Where the money goes on a $9.99 book

A book priced at $9.99 puts nothing like $9.99 in anyone's pocket. Two different arrangements decide where it goes, and they are not the same kind of number. Those arrangements are a royalty share and a wholesale discount. Compare them as if they were and you will reach the wrong conclusion about which channel pays better. This article works both through on the same $9.99, in an ebook and in a paperback.

What's the difference between a royalty share and a wholesale discount?

A royalty share is a percentage somebody pays you. A wholesale discount is the price a store buys at.

With a royalty share, the store sells at the price you set, keeps an agreed slice, and pays you the rest. Nobody else is in the chain. When a retailer says it pays 70%, this is the shape it means.

With a wholesale discount, the trade buys your book at list price minus a discount and then resells it at whatever price it likes. A 55% discount on a $9.99 book means the buyer pays you $4.50 and the rest of what happens is theirs. Out of that $4.50 you still have to pay the printer.

So a 30% cut and a 55% discount are not two versions of the same figure. The 30% is what one company takes from a fixed price. The 55% has to stretch across everyone downstream: the distributor, the shop, and the shop's own margin. And it comes off before your costs, not after.

Worked example: a $9.99 ebook

The arithmetic is short on a royalty-share ebook, because there is no print cost and only one company in the chain. This example uses a 30% store cut and a small delivery fee, then a publisher paying the author a quarter of what it receives.

A self-publisher is both parties here, and keeps the whole $6.84. That gap, $6.84 against $1.71, is most of the argument about self-publishing. It is also why the other side of the ledger, everything a publisher does for the difference, is a fair question rather than a rude one.

Worked example: a $9.99 paperback

Print changes the shape completely, because two things come out before anyone is paid: the discount and the manufacturing. This example is a 200-page black-and-white paperback sold through a channel at a 55% discount, printed to order at roughly $3.40 a copy.

Ten cents is not an arithmetic slip. It is the reason trade paperbacks are rarely priced at $9.99. Print-on-demand is charged as a fixed amount plus a rate per page, so a 400-page book at the same price would lose money on every copy sold through that channel.

Three levers move that last line: raise the price, cut the discount, or shorten the book. The discount is the one people forget is a lever at all. Many print channels let you choose it. A lower discount means more money per copy and less enthusiasm from shops that expect a trade rate.

What does "net revenue" mean on a sales report?

Net revenue means whatever the contract or the channel says it means. The definition is worth finding rather than assuming. The same two words are used for at least three different numbers:

• The list price minus the retailer's share.
• The same, minus transaction, delivery or currency-conversion fees.
• What the publisher actually banked, after returns have been deducted and a reserve held back against future ones.

The practical consequence is that two royalty percentages are only comparable when they sit on the same basis. Take the paperback above. A 10% royalty on the $9.99 list price is $1.00 — which is 22% of the $4.50 the trade actually paid. Same money, two percentages that look nothing alike. A contract offering "25% of net receipts" may pay better or worse than one offering "10% of list"; the words alone will not tell you which.

When you read a statement, find which number the percentage was taken from before you judge the percentage.

Things to consider

Price is not only a marketing decision. On a printed book it decides whether a sales channel works at all, and that calculation is worth doing before the cover is designed rather than after.

It is also worth knowing which of your channels are royalty-share and which are wholesale, because a single "royalty" column on a report can be adding together two quite different transactions.

How Pubblish handles this

Pubblish keeps the two numbers in the two places they belong. A supply arrangement records what a distributor or store keeps on each sale, per company, alongside which titles, formats and territories that arrangement covers. A rights contract records what you pay an author, and records the basis with it: a percentage of the net revenue a channel reports for ebooks, a percentage of your own list price for print. So the two are never quietly averaged together. See the help guides for how to record either one.