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.