A Publisher's Conversation with Authors: What Counts as Fair Royalties? A Practical Guide for Authors

 

Understanding royalties is one of the most important—and most misunderstood—parts of publishing. The numbers look simple on paper, but the basis on which they’re calculated can dramatically change what an author actually earns. Below is a clear, practical overview of what’s typical, what’s fair, and how to protect yourself from the “hidden math” of net‑based royalties.

1. The Two Royalty Models: List vs. Net

Royalties on List (Cover Price, MSRP)

• Calculated on the book’s full retail price
• Transparent and predictable
• Example: 10% of a $20 hardcover = $2 per copy

Royalties on Net (Net Receipts)

• Calculated on what the publisher actually receives after retailer discounts and other deductions
• Retailer discounts are typically 40–55%
• A “10% royalty” on net often yields far less than a “10% royalty” on list
• “Net” may include deductions such as freight, warehousing, marketing fees, and returns

Which Is Better?

• List‑based royalties are almost always better for authors
• Net‑based royalties can be fair only when “net receipts” is clearly defined and transparent

2. Typical Royalty Rates by Format

Hardcover

• Typically 10–15% of list price with major publishers
• Smaller presses may offer 10–15% of net
• Sometimes escalates after 5,000–10,000 copies

Paperback

• Typically 5–8% of list price
• Some presses offer 5–10% of net
• Lower margins mean lower royalty rates

Ebook

• Traditional publishers: 25% of net
• Self‑publishing platforms: 35–70% of list
• Traditional rates are widely criticized as outdated

Audiobook

• Typically 20–40% of net
• Distribution cuts (e.g., Audible) significantly affect net receipts

3. Why Ebook and Audiobook Royalties Differ

Ebooks

• Traditional publishers pay 25% of net
• Self‑publishing platforms pay 35–70% of list
• Many authors earn more per ebook when self‑publishing

Audiobooks

• Royalties are almost always net‑based
• Retailers take large distribution cuts
• Production costs and narrator revenue‑sharing affect payouts

4. How to Calculate Your Own Royalties

List‑based royalties

• Formula: List Price × Royalty Rate
• Example:
• $16.99 paperback × 7.5% = $1.27 per copy
• Predictable and easy to calculate

Net‑based royalties

To calculate net‑based royalties, you must know:

• The retailer discount (often 40–55%)
• Any additional deductions the publisher includes

Example:

• $16.99 paperback
• Retailer discount: 50% → publisher receives $8.50
• Royalty rate: 10% of net
• Royalty = $0.85 per copy

This is why two “10% royalties” can produce dramatically different earnings.

5. What’s Fair?

A fair royalty structure is:

• Transparent
• Predictable
• Format‑appropriate
• Escalating with sales
• Aligned with industry norms

Fairness also depends on:

• The size of the advance
• The publisher’s distribution reach
• The level of editorial and marketing support

6. Red Flags in Royalty Clauses

Watch for:

• “Net receipts” without a definition
• Broad deduction language (“publisher reserves the right…”)
• No royalty escalators
• Ebook royalties below 25% of net
• Audiobook royalties below 20% of net
• No transparency in sales reporting

7. Where MSI Press Stands on Fair Royalties

At MSI Press, we’ve always believed that royalties should be both fair and transparent—two qualities that are increasingly rare in a shrinking and highly competitive book market. Our structure is intentionally simple: 10% of list price for hardcover and paperback, and 50% of net for ebooks and audiobooks, where net is defined as gross receipts, not a publisher‑constructed “net” with hidden deductions. In other words, authors receive half of what we actually bring in—clean, honest math.

This approach has been praised by author associations because it aligns with a principle we hold deeply: our authors should succeed alongside us, not behind us. When the industry tightens, many publishers lower royalties or complicate their definitions. We’ve chosen the opposite path. We keep our royalties generous, predictable, and easy to understand because we want our authors to thrive, build sustainable careers, and feel respected in every stage of the publishing process.

Fair royalties aren’t just a business decision for us—they’re a commitment to the people who trust us with their work.

data on industry-wide practices and rates courtesy of AI research

These 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 22 years of publishing first-time and experiences authors, we have had a conversation with one of our authors that we can share with you.

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