Negotiating a Non-Fiction Book Contract: Royalties

While the advance section of a non-fiction book contract may get most authors the most excited, it is the royalties section that will ultimately determine whether you will end up making any money from the book in question. Many authors have come to realize over time that their royalty arrangements with their publishers leave their pockets empty and their publishers' full.

The Royalty section of your non-fiction book contract outlines how much the publisher will pay you for each book that sells in each of the locations they sell them and in each of the formats in which they publish them. Royalties are almost always based on actual book sales as opposed to a flat rate. However, contracts vary widely with regards to how much per book the author will make.

The most important part of book royalties to understand is the difference between net and gross. While some publishers make some further distinctions, gross often means "based on the cover price of the book" while net means "based on the wholesale price of the book". While it seems like a small difference, the first could mean twice the royalties of the second. For example, if your royalty contract states that you will be paid 10% gross, it means that on a $19.95 retail list price, you will get $2.00 (rounded) for every book that is sold to a reader. On the other hand, if the contract states 10% net, it means you will get 10% of whatever the publisher sold it to the bookstore for. As most publishers wholesale to stores at a 50% discount, you are now getting 10% of $9.98 or $1.00 (rounded)- half the amount of the first contract clause. Some publishers also stipulate that they can deduct further production or distribution expenses against the net amount to calculate the royalty.

Always try to negotiate a gross contract. The list price of the book is an objective number that does not require trusting in the back room operations of the publisher. If the contract must be on a net basis, make sure that it is clear on what basis the net will be calculated.

Another important part of the contract is an escalator clause. If the proposed contract pays you a set amount per book regardless of how many books you sell, negotiate an escalator, which means simply that after certain levels of books sell, you will begin to receive higher royalties on every book. An example of a common escalator is 10% gross on the first 10,000 copies, 12.5% on the next 5,000, and 15% after that. Escalators can increase your royalty checks significantly.

The last part of the royalty contract to consider is the holdback. Most publishing contracts allow the publisher to withhold a certain percentage of royalties due to you for a length of time. This is due to the fact that book stores can return unsold books to the publisher for refunds. The publisher wants to ensure that they don't pay you for more books than were actually sold at the bookstore. Most chain bookstores follow this practice of returning slow-moving product in order to reduce their inventory levels. Be sure that the amount and the timing of any holdback is clear. On the following royalty check, the old holdback should be released and a new one set up already.

Paying careful attention to the royalty part of your contract can pay you (literally!) for years to come.