Shatzkin on Royalty Math

August 27, 2010
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Mike Shatzkin‘s run the numbers comparing e-book royalties to hardcovers, to trade paperbacks, and to mass-market paperbacks, and how they work out under both the wholesale and the agency models (with the author getting 25% of net and with the author getting 40% of net).

By Shatzkin’s admission, this is a “just the facts, m’am” post, to create a framework on discussing the economics for publishers and authors regarding e-book royalties.  Shatzkin’s tables are below, make sure to check the comments section on his blog for some industry context.

Hardcover

Format Retail Net Cost Margin Royalty
Rate
Author
Royalty
Author %
of Margin
Print $26 $13 $3.25 $9.75 15%
of retail
$3.90 40%
Ebook – Wholesale $26 $13 $0.50 $12.50 25%
of net
$3.25 26%
Ebook – Agency $13 $9.10 $0.50 $8.60 25%
of net
$2.275 26%
Wholesale at 40% $26 $13 $0.50 $12.50 40%
of net
$5.20 41%
Agency at 40% $13 $9.10 $0.50 $8.60 40%
of net
$3.67 42%

Trade Paperback

Format Retail Net Cost Margin Royalty
Rate
Author
Royalty
Author %
of Margin
Print $15 $7.50 $1.875 $5.625 7.5%
of retail
$1.125 20%
Ebook – Wholesale $15 $7.50 $0.50 $7 25%
of net
$1.875 27%
Ebook – Agency $10 $7 $0.50 $6.50 25%
of net
$1.75 27%
Wholesale at 40% $15 $7.50 $0.50 $7 40%
of net
$3 43%
Agency at 40% $10 $7 $0.50 $6.50 40%
of net
$2.80 43%

Mass Market Paperback

Format Retail Net Cost Margin Royalty
Rate
Author
Royalty
Author %
of Margin
Print $8 $4 $1 $3 10%
of retail
$0.80 27%
Ebook – Wholesale $8 $4 $0.50 $3.50 25%
of net
$1 29%
Ebook – Agency $8 $5.60 $0.50 $5.10 25%
of net
$1.40 27%
Wholesale at 40% $8 $4 $0.50 $3.50 40%
of net
$1.60 46%
Agency at 40% $8 $5.60 $0.50 $5.10 40%
of net
$2.24 44%

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