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Royalty Management
Software Resources

Glossary of Terms – Rights and Royalties Definitions

The publishing business faces more challenges, and is more complicated, than ever before. The advent of new technology has brought in myriad new business models, different platforms on which to market books, entirely new species of book contracts, and created a need for new royalty software and royalty tracking solutions. To better understand some of this new complexity, we’re maintaining a body of knowledge on industry terms, with particular emphasis on those relating to rights, royalties, rights management, and royalty software.

This is a resource which we are constantly adding to, for our own reference, and for the broader publishing community; if you have terms or words you would like to see included, please email them to: [email protected]


Acquiring Editor: An editor who buys a specific book. The acquiring editor will then pass the manuscript on to the development editor, unless the acquiring editor and the development editor are the same person, which is often the case.

Advance: A payment made as an advance against royalties by a publisher to an author or illustrator when the author’s book is acquired by the publisher. The advance is often paid in two parts: half upon the signing of the contract, and half upon the delivery or the publisher’s formal acceptance of the manuscript. The advance is charged against royalties and must “earn out” (that is, accrued royalties must amount to the size of the advance) before any royalties are paid.

Advance orders: Orders placed by book retailers prior to a book’s publication date. Typically generated by a publisher’s early promotion efforts. The quantity of advance orders can be a factor in determining the number of copies printed, price of the book, and extent of promotion.

Affiliated Relationship: An arrangement between a small publisher – the affiliate – and a (typically) larger publisher who agrees to handle all details of warehousing, shipping, and billing, for an agreed-upon percentage of the net billing.

Agent: A book industry professional who represents authors and illustrators, helping them to place their work with publishers, negotiating their royalty calculations, collecting their royalties, and performing other duties on their behalf.

American Booksellers Association (ABA): The national trade association for operators of retail bookstores. Founded in 1900.

App: Short for “application,” or program. Largely used today to refer to programs developed for mobile devices. A book, or e-book app, is an application that provides capabilities (animation, interactivity) beyond what the “standard,” or current e-book version of a book provides. In some cases an e-book app is produced simply to provide another sales channel, and the app version provides no additional book content.

Association of American Publishers (AAP):
The national trade association of publishers of general, educational, trade, reference, religious, scientific, technical, and medical books. Created in 1970 by a merging of the American Book Publishers Council and the American Educational Publishers Institute.

Author’s Charges: Expenses that will be charged against an author’s royalties should be credited as they occur to Cash (or Sales, in the case of book purchases) and debited to either Author Accounts Receivable or Advances. Examples of author’s charges include costs of proofreading, indexing, and author’s alterations.

Author’s Earn-out: The point at which an author’s earned royalties equal the author’s advance.

Author’s Rights: Under the U.S. Copyright Act of 1976, the author of a copyrighted work has the right to: 1) reproduce the work; 2) prepare derivative works based on it; 3) distribute the work to the public; 4) perform the work publicly; and 5) display the work publicly. These rights may be assigned under contract separately or together. The term author includes the employer, in the case of works made for hire.

Backlist: Books from previous seasons that are still in print. A publisher’s backlist provides a significant source of revenue, as sales of backlist titles often prove to be more stable than frontlist sales. The backlist typically has it’s own royalty rate calculation, and is a factor in royalty negotiations.

Boilerplate: A publisher’s standard contract offered to an author and used as a starting point for final royalty calculation.

Book Industry Study Group (BISG):
An organization of publishers, booksellers, librarians, book manufacturers, and suppliers, formed in 1976 for the purpose of promoting and supporting research that will enable the various sectors of the book industry to realize professional and business plans. BISG collects and compiles statistics and issues research reports on the book industry, including the annual publication, Book Industry Trends.

Cannibalization: The process by which sales of one format of a book, often an e-book, are alleged to eat into sales of another format, such as paper or cloth.

