Probably the one section of the contract that involves the most negotiation is the royalty rate, size of the advance, and payment arrangements.
If there will be a hardcover version of your book, a common arrangement is 10 to 15% of the retail or the net price (which is about 50-60% of the retail price). Often the royalty is figured on a sliding scale, such as 10% for the first 5000 copies sold, 12% on the next 5000, and 15% on sales of more than 10,000 copies. The particular numbers can vary, but commonly, there is no hardcover book, since most books are now published as paperbacks or ebooks, and some companies only want ebook rights, with the typical royalty rates and advances outlined below.
The royalty rate can vary somewhat depending on how much the publishers wants your book, and the advance can vary even more, based on the number of copies the publisher thinks your book will sell at what amount in the first year, and then you get offered a percentage of that. This is where your negotiation skills are best exercised and where working with a good agent can sometimes get you more – even much more – than you can get yourself, making the 15% or sometimes 20% you pay the agent well worth it. But assuming you are dealing directly with the publisher, here are some things to consider.
The Royalty Rate
A common arrangement is to be paid by the publisher based on the net receipts, which is the gross income the publisher gets from the sales of the book less any returns and a reasonable reserve for returns – typically about 20%. Usually, you can expect 7-10% of the net receipts, with an increase after the first 5000 copies to 10-12%. But if copies are sold at a discount of 50% or more, outside the US, or a special retail offer, the royalty commonly drops to 5% of net. In the event books are sold to book clubs or other organizations, corporations, or the U.S. government , or are sold for use as a premium, the royalty might be even less, such as 4% of net. And remaindered sales, where the publisher decides to drop the book and is selling off its current stock, the royalty might be similarly reduced, say to 4% or less, and if the books are remaindered at cost, you may get nothing other than a first option offer to buy any books at this heavily discounted cost.
In the case of ebooks or any sales in electronic form, the royalty is commonly 25% of the publisher’s net receipts, though some publishers will pay as much as 40%. It doesn’t hurt to ask about this if the royalty amount stated in the agreement is less than 40%.
Sometimes a publisher may also add a clause about paying a reduced royalty when there is a low printing in a given year, such as 1500 copies or less. Then, the royalty may shrink to 5%.
You might find a little give in the different royalty rates if you ask. If not, it is generally best to accept those terms if you want to work with that publisher, since commonly, books don’t earn out their advance. So the most important number is the advance you will get and how you will receive it. A common arrangement is to get half of the advance up front and the second half on acceptance or publication. If possible, try to get this last advance payment on acceptance, which will usually occur a month or two after you submit the final manuscript, whereas a final payment on publication generally won’t come for about a year or more, which is the common gap between getting the contract and publishing the book.
Royalty Splits on Subsidiary Rights
Subsidiary rights involve deals with third parties, such as foreign language publishers, film and TV producers, and product merchandisers. This is where you can often negotiate the rights you are giving to the publisher and those you are retaining, and the percentage split between you and the publisher. A standard arrangement is 50-50, unless you work out a different split.
The particular subrights to negotiate are those you are still splitting with the publisher, based on your agreement in the grant of rights section. If you have retained a particular right, it shouldn’t be listed in this section which outlines the author’s and publisher’s percentage, since the publisher no longer has any interest in this right. If the right which you own exclusively is listed, request it be deleted, since the publisher doesn’t have that particular subright. For example, in some cases, authors retain the foreign translation rights, dramatization, film and TV rights, and the commercial and/or merchandising rights, or if it’s an ebook only deal, you retain the paperback and hardback rights.
While the usual split is 50-50, you can sometimes request a different split in your favor, such as 75-25 or 60-40, if you initiate the licensing of the book in another language or make the arrangements for a film, TV show, or theatrical piece based on our book. Likewise, if you can set up deals with gift, stationery, toy, or other manufacturers to produce a product based on your book, you might get 75-50. However, before asking for a change in the usual split,, consider if you are realistically going to do any outreach to set up these deals. If not, don’t ask for this exception. If you do plan to do any outreach, work out with the publisher how that will work. One good arrangement might be for you to each have a non-exclusive right to initiate contact with third parties, but then any agreement must be subject to the approval of the publisher.
The advance is what the publisher agrees to pay you as an advance against future royalties and other earnings. Most commonly you can expect half up front, usually within 30 to 45 days of signing the contract by both the author and publisher. Then, you get the balance on acceptance or publication of the manuscript, with that payment to come within 30 to 45 days of that event. Ideally, seek to get that second or last half of the advance on acceptance rather than publication, since you can expect an acceptance within a month or two after you turn in the manuscript or after the due date if you turn your manuscript in early, whereas your book may not be published for a year or even more after that. If possible, ask for the payment within 30 days rather than 45, but this may be a schedule that can’t be changed, due to the publisher’s internal payment system.
In some cases, where a book is already completed or close to completion, you may be able to get the whole advance in a single payment on signing, especially if it is a small amount from a small publisher. But usually, there are the two payments, or sometimes even three or four paid out at different times as the manuscript is completed, such as when a manuscript involves extensive research over a period of time.
The arrangements about the index and who is to pay for it will commonly be included here, and often state that any payment for the index if created by the publisher will be deducted from the final advance or from future royalties to the author. If possible, seek to have any payment applied to future royalties rather than to the advance on the royalty, if you can’t exclude this payment entirely.
This section will also indicate that the author will not receive any further payments until the entire advanced has been earned out through royalties, sales of rights, or other monies due to the author. Moreover it will generally indicate that no royalties will be paid on complimentary copies given out by the publisher or on copies which are lost, damaged, or sold for less than the manufacturing cost. These are common publishing industry practices, so there is nothing to negotiate here.
What is most subject to negotiation – and what is most important to negotiate if you can – is the SIZE of the advance, since if the book doesn’t earn out its advance, that’s all the money you will see. If this is a small publisher, you will usually get a small advance, or sometimes even no advance, because this is all the publisher can afford. But if the company sincerely wants to publish your book, you may ultimately earn more on the back end than a big publisher might pay up-front, if the company’s efforts result in big sales. So don’t turn down a small or no advance publisher, especially if that’s your only option. But try to negotiate so you at least get a small amount – say $1000 to $3000, though some publishers may be firm in saying that they can only give you the smaller or no amount they are offering. Then, it’s up to you to decide whether the possibility of future earnings and getting your book published by a mainstream publisher is worth agreeing to publish with them versus self-publishing your book.
In any case, be realistic about the advance you are likely to get, based on the type of book, the target market, the likely sales to that market, your track record, and your platform. Also, be aware that the royalty advances for the “midlist” book – a book by an author who isn’t a well-known celebrity or high-profile expert on something – have gone down in the last five years, because of the increasingly celebrity-driven marketplace and the millions of authors who are writing for little or no money and self-publishing their own books. Plus royalty rates to most authors have gone down because of the growth of ebooks, which are usually less profitable for publishers. Generally, you can expect an advance of about $5000-15,000 for a non-fiction book in most categories, such as self-help, popular business, and memoir – about half what these advances used to be, though some authors will get more. Try to get more money up-front if you can, and make the case for this based on how you can support and promote the book, and how much awareness you have already created for yourself through past PR, speaking engagements, workshops, and the like.
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