It is not undemanding to produce a quality ebook. Contrary to what many salesmen say, putting together a real ebook takes significant time and effort. So if you are preparing to actually make money on , you should be well informed about how much royalties you might have with various royalty arrangements.
As you would expect, "payment" or "royalty" is not an entirely uncomplicated topic to discuss. Without doubt, the concept of royalties is essentially about the particular quantity of dollars or pounds sterling that you may get with a particular publishing contract. But there are also alternative aspects of an arrangement or contract that can be just as important, and conceivably even more so. Such aspects can be, for instance, the length of the contract, the issue about the precise time for payments, etc.
Although other factors may influence an author to accept one type of royalty agreement instead of another, this article will only deal with the estimation of the total amount of money the author may get from different royalties deals. I shall in the following present four types of models that the aspiring writer may want to choose from. Two of these models are frequently found at major publishing houses; the other two pertain to authors who are interested in self-publishing their e-books.
1. Publisher's "List Price Percentage" Royalties
The "List Price Percentage" royalties model is perhaps the most "intuitive" of them all. This royalties model is relevant when writers or authors approach major publishing houses to market their ebooks (or even ordinary books). This royalties model practically boils down to that the writer will receive a certain percentage of the ebook's (retail) list price. The exact percentage typically varies between 10 and 20 %.
If, for instance, the arrangement is such that the writer is to receive 10 percent of the list price, and his ebook is priced at $25, he would expect to get an e-book royalty of $2.50 per item (0.10 x 25).
Although this sort of royalties arrangement previously has been regular at leading publishers such as Random House and Simon & Schuster, these publishers, as well as others, are now starting to use the second model, the "Net Receipts Percentage".
2. Publisher's "Net Receipts Percentage" Royalties
The second type of arrangement is the "Net Receipts Percentage" model. Just like the previous one, this model is (or has been) used at many major publishing houses. This model is increasingly popular among publishers, and probably will be even more so in the future. As of now, Macmillan, Random House, and Simon & Schuster are using it.
In this scenario the writer will obtain a given percentage of the net sales of the ebook. This percentage in general amounts to between 10 and 25% of the net sales.
Example: Assume that an ebook has a list price of $20, and that the publishing company is getting 60 percent of the gross sales. Net sales is therefore $12 per book (0.60 x 20). If the author's royalty agreement with the publisher says that he will get 15 percent of the net sales, then he should expect to see a royalty of something like $1.80 per book (0.15 x 12).
3. Self-Publisher's "Flex-Price Net Receipts Percentage" Royalties
Alternative number three could be to publish your ebook all by yourself, but still use one or more retailers and distributors to advertise and sell it. For example, you may want to use distribution channels such as Lulu.com.
Here, the author should receive a certain percent of the net sale of the ebook, and in that way it is pretty similar to the second model. However, with the "Flex-Price Net Receipts Percentage" royalties model, the author's percentage per book will be noticeably higher.
Another advantage for the author when comparing it to the second model, is that he might get more control over the product development. Not only will he be able to have more power of the editing and design, but he will also, most importantly, be able to set the list price himself.
4. Self-Publisher's "Full List Price" Royalties
The fourth model is built on the idea that the writer not only publishes the book himself, but also markets it himself. So in this particular model there are no external distribution channels or external retailers to worry about.
Doing it all by yourself is hard, but doable. And one does not necessarily have to have a complicated (or expensive) e-business solution implemented. One may very well use simple (and inexpensive) solutions such as PayPal to get up and running.
In any case, the royalty paychecks in the fourth model are relatively easy to calculate, since the author in essence will keep all the proceeds for himself. But it is important, to be really fair, to also appreciate that some of the company costs, such as for example costs related to the payment processing system or to the website, may have to be taken into consideration as well.
Final remarks
It might not be entirely easy to choose which royalty scenario suits you best. One consideration may be, for instance, how interested you are in marketing. If you are very interested in marketing your own ebooks online, then royalties scenarios 3 and 4 may very well be made for you.
But if you are not, initially at least, very engrossed in marketing, perhaps you should consider either royalty model 1 or 2. The problem with both of these models is, however, that it is not so easy to get a publishing contract at a major publisher. But even if you should, somehow or other, fail getting signed up, you could always use models 3 and 4 as your Plan B. A real writer never gives up!
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