Chains: Large companies that own many bookstores under the same name. The two biggest chains in U.S. bookselling are Barnes & Noble and Borders. A “superstore” carries 100,000 or more titles and can include a coffee shop and other amenities. Sales fluctuations at the chain level can have huge impacts on author royalties, and the health of business at the chain level may figure into royalty negotiations between authors and publishers.

Chunk: A portion of a larger piece of content that is licensed or used as a chapter, appendices, articles, etc.

Contract/Publishing Agreement: A legal document detailing an author or illustrator’s agreement to sell to a publisher some or all rights to a creative work. Contracts specify what rights under copyright are being granted, the author’s and publisher’s respective obligations under the agreement, the author’s royalties, and other provisions. Agreements can be thick with legalese and typically include anywhere from 3 to 20 pages, with up to 100 clauses.

Co-op Money: Expenditures by a bookseller to promote a publisher’s books. Co-op monies are then reimbursed by the publisher.

Copyright: The exclusive, legally-secured right to, among other things, reproduce and distribute works of original expression. Expression is your own unique way of expressing an idea, telling a story, or creating a work of art. Under copyright law, creators hold copyright in a book or other literary work from the moment they put the words down on paper, into a computer file, or into some other tangible medium. Copyright protection in works created after January 1, 1978 generally lasts until 70 years after the death of the creator. Copyright in works created by businesses or before 1978 can last for 95 years from publication. After a work is no longer protected, it falls into the public domain.

Copyright Act of 1976: This law is the primary basis of copyright law in the United States, as amended by several later enacted copyright provisions. The Act spells out the basic rights of copyright holders, codified the doctrine of “fair use,” and for most new copyrights adopted a unitary term based on the date of the author’s death rather than the prior scheme of fixed initial and renewal terms. The acts enumerates five exclusive rights to copyright holders:
1. the right to reproduce (copy),
2. the right to create derivative works of the original work,
3. the right to sell, lease, or rent copies of the work to the public,
4. the right to perform the work publicly (if the work is a literary, musical, dramatic, choreographic, pantomime, motion picture, or other audiovisual work), and
5. the right to display the work publicly (if the work is a literary, musical, dramatic, choreographic, pantomime, pictorial, graphic, sculptural, motion picture, or other audiovisual work).

Copyright Page: A page toward the front of the book which indicates that the book is protected by copyright, and that permission must be obtained to reproduce all or part of the book. Typically this page also includes cataloging data for libraries.

Cover Price:
The retail price of a book suggested by its publisher and printed on the dust jacket or cover.
Device: Computer, Netbook, notebook, tablet, smartphone, cell phone, or dedicated ebook reader.

Distributor: A company that warehouses, catalogs, markets, and sells books to bookstores, libraries, and wholesalers on behalf of a number of small publishers, consolidating those costs. Distributors play a significant role in the royalty math for any author.

Division: A branch of a publishing company. Some large publishing houses consist of several divisions.

EAN Bar Code: This bar code is the ISBN number transferred into machine-readable form. The electronic scanning lines printed on the back cover or book jacket are encoded with information about the book product, such as the title, publisher, and price.

Editorial Board/Publishing Committee: A group at a publishing house that approves the acquisition of a book, that is, purchasing an author’s work for publication. Editorial boards are typically comprised of an acquisitions editor, as well as representatives from the sales, marketing, and finance departments.

Escalator: A royalty rate escalator is a rise in royalty rate built into a royalty contract, after a certain threshold of sales has been reached. For example, for a hardback, a royalty escalator might look as follows: 10% to 4,000 copies, 12 1/2% up to 8,000 copies, and 15% thereafter. This allows authors to share in the success of a book once production costs have been absorbed.

ePub: A standard e-book format, supported by the International Digital Publishing Forum (IDPF). From the IDPF site: “‘.epub’ allows publishers to produce and send a single digital publication file through distribution and offers consumers interoperability between software/hardware for unencrypted reflowable digital books and other publications.”

First Serial Rights: The right to reproduce a portion or the entirety of a book in a magazine or periodical in one or more parts before the book’s official publication date.

Foreign Rights: The right to publish a book, whether in its own language or in translation, outside its country of origin.

