Pub Rants

Category: royalty statements

Speaking of 25% Of Net Receipts

by Kristin Nelson

Status: Gotta hit the shower and the ground running. RWA, day 2.


What’s Playing on the XM or iPod right now? NEVER THERE by Cake

An update from blog entry 8-4-2011:

In good news, we’ve now gone through all our Random House statements from the spring with a fine tooth comb and I’m delighted to report that RH is not doing a wholesale change to their electronic book royalty rate on existing contracts; there was simply an error that was resolved promptly. Contracts that have the royalty rate of 25% of retail will still have 25% of retail. Now, I have heard that they want to change any 15% of retail to 25% of net (which is actually to an author’s advantage) but I have not personally seen that so as far as I’m concerned, that’s simply a rumor for now.


Since we’ve been speaking of 25% of net receipts and it would have been easy to miss, if you publish with Random House, you might want to take a look at your April statements again.


Random House decided they were arbitrarily just going to use the 25% of net receipts to calculate their authors’ eBook royalties in this last accounting round—regardless of what is stated in the contracts. There was no mention of it to agents or letter circulated to authors–that I know of anyway. I’m assuming some folks just weren’t going to notice?


Now for some authors, this may be an improvement over what they were getting, depends on what is in the contract. However, for probably the majority, Random House used to pay 25% of RETAIL price that would then drop to 15% of RETAIL price after the title earned out. (and yes I’m capitalizing the word “retail” for a reason).


We had so much fun yesterday doing math, I can’t resist doing more today.


Let’s say you have a mass market paperback priced at $7.99. (we might as well use the same type of figures as yesterday):


25% of RETAIL of 7.99 = 1.99 of royalty per sale to the author.


Oh how I loved Random House back in the day….


Now, if RH switches to 25% of net receipts and because they did, as a company, switch to the Agency Model in March 2011, the math would look like this:


7.99 – 2.39 (which is the 30% to the distributor such as Amazon) = 5.60 to the publisher

25% of net receipts of 5.60 = 1.40 of royalty per sale to the author


Yep, the author just lost 59 cents per sale. Add that up over X number of sales and that’s a lot of dough.


However, if an author’s title has already earned out and they are now at the 15% of RETAIL price, it’s actually a better royalty to switch to 25% of net receipts.


15% of 7.99 = 1.19


Since the author would get $1.40 calculating the other way, then it might be worth considering (but make sure RH is not doing any other deductions beyond what they are paying to the distributor).


This concludes your moment of math. We will now return to our regularly scheduled programming.


Going Public

by Kristin Nelson

Status: Most of today I felt like I still had BEA brain. And the Brenda Novak Auction is ending tonight!


What’s Playing on the XM or iPod right now? ROSEALIA by Better Than Ezra


Many weeks before several authors started making headlines about their choice to self-publish, my author Courtney Milan, with my blessing and support (not that she needed it!), had already made that decision. She walked away from an offer on the table from her publisher Harlequin. There were several reasons for this decision but it will come as no surprise that it mainly hinged on the electronic royalty rate that had been offered. It’s no industry secret that Harlequin is well below what has become the “industry standard.” And it’s also not a secret what I think about Publishers’ current industry standard of 25% of net.


What was secret is that Courtney didn’t announce it—until now. Today she launched this new publishing direction with a novella entitled UNLOCKED in her Turner Brothers series that began with Unveiled & Unclaimed which will release in September.


In four short days, I can already tell you two important things about this digital revolution.


1. Pricing is everything. Pricing a title appropriately will move a great number of books in a short period of time.


2. Publishers are under-reporting electronic book sales in any given period on the royalty statements we are seeing.

That’s a fact.

In The Spring An Agent’s Fancy Turns To…

by Kristin Nelson

STATUS: Yesterday Angie and I were reviewing one client’s statement and to sum it up. What a hot mess.

What’s playing on the iPod or the XM radio right now? SWAY by Dean Martin

Love of royalty statements.

Yep, it’s that time of year again. April and October are NLA’s biggest royalty periods which means that the month of May and November are consumed by hours reviewing those statements.

