Royalty Calculations in Book Contracts

July 1996
by Ivan Hoffman, B.A., J.D

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Ivan HoffmanIvan Hoffman (photo right) is a publishing, copyright, Internet law, recording, and music attorney as well as a published writer and author. He practices in the Los Angeles area. You may reach him at or 818/342-1762.

We often hear about book royalties in a fashion that is illusory. To discuss a royalty rate without at the same time discussing the basis for the rate’s calculation is like comparing apples to oranges. To banter about numbers like 8%, 9%, 17% or such is only one part of a significantly more complex issue. In theory, a publisher can pay a writer a royalty rate of say… 96% and the publisher can still make tons of money and the writer nearly none at all.

Moreover, all royalty recipients face the same issues. It is not merely the writer that must pay attention but the publisher as well for there may be occasions when the publisher is on the receiving end of a royalty arrangement, such as in a licensing deal, a foreign sub-publishing deal or the like. But for the sake of simplicity in this article, let me focus on the royalty provisions between a writer and a publisher in a traditional book publishing agreement.

The significant question to ask is: “Upon what figure is the percentage royalty rate to be calculated?” In other words, by what number do we multiply the royalty rate? Examples range from “net monies received by publisher,” “gross cash receipts,” “the suggested retail list price,” “wholesale price,” and perhaps other variations on that theme.

In other words, we must initially distinguish the term “royalty rate” from the term “royalty.” The first refers to a percentage figure that is multiplied by some other figure; the second refers to the actual dollar and cent…IBPA Members – Click here to view the full article (login required).

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