AHA · Authors Helping Authors · General · Publishing

Royalties – JF Garrard Breaks it Down

Money-CastleFor many, publishing a book is already a complicated enough goal.  At the same time, another goal to consider is to just break even on the real money you invested in the book. As I prepare to publish my book in April 2014, I am scratching my head at the different royalties offered by different book distribution sites. To be honest, I don’t really care which company carries my book as long as I can calculate the correct amount of royalties I should be gaining from each sale. It’s important to me that data is available at all times in case I want to check on sales numbers in the middle of the night.

Note that all the distributors listed below are for self-publishing and they are not vanity presses. One of my friends published through a vanity press and they are supposed to give her monthly reports. You cannot verify the sales data on your own as the vanity press is the “middle man” whom you have hired to do the work for you. For some, they don’t mind paying the middle man to worry less about numbers, but you do give up a lot of control.

Generally, a royalty on your book works this way:

Retail price – book distributor fees = your royalty amount.

In the ideal scenario, if you sold your book at a retail price of $1.00 with 70% royalty rate and no fees, the book distribute charges $0.30 for their services and you end up with $0.70. However, in real life there are lots of little charges for services, so you will most likely not get the $0.70.

Also realize that many of the distributor sites such as Amazon or Smashwords are US companies. This means they will deduct 30% of your royalties automatically for the IRS.  If you are not a US citizen or can be exempted from this, you will need to apply for an Individual Taxpayer Identification Number (ITIN) number. It takes exactly 8 weeks for them to process paperwork and if they are late, they will send you a letter to let you know that your application has been received and they are working on it! After getting the ITIN number, you fill in a form with each distributor and ask them to submit to the IRS on your behalf to release your royalties back to you in order for you to declare as income to pay taxes in your own country. If you do a search on any of these distributor sites you will find forms and information on how to get your own ITIN. I needed to line up at the passport office to obtain certified copies of my passport to start this process, so be aware you will need to visit them during office hours.

Going back to royalties, prior to any deductions for the IRS, the way royalties are calculated for e-books and print books are a bit different. For both types of books, the country of the purchaser comes into play and if there is any price matching, your royalty will be lower. E-book royalties involve file size and pricing considerations; while print book involves the physical cost of printed pages in either black & white or color.

There is a lot of information, but I’ve compiled it into a chart below. Be aware things can change any time, so do check on the distributor’s website once in a while as the industry is continuously changing!

An information chart on e-book royalties, examples in US dollars:

