Imagine listening to the song “It’s All About The Benjamins” by P. Diddy and the Family. The 1997 hip-hop hit dominated radio airways for weeks. It had everyone wanting to be rich and to live a lavish lifestyle like the song says. But there was always a lingering question of how to get the money or “Benjamins”. Let’s explore royalties and how they can be a passive income stream to pad your pockets.
Book Royalty Defined
Royalties are a percentage of sales paid to an author, composer or performer by a publisher for each book or performance sold. In our case, the author (and publisher) will get paid based upon the list price of the book. Since the publishing sector has grown, there are now two types of royalties, retail and “on net sales.”
Royalty Amounts and Bankrolls
Royalties are chosen and placed in a book contract before publishing begins. They can vary depended upon editions of the book such as hardcover or paper back and calculated. For example, if your book has a list price of $15.00 and the rate for royalties is 10%, then you as an author would earn $1.50 for each book sold. It’s not much, but the coins add up. If you do effective book marketing and sell 1,000 copies that amounts to $1500. Try selling 10,000 copies, that’ll give you $15,000. Therefore, making a monthly sales goal is ideal.
Advance of Royalties
A book advance is when the publisher gives the author advanced royalties based on what they think the book will profit. The advance can range from thousands of dollars to millions based on the size of the publishing company. It also factors in the author’s platform and genre relevance among other facets. Given in increments, they can disperse the royalty amount during the contract signing, manuscript development and acceptance phase all defined in the contract.
After an accumulation of book sells, a royalty check goes to the author. If the author has a literary agent, then their percentage is subtracted first. Checks are issued with a royalty statement. The royalty statement shows how many books were sold. The author does not have to pay back the unearned portion of the royalty if a book under-performs per industry convention.
Disclaimer: This article is to give general book advance and royalty basics. The author of this post is a writer — not a literary agent or a lawyer — and you should not consider the contents of this article a substitute for legal advice. Seek the counsel of a literary agent and an attorney or both if needed.