How do authors get paid?

What an author is paid per sale is dictated by the contract they have with their publisher (or, for self-publishers, the terms required by wholesalers and retailers). Payment clauses tend to be long and complicated but here we flag up the impact on authors’ royalties from different forms of sale.

We are talking here about general consumer books. Different terms may apply to scholarly, educational, and highly illustrated and specialist non-fiction works.

Authors don’t get a salary, and once an author has written a book it can be traditionally published - or the author can self-publish.

A self-published author will pay to publish the work (often sourcing outside help such as editors and designers) and will then sell it using any proceeds to defray the initial outlay and in the hope of making a profit. They will usually receive a proportion of any wholesale or retail receipts, so the more you pay the more they receive. The setup is quite simple.

The situation with books published by publisher is far more complex.

Publishers set the recommended retail price of a book, and retailers and distributors acquire copies from the publisher at a discount. The discount to major retailers is likely to be more than 50%.

The author will make a deal with a publisher and enter into a contract. Traditionally under the contract the author will be paid an up-front sum, known as an ‘advance’ (advances are generally modest these days). An advance is a non-returnable loan paid by the publisher in anticipation of, and offset against, royalty earnings.

Royalties

The author is then entitled to royalties from sales of the work, which are first used to pay off any advance. Traditionally the royalty is a percentage of the recommended retail price (RRP). A typical royalty is 10% of the RRP on hardbacks and 7.5% on paperbacks: so, on a £16.99 hardback the author would receive around £1.70 for each copy sold and on an £8.99 paperback they would receive 67p. This royalty usually drops when retailers demand higher discounts. For instance, at a 52-55% retail discount the author gets four fifths the full royalties, with a further drop on sales at even higher discounts.

Net receipts

It is also increasingly common for authors to be paid not on a percentage of the retail price but on a percentage of the ‘publisher’s receipts’ - the amount that wholesalers and retailers pay the publisher. In other words, the discount demanded by the retailer is deducted before the author gets a percentage of what remains. As the discount grows, the royalty shrinks.

The discounts we are talking about here are those demanded by the retailer. Once it has acquired stock, the retailer can choose to sell it to readers at whatever price it wants. Usually the retailer will want to make a profit, but some major retailers, including Amazon and supermarkets, may be willing to treat bestselling books as a loss-leader.

When it comes to ebooks, the retailer pays the publisher a percentage of the recommended retail price (taking a discount in line with that for printed books) and the author receives 25% of the monies paid by the retailer to the publisher.

Fixed fee

For some specialist non-fiction and multi-contributor works it is common for authors, including illustrators, to be paid a fixed fee. The author receives no further payments after that initial fee, regardless of how many copies of the book are sold. However, the author still has a vested interest in the publisher earning a decent return on the books because if a book doesn’t sell well the publisher is unlikely to commission the author again. We believe that all contracts should be subject to a bestseller clause so if a work does significantly better than expected the author can share the reward.