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• How Authors Get Paid

A few years ago, I found an interesting article by Laura Backes, publisher of Children's Book Insider, which Backes bills as "the newsletter for children's writers." I found Backes' article very helpful in figuring out how to estimate how much an author prospect earns in royalties. The article, entitled "How Authors Get Paid," can be found on several Web sites, including the Word Weaving site:

http://www.wordweaving.com/articlenov10_01.html.

Based on Backes' article and some other research about royalties, I developed a research methodology and some earnings calculations or, more accurately, a way to make educated estimates. I use these only for authors of bestsellers, popular fiction and children's books published by regular publishing houses. I have not been able to determine if other publishers, such as academic presses, pay on the same scale or if authors of how-to, self-help, coffee table and less widely read books (histories, biographies, religion) reap similar rewards, unless they are bestsellers.

My first step when I research an author's royalties is to compile a list of the books the person authored. I gather information from versions of the author's biography, Amazon.com, other bookseller sites and a Web search to be sure I find all the author's titles. Amazon may not have older, hard-to-find or out-of-print releases, so I don't rely on it as my sole source of information.

After I find all the titles, my second step is estimating the number of books sold for each title in both hardcover and paperback. If I'm lucky, I can find a few current articles stating the exact number of books the author has sold. If I don't find exact figures, I estimate based on press releases and other evidence regarding sales volume (if the book made the New York Times Best Seller List, for example). If no sales information is available, I'm frank with the development officers that I can't make even an educated guess.

The third step is estimating the original hardcover and paperback prices for each book. Since a majority of books are sold just after their initial hardcover and paperback releases, estimating the sale price at initial release makes royalty calculations more accurate. I use Amazon.com and other booksellers (like my hometown favorite, Powell's City of Books at http://www.powells.com/) to find the current sale prices for both hardcover and paperback releases. I regress the prices for earlier hardcover and paperback releases based the date of release, since I usually can't find the actual new release price. Used book prices for titles also are helpful in estimating prices for older titles.

Fourth, I estimate the ratio of hardcover to paperbacks sold for the author's titles, based on actual sales figures for each format. A 1999 article by Doreen Carvajal of the New York Times stated that the ratio of paperback to hardcovers sold is down to 2:1 in recent years, so if I can't calculate a ratio, I assume one third of sales were hardcover and two thirds were paperback.

Then I make my royalty calculations for each book individually, a time-consuming process if the author is prolific! If I have the exact number of books sold, I use that figure. Otherwise I use the sales figures I estimated for each title as my basis.

The formulas I have worked out for calculating a range for potential royalty earnings are as follows:

(1/3 times number of books sold) times hardcover release price times 10% = high-end hardcover royalties

(1/3 times number of books sold) times (40% times hardcover release price) times 10% = low-end hardcover royalties

(2/3 times number of books sold) times paperback release price times 7% = high-end paperback royalties

(2/3 times number of books sold) times (40% times paperback release price) times 7% = low-end paperback royalties

None of the formulas factors in the price decline a title may experience after its release. The first calculations for hard and soft covers, (1/3 times number of books sold) or (2/3 times number of books sold), in all the formulas are based on the one-third hardcover to two-thirds paperback sales ratio. I adjust this if I determine that the author's ratio is different or if the author has only been released in paperback (Harlequin romances and pulp fiction series, for example). The second calculation (40 percent times paperback release price) in the low-end royalty formulas is based on the statement in Backes' article that more royalties are now being paid on what the bookstores pay the publisher (30-50 percent off retail). The 10 percent and 7 percent figures are based on what Backes says are the royalty percentages paid for hardcover and paperback releases.

After making the calculations for each title, I tally up the low-end figures and the high-end figures to get a potential range of royalty earnings for the author. Finally, I compare the earnings range I calculated to what I know about the value of the author's other assets and lifestyle to ensure that my results are in line.

Obviously, there are a lot of assumptions in this model, but it has the virtue of allowing me to demonstrate concretely to development officers how I arrive at royalty figures and, in combination with other asset values, to use them as the basis for calculating giving potential.

Chris Mildner

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