So, in an effort to empower authors about their statements (because I promise you that a lot of agents don’t spend nearly the time they should on reviewing them), here’s another tidbit to file away in your knowledge bank.

If your publisher holds World rights and is selling your titles abroad, it’s important to track where the projects are sold to and when they will be released.

Why? Because if you don’t know that info, how do you know when the monies are supposed to appear on your royalty statements? Also, do you have a copy of the licensing agreement and the latest foreign royalty statement from the territory in question?

Most agents insert a clause in the contract allowing the author to receive such info—usually upon request. Without it, it’s impossible to review a statement for accuracy. What? You gonna just take the Publisher’s word for it?

Considering the number of errors we see in EVERY royalty period, that’s a lot to take on faith.

And there’s another facet to this. If Publisher has World, did they sell UK rights to separate publisher or was it done by a sister house in England? If a sister house, then UK royalties are specified in the US contract and should show on the US statement.

You don’t want to know how many times this information has just been plain missing from the statement or just wrong.

Knowledge is power and as an author, you have a right to a copy of those licensing agreements so ask for them. I would say that in the last several years, NLA has recovered well over $100,000 in missing royalties—money clients would never have received if we hadn’t pestered Publishers about info missing from the statements. In fact just last week, a client got $8000 because we argued that the wrong royalty rate was being used to calculate certain sales listed on the statement. And per the contract, we were right and they paid up. But if we hadn’t pointed it out…

Well, that’s a lot of money to leave on the table.

Importance Of Tracking World Rights

by Kristin Nelson

Status: Ah, worked on royalty statements some today. Hence, this entry!

What’s Playing on the XM or iPod right now? SUNSHINE ON MY SHOULDERS by John Denver

Even though as an agent I rarely grant World rights in a deal, I occasionally do if the monies are right. If the agency sells UK and translation rights, it’s easy to track the deals/monies as all info will be moving through the agency.

However, if a Publisher holds World, then all the info and monies move through the Publishing House’s subrights department. Sometimes editors are good at staying on top of the info and sometimes they aren’t. That’s why when I do grant World rights, I make it a point to contact the subrights person in charge of selling the rights for my author’s title.

It’s absolutely essential to know what foreign rights have sold and the terms of the deal. Why? If the royalty statement comes in and the subrights sales aren’t on it, then it’s clear something is amiss with the statement.

Case in point for a royalty statement I was reviewing today. We had on-file the deal memos and dates of all foreign deals done so far. Now foreign monies can often take 6 to 12 months to show on a statement so we don’t expect them to show immediately. However, if more than 12 months have elapsed since the close of the deal, it’s time to start asking questions.

In our case, the subrights monies were there but tied to a dummy ISBN that was created when the books first sold and not to the actual ISBN. This glitch kept them from showing on the statement.

Easy as pie as one phone call fixed the problem, but the issue can only be fixed if an agent or author knows to ask the question—which is why one should always track World right sales when the publisher holds those rights.

When Errors Are Found In Royalty Statements

by Kristin Nelson

STATUS: Not really liking how dark it gets so early.

What’s playing on the XM or iPod right now? LIGHT MY CANDLE from the Soundtrack RENT

Yesterday I highlighted the top 3 culprits regarding errors in royalty statements. So what happens if errors are found?

It’s pretty simple. We call our main contact in the royalties department. Since rarely an accounting period passes without some error being found on any one of the hundred + statements we receive, we talk to the royalty managers pretty often. First name basis actually.

We usually call first to discuss the errors and then follow up with an email so there is a paper trail. In all our instances, the royalties contact has corrected the errors promptly and regenerated the statements so we have correct ones for our files.

We make notes in the client’s royalties file so we can track past issues and be on the look-out for future issues (as sometimes it’s the same error that keeps reoccurring). Do I think the errors deliberate? For the big publishers, no. For some of the indie smaller publishers, it depends on the company.

Now there are definitely other things Publishers have done that haven’t been above board (as there have been lawsuits etc) that could impact royalty statements but they weren’t issues on the royalty statements themselves per se.

