1.18.2006

Wholesale price..the new giant squid of publishing

Miss Snark, recently a nonfiction agent told a member of another board that "most" book contracts are going to royalties of 10% on wholesale price. I was surprised to hear this; I can't imagine either agents or authors going along with it. In your experience, is this the new trend



First there is no such thing as "wholesale price". The only price that is ever printed anywhere is the retail price and all prices to wholesalers and others are discounts based on that retail price. The distinction is important. To wit:

$20.00 retail price. This is the price printed on the book, that you pay at the local indie store.

$10.00 WalMart's price to you. This is what they charge you when you buy your books with tires, a case of cough syrup, a cake, three gallons of gin, and an electric cattle prod.

Wal Mart gets a discount of 55% off the retail price. They sell it to you for 50% off the retail price. Of such small sums, in great volumes, is a fortune made.

Now, the indie store on the corner where you buy your books, talk to the owner, and pet the cat that reads Proust, that store owner pays a 48% discount off retail for the books she sells to you at full retail.

Now in case some of you aren't good at math, I'll just tell you: the indie store owner pays more to buy it from the publisher, than you can buy it for at WalMart. Naturally some of them take umbrage at this.

Anyway, what does this have to do with how royalties are counted.

Well, lots.

It used to be they paid you based on the number of books sold. More books, more money. Yum yum, sign me up for that.

Well, as you can see, paying you $2.00 for a book sold at the indie store means the publisher keeps a decent chunk of change:

RETAIL: $20.00
LESS: $9.60 discount taken by indie store owner (48% of $20)
EQUALS: $10.40 gross to publisher
Less: Commission to author: 2.00 (10% of hardcover retail price)
Equals: $8.40 first net to publisher.

You sell enough of that you'll make some dough.

Now: look at the Wal Mart equation

Retail: $20.00
Less: $11.00 (55% discount given to big box store and HIGHER)
Equals: $9.00 gross to publisher
Less commission to author: 2.00 (10% of hardcover retail price)
equals: $7.00 first net to publishers

well, it didn't take long for publishers to realize that authors were not absorbing the pain of box store discounting so they changed how royalties are calculated.

They started factoring in the discounts.

Now it's 10% on retail price for books sold at standard discounts
and 6-8% for books sold at "steep discounts".

And some of the smaller publishers pay you a percentage based not on retail price but on "net"... the price they get after the discounts are taken.

The only way to figure out if its a good deal or even acceptable is to run the math.
I do it with every offer.

This has been going on for years.
It's industry standard now.
Doesn't mean we have to like it.

And the reason there is no "wholesale price" is cause the price changes for each wholesaler depending on what discount they get: its not a standard number. Discount is the piece of info that lets you calculate how much they paid per book.

15 comments:

Anonymous said...

Yet another reason why authors need an agent ... in case there are people out there still debating this.

Dana Y. T. Lin said...

Oh, gosh. I know Miss Snark explained it very laymanly-like, but my mind is still spinning.

Thank gwad for agents!

Anonymous said...

hardcover royalties are 10% on the first 5000 copies, 12.5% to 10000, and 15% thereafter so anyone selling enough books to get their books into walmart is getting 15% not 10%. i'm glad snark isn't my agent.

Anonymous said...

Yes, Miss Snark (no, Miss Snark; whatever you say, Miss Snark!), but are agents able to negotiate a better deep discount percentage?

Or do publishers laugh when asked to pony up more on the deeper discounts?

Debbie

PS, annonymous---that's the whole point: your book (if it's in Wal-mart) *isn't* getting either that 10 *or* that 15 percent----Wally World is a deep discounter, remember? So, you're getting 6-8 percent, tops (unless your agent can negotitate higher, which is my ?????)

Miss Snark said...

1st Anon, first, those number are for illustrative purposes only. And second, since the hardcover royalty goes UP on larger volumes in the standard forumla, publishers make even less money which was the point of the post.

And yes Anon2, all things are negotiable.

The Beautiful Schoolmarm said...

The Ethan Ellenberg Literary Agency has a helpful article on their website that exlains this, too.

Anonymous said...

Thanks, Miss Snark. One clarification, if you would: when you say it's "industry standard now," do you mean that most/all publishers do this now, or that it's not uncommon? Some authors I greatly respect advise new authors not to accept contracts in which royalties are based on net. Is there reasonable hope of being able to do that?

Anonymous said...

Er. I meant reasonable hope of being able to negotiate a better contract than one in which royalties are based on net.

Anonymous said...

Please forgive me. I'm an idiot. I just found the all-important sentence in the original post where you answered my question. That teaches me that I really cannot do twenty-six things at once; twenty-five is my limit.

Elektra said...

Miss Snark, I think some book stores have found a way to get around this. The other day my bn.com books came in, and on the cover of the first one, lo and behold, was a Wal-Mart price sticker

Anonymous said...

Woah woah woah, forty-eight percent? When did everything change? I had a bookstore back in the early nineties, and I used to fuss about the fact that on a $10 book, I got $4. When did it go up to let independent booksellers get an extra eighty cents? Grr!

As for the royalties, go figure -- could sort of see that one coming, even 10+ years ago, when Walmart was just starting its world domination, and there was Crown Books and Walden, mostly. Even those did "deep discounts" of about 15%-20% off retail price on a regular basis.

There is a reason I don't own a bookstore these days, and it's the same reason I'm glad, too. Sigh.

-ksgreer

Mark said...

Yeah and the so-called nonfiction "agent," isn't listed in any agency directory, agentquery or anywhere else to give you some idea of the source of this myth. As usual, nice work Miss Snark, a real literary agent.

Emjay said...

Can one actually get an electric cattle prod at Wal-Mart?

I need one for my dog.

It would probably be better not to mention this to K.

Miss Snark said...

I'm not sure. I've never actually been to a WalMart.

I purchase my cattle prods from the AAR online store. You can buy form rejection letters, and SASE eating bacteria there too.

Emjay said...

Thanks, but I have an adequate supply of rejection letters already on hand.