An author receives 10% to 15% of income from the price of a traditionally published book. New York Times bestselling author Rebecca Brandewyne offers a thorough discussion of traditional author royalties on her website if you wish to study this topic further. Basically, a traditional hardcover book generally costs from $15.00 to $27.00. If you plug these numbers into a calculator, and apply 10-15%, you might conclude that with such prices, authors should receive about $2.25 to $4.00 per book. Yet, often the amount received is much less. So what is going on? Where did the expected royalties go?
"This price is an industry-wide price for your book’s format and genre and not just a random decision of the publisher."
To understand vanishing royalties, look at the book’s pricing path. If you have a traditional publishing contract, your publisher will have set the price of your book. This price is an industry-wide price for your book’s format and genre and not just a random decision of the publisher. For example, the basic price range for a mass market paperback is $4.99 to $9.99. Trade paperbacks are priced a little higher, from $7.99 to $12.99. Hardcover novels, fiction, and memoirs usually begin at $14.99 and can go as high as $27.99.
Once a retail price is set for a book, the books are produced and sent from the printers to the distributors. Two major book distributors are Ingram Book Company and Baker and Taylor. These companies provide wholesale distribution services to independent bookstores, specialty markets, such as libraries, as well as to other wholesalers. These major distributors have warehouses to store the books. They have staff to ship the books. The warehouses, the staff, and the shipping all cost money. So the distributor gets a cut of the profits from the sales of the book.
"Big box retailers, such as Target and Wal-mart, take big discounts on the publisher’s suggested retail price."
“Brick and mortar stores” are the final outlet for traditional books. Big box retailers, such as Target and Wal-mart, take big discounts on the publisher’s suggested retail price. These discounts, of course, reduce the profits made on books. Author contracts reflect these discounts. Royalty rates are often reduced when books are sold for a reduced amount.
Independent bookstores do the least amount of discounting, often because they provide opportunities for readers to interact with authors. This enhanced experience often serves to justify a premium price.
In a snapshot, here is how the book pricing chain works. Publishers supply distributors with books. Distributors deliver those books to brick and mortar stores, to libraries and to other specialty markets. Readers purchase the books from brick and mortar stores, libraries also pay for their books, as do specialty markets. The money travels back through the chain. When the bookstore, distributor, and publisher have taken their percentage of the sales price, then the author receives his portion. That net royalty rate is often lower than 15%, due to the intermediary discounting.