What are the most common royalty rates for printed textbooks?
Textbook authors are either paid a flat fee, or a royalty based on net receipts or list price. Textbooks may have a primary author(s) that receives a royalty based on sales and contributing authors that receive a flat fee for their contributions.
Textbook royalties are usually based on the net receipts. These rates vary by the target market.
- Grades K to 66: 4% to 6%
- Grades 7 to 12: 4% to 10%
- College: 10% to 18.75%
Royalty rates may escalate based on quantity sold.
Example for a college text: 12.5% on the first 10,000 copies sold, 15% on the 2nd 10,000 copies sold, and 18.75% thereafter.
The screen image below shows how this rule would be entered in our royalty software. The royalty is calculated as a percentage of the net sale amount. The escalator is based on the quantity sold for each edition. This means that the escalator is tracked separately for the 1st, 2nd, and 3rd editions of a title. Royalty rates increase when 10,001 and 20,001 copies are sold of each edition.
What are Advances?
Advances are payments made against future royalty earnings. The amount of the advance is based upon the expected revenue from the text, and the success of the author’s prior publications and the author’ stature. Advances are usually not recoupable except as a credit against royalties earned.
An advance is often for the expected first year’s royalties or half the royalties expected from sales of the first edition.
What is a Grant?
A grant is a sum of money paid to the author, in addition to royalties. Grants can pay for travel expenses, to pay for income lost while writing the book or content development. Grants are not royalty advances. They are not recoupable against royalty earnings.
In our royalty software grants are entered in the royalty contract record as a non-royalty item in Advances & Fees. Non-royalty items are not deducted from royalty earnings.
In the United States, companies report grant payments, royalty advances and royalty payments made to individuals to the IRS (Internal Revenue Service) on IRS Form 1099-MISC. Payments to foreign persons are report on IRS Form 1042-S. Authors can deduct business expenses from taxable income if they itemize expenses.
Guide to Textbook Publishing Contracts
The Textbook and Academic Author’s Association Press has a guide to textbook publishing contracts.
In this new book, Guide to Textbook Publishing Contracts, Stephen Gillen, a Partner at Wood Herron & Evans, shares the key provisions of a typical textbook contract and how authors can determine what’s important to them so that they can enter into the contract negotiation process better informed. This step-by-step guide includes the “typical”, “better” and “better still” options authors can consider when making decisions about what to negotiate. For more information, visit http://bit.ly/textbookcontractsguide.