David Lubar (davidlubar) wrote,
David Lubar
davidlubar

A Whole New Kind of Subsidy Publishing

The following information is offered as a public service:

There’s a dangerous clause in some book contracts. The clause basically states that for any books sold at a discount of 52% or greater, the author shall receive ½ the regular royalty rate. If math makes your head hurt, please don’t stop reading. I promise I will make this as painless as possible. But it is also very important – especially if you are a writer. Consider the following two cases for a book with the convenient cover price of $10.00 and with a typical hardcover royalty of 10%.

Case #1, where publisher gives the wholesaler a 50% discount:
Publisher gets $5.00
Publisher pays a royalty of $1.00 (10% of cover price)
Publisher is left with $4.00

Case #2, where publisher gives the wholesaler a 52% discount:
Publisher gets $4.80
Publisher pays a royalty of $0.50 (5% of cover price)
Publisher is left with $4.30

The publisher can actually make more money, and make the distributor happier, by offering a larger discount. Which means there is no reason to offer the lower discount. Basically, the author has subsidized the discount. It’s like a magic trick. Fifty cents disappears from the writer’s pocket, and shows up two other places.

If the publisher receives less money, it is not unreasonable for the author to receive less money, too. But the clause under discussion is flat-out wrong, and I’ve heard very little discussion of it, which is why I felt motivated to post this. I don’t understand why there hasn’t been any outrage. Maybe it’s because people don’t take a close look at the math.

A much fairer approach is a sliding scale, where, for example, the royalty drops by ½% for every 1% extra the publisher gives the distributor above 50%. So if the publisher gives a discount of 52%, the author now gets 9%. This method shares the loss.

Okay. I’ve shed some light on it. Thoughts?
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