How to Calculate, Track, and Manage Ebook Royalties Effectively

Ebooks and other digital content have changed so many areas of publishing, and royalties are no exception.

Ebook royalties are the percentages of overall ebook sales revenue that are paid to the author (or in some cases, the illustrator or another contributor). For any given ebook title, they are determined by an agreement between the author and ebook publisher.

Although royalty levels in print books have never become universally standardized, they have gravitated to widely accepted levels—often 10%, or a little more or less. (See our introduction to book royalties and typical rates.) But ever since the first e-readers emerged in the late 1990s, the spectrum of rates payable to authors for ebook sales has been far wider.

Different costs, different rates

This is partly because the costs of producing ebooks differ from print. There are no paper or printing costs of course, and expenditure on distribution and wholesale is much lower. Depending on where an ebook is sold, the cut taken by a retailer may be smaller. 

These and other cost savings have led authors and agents to believe that ebook royalties should be much higher than for print sales. However, publishers counter that many other costs—like editorial work, design, publicity and marketing—remain unchanged. They argue that the investment and expertise that are required to produce a digital book are not much lower than for its print equivalent. They also point out that ebooks typically sell for much less than a print book, because buyers expect the costs of delivering it to their device to be substantially lower. 

This has led to a divergence in opinions between authors, who think their royalties should be much higher on ebooks; and publishers, who believe that rates ought to be comparable with print. This tension is ongoing, though some consensus has emerged as the digital market has matured. Ebook royalty rates are now often roughly double the rate of their print equivalents—typically between 25% and 50% of net sales.

Self-published authors and ebook royalties

Of course, rates are much higher for authors who handle many of the publishing tasks themselves. In theory, if an ebook is produced and sold directly from author to reader, royalty rates can reach 100% because there are no intermediaries to pay. High royalty rates can be an attractive option to traditionally published authors who are accustomed to much lower earnings on their print titles. However, the flip side is that these authors have to take on the responsibilities and costs that are normally borne by publishers. When authors do not have the expertise to handle things like promotion and distribution, visibility and sales—and hence income—can be much lower.

It’s more usual for self-published authors to sell ebooks on hosted platforms, which will take a percentage of sales. The biggest of these, Amazon’s Kindle Direct Publishing, simplifies royalty models into two options, with rates of either 35% or 70%. Authors are free to choose between the two, but there are rules around territories, delivery costs, the matching of competitors’ pricing and more. Rates that seem straightforward on the surface can soon become complicated.

Calculating ebook royalties

For publishers, calculating ebook royalties can be at least as complex a task as it is with print books. For one thing, there is a difference between ‘retail’ royalties—based on the price for which an ebook is sold—and ‘net’ royalties, which are calculated after the margin taken by a retailer and, sometimes, digital distributor. (See our rights and royalties guide to terms like ‘retail’, ‘net’ and many others.) 

Just like in print, ebook royalties will frequently be adjusted for multiple clauses. For example, if ebooks are sold at a heavy discount—in a promotion on a platform like Amazon, for example—the royalty will be reduced too. Bonuses, escalators or sliding scales may be applied, triggering higher rates when sales have reached certain levels. Because ebook pricing is so dynamic, and often changes from day to day, these clauses are often more important than in print, and more frequently in use. 

The challenges of royalty management

These and other complexities emphasize the need for royalties to be clearly and transparently set out in agreements between licensees and content creators. They also point to the difficulty of managing royalty payments. When an ebook is sold for a fixed price on a flat royalty rate, calculating the money that is owed to its author or illustrator is straightforward. But as soon as any clauses kick in, the math of royalties becomes much more difficult. 

Just as with print, multiple sales files will be involved and different rates will be applied. Territoriality adds another layer of complication, because unlike print books, ebooks can be sold internationally without crossing physical borders. Prices and royalties will change from country to country, and multiple currency conversions may be required. 

All these variables can dramatically increase the time that is needed to calculate royalties. They also raise the risk of error, which can cause significant financial and reputational problems; and the risk of delays to payments, which damage author relations. 

Simplify Ebook Royalties

Royalty Tracker® Makes Ebook Royalties Easy

Contact us to learn how Royalty Tracker® automates royalties for ebooks, audio books, and every other format—to save you time, eliminate errors, and reduce royalty-induced stress.

The power of automation

Fortunately, automation can substantially ease the burden of ebook royalty management. MetaComet’s Royalty Tracker® and other automation tools make it much easier to calculate the money that is owed on each ebook sale, and eliminate the stress of manual calculations. They integrate numerous sales reports, royalty rates, and other variables related to ebooks to create an accurate and complete picture at the click of a button, and ensure payments are made in good time. Based on past performance, we have found that the time spent on royalty management can be cut by as much as 95%. 

While ebooks have added new dimensions to publishing, at their simplest they are just another way of getting content from creator to reader. With the help of MetaComet’s automation, they don’t have to make royalties any harder. 

Need more help to manage your royalties? To discuss your needs and learn more about MetaComet’s solutions, contact the team.