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College textbook publishing: Royalties, risk, and reward

High books stack with open book isolated on white background. Many colorful book covers.College textbook authors are motivated to write for many reasons. Some write with the goal of providing the optimum textbook for their students. Others are excited to share their approach to teaching a subject, or they simply enjoy the experience of translating research into practice. And, in some cases, the primary motive is to generate income.

Regardless of their motives, every textbook author must grapple with the same question: How can I achieve the best return on the time I spend writing a textbook, and how much risk should I accept in exchange for my sweat equity? To this end, there are several considerations authors should keep in mind regarding royalties as they negotiate a publishing agreement.

The Royalty Landscape

The most common financial arrangement for textbooks is for an author to receive a percentage of their published book’s sales, also known as a “royalty rate.” Payments based on contractual royalty rates are remitted to authors by their publishers at regular intervals along with a statement of account. The publisher retains anything above the author’s royalty payments, with those proceeds going toward offsetting the costs of producing and bringing the book to market as well as realizing profit.

Royalty rates have remained remarkably consistent over the past several decades even while the industry has undergone significant evolution. For the most part, royalty rates for college textbooks sales to the core U.S. market range from 10 to 15 percent, with the final rate based on the author’s negotiating leverage, the publisher’s planned investment, and how the parties agree to share publication costs.

Baked into a publisher’s standard royalty rate are some assumptions about risk. Not every textbook is a hit, and publishers must hedge their bets in case a particular textbook simply does not resonate with potential adopters. If it publishes too many flops or negotiates author royalty rates that are too rich, a publisher will eventually be out of business.

The Benefits and Risks of Royalty Contracts 

From the author’s standpoint, a royalty rate can have a significant impact on future earnings, especially if the course for which a book is targeted enrolls a large number of students. The primary advantage of a typical royalty rate is unlimited upside for an author if the book is successful. Further, college textbook authors who write with for-profit publishers are generally not asked to contribute capital or invest in a book’s publication up front. Certain costs may be shared, but they are deducted from future royalty earnings so the author is not out of pocket. Aside from these benefits, a royalty arrangement also comes with potential downsides.

A key disadvantage for authors includes the universal practice of setting the royalty rate before it is known how successful the book will be. The publisher counters this disadvantage by pointing to the risk of investing in an unknown quantity. Ultimately, the royalty rate will be determined within acceptable parameters of the publisher’s estimate of the likely return on its investment with some measure of assumed risk.

The final royalty rate also reflects the value an author places on his or her own time. To achieve the best possible rate, a college textbook author gains leverage by submitting to multiple publishers simultaneously. The publisher must then calculate the risk of losing this project to a competing house against the potential revenue that would be generated by publishing the manuscript. Further, if multiple houses offer a publishing contract for a book project, this only serves to reinforce the project’s perceived quality. As a result, each publisher lowers its own risk assessment, thus making it more palatable to offer a higher royalty rate.

In most cases a publisher will not agree to increase a royalty rate for second or subsequent editions. It is important to remember that college textbook publishing contracts are usually written to apply not just to the first edition, but to all subsequent editions as well. While it is technically possible to negotiate royalty rates one edition at a time, as a practical matter that rarely happens.

The publisher possesses an additional advantage in that most publishing contracts include a revision clause. This clause allows the publisher to retain a third party to revise the work and charge the author’s royalty earnings if the author is unable or unwilling to deliver a revised edition.  A standard revision clause makes it impossible for an author to “go on strike” in order to hold out for a higher royalty rate on subsequent editions.

The Flat Fee Alternative

An alternative to the traditional royalty agreement is a flat-fee payment. Under a flat-fee scenario, compensation for writing services is negotiated up front and the author is paid the agreed amount upon delivery of the acceptable manuscript. While the promise of a guaranteed payment is attractive to some authors, being unable to share in the potential revenue upside if the work is successful is too great a disadvantage for others to accept. It is also worth noting that flat fees are usually much lower than what an author would expect from a royalty share because of the lesser risk associated with a guaranteed payment.

While royalty-based publishing agreements have their flaws, a royalty arrangement’s promise of greater rewards for assumed risk is still more attractive to most authors, especially when embarking on an exciting new textbook project.

Sean WakelyVice President of Product and Editorial at FlatWorld, Sean Wakely possesses extensive higher education publishing experience gained by working at Cengage Learning, Thomson Learning, Pearson Education, and Houghton Mifflin’s college division.