A Publisher's Conversation with Authors: Do publishers cheat authors on royalties?

It is Tuesday. Monday's madness is over, and Wednesday will take us over the hump, so Tuesday it is--for some serious discussion with authors. Tuesday talks mean to address authors in waiting and self-published authors who would like to go a more traditional route or who would at least like to take their steps with a publisher by their side. 

Today's topic asks (and answers) I question I see underlying a number of authors' organizations posts on the Internet that do a great disservice to authors. The question: Do publishers cheat authors out of royalties? The short is that traditional publishers are honest; there is no reason not to be. Scammers are everywhere, and many would-be published authors get sucked in by being told how wonderful there book is when a traditional publisher will not take it (because it is not wonderful). Let's look first at why traditional publishers have to be honest, and then let's look at why authors question their royalties. (To set the stage--full disclosure--I am the managing editor of a traditional press (yes, we also do hybrid publication for first-time authors with good platforms but weak or no platforms, but with the exception of initial shared costs, our hybrid authors are treated no differently than our traditionally publisher once the book has reached ARC or release stage. I have also published a few dozen books--some have won coveted professional awards--with the leading academic publishers: Cambridge University Press, Georgetown University Press, San Diego State University Press, Corwin Press, and others. I have also served as an advisory board member of one of the top academic presses. So, I have experience from both sides of the aisle, so to speak.)

Why traditional publishers are honest: 

• Most traditional publishers use Ingram for wholesaling/distributing their books, so sales figures are actually coming from a third party. Ingram has often been accused of under-reporting sales by authors who are disappointed in their sales numbers and certain that they should be higher; Ingram has never, in decades, been found to cheat. Do you they occasionally make a mistake? Yeah, rarely, but it can happen; a publisher will usually catch that. If you think they have made a mistake, is it okay to ask? Yes, of course. Do authors frequently find mistakes? No, almost never. Usually, there is a legitimate explanation for situations where there is confusion. Ingram's figures are reliable; they have a good reporting system and accounting system. There is no incentive for Ingram to cheat: it would be too expensive to cover its tracks; it would have to keep two sets of books (one real for the IRS and one for publishers/authors). One set of books is already expensive. Ingram knows it can be double-checked by a publisher-requested or author-requested audit (be careful what you request; audits are expensive and usually come up dry); if they are found to be off by any number of book sales, they will be expected to pay up, plus the cost of the audit is likely to move onto their ledger sheets, not the publisher's or author's. Why would they risk that amount of money--and if discovered loss of publisher customers. The publishing industry already has a very think margin of profit. 
• Most traditional publishers have no reason and no incentive to cheat. Those not in the big five, which is all but five publishers, have multiple checks on their accounting: internal from their own books, external from their wholesaler/distributor, and an absolute check from the printer--more books cannot be sold than are printed. Before issuing royalty statements, most have internal checks. Still, yes, there could be something missed, and if an author believes that, the author should check with the publisher. I do not know any legitimate publishers who will not re-run the figures at an author's request. Any cheating would be at great risk -- the same risk that a distributor would run in mis-reporting to authors and to IRS, two sets of book (expensive and hard to explain to an auditor), and, quite frankly, speaking as a publisher, not worth the effort. It would also deprive the publisher of accurate information in working with authors to increase sales. I do not know any legitimate publisher that cheats or would be tempted to. There is no upside to doing that and a big downside. The big downside? If discovered, they may no longer be allowed to operate (as a result of lawsuits); the word, for sure, would get out, and the publisher would lose credibility and future (and even current) authors. Not worth it, indeed!

Why authors sometimes distrust their royalty statements:

