Ever since I published a book, I’ve had tons of authors asking me about the publishing industry, wanting to know how book royalties work (and more importantly wanting to know if they can live off royalties). I’ve put together a quick reference guide on how book royalties work and what you can expect if you want to become a published author.
First the Basics: What Are Royalties?
Book royalties are the payments your publisher will pay you, the author, based on the sales of your book. The royalty rate depends on whether your book is a hardcover, softcover, or paperback book.
Royalties for hardcover books
Typical royalties paid to the author for a hardcover book are 10% of the cover price for the first 5000 books sold, 12.5% of the cover price for the next 5000 sold, and 15% for all books over 10,000 sold.
Royalties for softcover: Trade or quality paperback and mass market
Trade paperbacks include business, self-improvement, and other nonfiction books. Mass market paperbacks, typically are fiction novels. The typical royalty for trade paperbacks is 7.5% of the cover price and 10% for mass market.
Let’s do the math
Can you make a living off your royalties? That depends. Let’s say your book sells for $30 and you have an 8% royalty. That means you get $2.40 for each book sold (at the trade, non-discounted rate). Suppose you need $60,000 a year to survive (so you can write more books, of course). That’s $5000/month, which, after state and federal taxes is only $3500/month. In any case, this means you need to sell 25,000 books.
A more realistic annual income (which covers your rent/mortgage, car payments, food, gas, utilities, health insurance, computer equipment, clothes, travel, entertainment, and so forth) is probably $80,000. This means you need to sell 33,333 undiscounted books or 2778/month or 93 books/day, every day for an entire year. This is a very difficult as well as a very rare sales volume to reach and then sustain.
Why are royalties so small?
I, like most new authors, was shocked by how small royalty rates are. My plans for a new car, retiring from my full-time job, and writing on the beach in Maui quickly vanished. Why so small?
For one, some contracts pay the author a royalty based on the wholesale price of the book. Thus your book might retail at $30, but its wholesale price is $18. This is because Ingram, the major book distributor, adds its own mark-up ($6), so that the book costs $24 to the retailer, who makes just $6 on the book.
If your royalty is based on the wholesale revenue (which is, after all, the money your publisher receives) you would receive $1.44 per book and you can do the arithmetic to see that making even $36,000 per year ($3000/month) is going to be very, very difficult.
Besides the wholesale aspect, the publisher is taking a risk with each book published. It had to pay for the cost of formatting and printing the book and if the books don’t sell, the wholesaler is allowed to return the books to the publisher.
Don’t be discouraged! You can still earn a living and realize your dream of seeing your book on the shelf of a major bookstore. In my next article, I’ll let you know how you can make money off your writing. Until then, keep writing!
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