How Do Book Royalties Work? Complete Author Guide to Royalties in 2023

Did you know that 99% of authors are supported by the most successful 1%?

That’s right—most authors never even see a royalty check.

Not even some New York Times Best Sellers.

I don’t say this to scare you.

You just need to know that royalties don’t equal success in the publishing world.

But how is this possible? Does this mean that royalties aren’t important?

Of course not! It just means there are a million paths to success as an author.

And it’s critical that you understand your options so you can decide whether or not you need royalties to achieve your ultimate goal.

What Is a Book Royalty?

Royalties are what traditional publishers pay authors in exchange for the rights to publish their work in book form. 

Royalty rates—the way you profit as an author—are the percentages you earn from individual book sales. Royalty rates are negotiable, though some publishers try sticking with royalty standards/ranges for most of their book deals.

But remember how I said most authors will never even see a royalty check? This is because in order to earn royalties, an author must first pay off their advance—or earn out.

What Is an Advance?

An advance payment is given to an author by their traditional publisher before any books are sold. 

In other words, the advance is a prepayment based on the minimum the publisher thinks your book will make in royalties. And the advance must be redeemed in full before you’ll start earning royalties yourself.

This is one reason why modern traditional publishers prefer authors with a built-in audience: they can more safely guarantee a profit. Authors with a fanbase don’t require much marketing and are much more likely to earn out upon publication.

But earning out is not the end-all-be-all. Most authors with a traditional book deal don’t earn out and can still go on to become best sellers.

Average Royalties for a Book That’s Traditionally Published

The book deal process in a traditional publishing company goes like this:

1. You write a manuscript
2. Your agent pitches that manuscript to their publisher contacts
3. One of them (or multiple in the case of an auction) decides they want to publish your book
4. The acquisition process (or sales projection) between your agent and chosen publisher begins
5. The publisher drafts a book deal

The publishing company and your agent will negotiate an advance payment. The advance payment could range anywhere from four figures (common in small or indie publishing companies) to seven figures (a rarity in publishing).

No matter the advance amount, you’ll have to earn out before you’ll see any royalties. This could mean selling thousands or hundreds of thousands of copies depending on your book deal.

Here’s an example of how the math works…

Let’s say you sell a whopping 10,000 copies in the first month and manage to pay off your advance (this is about a 1/1000 chance, by the way). Now you can begin earning royalties!

But just how much will you make from a traditional publishing company’s royalty rate?

Standard royalty rates may differ based on genre, publishing company, and manuscript format. But most publishers follow these retail rates:

So for a $20 paperback copy with a 10% royalty rate, you would earn $2 per book sold. Doesn’t seem like a lot, does it? Especially if your advance is five or six figures…

Keep in mind that royalties are the only profit publishers make. They’re taking the risk, so they give you a lower royalty rate (which is also why royalties are higher when you self-publish).  But no matter what, you’ll get to keep the initial advance.

There are two other types of royalty rates worth mentioning: graduated and net sales. 

Graduated royalties mean that as time goes on, or if you meet a certain threshold of books sold, the royalty percentage you earn will increase. So if you start out earning 10%, you could potentially increase to 12%, 15%, and so on.

And if you knock it out of the park with your first book, publishers might offer you increased rates for additional books. The inverse is true if you fail to meet sales numbers, however—so keep in mind that your sales history sticks with you throughout your author journey.

On the other hand, royalty net sales mean the publisher takes discounts and other fees out of the royalty percentage you earn. This often comes into play with e-books, which are best sold with discounts and only ever sold with delivery fees on KDP (which we’ll touch on later).

Either way, make sure you’re familiar with the royalty rates you’re agreeing to before signing a book deal.

Average Royalties for a Book That’s Self-Published

Most self-publishers use software like KDP (Amazon Kindle Direct Publishing) to sell their manuscripts. If this is the case, the royalty rates you’re looking at are likely:

At first glance, the 70% option seems like a no-brainer. That’s way higher than a traditional publisher! And it’s 70% across the board between paperback, hardcover, and digital.

But there’s a catch. If you choose the 70% option, the delivery/production fees will be taken out of your royalty check. And it’s a flat fee no matter how you price your book.

Additionally, Amazon requires that you price an e-book starting at $0.99 (this may vary slightly depending on the size of your manuscript). So let’s say you price your e-book at the cheapest option—$0.99. If your delivery fee is $0.20 with a royalty rate of 70%, you’re earning about $0.49 per book.

Believe it or not, this is a great rate compared to traditional publishing. An e-book of the same price with a traditional royalty rate of 25% would leave you at $0.77 per copy.

This means self-publishers are earning more than half the royalties of authors with traditional book deals. But there are other factors to consider.

You take on the bulk of the work as a self-publisher. This means you’re responsible for the writing, publishing, illustration, distribution, and marketing of your book. And if you aren’t a professional in any of those areas, driving sales can be incredibly difficult.

It is possible to outsource the resources you need. But that could require hours of scouring for individual professionals—not to mention the cost. A 70% royalty rate sounds enticing until you factor in the time and effort it takes to self-publish.

At this point, you’re probably ready to run back to traditional publishing. A four-to-five figure advance, a book deal, and a company filled with professionals to take the dirty work off your hands.

The problem is: you still do most of the dirty work with a traditional publisher. 

Traditional publishing companies are great for mainstream exposure, but not so much with targeted marketing. If your book falls into a niche category, most of the marketing will fall into your hands. Traditional publishers mainly help with the distribution of your book not the marketing of it.

But what if there was another option? An option that offered both the professional assistance of traditional publishing and the creative freedom of self-publishing.

Enter: hybrid publishing.

A Worthy Alternative to Traditional and Self-Publishing That Makes You More Money

A writer pays a hybrid publisher to handle the production/distribution of their book while retaining most or all of the rights and creative decisions. 

In other words, hybrid publishers are a one-stop-shop for expert resources you would have to outsource separately in self-publishing. Editors, illustrators, and publishers are all at your disposal—you make the creative calls.

Also, hybrid publishers offer higher royalty rates. 50% higher royalty rates than traditional publishers, in fact. (At Best Seller Publishing, we offer 100% rights and royalties).

The only trade-off is that you’re paying the publishers for publication. On the low end, you’re looking at a sum of $3,000-$5,000. Some hybrid publishers may charge up to $10,000 – $20,000.

The good news is that a hybrid publisher’s royalty rate could be as high as 85%. This would mean that, if you paid an advance of $3,000 and charged $20 per book, you would only have to sell 176 books to make a profit.

Consider the same scenario for traditional publishing: you’re paid an advance of $3,000 with a royalty rate of 8% for $20 hardcover copies. You would have to sell 1,875 books to earn out and start receiving royalties.

That’s over 1,000 more books!

And as a bonus, hybrid publishers can print and distribute your manuscript in half the time of a traditional publisher (which often have 6-8 months lagtimes). Most publishers have a fall and spring list to determine when they’ll push your book—hybrid publishers start the production process right away.

Hybrid publishing is a great choice for authors who want the resources of a traditional publisher with the creative freedom of self-publishing.

Conclusion

We’ve gone over three different methods to earn royalties as an author.

No matter which method you choose—or find yourself in—remember that the manuscript you’re writing is for you, not your publisher. Only you can decide the means by which to publish your book.

But if you’re still in need of more guidance, you’re in the right place. My Wall Street Journal bestseller, Publish. Promote. Profit. helps you effectively launch and market that book you’ve been wanting to publish.

And the best part? It’s completely free (plus shipping).

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