Ebook Royalties Payments: 4 Different Royalty Models That the Business-Minded Ebook Writer or Author Should Be Aware Of
It is not effortless to compose a quality e-book. Contrary to what many advertisments assert, putting together a real ebook takes considerable time and effort. So if you are planning to actually earn money on your ebook, you should be well informed about how much royalties you could have with different royalty contracts.
Essentially, royalty is about the amount of money the author will make when his book starts selling well. So it is about dollars or pounds sterling. But a royalties model may also be about other things, which may also be crucial to consider, such the length of the contract, or the interval between payments, etc.
Although other factors may influence an author to accept one type of royalty contract instead of another, this article will only deal with the estimation of the total amount of money the author may get from different royalties arrangements. I shall in the following present four types of models that the aspiring writer may want to contemplate. Two of these models are frequently found at major publishing houses; the other two pertain to authors who are interested in self-publishing their e-books.
1. Publisher’s “List Price Percentage” Royalties
One type of royalties that I am going to talk about is the “list price percentage” model. This is maybe the most “easy-to-conceive-of” model of all of them. Typically, this royalties arrangement is used when authors approach publishers to get a publishing contract for their ebook. In this model, the author’s forthcoming income will be calculated as a percentage of the retail list price of the ebook. It is not uncommon to see that authors receive between 10 and 20 percent of the list price in ebook royalties.
An example: An ebook sells for $20 and the royalties model says that the author will have 15 percent of the list price from the sale of every e-book. This means that the author might expect to be paid a royalty of $3 per e-book (0.15 x 20).
Big publishing houses such as Random House and Simon & Schuster have previously used this type of arrangement for contracts with ebook authors. Nowadays, however, these and other publishers are moving on to the second model, the “Net Receipts” model.
2. Publisher’s “Net Receipts Percentage” Royalties
The second model is the “Net Receipts Percentage” model. Just like the previous one, this model is (or has been) used at many major publishing houses. This model is increasingly popular among publishers, and probably will be even more so in the future. As of now, Macmillan, Random House, and Simon & Schuster are using it.
In this set-up the author will get a certain percentage of the net sales of the ebook. The exact percentage in general amounts to between 10% and 25% of the net sales.
Illustration: Assume that an ebook has a list price of $20, and that the publisher is getting 60 percent of the gross sales. Net sales is therefore $12 per book (0.60 x 20). If the author’s royalty agreement with the publisher says that he will get 15 percent of the net sales, then he should expect to see a royalty of something like $1.80 per book (0.15 x 12).
3. Self-Publisher’s “Flex-Price Net Receipts Percentage” Royalties
The third model is based not on an agreement with a major publishing house, but is a system where the author to some degree publishes the ebook himself. However, he still uses external retailers and distribution channels (such as Lulu.com) to market his ebook in a variety of ways.
Here, the writer should receive a certain percent of the net sale of the ebook, and in that sense it is fairly similar to the second model. However, with the “Flex-Price Net Receipts Percentage” royalties system, the author’s percentage per book will be dramatically higher.
Another difference is in terms of price-setting flexibility. Since you would be self-publishing your e-book, you may actually yourself decide what the list price should be. You will as a result have more flexibility in terms of preparing how much your total royalties will be.
4. Self-Publisher’s “Full List Price” Royalties
The fourth model is built on the idea that the writer not only publishes the book himself, but also markets it himself. So in this particular model there are no external distribution channels or external retailers to worry about.
Even though there may be no distributors or external retailers to worry about, the author may here need more technology to set up some kind of e-business solution. Note, however, that the technical aspects of selling products online may not be as problematic as many think. Relatively simple-to-integrate payment processing solutions such as PayPal.com work well.
Anyhow, the amount of royalties to be anticipated from this fourth arrangement is fairly easy to calculate, since you can keep all the profits for yourself. Obviously, however, depending on the particular solution you are using, you may wish to adjust the figures, in order to properly account for costs related to services such as your website hosting or your payment processing, etc.
Conclusion
It could be difficult to make a decision which model to choose. But if you are interested in marketing perhaps royalty model 3 or 4 could be interesting for you.
However, if you are mainly an author, and not so interested in internet marketing, it might not be a bad idea to aim at the first and second royalty models. The downside with these two royalties scenarios is, unfortunately, that it may not be so simple to get published; but if you don’t get lucky, you can always try models three and four as your plan B.
ABOUT THE AUTHOR: Johnny Jones currently appears at the EbookBrothers.com website, where he shares his views on ebook marketing, and on specific topics such as ebook royalties models etc. For a free subscription to the EbookBrothers.com Newsletter (with free articles and tips on how you can succeed with your own ebook plans), be sure to visit Ebook Brothers now, before the free offer expires.