other models where it is the publisher who sets the list price.

4. ‘Full List Price’ Royalties Model for Those Authors Who Self Publish
This is known as the ‘Full List Price’ model and is what you will have if you choose to go the self-publishing route. With this model it is the author who takes on more control and also responsibility with the pricing, marketing and selling of their eBook.

If you are a little nervous about taking on the task of self publishing then it is essential to do some research prior to committing to this type of publishing option.

In our eBook Author Academy we provide you with all the tools and tips to help you get there. But essentially it is up to you to follow through and implement these tips for your own eBook.

In this model the author gets to keep all of the royalties. But then you need to take into account additional costs such as commissions for payment processors (PayPal or Clickbank) and also what cut the distributor or retailer gets.

How Do You Decide?
When it comes to deciding which model is best for you comes down to you doing your own research as well as asking yourself some serious questions with regards to how much effort you will put into marketing your eBook.

If you know you just won’t devote the time and effort into marketing or distributing your eBook then go for another option. Yes, you will receive less money but at least you will be having the assistance of someone else in getting your eBook to the market for sale.