Got a call from my nonfiction publisher, Self-Counsel Press, this afternoon: my royalty statement was available, and did I want to come in and pick it up? Since their office is close to my campus, I dropped in on my way home.
It wasn't much, but more than I'd expected, for sales from May to October. This was for two books: Writing for the Web (in two editions) and Writing Science Fiction and Fantasy. And it gives me a reason to talk about books and money.
Royalties used to be pretty straightforward: 10% of list price for hardback books, 6-8% for mass-market paperbacks. The advance was a prepayment on those royalties, and if you sold enough copies you would "earn out" the advance and then look forward to twice-yearly payments...perhaps for years.
It's more complicated now.
Increasingly, publishers are being beaten to death by "returns": booksellers can accept a batch of books and then ship them back if they don't sell within some (very short) period of time. The bookseller then gets credit for the next batch of books. Without this option, many booksellers wouldn't buy anything from publishers except absolutely guaranteed best-sellers.
But it means publishers can't tell for months if they're really selling any books at all. So modern contracts specify that part of the author's royalties will be held back "against returns" for six additional months.
In addition, publishers increasingly offer royalties based not on the list price of the book (which is almost always discounted anyway), but on the discount price paid by the bookseller--usually 60% of list price, and sometimes even less.
So you've got a novel on the market with a list price of $30. In the old days you'd have received $3 for every copy sold. If you got a $3000 advance, you'd earn out when your book had sold a thousand copies.
Now, however, you may get a royalty based on only 60% of list price: the bookseller paid $18 per copy, so you get $1.80. You'll have to sell a lot more copies to earn out. (Sales to book clubs are nice, but they're at such a deep discount that you get even lower rates.)
Foreign royalties can complicate matters. When I was publishing paperback novels in the US, my royalty was usually 8% of list price: about 64 cents for a $7.95 book. (The royalty would rise to 10% or even 12% on any copies sold beyond 150,000...in my dreams!)
But copies sold in my own country, Canada, were "foreign" sales, and on those I got a royalty of only 4%.
Of course I pay taxes on my royalty income. But under Canadian law I can take some considerable deductions on my income tax as long as I occasionally make more money from writing than I spend to make the writing possible. Five consecutive years of losses, and the tax people will say it's a hobby, and the deductions will stop. Until that evil day, I can claim deductions on my computer lease, software, book purchases, research expenses, travel, office furniture, and so on.
And when I donated my papers and memorabilia to a local university library last year, I got a huge charitable deduction—so don't throw anything away, including those awful first drafts!
We Canadians have another kind of royalty, and it's not the Queen. The Public Lending Right Commission goes out every year and visits ten different public libraries. It has a list of books published by Canadian authors, and every time it finds one of those books in the holdings of a library, the author makes about $40. This is to compensate the authors for sales lost because library users are such cheapskates.
If the book is in all ten libraries, that's $400. And when you've published 20 books, many of them held in Canadian libraries, it begins to add up...even for books that have been out of print for 20 years.
The drawback in the economics of modern book publishing is that publishers are increasingly reluctant to take a chance on a book unless they think it's going to be a blockbuster. The "mid-list" book that would sell slowly but build a readership is almost gone. Publishers can't afford to keep them in the warehouse, and booksellers can't afford to keep them on their shelves. Meanwhile, cash-flow problems keep publishers from gambling on promising new writers...because the booksellers are so slow to pay for the books they sell, and so quick to return the copies they can't sell.
Not a pretty picture. But you weren't really planning to get rich by writing fiction, were you? Or nonfiction?