Textbook contracts: How to determine a good royalty rate offer

Q: “I’m in discussions with six publishers right now for my first book. One of them has just made a preliminary offer, including a 12 percent royalty on the first 2,000 sold and 15 percent thereafter. They also offered me a $3,000 advance against royalty to prepare a camera-ready copy over the summer. The editor has informally projected something like 2,000 books/year sold at about $90-100 per, saying it costs them $60-70 per. Here are some of my questions: 1) How common is it to have a lower percentage on the first chunk of books?; 2) Even if it sold only 1,000 at $80, 12 percent of that equals $9,600. Shouldn’t they be willing to part with more than $3,000 of it up front?; 3) How much am I saving them with a camera-ready copy? Doesn’t that cut out a lot of work for them and shouldn’t that translate into a much better deal than this? Sounds like a cookie-cutter offer.”

A: Don Collins, former managing editor at a publishing company:

“First, it is very common to offer a lower rate on the first texts published. The publisher is in business for profit and at every point the publisher wants an advantage although in your case it seems slight. Second, up front money is an expense. If the book does not sell then the publisher is out this money. But you get to keep the advance. And lastly, you may think of giving camera ready copy as saving the publisher money. It probably is. But the way publishers play the game is to take only authors who are willing to do this.

Only after your work has proven successful and you have established a reputation will you have much of a chance of negotiating better terms.”

A: Laura Taalman:

“One of my contracts has a lower rate on the initial chunk of books, but if more then a certain number are sold within the first two years, then a higher royalty rate kicks in and is *retroactive* to include the first chunk as well. You might be able to negotiate a similar deal.

One other point: Be careful about calculating those projected royalties. Your 12 percent will be multiplied by what the publisher sells the books to the booksellers for, NOT for what the book ultimately sells at. I’m not sure what they mean by telling you how much the book costs them; maybe that figure was really representing what they will get when they sell the book to retailers?”

A: Stephen E. Gillen, Authoring Attorney:

“For starters, I have a hard time believing that it costs this publisher $60-70 per book for a book that sells to students at $90-100. A normal range for the per-copy manufacturing cost of a text is 15-25 percent of the selling price. Even allowing for an allocation of all of the publisher’s overhead, total costs shouldn’t hit the cited range. (Indeed, if $90-100 is the student price, then the publisher is probably getting only about $55-65 per copy.)”

A: Jan Lyons:

“I know from working at a Fortune 50 company that we bought boxes of textbooks for our employees attending local universities at deep discount (about 40 percent off list), so keep that in mind as you do the math on potential profits that you will share with the publisher. I also know from experience that large companies have lots of things they can charge against overhead, so I believe that total ‘cost’ for a text could end up being quadruple the manufacturing cost.”

A: Michael Sullivan, Mathematics Author:

“1) Be patient with this offer and wait for the others to show interest and make their offer. Remember that this offer is their starting point for negotiation and you have the advantage of potentially other offers from other publishers going forward; 2) Absolutely hold out for 15 percent of net proceeds on all sales; 3) The $3,000 advance against royalties is them paying you your money. Instead ask for a $5,000 grant for supplying the publisher with camera- ready copy and for incentives for you to get the book to them in a timely fashion. Ask for 1/2 at signing and the other half upon submission of camera-ready copy by a mutually agreed upon date; 4) Do not be concerned about their cost of production and their selling price. They will follow their business model regardless of what you say or want. Be concerned that you get your fair share of the net proceeds of every sale. I like to remind publishers that they get 85 percent of all net proceeds and authors get 15 percent; 5) There are many more land mines in a typical contract for you to be concerned about, such as Electronic Rights, Reversion Clause, Succession Clause, Royalties on Canada sales, Foreign Sales, Internet Sales, Direct Sales, High School Sales, Subsidiary Rights, Bundled Sales, and on and on.”