We were asked how algebra could possibly be relevant to authors. We thank you for asking! This is one of our favorite subjects. Most authors we know think math is icky and scary (and you won’t get an argument from us), so they trust others to make sure they’re being paid correctly (in addition to trusting, oh, friends and relatives to read agreements and say, “yeah, this makes sense”). This is a Bad Idea. You must understand what is going on. We cannot emphasize this enough. Mistakes can be made. Any author who does not take the time to understand how his publisher is paying him (or her) and how his agent is handling commissions deserves to be ripped off. We are serious. If you can’t be bothered to understand your business, you get what you deserve.

We have to be honest, we were doing royalty calculations for many years before we realized it was pretty much algebra, only real life. As we had spent our education terrified of the word “math” (our younger sister was a bit more advanced and sacrificed evenings she could have spent crawling out the window trying to explain what “we” learned in class. This was both embarrassing and not very illuminating.), our surprise was, well, heart stopping. Royalty calculations are a subset of participations — which is the way motion picture studios report proceeds to major talent such as actors, producers, directors, writers, etc. — these calculations are to royalty calculations what calculus is to algebra. Hmmm, lack of knowlege may affect our analogy: participations are way harder. Trust us, we’ve done both. A lot.

So, algebra. Since we don’t have language from an agreement in front of us, we are going to be real simple because it really is simple — of course, it’s a word problem, so the stakes are even higher (yeah, not only algebra, but a word problem — it’s a cosmic joke on writers). The brilliance of royalty calculations is that they can vary from agreement to agreement — word problems with variations. We imagine the publishing industry is a bit more rigid than the motion picture industry, so we’re doing a basic royalty calculation. Other costs may or may not apply — by that we mean printing costs, freight costs, ad/pub costs, you-name-it costs. We’re omitting the A, B, C, D concept we all loved in high school in favor of word that actually make sense (at least to us). So, very generally, it goes something like this:

Gross Sales (books sold)

less

Reserve for Returns (sales x reserve percentage)less

Reserve for Bad Debt (gross sales x bad debt percentage)less

Other Deductions (discounts/rebates/other — these can be actual amounts or calculated as percentages, depending, but actuals are preferred)=

**Net Sales**

Then, one more calculation is applied:

X Royalty Percentage (6, 8, 10 or more percent — hopefully not less)

=

**Calculated Royalties**

But that’s not really tough enough. So someone thought, let’s add one more:

Calculated Royalties less Advance

=

**Amount Due Author**

In perfect world (i.e., your book sells beyond your wildest dreams in the first accounting period — usually six months in the book world, unless things have changed recently), the Amount Due Author is a positive number. This means a check is generated, involving a bit more math:

Amount Due Author

less

Agent’s Percentage (Amount Due Author x 15% Due Agent)=

**Actual Amount Author Takes to Bank to Spend on a New iPod**

As mentioned, this is very general. Actual calculations may include more or less. For explanations of concepts or terminology, please ask us. We really get too excited about these things. The husband prefers we take it out on complete strangers.

## 2 responses so far ↓

sillybean » Writing and Publishing 101// Apr 12, 2005 at 1:12 pm[…] 20;Next” at the top) Negotiating novel contracts Anatomy of a three-book deal Money Royalty calculations explained Real World Book Deals (follow-up #1, follow-up #2) More on mone […]

sillybean » Writing and Publishing 101// Apr 17, 2006 at 6:58 am[…] Annotated first novel contract (in parts; hit “Next” at the top) Negotiating novel contracts The Importance of Reversion Clauses in Publishing Contracts Anatomy of a three-book deal Money Royalty calculations explained Real World Book Deals (follow-up #1, follow-up #2) More on money and the writing life Survey of first novel advances and analysis of data thus far (in short: get an agent) […]