[MaggieScratch]

Originally Posted by Kali Yuga

I was under the assumption that royalty rates are roughly 10% for hardcover, 7.5% for trade, and usually change after x number of copies have sold.

Close enough for government work.

I assume the royalty is based on the wholesale price. E.g. Ballantine wholesales 1 copy of Book X for $10, and the author gets say 10% of that price, regardless of whether Amazon charges $5 or $15 for it.

No, most royalty rates are based on the cover price. Say the cover price is $20 (nice round number) and the royalty rate is 10% (also nice round number). The author's royalty for one copy is $2. The wholesale amount, that is, the discount price at which the publisher sells the book to the distributor or retailer, doesn't matter. HOWEVER, the royalty rate might change based on the discount. Amazon and other big chain stories, Costco, Wal-Mart, etc. get larger discounts as they buy in large volume.

So I'm not sure what "25% of net" refers to in this context, or what the typical ebook royalty rates are.

Actually that would be what you referred to above--the percentage is taken from the publisher's profit after the discount to the wholesaler/distributor/whatever is taken out. And the definition of "net" could also include the publisher's sunk costs, such as editorial, marketing, overhead, etc. (but that would be especially nasty).

Even a very high royalty rate such as 25% of net might end up being less than 10% of the cover price, especially if the pricing paradigm for ebooks changes. Say $9.99 becomes the normal "cover" price for ebooks, which the publisher provides at a 50% discount (all very round numbers). The author ends up making 25% of $4.98, or about $1.25 per book. If Amazon demands a 55 or 60% discount because they are a large-volume retailer, the author gets even less.

These rules are not hard and fast, by the way, and neither are the royalty rates. There are exceptions for certain publishers, certain genres, etc. I'm generalizing a lot.

Yep, which still kind of brings me back to my original query. Namely, why would advances be the hold-up, unless the publisher is trying to, for example, include international ebook distribution rights? I can see how authors would be slow to line up behind ebooks if their royalty rates are inferior, but that is not what the author of the article is saying -- he is specifically saying that authors are balking at ebooks because the advances are not increasing.

I don't really get that either. I'm making an assumption that he means most deals (advance + royalties) are based on the amount of books the publisher thinks will sell, and really they're only talking about hardcover. If paperback rights are included in the deal--which is almost always the case at this point in time--the advance is usually increased to accommodate that part of the deal. Because until recently ebooks have generated such a small amount of revenue, they weren't really included in the equation, and I think he is saying that if they were, presumably the advance should be larger, because the potential for making some real coin is there now.

And once the deal is done, if ebooks suddenly explode the way digital music did, they can't go back and say, "We can haz ebook rights now?" because oh well, you signed the crappy deal back when ebooks didn't make a difference.

I could be wrong, but I *think* that's what he is saying.

Probably never.... I'd think a smart publisher would try to hold the ebook rights for the life of the copyright. A smart author might not allow that, though.

Yep.