Composing a really useful ebook is not a simple task: it takes substantial time and energy to create a piece of work that is truly correct, to-the-point, as well as enjoyable to read. So unless you are just writing for the thrill of it, you must prudently evaluate what your alternatives are in terms of your future royalty payments. How much royalties you will get depends on a number of factors.
As you would expect, “payment” or “royalty” is not an entirely straightforward subject to discuss. Without doubt, the concept of royalties is essentially about the actual quantity of dollars or pounds sterling that you would get with a particular publishing contract. But there are also alternate aspects of an arrangement or contract that may be just as important, and conceivably even more so. Such aspects can be, for example, the duration of the deal, the issue about the precise time for payments, and so forth.
However, in this current article I shall mostly talk about the total sum of money that you might anticipate from various kinds of royalties arrangements. Even if there are many different types of deals in the publishing world for writers and authors, I shall in this short article outline only four kinds of royalties: “list price percentage|, “net receipts percentage”, “net receipts percentage”, and “full list price”.
1. Publisher’s “List Price Percentage” Royalties
The “List Price Percentage” royalty model is perhaps the most “intuitive” of them all. This model is applicable when writers approach major publishing houses to market their ebooks (or even ordinary books). This royalty model practically boils down to that the author will receive a certain percentage of the ebook’s (retail) list price. The exact percentage typically varies between 10 and 20 %.
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. So the author might expect to be paid a royalty of $3 per ebook (0.15 x 20).
Big publishing houses such as Simon & Schuster and Random House have previously used this type of arrangement for contracts with ebook authors. Nowadays, however, these and other publishers are moving on to another model, namely the “Net Receipts” model.
2. Publisher’s “Net Receipts Percentage” Royalties
Another model, also used by publishers at large publishing houses, is the “Net Receipts Percentage” model. At present, many publishing houses use this type of royalties scenario, including Random House, Simon & Schuster, and Macmillan.
In this model, the net sales of the e-book is the major figure around which the calculation of the royalty amount revolves. The percentage figure most commonly used in this type of arrangement is between 10 and 25 percent.
For example, assume that an ebook sells for a list price of $18. Also assume that the publisher arrives at the net sales figure as 60 percent of the net proceeds. If now the author has a deal where he gets 15 percent of the net sales, then he would, in this example, look at something like $1.62 per e-book (18 x 0.60 x 0.15).
3. Self-Publisher’s “Flex-Price Net Receipts Percentage” Royalties
Option number three could be to publish your ebook by yourself, but nevertheless use one or a number of retailers and distributors to market and sell it. For instance, you might want to use sales channels such as Lulu.com.
In this scenario the writer will receive a given percentage of the net sales of the e-book, and in that way it is very comparable to the second model above, the one named “Net Receipts Percentage”. However, even if the models are similar, the “Flex-Price Net Receipts Percentage” has the major benefit that your cut per book will be radically higher, assuming that you will sell your e-book for more than simply a dollar or two.
Another difference is in terms of price-setting flexibility. Since you would be self-publishing your e-book, you may actually yourself come to a decision what the list price should be. You will consequently 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 author 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.
Doing it all by yourself is hard, but doable. And one does not necessarily have to have a complicated (or expensive) e-business solution implemented. One may very well use simple (and inexpensive) solutions such as PayPal to get up and running.
At any rate, the sum of royalties to be anticipated from this fourth arrangement is quite easy to calculate, since you will keep all the income for yourself. Logically, though, depending on the exact solution you are using, you may wish to adjust the figures, in order to properly account for costs related to services such as the website or blog hosting or your payment processing, etc.
Final remarks
Selecting which type of arrangement would work best is not always very simple. But you might ask yourself: “How interested am I in marketing?” If your answer to that question is “a lot”, you might want to consider either royalty model 3 or 4.
However, if you are not the born marketer, perhaps model 1 or 2 would be better for you. The problem is, however, that it is not easy to get a good publishing contract with a major publishing house. But if you do not succeed in getting such a publishing contract, you could always go for model 3 or 4 later one. For a determined writer of ebooks, there are many ways and alternatives to get that ebook out there!
ABOUT THE AUTHOR: Johnny Jones is currently writing for the EbookBrothers.com website, where he writes about ebook marketing, and on particular topics such as ebook royalties etc. For a free subscription to the EbookBrothers.com Newsletter (with free tips and articles on how you can succeed with your own e-book business), please visit the EbookBrothers.com home page immediately, before the free offer expires.