Top 3 Culprits

by Kristin Nelson

STATUS: It can’t be 2:30 in the afternoon already.

What’s playing on the XM or iPod right now? NEVER, NEVER GONNA GIVE YOU UP by Barry White

One of the issues of writing a blog for so long (since 2006 for me) is that I often forget what topics I’ve covered and what I haven’t. And sure, I could scroll through some of my tags but I’m too lazy. *grin*

April/October is our biggest royalty period. It’s when we receive the most statements. So right now I have quite a pile on my desk so it’s first and foremost in my mind. And for one major publisher, their October statements always come the first week in November.

So after reviewing the umpteenth one today, whether I’ve already discussed this or not, I wanted to highlight the top 3 culprits regarding errors in royalty statements that I’m seeing:

1. Returns at a price point that didn’t exist with the original published edition.
If a book was published for let’s say $13.99, then returns have to be at $13.99. Any other number is a clear error.

2. The wrong percentage recorded for electronic books
This can happen in a variety of ways. Perhaps the royalty is supposed to be on retail price and it’s showing on net or it’s just the wrong percentage altogether.

3. A royalty escalator has kicked in but the statements don’t reflect it.
In deals, there are often royalty escalators at certain break points. For example, for an adult hardcover, a standard is 10% to 5000, 12.5% to 10,000 and 15% thereafter. The royalty statement might have an error putting all copies at 10% but let’s say 6000 copies have sold so 1000 of those copies should be at the 12.5% level.

Ebook Royalty Glitch

by Kristin Nelson

STATUS: So excited! Leaving the office before 6! However, I’m just going to take Chutney for a walk and then continue working tonight as I need to read client material.

What’s playing on the XM or iPod right now? POCKET FULLOF SUNSHINE by Natasha Bedingfield

Today I was reviewing a royalty statement from a book that had been recently released. In other words, this was the first statement for the title that we had seen.

In looking at the statement, I noticed that there wasn’t a single electronic book sold in the six-month accounting period this statement encompassed.

Red flag! And you don’t even have to be a rocket scientist (or a literary agent for that matter!) to be able to look at the statement and realize that if an electronic book is available but sales are not showing on the statement, something has gone awry.

Now in this instant, the problem was easily solved. The book released right at the end of the six-month accounting period (so in late December) and the ebook didn’t release until 2 weeks later (in January) so there was no way for ebooks to show on this statement. Problem solved.

However, I bring this up because I’ve seen this issue on other statements and the above situation was not the issue.

The issue ended up being this: the ebook ISBN was not tied to the print title of the book and thus the publishing house royalty system was recording ebook sales with that ISBN but it wasn’t linked to anything. There was no way for the computer to know what author to attach it to.

The only way the problem was solved was by me ringing up the editor to get the ISBNs for the ebooks and then ringing up the royalty department to say, look, there’s an issue here. You need to tie these ISBNs to the statement for these titles. Then have the publishing house regenerate the royalty statements.

So even though you trust your agent, it’s still good idea to read your royalty statements and see if they make sense. Lots of royalty statements can come in certain months (like April/October) and heck, everyone is human and something could be accidentally overlooked. Be your own best advocate.

eBooks and Royalty Statements

by Kristin Nelson

STATUS: Remember when I said we were reading a lot? Yeah, that was before the Olympics began. Bad Kristin but I can’t tear myself away from the TV in the evenings!

What’s playing on the iPod right now? HOLDING BACK THE YEARS by Simply Red

As you know from a previous post, I’m not all that enthusiastic about this move by Publishers to switch an eBook royalty rate based on retail price to a royalty percentage based on net amount received.

As I ranted about this topic previously, my issue is the lack of transparency on the statement. It’s impossible to track actual amount received by the publisher unless you can get more detailed accounting info

So what have we been doing? Asking Publishers to included language in the agreement that contractually obligates them to provide more accounting information upon request. The only way to verify the accuracy of the Publisher’s stated amount received is to get info such as a list of customers purchasing and disseminating the electronic product, the business model used (wholesale or agency commission or maybe something not even invented yet), the actual retail price, the discount, any deductions made to establish the Amount Received figure from which the royalty calculation will be based.

