Hello Mr X aka The Bean Counter. Thank you for agreeing to be part of the A New Friend for Marmalade blog and answering some questions about the financial side of publishing.
Could you please tell us a little bit about your background.
Hi Alison, Thank you for asking me.
Congratulations on A New Friend for Marmalade, it is a lovely book and a very fitting follow up to A Year with Marmalade. I have worked as an Accountant for 30 Years and in the publishing sector for the last 25.
Can you give a brief description of what a book contract is and what the author is contracting to do?
When you enter into a contract with a Publisher you are giving them the right to publish your work in the manner, and for the time period, as specified in that contract. In return they are committing to pay you certain amounts of money calculated as per the terms of that contract
Can you give a quick explanation of the difference between royalties calculated on nett receipts and RRP – Recommended Retail Price?
Royalty calculated on nett receipts means that you are paid a percentage of what the publisher sells the book for. For example if the publisher sells a book to a bookshop for $1.00 and your agreement is 7.5% of net receipts you will be paid 7.5c.
This can vary greatly as the price the publisher sells the books for will depend on who the customer is and how many copies they are buying. They may sell to a mass market chain at a low cost so your royalty paid per book will be low but they might sell a large quantity.
A royalty calculated on a percentage of a RRP is a royalty that is calculated as a straight percentage of the Recommended Retail Price of the book. This type of royalty is usually stepped. For example if a book sells above a certain price they may pay 10% of RRP then below a certain price it will drop to 5% of RRP.
Some contracts are a combination of both with a percentage receipts up to a certain sell price and then a percentage of RRP above that.
Often export sales are a percentage of Receipts.
Are there any situations when it is better to have royalties based on net receipts?
This is hard to answer as it varies from book to book and also it is very hard to predict where the majority of sales will come from for any book. The best thing is to try and find out as much as you can from the Publisher about the sales plans for the book, see what they are willing to offer you and consider if that will give you a good return for the work that you have put into that project.
What is an advance?
An advance is a payment made to the author usually before the book is published. It gives the author some income while they wait for their first royalty payment. When royalties are payable they are deducted from the advance until the advance has been all earnt out. Once the royalties you have accrued get larger than the advance you will eligible to receive royalty payments from the publisher. .
How is it decided how much an advance should be?
This also varies greatly. Some Publishers calculate it at 50% of the total royalties that could be paid on that book for the first print run.
How are royalties worked out?
Each publisher has a different system but often the Finance Department gets information from the sales software and then process that data to calculate royalties payable
How often do authors get paid royalties?
This can vary with each contract but the standard is twice a year. They are usually paid at the end of September for sales in the period January to June and at the end of March for the period July to December of the previous year. Never be afraid of chasing your Publisher for payment if they are overdue as they are often tardy with payments and a nudge might help you get paid a bit quicker.
What should authors watch out for in their royalty statements?
Make sure that the correct calculation rates have been used. Also if you know of any special sales for example export sales that have been made, make sure they have been included at the correct rate.
Should authors contact finance sections when they are confused by their royalties?
Certainly. If they have any queries they should contact the Publisher and ask for clarification. The relationship between an author and publisher needs to be transparent and both understand and trust each other.
Are there any clauses that you suggest authors should put in their contracts? e.g. reversion of rights/sliding scale of royalties?
Again this depends on the author and any special requirements they may need. The area that you need to make sure is covered adequately in any contract is how the publisher will pay you for any electronic format of your book. This needs to cover current e-book formats but should also be broad enough to cover formats that may not exist currently
Please don’t feel obliged to answer this, but what’s better in your opinion for a mythical author – sales in mass market or sales for a higher royalty in the independent book shops?
I think a good spread is desirable. You might not get as much royalty for a mass market sale but it may be a larger quantity and it may reach readers that never go into bookshop. With less and less bookshops around publishers need sales to the big mass market discount stores to survive.
I often hear people in publishing talking about margins when selling books. What exactly are the margins?
The margin is the amount that the publisher makes on a book after he pays all his costs. He will often accept a smaller margin if he is selling a larger quantity. If a book cost a publisher 70c and they sell it for $1.00 then they have a margin of 30%
Most publishers now need to have overseas sales to survive. How does this affect the royalty rates of the author?
Often the author’s royalty rate is a lower percentage of receipts for export sales. Often the publisher will sell a larger quantity of a book overseas but will have to sell them at a lower price so the amount that he or she makes per book is less than a local sale so the amount they will pay an author is also usually less.
Thank you so much for your time Mr X aka The Bean Counter. I hope this proves useful for my fellow creators.