• They are disappointed in the sales figures. No one likes to think that their wonderful, unique, should-be-highly-desired, hard-worked-on book sold only ten copies in a year. But it happens a lot because authors have poor SEO and/or do not invest the time and energy into promoting their book(s) every week and, preferably, every day.
• They are assured that a number of friends have purchased books. This is a very iffy criterion for a couple reasons:
• Often, they really did not purchase the books.
• If they purchased the books, they may have purchased used copies, for which authors do not get royalties and which are not even tracked in any database; it would be  difficult to do that -- if Sally bought it from Amazon (that is a royalty-owed, trackable sale); if Sally then sold it to Joe on e-bay (no tracking, no royalty owed -- royalty has already been paid on that book from when Amazon purchased it); if Joe then swaps it on BookSwap (no tracking, no money involved, no royalty owed -- royalty has been paid when Amazon purchased the book, etc.)
• Book scan figures differ from royalty statements.
• This is perhaps the most confusing input for authors. Book Scan figures are simply not reliable. 
• For self-published books (and self-marketed) books, the cred on the street is that Book Scan under-reports; in fact, Book Scan estimates that it is only able to track about 75% of sales. That is because they are getting figures second-hand.
• For traditionally published books, the publisher knows the exact number of sales; Book Scan can only guess. It is highly unlikely that Book Scan would under-estimate sales because they get figures from the wholesaler/printer, and so can get pretty accurate figures since there are not going to be any other sources of sale (if a printer did not print a book, then a book could not possibly have been sold--and publishers using printer/distributor services generally are not actively using other marketing sources; they do not have to. However, research shows that they can be plagued by phantom sales, ones that never occurred. This can happen when authors purchase their own books from a publisher--it might show up as a sale for which a royalty is owed, but, of course, is not. There have not been good explanations for phantom sales showing up on Book Scan, but it happens.
• They see their sales rank on Amazon drop. That means more sales, right? No, it does not necessarily mean that. If Amazon has inventory on hand, it has already purchased each of those books being sold. Until new inventory is needed, a lower bestseller rank can simply be a matter of Amazon selling already-purchased books.
• They purchase books themselves from an online seller and do not see those books showing up on their quarterly royalty statements. If purchased through Amazon or B&N, check to see if you purchased books in inventory, not created a situation where books had to be ordered. Please note that a purchase today can take weeks to be reported, so it si hard to track that (this is especially a difficulty for self-published authors).
• Sadly, they are sometimes misled by author groups and organizations that are paranoid about the topic and sow doubt among authors. If any organization claims that publishers are cheating, then authors should expect the organization to show the evidence. Most make innuendo without facts. This does not do their members any service.
• Illegitimate publishers (scammers) exist in far too great a number. 

What to do if unsure; you are not without recourse:

• First, just ask your publisher for a re-run of the figures, and if still not sure, ask for a human to do a hand count (but you need to have "evidence" other than a gut feeling or 20 people told you they bought copies and you only got credit for 10.) You can share Book Scan figures as "evidence," but most publishers know that Book Scan is not reliable as a source of accurate sales information.
• Second, learn to read your Amazon book page accurately. If the bestseller rank is falling, check the books in inventory to make sure these are new sales and not sales of books previously purchased.
• Make sure you are publishing through a legitimate publisher. If you are not sure, there are lists. Do a google search for your publisher. See if you can find complaints on Yelp, BBB, or through an authors' organization or union. The latter often join forces to take the scammers to court. if you have been caught up by a scammer, join the groups that are suing. Or, if you have deep pockets, get a intellectual property rights attorney to take up your cause with the scammer and with the law.

Want to read more about this topic? Here is an excellent article about Amazon and Book Scan, under-reported sales, and phantom sales. 

Bottom line: If you are published (traditionally or in hybrid form) by a legitimate publisher, the chances are nearly 100% that you will not be intentionally cheated out of royalties or that there will be mistakes that disadvantage you -- and that publisher will be willing to double-check figures for you.

Lesson for today's Tuesday talk: If you are traditionally published, relax and expect your royalty statements to be honest and accurate and know that you can always request a relook if you find something you think is off.

See more Publisher Conversations with authors HERE.

 Learn more about publishing from an acquisitions editor -- how to get your book proposal accepted, why proposals are turned down/accepted, and how to find the right publisher for your book. On special sale for $5 while inventory lasts at MSI Press webstore.

The Tuesday talks reflect real discussions between the management of MSI Press LLC and our own authors or those would-be authors who come through our doors but don't make the cut--yet. If you have a topic that you would like addressed, leave the question in the comment section. Chances are, in our 18 years of publishing first-time and experiences authors, we have had a conversation with one of our authors that we can share with you.

                             

Sign up for the MSI Press LLC newsletter

Follow MSI Press on Twitter, Face Book, and Instagram. 

Interested in publishing with MSI Press LLC?

Check out information on how to submit a proposal.

Interested in receiving a free copy of this or any MSI Press LLC book
 in exchange for reviewing a current or forthcoming MSI Press LLC book?
Contact editor@msipress.com.

Want an author-signed copy of this book?
Purchase the book at 25% discount (use coupon code FF25)
and concurrently send a written request to orders@msipress.com.

Want to communicate with one of our authors?
You can!
Find their contact information on our Authors' Pages.