Royalties are the payments an author earns from each copy of a book sold. They sound simple, but the details vary enormously between traditional publishing and self-publishing, between formats, and between contracts. Understanding how royalties are calculated helps authors compare offers, set realistic expectations, and price self-published books sensibly. This guide explains how book royalties work in both models, with the actual rates Amazon’s Kindle Direct Publishing lists for self-published authors.
Traditional Publishing: Advances and Royalties
The advance
In a traditional deal, the publisher usually pays an advance against royalties. It is money paid up front, often in installments tied to signing, delivery, and publication. The advance is not a bonus on top of royalties; it is an early payment of royalties the book is expected to earn.
Earning out
Every royalty the book earns is first credited against the advance. Only after the book has earned more in royalties than the advance paid does the author receive additional royalty checks. This is called “earning out.” If the book never earns out, the author typically keeps the advance, as long as they delivered the book under the contract’s terms.
Royalty rates
Traditional royalty rates are set in each contract. They are commonly calculated as a percentage of the book’s list price or of the publisher’s net receipts, and they often differ by format: hardcover, trade paperback, mass market paperback, ebook, and audiobook each tend to carry different rates, and some contracts include escalators that raise the rate after a certain number of copies sell. Because terms vary so much, authors should read royalty clauses closely, ideally with an agent or an attorney.
List price versus net receipts
This distinction matters a great deal. A royalty on list price is calculated on the cover price. A royalty on net receipts is calculated on the money the publisher actually receives after discounts to retailers and distributors, which can be much lower than the cover price. The same percentage can produce very different earnings depending on which base the contract uses.
Royalty Statements and Reserves
Traditional publishers send royalty statements on a regular schedule, often twice a year. Statements may include a “reserve against returns,” money held back because bookstores can return unsold copies. Reserves are usually released over later statements. Understanding these statements takes practice, and agents typically review them for their clients.
Self-Publishing Royalties on Amazon KDP
Self-published authors do not receive an advance, but they keep a much larger share of each sale. Amazon’s Kindle Direct Publishing (KDP) publishes its royalty rules in its help pages.
Ebooks: the 35% and 70% options
- 35% royalty: KDP pays 35% of the list price, excluding VAT, for each unit sold.
- 70% royalty: available only in the countries listed on KDP’s pricing page and only for eligible books priced within KDP’s required range. KDP calculates it as 70% of the list price excluding VAT, minus delivery costs, which it says average $0.06 per unit and vary with file size.
- Public domain works are limited to the 35% option.
Because the 70% option depends on list price limits that KDP sets and may update, authors should check the current requirements in KDP’s help pages when pricing a book.
Paperbacks: royalty minus printing costs
For paperbacks, KDP pays a royalty rate of 60% or 50% of the list price depending on the price, minus the printing cost. KDP calculates printing cost as a fixed cost plus a per-page cost. Its own example is a 300-page black ink paperback sold on Amazon.com: $1.00 fixed plus 300 pages at $0.012 per page, for a printing cost of $4.60.
Here is how that works out at a $14.99 list price at the 60% rate:
| Step | Amount |
|---|---|
| List price | $14.99 |
| 60% of list price | $8.99 |
| Minus printing cost (300 pages, black ink) | $4.60 |
| Author royalty per copy | $4.39 |
Color printing costs more per page, so illustrated books earn less per copy at the same price.
Audiobook Royalties
Audiobooks can be produced by the publisher, licensed to an audio publisher, or produced independently by the author. Royalty terms depend on the route, the distributor, and whether distribution is exclusive. Authors producing their own audiobooks should compare the distributor’s royalty rates alongside production costs for narration and editing.
Traditional Versus Self-Published: A Quick Comparison
| Traditional | Self-published | |
|---|---|---|
| Advance | Usually yes | No |
| Royalty share per copy | Smaller percentage, set by contract | Larger percentage, set by platform |
| Upfront costs to author | None from a legitimate publisher | Editing, design, and marketing |
| Distribution to bookstores | Strong | More limited |
| Payment frequency | Often twice a year | Often monthly |
Questions to Ask About Any Royalty Clause
- Is the royalty based on list price or net receipts?
- What are the rates for each format, including ebook and audio?
- Are there escalators after certain sales thresholds?
- How large is the reserve against returns, and when is it released?
- How often are statements and payments issued?
- What happens to royalties if the book goes out of print?
The Bottom Line
In traditional publishing, royalties are a percentage set by contract and paid only after the advance earns out. In self-publishing, the author earns a larger share of each sale, calculated by the platform’s rules, such as KDP’s 35% and 70% ebook options and its 60% paperback rate minus printing costs. Whichever path you choose, knowing exactly how your royalties are calculated is the first step to understanding what your book can earn.