Ebook Royalty Checks: 4 Different Royalty Models that the Business-Minded Ebook Author Should Know About
Creating a top quality ebook is not an unproblematic job: it takes substantial time and effort to write a piece of work that is factually correct, to-the-point, and enjoyable to read. So unless you are just writing for the thrill of it, you should prudently weigh in what your alternatives are in terms of your upcoming ebook royalty. How much royalties you will receive depends on a variety of factors.
Basically, royalties is about the amount of money the writer will receive 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 important to consider, such the length of the contract, or the interval between payments, etc.
However, in this present article I shall mostly talk about the overall amount of money that you could anticipate from different types of royalties arrangements. Although there are numerous different types of contracts in the publishing world for writers and authors, I shall in this short article describe 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 first type of royalties that I am going to talk about is the “list price percentage” model. This is perhaps the most “easy-to-conceive-of” model of all of them. Usually, this royalties arrangement is used when authors approach publishers to get a publishing contract for their ebook. In this model, the author’s future income will be computed as a percentage of the retail list price of the ebook. It is not unusual to see that authors receive between 10 and 20 percent of the list price in e-book royalties.
An illustration: An ebook sells for and the contract says that the author will receive 15 percent of the list price from the sale of every ebook. This means that the author could expect to be paid a royalty of 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 deals 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
The second type of arrangement 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 system, the royalty is calculated as a percentage of the net sale, not the list price. The given percentage that the author receives is generally between 10 and 25 percent of the net proceeds.
For instance, assume that an e-book sells for a list price of . 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 .62 per ebook (18 x 0.60 x 0.15).
3. Self-Publisher’s “Flex-Price Net Receipts Percentage” Royalties
Alternative number three could be to publish your ebook all on your own, but still use one or more retailers and distributors to market and sell it. For example, you may use sales channels such as Lulu.com.
Here, the author should receive a certain percent of the net sale of the ebook, and in that sense it is quite similar to the second model. However, with the “Flex-Price Net Receipts Percentage” royalties model, the author’s percentage per book will be noticeably higher.
Another big difference is this. Because you are self-publishing your ebook, you can actually determine yourself what the list price should be. That way you will have further flexibility in terms of setting a product price that may bring in maximum royalty.
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.
Note, though, that you do not inevitably have to have a very complicated e-business architecture integrated with your web site. You may very well instead use a more straightforward solution such as the payment processing used by PayPal.com, or other comparable systems.
In any case, the royalties from this type of arrangement are fairly easy to project. Basically, the author will keep all profit. However, it may be necessary to also include other costs in the computation, in order to correctly be able to compare this model with the other royalty arrangements. So, for example, costs related to website hosting and payment processing may lessen the “actual” royalty figures somewhat. However, the exact details of this calculation depend, of course, how the author has implemented his own ebook marketing business.
Final remarks
It might not be entirely easy to choose which model works best for you. One issue might be, for instance, how involved you are in marketing. If you are very interested in promoting your own e-book online, then royalties models 3 and 4 may very well be good for you.
However, if you are for the most part an author, and not so keen on internet marketing, it may not be a bad idea to try to go with the first and second royalty models. The downside with these two models is, unfortunately, that it is not so simple to get published; but if you don’t get lucky, you may 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 other aspects of running a lucrative ebook business, such as this article on ways to make money using ebooks online, etc.
For a free subscription to the EbookBrothers.com Newsletter (with free tips and articles on how you can succeed with your own ebook business), visit this ebook business blog right now, before the free offer expires.
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