Royalty Rate x (List Price – Delivery Costs – Matching Costs) = Your Royalty

Distributor with   reference link Royalty Rate Delivery costs Matching   Competitor Prices Royalty Notes How Payment Works
Amazon Kindle Choice of 35%List Price must   be no higher than the list price in any sales channel for any digital or   physical edition of the Digital Book. None if under   10Mb If your book is   $0 elsewhere, Amazon will match. No royalties will be distributed.For price   matching, the list price will be lowered resulting in lower royalties. Must be priced   between $0.99 and $200.00.Example – $3.99,   1Mb book, no price matching35% x (3.99) =   $1.40Taxes are added   on top of the list price you chose so it is not factored into royalty   calculations. For example, if you pick $3.99 as list price, Amazon will add a   3% VAT levy in Europe, so the price on the product page is $4.47. Set up bank   account for electronic payment – $0 threshold, sixty (60) days following the   end of the calendar month during which sales occurred.Cheques are mailed   after a $100 threshold is reached, 60 days after sales month.
Amazon Kindle Choice of 70%(in certain   cities, 35% for others) Differs for each   country, example – Amazon.com: US $0.15/MB Same as for 35%List Price must   be at least 20% below the list price in any sales channel for any physical   edition of the Digital Book. Must be priced   between $2.99 and $9.99.Example – $3.99,   2Mb, price matching of $0.5070% x (3.99 –   0.30 – 0.50) = $2.23Same as 35% in   regards to taxes added onto book list price. Same as for 35%
SmashwordsSmashwords is an   aggregator of different distributors – you pay them a small fee to combine a   bunch of accounts into one. The fee is already built in, for example, for   Kobo you can earn 70% if you upload yourself versus 60% from Smashwords. Your royalty rate   is typically 60% of the list price for most retailers.Apple, Baker   & Taylor (Blio, a retailer), Barnes & Noble, Sony and Diesel:  60% (books >$0.99)Apple U.K.,   Europe: 60% of the list price minus the VAT taxOyster, if   subscriber reads more than 10% of book: 60%Flipkart: 60% of   the list price minus the VAT taxBaker &   Taylor (Axis360 library platform): 45%Smashwords   Library Direct: 70%Kobo: 60% list   (only US & Canada) for prices between $.99 and $12.99.  For prices over $12.99, your earnings share   is 38%Smashwords store:   85% Varies due to   paypal payment system for customers.PayPal charges a   fixed fee per shopping cart transaction (approximately 33 cents), regardless   of the number of books in the cart, and then adds a percentage fee based on   the overall price.Taxes or VAT (if   any) are also deducted from royalties. With the possible   exception of Flipkart, Smashwords retailers don’t discount unless they are   price-matching a lower price elsewhere.For price   matching, the list price will be lowered resulting in lower royalties. Can’t really do   straight calculation on this one as PayPal costs unkown.Theoretically:Example – $3.99,   1 book in customer’s cart, 60% royalty rate, VAT rate of 3%60% x (3.99 –   0.33 – paypal overall percentage fee – 0.12) To qualify for   payment, accrued earnings must be over $75.00 for paper checks, and $10.00   for all authors who want electronic payment via Paypal.  The quarters are Q1   (January/February/March), Q2 (April/May/June), Q3(July/August/September) and   Q4 (October/November/December), Smashwords will issue payments approximately   one month after the end of each quarter.
Kobo 70% royalty rate   only if book is priced $1.99 – 12.99Less than $1.99   pricing, 45% royalty income. Taxes or VAT (if   any) are deducted from royalties. Your eBook must   also be at least twenty (20%) percent lower than the price ofthe physical   edition of the book, if one is available.For price   matching, the list price will be lowered resulting in lower royalties. Example – $3.99,   1 book in customer’s cart, 60% royalty rate, VAT rate of 3%70% x (3.99 –   0.12) = $2.71 Payment will be   issued as a direct deposit to a bank account on a monthly basis if your content   has generated over$100.00.If after 6   months, your content has not generated over $100.00USD, we will   deliver all of the earnings your content has generated at that point.
Ingram Spark 40%Title Set-Up FeesBook and ebook —   $49.00 (submitted at the same time)E-book — $25.00Global Market   Access (Book & Ebook Distribution) FeesBook and Ebook   Market Access — $12.00 per title, per year (if submitted at the same time)Ebook Market   Access — $12.00 per title, per year Taxes or VAT (if   any) are deducted from royalties. For all books   published in mass market or trade paperback with a list price of $22.00 or   less, the Customer Price for the e-book shall not be greater than $9.99   during the first twelve (12) months after publication in those formats. Example – $3.99,   1 book in customer’s cart, 40% royalty rate, VAT rate of 3%40% x (3.99 –   0.12) = $1.55 Payment will be   delivered as a direct deposit into a bank account no later than ninety (90)   days following the close of the previous monthly accounting period.Note – all of   these details were in the “terms of agreement” and not easily found on the   website.

An information chart on print book royalties, examples in US dollars:

List Price – Sales Channel Percentage – Fixed Charge – Per-Page Charge = Your Royalty

