Publishing

Buying Books and Author Royalties… What’s the Scoop?

One of the questions I most frequently receive from readers is; where should I buy your books from to ensure you get the highest royalty payment?

This is a really lovely thought and I appreciate that people take the time to consider where they shop, and the amount that will ultimately reach me as the creator of the work.

The answer, however, is complicated and differs from author to author.

As I see quite a lot of differing information going around, I thought I’d sum up the situation to give readers a greater understanding of how book royalties work.

Firstly, there’s a big difference between Indie authors and Traditionally published authors. An Indie author has full control over their work, can choose pricing, and distribution methods, and therefore doesn’t receive a cut from a publisher but gets their payment directly from the distributors. A Traditionally published author receives a payment from their publisher, this payment changes depending on the terms of their contract and the site the book was purchased from.

I’m a hybrid published author, meaning I have some booked with a publishing house, and some books I have independently published.

Contracts vary a lot from author to author and from publisher to publisher, I’ll be using industry-standard figures based on my own experience and conversations with other authors. But, that doesn’t mean that these figures fit all authors and some authors will have different contracts.

Many publishing houses will have a sliding scale of royalty percentages, meaning that the more books an author sells… the higher their royalty payment will be. This is generally to incentivise authors to market their book as well as they can to ensure they reach the higher royalty tier. Most publishing houses will also pay a different royalty rate depending on where the book is purchased from.

So, for example, let’s assume that a publisher will pay an author 25% of the sale price of every book sold through the publisher shop. On a $10 book, this would equate to $2.50. Some publishing houses use the net figure rather than the gross figure, this means the amount of money the publisher receives from the sale once deductions such as tax and credit card charges are deducted, so this could be reduced to anywhere from $2.10 to $2.45 depending on the method of payment and the location of the purchaser.

This sliding scale of royalties is often present for other platforms as well, such as iTunes, Nook, and (of course) Amazon. The average royalty rate is anywhere from 20%-30%, so an average for this would also be 25%. However, this time we need to factor in the distribution fee of the platform. Selling a $10 book on Amazon means that Amazon will take a 30% fee, and pay the publisher 70% of the sale price. Some think this is unfair, but when you consider the enormous amount of web development, hosting fees, customer service personnel, data management, tax management, and more that Amazon provide… it is quite a fair price. So, here the amount arriving to the author will depend on their contract and whether it states that the sale price, or the net price, will be the basis of the royalty rate. If it is the sale price, and we take the average of 25%, then the author will make $2.50. If it’s the net price, then it will be $1.75.

A quick note here, I’m using the figure of $10 but you will rarely, if ever, see that price on Amazon. That’s not because people think $9.99 looks better, but because Amazon have a pricing structure in place that means the 70% royalty rate that Amazon pays to publishers/authors is only payable if the book is priced between $2.99 and $9.99. So, when I say $10, I really mean $9.99 but I’m rounding up for ease.

If the book is priced under $2.99 or over $9.99, then Amazon will not pay the 70% royalty rate, it will only pay 35%. And that is why you will rarely, if ever, see a book more than $9.99.

Another weird quirk of the Amazon system is this; if a user purchases a book from an Amazon site outside their own country, Amazon will pay the lower royalty rate to the publisher/author. So, if you are based in France, but you purchase on Amazon.com, Amazon will not pay 70% of the sales price to the publisher/author but the lower 35%. Same if you are in Canada and purchase from Amazon.com. Or if you are in Ireland and purchase from Amazon.co.uk. The reason for this is that different countries have different sales taxes and Amazon is legally obligated to pay these, and therefore they charge a higher fee in order to ensure that international taxes are adhered to as you are purchasing outside of your country of residence.

(Do you get why I said this is complicated?)

Now, I know many people say that they will buy from publishing houses as that’s how they can guarantee that the author gets the most money. This is often true that the publisher shop will pay more, or the same, as another platform (such as Amazon) to the author. A publishing house will definitely receive more from a sale through their own shop than they do from Amazon, as they often (and should) suck up that Amazon distribution fee. An author often receives the same, or around the same.

However, I believe there’s another aspect to this. You see, sites like Amazon are incredible selling machines. Amazon at its heart is NOT a store. It’s a database, programmed to figure out how to sell as much as possible. They use complicated algorithms to suggest products to people in the hope they will buy those products and they are massively successful at it. So, selling more books on Amazon means that Amazon starts to take note and they engage their impressive technologies to help that book sell even more copies. They may email people who they think will be interested, or recommend it on the site, on other sites, on also bought modules. The more you sell through Amazon, the more Amazon helps you to sell even greater numbers.

