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[GWL]: Analyzing Timber royalty rates: An example

In the info Graham provided, Timber mentions a hardback royalty rate of 
10% of the net in all markets, including export.  There are no reduction 
clauses in the back end.  

The question is:  How does that deal compare with a royalty of 10% 
retail WITH THE NORMAL REDUCTIONS SUCH CONTRACTS HAVE in the back end?

The answer depends upon the kind of market.  The average sale for Timber 
is often going to be a mail-order sale.  (This is of special relevance 
to us, because many successful gardening books sell primarily via mail 
order.)  In this market, the retail price and the net price are the same 
number.  Let's consider a $20 book.  Timber actually sells it to the 
retail customer for the full $20.  So the net is the same as the retail 
price, $20.  At a 10% royalty rate on sales of all kinds including 
mail-order, the author's share is $2.

Now consider that sale if the contract is 10% retail WITH THE BACK-END 
clause reducing royalty rates on mail-order sales.  The retail price is 
still $20.  But now the royalty rate is 5%.  The author's share is only 
$1.

If your book is going to sell primarily through book stores, the 10% 
retail is of course the better deal.  (Unless there is a clause reducing 
royalty for discounts above a certain amount.  Once upon a time, sales 
below those figures were rare, but now they can be common.)

If your book is going to sell primarily mail order, the Timber hardback 
royalty is a good one.  It's a lousy deal if your book is going to sell 
primarily through book stores, of course.  But most Timber books 
probably sell primarily through mail-order.    

Contracts based upon retail price virtually always reduce the royalty 
rate for direct-mail sales, because shipping books out one at a time is 
more costly than shipping out bunches.  A contract based upon net gets 
around the problem in a different way.

Seed companies generally get a 50% discount, nonreturnable basis.  I 
happen to know that Timber does not have a special discount for seed 
companies.  It sells to seed companies at 60% returnable, exactly the 
same as for bookstores.  So for seed-company sales, for a $20 book the 
author would get 10% of the net of $12, or $1.20.  

A company selling the book under a 10%-of-retail form of contract would 
probably have one reduction clause for "special sales" and quite 
possibly another for "sales at greater that 55% discount."  The real 
royalty would be 2 1/2 percent or 5% depending upon whether one or two 
deescalators applied.  So the author's share would be 0.50 or $1.00 
depending, both less than what Timber does.

For a book that is to sell primarily mail-order, the Timber royalty is 
pretty good, I think.  It is likely that one could negotiate an 
escalating royalty, however.  If they can pay 10% on any sales, they can 
pay somewhat more on sales above a certain amount. 

It is worth negotiating the back end of your contracts quite carefully, 
taking into account the type of sales you expect.  

Also, consider sales prices when you compare contracts. A publisher who 
plans to sell primarily to book stores usually tries to keep the price 
as low as possible to encourage casual sales.  A publisher who has a 
small but serious mail-order market might have a list price 
substantially higher, so all the percentages would be percentages of a 
higher number.

When analyzing a contract, you need to consider the type of sales.  If 
you expect primarily book-store sales, then many contracts based upon 
retail price would beat the Timber contract.  If you expect both types 
of sales, you can make some guesses and plug in numbers and see how it 
works out.  For example, which contract is best if the sales are half 
direct sale and half bookstore?  You plug in the numbers and work it 
out.  Also, these days, many direct-mail-type sales might be through 
Amazon instead of directly from Timber, which would also change the 
numbers.  

A final caveat --
Many contracts will list a quite attractive royalty figure for hardcover 
sales, then are much more aggressive about their share of the trade 
paper.  This means they intend to publish the book in trade paper, and 
don't give a damn about the irrelevant hardback numbers.  Don't let an 
attractive hardback royalty rate seduce you into accepting an 
unattractive trade paper rate, when the latter is the one that is going 
to matter.

Carol Deppe
Author of BREED YOUR OWN VEGETABLE VARIETIES:  THE GARDENER'S AND 
FARMER'S GUIDE TO PLANT BREEDING AND SEED SAVING (See table of contents, 
excerpts, & reviews at http://www.chelseagreen.com.)  

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