Distributor with   reference link Sales Channel   Percentage Fixed Charge Per-Page Charge Royalty Notes How Payment Works
Amazon   Createspace This is   percentage taken out for the sales channel-Amazon.com &   Amazon Europe = 40%-CreateSpace   eStore = 20%-Expanded   Distribution = 60% Amazon.com, CreateSpace   eStore, and Expanded Distribution:-Black and white   books with 24-108 pages $2.15 per book-Black and white   books with 110-828 pages $0.85 per book-Full-color books   with 24-40 pages $3.65 per book-Full-color books   with 42-500 pages $0.85 per bookEurope:-Printed in Great   Britain £0.70 per book-Printed in   continental Europe €0.60 per book Amazon.com,   CreateSpace eStore, and Expanded Distribution:-Black and white   books with 24-108 pages None-Black and white   books with 110-828 pages $0.012 per page-Full-color books   with 24-40 pages None-Full-color books   with 42-500 pages $0.07 per pageEurope:-Black and white   books printed in Great Britain £0.01 per page-Full-color books   printed in Great Britain £0.045 per page-Black and white   books printed in continental Europe €0.012 per page-Full-color books   printed in continental Europe €0.06 per page Example – $8.99   retail list price, 5×8”, 184 pages, black and white, sold through Amazon.com$8.99 – ($8.99×40%)   – 0.85 – (184 x 0.012)=8.99-3.60-.085-2.20=2.34Royalty calculator here Set up bank   account for electronic payment – $10 threshold, a month after sales or   threshold reached.Cheques are   mailed after a $100 threshold is reached, a month after sales or threshold   reached.
Ingram Spark These are   percentages for author, 45% or 60%.So sales channel   will take either 55% or 40%.Title Set-Up FeesBook and ebook —   $49.00 (submitted at the same time)Book — $49.00When a print   order is placed for 50 copies within 60 days of title set-up, the customer   will receive a $49 refundGlobal Market   Access (Book & Ebook Distribution) FeesBook and Ebook   Market Access — $12.00 per title, per year (if submitted at the same time)Book Market   Access — $12.00 per title, per year Costs depend on   book size and many other details.Pricing sheet here Costs depend on   book size and many other details.Pricing sheet here Example – $8.99   retail list price, 5×8”, 184 pages, black and white, perfect bound, white   paper$8.99 – ($8.99×55%)   –$3.29 (print charge)=$0.76*Print charge   number from royalty calculatorRoyalty calculator here Note – all of   these details were in the “terms of agreement” and not easily found on the   website.

There are also other distributors such as Lulu and Book Baby which are similar to Smashwords as they aggregate different channels together; and they do print and e-books. No matter which distributor you pick, there will be a cost for services and this is something that cannot be avoided!

Of note, the print book list price is more important than the e-book price because there is a real cost to printing. If you set your print costs too low, you will be paying to sell the book instead of gaining royalties! So before you set a list price for the print book, do use the calculators to make sure that this is a positive venture.

For e-book pricing, a survey done by Beverley Kendall with 822 self-publishers in 2013 concludes:

-For authors with annual earnings of $50,000 – $500,000, $3.99 is the price point of choice.
-For authors with annual earnings of above $500,000, $4.99 is the price point the majority (45%) of those authors are using
-Authors who made $0 – $10,000 annually had their bestselling books priced between $0.99 – $1.99

Look up the survey when you have a chance, lots of good info there!

This is an older calculator, but if you are curious about how many print books you need to break even, give this a shot:

http://www.self-pub.net/tools/calculate.html

Remember to look at the websites of the distributors once in a while as rules are always changing.  Up until recently Ingram Spark only offered 45% royalties for print books but upped it to 60% when they realized they weren’t competitive enough!

Best of luck!

~~~~~~~~~~~~~~> JF Garrard is a multicultural fantasy author of The International House of Vampire Series. Book 1, The Undead Sorceress has a release date set for April 8, 2014. Her website features concept art, a blog and podcast about her journey on writing and publishing. Connect with her at About.me.

http://jfgarrard.com

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3 thoughts on “Royalties – JF Garrard Breaks it Down

  1. Lots of interesting info here – thanks for putting it all in one place.
    I’d like to make a suggesting on one point, regarding the with-holding of taxes for those of us outside the US. It is WAY easier and faster to get an EIN than an ITIN.
    EIN is an ’employer identification number’, and if you, as the author, are a self-employed person, you are entitled to be classed as an employer.
    The paperwork can be started online, and then you need to have a short telephone conversation with someone at the IRS in the US. Total time for paperwork and phone call? About 1 hour. And they give you the number over the phone, so within one hour you are ready to go. The official papers come by post, but as you have the EIN instantly, you can go ahead and use it before the papers arrive.
    There are several posts on how to do this online – just google it.

    Like

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