How to Read a Royalty Statement

The numbers can be baffling, but if you’re an author, you must learn to decipher them — for your own protection

Photo by Ximena Balderas on Unsplash

One of my semi-annual royalty statements just popped into my inbox. It’s for my book Gaining: The Truth About Life After Eating Disorders, which was released by Wellness Central in hardcover in 2007. Understandably after all these years, sales of this book have slowed to an occasional dog paddle, but the statements keep coming, in all their many pages. And as I glanced through the cumulative figures, I thought they might offer a useful object lesson.

Royalty statements are notoriously confusing. Publishers are forever promising to streamline and make them easy-to-read, but the industry’s opaque practices and apparently infinite pricing variations thwart that promise. To give you just one wild example, my statement reflects pricing on the electronic version that ranges from $1.99 to $75 per copy. Yes, truly insane! And each price variation requires a separate royalty calculation and line in the report. Which is how a statement for a book that’s sold just 44 copies in this period winds up being 16 pages long.

But learning to track your royalties is a necessary part of becoming an author. So here goes.

What’s in a Royalty Statement?

The first thing to know about royalty statements is that there’s no real industry standard, especially among independent publishers. The Authors Guild has long advocated for more transparency, but progress is limited. In theory, you should receive a royalty statement at least once a year for as long as your book is available in print. But one of my publishers sent me a grand total of two royalty statements over my book’s first five years, and those statements never included any mention of the French edition, for which I was supposed to receive a cut.

IMHO, a lot of the indie publishing world operates on the principle that the spoils are so small, no author can afford to fight for them. Yes, you can request an audit, and the Authors Guild can help you do that, but if you know you’ve only sold a couple thousand copies, there’s really no financial justification for all that effort. So some small presses will pocket a few hundred here or there without recording them. This is one of the many reasons I urge emerging authors to push hard for deals with established, reputable publishers.

Mainstream publishers have accounting departments that produce sales reports for every title, and most send royalty statements to their authors twice a year. These statements basically provide a publishing history for every book. They reflect the initial advances, subsidiary licensing revenues, and sales for each version of the book that’s handled by the publisher. If the publisher makes a foreign sale of your book, you’ll see the licensing fee on your royalty statement; actual foreign sales will be reflected in statements from the foreign publisher… if you’re lucky. As with indie presses, a lot of foreign publishers simply swallow their sales figures without a word to the author. That’s why it’s important to cut a good licensing deal and collect the money up front.

All right, so I’m going to walk you through my current royalty statement for *Gaining: The Truth About Life After Eating Disorders. *Not all 16 pages, but the main sections.

Current summary

Often I’ll look no farther than the general summary at the top of the report. This tells me how many total copies [units] I’ve sold of each edition, both during the current 6-month period, and cumulatively since the book was first released. This summary reflects sales of the hardcover, paperback, all electronic editions, and subsidiary rights. It also shows my total cumulative earnings on these sales.

The big takeaway in nmy current statement is that my cumulative earnings on nearly 35,000 books sold over the 18 years Gaining has been in print add up to about $63,000 — before my agent takes his 15% cut. So much for reality.

Note: Had I sold a lot of foreign rights for Gaining, as I did for my novels, those licensing fees could have cranked the total earnings figure much higher, even without selling more books domestically. But for whatever reason, eating disorders weren’t as hot a topic overseas in 2007 as they were in America.

Advances

The royalty statement posts all advances against total earnings in a special Schedule. I received an advance for this book of $50,000, half on signing and half on delivery. This is considered a moderate advance, and this split is standard. As I wrote in the post below about my current ghost project, the splits get much more drawn out and complicated as advances rise.

[embed]Notes On a Big-Deal Book Deal Current intel from the Big 5 publishing trencheswritingcooperative.com

This section of the statement also reflects any expenses leveled against my side of the balance sheet — $37 for copying? messenger service? Who but the Hachette accounting department can say?

Then these payments and charges are added to the sum of royalties paid beyond the advance to calculate the book’s total earnings to date.

Royalty overview

The Schedule of royalty earnings takes up the bulk of the statement — 12 pages, in this case. The first section shows the different author’s percentages paid for various editions. These contractual percentages can be negotiated if you and your agent have leverage, but in my case, they’re pretty standard:

• 10% for regular hardcover sales (stepping up to 12.5–15% over a certain number of sales)
• 10% for special discount and export sales
• 5% for remaindered hardcovers
• 7.5% for most paperback sales

Something I just realized in reviewing this statement is that the bulk of the sections in this schedule are devoted to electronic sales. Print accounting is pretty straightforward, with just a couple of breakouts for Canadian sales and Premium discount group sales. But there are 30 different sections reflecting all the many price points assigned to what I assume is one electronic edition of this book!

Some are priced at $1.99, some $15.99, some $9.99, some inexplicably $38.99 or that insane $75. All for the same book, digitized. Maybe these variations reflect formats for different devices. I have no idea, but a couple of copies were sold at the highest price points. It’s a mystery. Regardless of the price, my contractual percentage is 25% of electronic sales.

Licensing

The schedule of licensing revenue, also called subsidiary rights revenue, is paltry for Gaining. Licensing some of my other titles earned more than all physical book sales combined. This is one area where novels can pay better than nonfiction, since foreign publishers have — or used to have — a voracious appetite for American fiction.

But foreign sales aside, this schedule also typically lists subsidiary licenses made to book clubs to publish their own editions, permissions for versions for the blind, etc. If the publisher had sold rights to an audio, video, or TV version of this book, they’d be listed here, too.

What’s the Upshot?

Royalty statements may be confusing, but I much prefer the ones I receive to ones I don’t. If you are negotiating a book contract with a small press, do make sure to require regular royalty statements. If you know someone who’s published with that house, ask to see one of their statements and ask how their publishing experience has been.

For more info on royalties, read this article from the Author’s Guild , which points out many elements not reflected in my current statement. Also, join the Guild, which is the closest thing authors have to a union. Whether or not you yet have a book out, the Guild will provide invaluable support for your writing career.

An earlier version of this post was published in my Substack publication MFA Lore, where I offer the essence of an MFA in creative writing, minus the tuition. If you’re looking for more pro-tips to elevate your writing, consider subscribing HERE.

This post includes affiliate links to my Bookshop site, where your purchases support my work and independent bookstores, instead of Amazon.