Understanding Publisher Royalties

If you are publishing with a POD publisher solely to see your name in print, royalties are of little concern to you. For the other authors reading this site, royalties should be one of your primary concerns when considering which POD publisher to publish with. Understanding how their royalty system works is the first step to understanding how many copies of your book it will take to break even.

Each publisher seems to have a different way of phrasing their royalty payments and a different way of calculating your royalty payment. With several hundred dollars on average for setup fees, knowing how much money you can expect to make will help you make your decision whether or not to publish with a Print on Demand firm and how many copies you will need to sell.

Primary Royalty Calculation Methods

There are two primary methods of calculating your royalty: percentage of retail and percentage of net (discount rate minus printing costs). On PublishOnDemand.net, we look at the royalty percentage you earn on wholesale sales - sales via Ingram on sites like Amazon.com or booksellers like Barnes and Noble. This is a more accurate reflection of your sales as some sales will come from your publisher's site, but a majority of your sales should come from the distribution channel - bookstores.

Example of Retail Royalty vs Net Royalty:

Of course, with this example, it takes into consideration of both royalty rates being an equal percentage, but it illustrates how different the resulting royalty can be. With the retail royalty calculation, it is much easier to calculate your royalty. With net royalty calculation, it becomes more difficult to understand what the "net" costs are - calculations could include shipping, handling, printing costs, and more. Be sure to ask for an example calculation for a book for your retail range before signing with a net royalty based publisher.

Read the fine print of your contract before signing with a publisher to see how the royalty calculation is described in the contract.

Calculating Your Breakeven Point

Breakeven analysis is a very important part of your decision to proceed with a POD publisher. Breakeven analysis is simply calculating how many books you need to sell to breakeven with your costs. Your costs include your submission fees, cover design costs, marketing materials purchased, review copies purchased, and other costs. Assuming your costs are $500 and your royalty calculation shows you will make $2 per book, it takes 250 books sold to break even. After 250 books, you will begin making a profit.

Don't Be Afraid to Ask

Don't be afraid to ask customer service for a sample royalty calculation to see how much money you will make. Since each publisher calculates their royalties slightly different and these differences could mean thousands of dollars, it is imperative to include royalties as a decision point when reviewing your publishing contract.

by Jeremy Reis

Understanding Publisher Royalties
Before you sign with any publisher, you need to understand their royalty system to understand how much money you will make.  

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