And I could go on.

Notice that yet again, the onus is on the author/agent to go out of their way to request this information. It won’t necessarily or automatically be stated on the statement.

If we are having such a revolution in publishing over the electronic book, is it too much to ask that publishers have a revolution regarding the info provided on a statement? You got to change the system anyway to account for these new royalty structures. Why not make the whole reporting process more transparent. Heck, why can’t all this info be readily available online and the author can access it at anytime.

Now that would be a step in the right direction.

Agenting 101: Why I Don’t Like Net Amounts Received

by Kristin Nelson

STATUS: Phone conference in 10 so I’m trying to dash this entry out before it begins.

What’s playing on the iPod right now? NESSUN DORMA by Paul Potts

If you read my Agenting 101 entries on royalty statements (see right side bar), you should know why Kristin wouldn’t like net amounts received.

But if you haven’t, then I happy to just rant about it and tell you. There are two main reasons why I don’t like royalties to be based on net amounts received.

1. It’s archaic and currently doesn’t serve much of a purpose as audio and eBooks have a retail price and there are high discount clauses in all contracts so why not simply make the royalty based on retail?

And

2. Agents can’t track net amounts received by the Publisher. The only way we will get that information is if we:

a. audit and therefore look at the books to see what monies were actually received, from what account, for how much, and what were the deductions, or

b. we put a clause in the contract, not unlike reconciliation to print, that allows us to request the information from the publisher at any time and they can print out all the amounts received information so I can determine if what is on the royalty statements is correct.

Ah yes, once again the onus is on me as the agent to be a squeaky wheel, to demand more info, and pry the necessary info out of the publisher to see if the royalty statement is remotely accurate. And this is making a huge assumption that the publishers have the necessary software in place that will allow for this information to be accessed, printed, and shared.

I know Random House has that in place. Do the others? Guess I’m just about to find out because you know I like kicking up a fuss and less is not more for me when it comes to royalty statements.

See how much simpler it would be if all royalties were based on retail price? I’m capable of doing the math easily on royalties calculated via retail price.

Now that we have this big push from publishers to move to 25% of net receipts for eBook royalties, whose going to hurt 10 years from now when eBooks may be the main format and print editions the secondary?

Yep, you can see why I’m in state of righteous indignation all the time as of late. Maybe it’s time we move back to a term of license on contracts instead of Out of Print clauses and term of copyright.

Agenting 101: Royalty Statements: Lack Of Detail

by Kristin Nelson

STATUS: Interestingly enough, I’ve got more film interest for one of my clients. This will be the fourth of fifth deal we’ve done in this year alone. Go film!

What’s playing on the iPod right now? HOLDING BACK THE YEARS by Simply Red

Just this month I received a royalty statement that only had the following info on it:

Total copies in print
Copies printed during period
Copies shipped during period
Total copies paid during the reporting period [note: because royalties are based on net—not retail price—which is sometimes true for smaller independent houses)
Total copies returned during the reporting period
Net amount earned during period.

That’s it. That’s all that is on the statement.

So right off, we have some legwork we are going to have to do in order to review this statement. Lots of info missing.

Not to mention, I’m going to have to create a whole separate excel spreadsheet so I can track earn-out. On this royalty statement, the advance paid isn’t listed. So it’s going to be up to the agency to track it so we know when the title has earned out because that info isn’t on the statement.

Also a problem? All sales are lumped together in “total copies paid during the reporting period.” That means there is no break-down of format (as in hardcover, trade paperback, electronic). We didn’t grant translation, audio, or other rights so that won’t be an issue (as we’ll sell separately) but I want to know how many of those sales are eBooks. This statement won’t remotely tell me that. And let’s not even get started about high discount, special sales, export, etc.

Do you see what else is missing? No mention of reserves held. Now maybe this publisher isn’t holding any but I won’t know that unless I ask. Some publishers do hold a reserve but don’t list that info on the statement. If that’s the case, we’ll have to make a note to always ask separately.

And the list goes on. For me, less is not more.