Frontlist: All of the books released in the current season and featured in the publisher’s latest catalog. Generally among the first considerations of publisher in determining overall royalty payment liability.

Front Matter: All of the pages in a book that appear before the body copy. Types of front matter include the title page, copyright page, dedication, table of contents, foreword, preface, acknowledgment, and introduction.

Independent Booksellers: Retail shops, not owned by large companies, selling books to the general public. Lower volume than chains, but still a consideration in author royalties.

ISBN (International Standard Book Number): A worldwide, numbered identification system that provides a standard way for publishers to number their products without duplication by other publishers. “ISBN” also refers to ISBN numbers themselves. The first part of the ISBN identifies the language of publication (“0″ for English), and the second part identifies the publisher. The next string of digits in the ISBN identifies the book product itself, and is followed by a digit specifically calculated to ensure the integrity of the ISBN. One of the main identifiers used by royalty software systems.

ISSN (International Standard Serial Number): A worldwide numbering system for periodicals and other serially-produced products. Another main identifier used by royalty software systems.

Kill Fee: A payment that may be made to an author or illustrator when a publisher cancels a project.

Line-Editing/Copy Editing: Line-by-line editing of a manuscript, concentrating on style, punctuation, spelling, grammar, flow, sequencing, clarity, consistency, and content errors.

List Price: The cover price of a book, also called the “retail” price. A key data input for a royalty software program.

Literary Agent: A person acting on behalf of an author, to find a publisher for a proposed or written manuscript, and who handles the subsequent subsidiary rights not acquired by the publisher; sometimes called an author’s agent or author’s representative. Also one who acts on behalf of publishers to find special types of material or authors to develop that material.

Manuscript: An author’s written material before it is typeset and printed. MS and MSS are the shorthand designations for “manuscript” or “manuscripts.”

Mass Market Paperback:
A smaller (4 and 3/16″ x 6 and 3/4″) paperback book usually printed on low-grade paper and released in high quantity at a lower price than a trade paperback. The subject matter of these books typically fit current popular market needs. In addition to bookstore placement, these so-called “rack sized” books are often distributed through drugstores, airports, and supermarkets. Typically constitutes a distinct piece of an author’s overall royalties calculation.

Monthly Royalty Expense: The monthly entry consisting of a debit to royalty expense, which is part of the cost of goods sold, and a credit to the royalties payable liability. This entry can be either an estimate calculated as a percentage of sales based on historical data or an actual figure provided by the publisher’s automated royalty system.

Option Clause: A clause in a publishing agreement giving the publisher the right to consider acquiring the author’s next book before other publishers can do so.

OOP/Out of Print: When a publisher has no copies of a book on hand and does not intend to reprint it.

OSI/Out of Stock Indefinitely: When the publisher has no copies of a specific title on hand, but may wish to reprint it in the future.

Permissions: Agreements from copyright holders granting the right to someone else to reproduce their work. Authors who want to excerpt someone else’s work in their own book may be obligated under copyright law to secure permissions.

Public Domain: Products of the human mind – such as books, inventions, computer programs, songs, movies, and other works – are often owned by the creator as “intellectual property,” meaning that the creator may have control over uses of the work such as reproduction. Intellectual property is recognized under copyright, patent, trademark, and other laws. If a work is not legally protected as intellectual property (possibly because its protection has expired), it is said to be in the “public domain.” Anyone may reproduce, sell, or otherwise use a public domain work without having to obtain permission.

Remainder: The overstock of a title whose sales demand has dropped, typically offered at a reduced price through jobbers and booksellers. Remainder have been known to sell well enough that publisher or wholesalers are motivated to reprint an inexpensive hardcover edition of the remainder and advertise it accordingly. Normally no royalties are paid on this stock reduction.

Remainder Copies: Copies of a book that are deeply discounted for fast turnover, often due to slow-moving sales or an overabundance of stock.

