Royalty to Authors

A book royalty is the amount that a publisher pays an Author in exchange for the rights to publish their book. Royalties are calculated as a percentage of book sales. For example, an author might earn 50% (net profit) as royalties on every paperback sold and 50% on every eBook sold. 

In the context of a print book, the net profit is calculated by subtracting the production cost and shipping charge from the sales price of the book. This net profit is then shared between the author and the publisher, EduPub, with each party receiving 50%. Let’s break down each component and the profit-sharing mechanism in detail.

1. Components of the Calculation

Sales Price:

  • The sales price is the amount at which the print book is sold to the customer.
  • This price includes any markup added to cover production costs, shipping, and profit margins for both the publisher and the author.

Production Cost:

  • Production cost includes all expenses incurred to produce a physical copy of the book.
  • This typically involves costs related to printing, binding, and any other materials or processes required to produce the book.

Shipping Charge:

  • Shipping charge covers the costs associated with delivering the book to the customer.
  • This includes postage, packaging, and handling fees.

2. Net Profit Calculation

The net profit is calculated using the following formula:

Net Profit=Sales Price(Production Cost+Shipping Charge)\text{Net Profit} = \text{Sales Price} - (\text{Production Cost} + \text{Shipping Charge})

Net Profit=Sales Price(Production Cost+Shipping Charge)

For example, if a print book is sold for $20, and the production cost is $5 while the shipping charge is $3, the net profit would be calculated as follows:

Net Profit=$20($5+$3)=$12\text{Net Profit} = \$20 - (\$5 + \$3) = \$12

Net Profit=$20($5+$3)=$12

3. Profit Sharing

According to the agreement between the author and EduPub, the net profit is shared equally. Here’s how the sharing mechanism works:

Author's Share:

  • The author receives 50% of the net profit.
  • Using the example above, the author’s share would be 50% of $12, which is $6.

Publisher's (EduPub's) Share:

  • EduPub also receives 50% of the net profit.
  • In the same example, EduPub’s share would be $6.

So, the detailed profit-sharing for a print book would look like this:

Sales Price-$20
Production Cost-$5
Shipping Charge-$3
Net Profit$20 - ($5 + $3)$12
Author's Share (50%)50% of $12$6
EduPub's Share (50%)50% of $12$6

Example Scenarios

Scenario 1: Higher Production Costs

  • Sales Price: $20
  • Production Cost: $8
  • Shipping Charge: $3
  • Net Profit: $20 - ($8 + $3) = $9
  • Author's Share: 50% of $9 = $4.50
  • EduPub's Share: 50% of $9 = $4.50

Scenario 2: Free Shipping Promotion

  • Sales Price: $20
  • Production Cost: $5
  • Shipping Charge: $0 (covered by promotion)
  • Net Profit: $20 - $5 = $15
  • Author's Share: 50% of $15 = $7.50
  • EduPub's Share: 50% of $15 = $7.50

Important Considerations

  • Variable Costs: The production and shipping costs can vary based on the quantity produced, the complexity of the book, and the shipping distance.
  • Discounts and Promotions: These can affect the net profit as they might reduce the effective sales price.
  • Sales Channels: The net profit can also vary depending on whether the book is sold directly, through a retailer, or an online platform, as different channels may have different cost structures.

By understanding these details, both authors and publishers can better manage their expectations and financial planning for print book sales.