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How Do Royalties Work? 

Here is how the royalty rate is calculated for POD books: 

List Price less Discount less Print Cost = Publisher Compensation

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Publisher Compensation less Publisher Royalty = Author Royalty

 

So what does that mean? 

Let us go through the formula.

First is the list price. That is the price you set for your book and is on the barcode/ISBN. It is the specific price for the format of your book (hardcopy, paperback, ebook)

For example, say the list price is $20 for your paperback book. You get your price by industry standard for similar books; by genre, size, color, paper, and length. You want the cost of your book to be high enough so that you are not upside down and owe money on each sale but also low enough that people will still buy it. 

The second is Discount. That is, the wholesale Discount you set determines how much a wholesaler will pay for your book. Of course, they need a discount or cannot make money, and you can select your discount. The industry standard is 55% discount. However, you can do as low as 30%. You may ask why you would do 55% since you would make less, which is true, however, it is historically standard that a bookstore will not stock your book (this is NEVER guaranteed even at 55% )or even order your books if they are not making the standard 55% on your book. However, it is up to you, and plenty of people use a lower discount and still get their book ordered. There is no rule here and it is up to you! Starlight Books recommends a 55% discount. 

The third is Print Cost. This is the cost of creating your book. The price is based on pages, the weight of paper, color/b&w, number of pages, format, any embellishments (for offset)

 

So let's plug in the numbers with a list price of $20 and a 55% discount, and a $7 print cost for a paperback.

List Price less Discount less Print Cost = Publisher Compensation

$20 less 55% is $9 less $7 print cost = $2/book is the publisher's compensation 

Now let's review the next part: 

Publisher Compensation less Publisher Royalty = Author Royalty

So we know Publisher Compensation in the above example is $2, and this formula states to subtract any Publisher Royalty, and the remaining would be YOUR Author Royalty. 

For this exmaple let us say that if the publisher did not take ANY royalties, then the Author Royalty would be $2/book. Alternatively, if the publisher had an agreement for 20% royalties, it would be .40 to the publisher and $1.60/for each book to the Author. 

Here is how the royalty rate is calculated for Offset Printing: 

List Price less Print Cost  = Author profit

Let us use the same list price of $20, and because it is offset printing (large quantities cheaper printing cost) it will have a lower (in most cases) printing cost, let's say $4 to print, then the Author makes $16/each book. 

Is there publisher compensation for offset books? 

If the author is selling the book directly and ordered the books at the author's expense, there is no publisher compensation (not with StarLight Books); 100% profit goes to the author. 

However, if StarLight Books sells the book on the StarLight website, there is a 25% publisher royalty and 75% author royalty split. Therefore in the above example of a $16 royalty, StarLight Books would get $4 and the Author $12 (for contracts after August 1, 2023, for ones before August 1, 2023, this would begin after 24 months of signed contract date when the Author and StarLight would sign a new contract)

REMEMBER, EVEN THOUGH SHIPPING IS NOT FIGURED INTO THESE CALCULATIONS TO REALLY HAVE A TRUE NUMBER OF WHAT YOU ARE MAKING PER BOOK, ADD IN YOUR SHIPPING COST!

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