Reserves: The author contract may permit part of the royalties payable to the author on a new book to be withheld for several royalty accounting periods as a reserve against future returns, to ensure that the author is not paid for books that do not actually sell through. If such an overpayment were to occur, it would be highly unlikely that the author would reimburse the publisher. Although each contract is different, a 20 to 30 percent reserve held for three to four periods is not uncommon. Some publishers automatically withhold a reserve on every new book, while others make a title-by-title decision based on the type of book (a trade book being more likely to suffer high returns than a scholarly title).

Returns: Unsold copies of a book that are returned to publishers from booksellers. In most cases the bookseller is allowed to return any unsold books to the publisher for a complete refund. Returns often do not factor into a royalty contract with an author; typically this is a cost absorbed by the publisher.

Royalties: A percentage the author or illustrator receives out of the proceeds from the sale of each copy of the book.

Sales Call: Regular appointments between the publisher’s sales representatives and potential buyers. A catalog of front list titles is used during this meeting and a Purchase Order (PO) is issued.

SAN (Standard Account Number): A number assigned to libraries, schools, and other organizations that buy, sell, or lend books. Can be used by royalty software systems to determine a book’s total distribution.

Sarbanes Oxley: The Sarbanes-Oxley Act, or Sarbox, created new standards for corporate accountability as well as new penalties for acts of wrongdoing. It was passed by Congress and signed into law in 2002, after a number of foundation-shaking corporate meltdowns, some resulting from fraudulent bookkeeping. The Act changes how corporate boards and executives must interact with each other and with corporate auditors, and removes the defense of “I wasn’t aware of financial issues” from CEOs and CFOs, holding them accountable for the accuracy of financial statements. The Act specifies new financial reporting responsibilities, including adherence to new internal controls and procedures designed to ensure the validity of their financial records. The act applies to all public corporations, and therefore has impacted the way that larger publishers manage their royalty accounting.

Slush Pile: Manuscript submissions that are received by publishing houses, but are unsolicited or do not come through agents. Some publishers do not consider unsolicited manuscripts, while others do review them.

Submissions: Manuscripts sent by an author or agent to a publisher for consideration.

Subsidiary Rights: Some of the many different ways in which a book can be distributed include through book clubs, as foreign translations, through excerpts in newspapers and magazines, or as a movie adaptation. The rights to distribute a book in one of these or other extended forms are referred to as “subsidiary rights.” If the publisher licenses the subsidiary rights to another company to exploit them, the license proceeds are shared between the author and the publisher. Sometimes the publisher exploits subsidiary rights directly, such as by selling its own book club edition of the work. If the author withholds these rights from the publisher and the author’s agent licenses the rights directly to a third-party company, the author keeps all of the proceeds minus the agent’s commission.

Subsidiary Rights Income: As income is received, the share belonging to the publisher is credited to the income account “Other Publishing Income,” and the share belonging to the author is credited to the liability account “Royalties Payable.” If your author contract calls for subrights income to “flow through,” or be paid upon receipt to the author after the advance is earned out, then Cash should be credited rather than Royalties Payable.

Trade Bookseller: A bookseller which distributes books to the general public. Some trade booksellers include superstores, chain stores, independent booksellers, and online retailers.

Trade Discounts (also called long discounts): A method established for selling general books to retailers, scale from 30 to 45 percent and upward (depending on the individual publisher and quantities purchased). A trade discount schedule is printed by a publisher to announce the variations in discounts dictated by the number of books ordered. Legally, a publisher must offer the same trade discount schedule to all booksellers.

Trade Paperback: Trade paperbacks are larger than mass market paperback books and are bound with a heavy paper cover. They are often are the same size and bear the same cover illustration as the hardcover edition. Trade paperbacks are usually bound with glue only. Trade paperbacks also typically constitute distinct portions of royalty calculations.

Wholesaler: A company that buys books in large quantities from publishers at high discounts, and sells them to bookstores and libraries at a mid-level discount.

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MetaComet Systems, Inc., Computer Software Publishers & Developers, South Hadley, MA

Have any questions?
+1 (413) 536-5989