So, my argument would be, making a few cents extra per book sold through a publisher’s website is nice… but would that sale have benefited an author more if that purchase took place on Amazon?

For example, if a Traditionally published author was hoping to rank well on the Amazon charts, they may need each and every possible sale to come through Amazon to push their book up the rankings and into a high chart position. If they were going to sell 20 copies that day, and 10 copies went to the publisher store, and 10 copies went to Amazon that would mean that they are lowering their chances of ranking highly on Amazon.

Now, you may think… so what?

The problem is that many readers have no idea about publishing houses. They don’t go to the publishing house websites, because they don’t know they exist… or they don’t shop there. But many people shop at Amazon. So, seeing that book in the charts may mean a sale to a reader that would never have been reached otherwise. Which, to me, is more important than a slightly higher royalty rate per book.

However, all authors are different. And all contracts are different.

So, the answer… is complicated.

My advice is to shop wherever suits you best, if you are really wanting to support the author… then reach out to the author in question and they’ll tell you the best place to buy their work to help them in their individual goals.

However, buying the book at all is massively supportive to all authors, and talking about the book on social media is worth an amount money literally cannot buy.

8 Comments

  • Les Mood

    I know this is a month late but . . . you mentioned Kindle Unlimited in passing in your post. I read a lot of books, so because of the expense I usually read on KU (or Scribd). I have noticed lately that many of the more popular authors are no longer available on KU. Is there a marketing or profitability reason for this?

    Full disclosure: I am also an indie writer of lesfic. I’m not trying to make a living at it, I’m retired, I just like to write stories and have people read them.

    • aeradley

      On the whole, an author gets paid less for a book read through Kindle Unlimited than a book purchased. Unless the book is very long, in which case it can then be worth more but this is not going to happen with your average book. Kindle Unlimited pays the author an amount per page read, so, if you read ten pages and then give up… the author gets paid for those ten pages. However, the amount is much less than a book purchased outright. And, because of the complicated math that goes into deciding this amount per page read, it changes from month to month.

      Because of this, most publishing houses don’t enrol their books into Kindle Unlimited. However, they are missing a massive marketing opportunity by ignoring KU.

      Firstly, Amazon takes into account many things when creating the charts and one of those things is KU page reads, because of this it is very hard for a non-KU book to rank highly in the charts. The marketing potential of this is huge and most Indie authors would happily give away a few books for free or for cut price in order to dramatically increase their readership. Publishers are hesitant to do this, as are people who consider their book to be of a certain value and do not wish to devalue the book by putting it on sale.

      Personally, I love KU. I’ll happily sell books at a discount to increase my audience and KU has definitely done that. It helps my books to rank well and accounts for fifty percent of my income. Sadly, to be in KU the book must be exclusive to Amazon which means some authors don’t want to do that as it would mean readers who use Kobo, iTunes, and the like wouldn’t be able to purchase the book while it was in KU.

      If money isn’t too big a factor for you, you may want to try KU as it will definitely help to get your stories to a wider audience!

    • shelly bonsall

      Thank you for taking the time to explain how KU works. I read a lot on KU, your books included, so I hope you are financially benefiting.

  • rita

    Hello aeradley,
    I tried to follow your interesting explanation and understood that it might be better to buy at a publishing house or wherever it suits the buyer best. However, when I click on the “buy now” button of your latest book, I am not presented with a choice of publishing houses websites, but I am redirected to a well-known selling database… I think, I am not logical enough to understand the logic behind… At least, your explanation left me with a smile, as do your books which are great fun to read 🙂
    Successful writing!
    rita

    • aeradley

      Hi Rita!
      Thank you for leaving a comment on this blog post. As an independent author, I don’t have a publishing house website to link to and I am exclusive to Amazon as I currently enrol all my books into the Kindle Unlimited program which means they must be exclusive to Amazon. Other authors may well direct you to their publisher website, or other sites in general, but-at the moment-all my book links will lead to Amazon.
      All the best!
      Amanda

  • Jude

    Thank you for this post. It is complicated, and whenever I buy books I can’t get from my local bookstore, I try to balance everything I know so the author will get the most out of it (and small publishers too, as they too need support). Knowing more about how Amazon works helps a lot, for example. Especially as it really worries me that they do everything they can to get out of paying taxes, so if I could, I’d really rather not go through them. But as you said, it’s not that simple, and the more I know, the better to decide.

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