The Importance of Educating Yourself (Royalty Statements Part 1)

I recently taught a workshop on how to read royalty statements at an SCBWI (Society of Children's Books Writers and Illustrators) annual conference. It was one of three workshops I lead while I was there. And it was the least attended.

Now I completely understand that people attend writer's conferences mostly to improve their craft, to network, to be inspired. And learning about royalty statements isn't exactly the most inspirational thing to do at a conference that has talented presenters like Richard Peck, Laurie Halse Anderson, David Wiesner, Mac Barnett, Jon Scieszka and many others. So I get it. I probably wouldn't want to attend the royalty statement workshop either.

But from the 25-30 people that did show up, I learned something I didn't expect: at all stages in a publishing career, authors and illustrators didn't seem to know enough about how to interpret their royalty statements. There were a lot of newly published people in attendance, some yet-to-be, and even some seasoned authors/illustrators there. And they all had good questions.

I've been thinking about this workshop ever since, and it has inspired a series I'm starting here on PC on the Importance of Educating Yourself in this new publishing world. Times, they are a-changing, and one way you can prepare for what's ahead is to educate yourself in what you can now. Because guys, traditional publishing or self-publishing, it doesn't matter—there is a ton to learn on both sides.

This is your money. Your business. Whether or not you have an agent, you should know how your business works.

Now let's get to it.

Royalty statements can be intimidating! I know this, and you know it. But what you may not know is that the key to interpreting your royalty statement in NOT about being good at math. The key, is patience.

It might take you a few hours or even an entire weekend to break things down, but if you're capable of reading, then you're capable of deciphering your royalty statement. I promise you. And after all of your hard work, if there are still one or two items that you don't understand, DO NOT BE AFRAID TO SEND QUESTIONS TO YOUR PUBLISHER (or your agent) (or your self-pub contact at a particular publishing platform). I can't stress this enough. You are 100% allowed to—and absolutely should—ask questions when it comes to your money.

Today I will be focusing on traditional publishing.  (Will get to self-publishing at a later date!)

Question: You get your statement in the mail, and what's the first thing you do? Answer: Take out the corroborating book contract. Everything that is in your statement is covered in your contract, with one possible exception marked off below with a "**". You also might want to be near internet access as well, so you can look up an ISBN (International Standard Book Number) if you need to. While publishers often distinguish the edition of the book on the statement (paperback, hardcover, B&N edition, etc), sometimes they do this by listing the separate ISBNs, so you'll need to look up what edition the statement is referring to by that number if that's the case.

So for Part One of this series on Royalty Statements, I'm going to talk about what you need to know in your book contract in order to interpret your royalty statement. I highly recommend that you keep your contract files organized, and that you also keep a digital copy backed up to your computer by scanning it in. I also recommend that for the purposes of interpreting your royalty statement, you print an extra copy to highlight and take notes on.

These are the items to highlight:

1. Advance

• Payment Schedule

• Bonuses

2. Royalties‐make sure to note whether these royalties are based on the list price/cover price, or whether they are based on the net (also referred to as "amounts received").

• Regular Sales (hardcover, paperback, ebook, etc)

• Special Sales (book fairs, books sold at percentage greater than wholesale discount)

• Export Sales (US or International English editions sold outside the US—often grouped with Special Sales)

• Reduced Printings (also referred to as "Short-run" printings)

• Deep or High Discount Sales

3. Subrights—all of these monies are based are the "amounts received" by the publisher.

• What subrights does the publisher have (audio, anthology, book club, translation, etc)?

• What is your split of the money with your publisher? 50/50?  70/30 (in your favor)?  Whatever the split for whatever particular subright, have it highlighted for quick reference.

4. Accounting & Statements—some of the items below can be in separate paragraphs, but all of them with the **exception will be in your contract.

• Mark your calendars for the approximate time you should be receiving your royalty statements every 6 months (and in some cases: monthly, quarterly, or even just annually—it depends on your publisher and whether or not you've self-published—either way, the dates will be listed in your contract or somewhere in the terms of your self-publishing platform site). Things to note here: what is the royalty period, and how long after it ends does your publisher/platform have to send you your information. Some contractually have up to 6 months to calculate your royalties and send you the statement. Most take 90 days.

• **Reserve for Returns—this is not always covered in the contract, but it might be. Either way, it will be listed in your royalty statement, which we will go over in Part Three.

• Are your books Jointly Accounted or Separately Accounted? (Nathan Bransford explains the difference in an easy-to-interpret way here.)

5. Out-of-Print—KNOW THE BENCHMARKS. At what levels is your book considered "out-of-print"? This doesn't just refer to physical copies anymore. Compare these benchmarks to your statement to see if you qualify to have all of your rights reverted back to you.

And that's where I'm going to end things today, leaving you with an assignment: find these parts of your contract. Read them thoroughly. And if you've taken my advice on printing an extra copy of your contract to take notes—highlight these sections. Become familiar with the ways in which your books earn money.

For Royalty Statements Part Two, I plan on answering some Frequently Asked Questions about the above post, so please put your questions about this post in the comments here! I will pick a handful of the most FAQ to answer on Pub Crawl directly next month. However:

I will NOT answer questions specific to your contract.  I also will not read your contract for you.

Please remember to keep your contractual terms confidential.

If you need to consult on items specific to your contract, I suggest discussing these items with your agent, attorney or publisher directly.

I will not give accounting advice. For that, I suggest you find an accountant.

Looking forward to your questions!