A frequent worry we hear about at the Watchdog Desk is royalty reporting. A statement from a publisher or distributor may be the only information an author has about the sales of their book, and that can lead to suspicion and doubt. How do we know that a company is correctly and faithfully reporting our royalties?
Errors are rare; fraud is even rarer
When sales don't match expectations, we look for explanations. We trust our service providers to give us an accurate accounting, but when those numbers seem off and we're asked to take that accounting on faith, it's natural to have doubts.
In most cases, there's a reasonable explanation for an apparent discrepancy. Perhaps some of the sales are being reported in Canadian dollars instead of US dollars. Perhaps some of the sales are in regions for which the retailer pays a lower royalty rate. Or maybe there were returns that offset some of the royalties. The majority of accounting concerns are unfounded.
It's extremely rare for a company to willfully defraud authors by shortchanging them on royalties. That's a criminal act, one that's easily detected and proven in court. Even the seediest vanity presses are wary of blatant theft of this sort, especially when they can persuade authors to hand over thousands of dollars for worthless — but legal — services.
Errors are slightly more common, but are still infrequent among the hundreds of millions of book sales annually.
But whether a discrepancy exists or not, whether it's due to error or fraud, the cure is the same: identify the problem and verify the numbers.
Understanding your royalty statements
Authors with relatively low sales may try to pinpoint when a particular sale was credited to their account. Perhaps a friend said, “I bought your book,” but there were no sales listed on the current statement. Immediately, suspicion bubbles to the surface.
But publishers, distributors, and retailers may all have different reporting and payment schedules, and this can make it difficult to match sales to the reports.
Let's say Retailer #1 pays monthly, 60 days after the month of the sale. Retailer #2 pays monthly, 30 days after the month of the sale. A distributor aggregates those sales and passes a share of the royalties to the author on a quarterly schedule (March, June, September, December).
Now, a sale in February could appear in the March statement if it's sold on Retailer #1, or the June statement if it's sold by Retailer #2. And if there's a delay in reporting on the retailer side, it could even appear in the September or December statement.
Trying to match individual sales to these convoluted reports is a daunting affair, so before assuming that dishonesty or incompetence is behind it, consider that this may simply be delayed reporting due to the different statement cycles.
And always remember that sudden, dramatic spikes and dips in sales are commonplace. An anomalous statement might be completely accurate.
Confirming sales
If there is a credible doubt about the reporting accuracy, ask your service provider to look into it. Be polite: you're asking them to take time out from a very busy schedule to help you understand the statements. Pointing an accusing finger at your publisher and shrieking, “thief!” isn't going to win you any friends, or resolve your issues.
Any company that handles royalties is going to receive questions about their reporting accuracy, and most of those inquiries will be unfounded concerns. The assumption will be that your concerns are also unfounded. The burden is on you to show that there's a reasonable doubt about the accuracy of the royalty statements, and that means you'll need to do a bit of homework to build your case.
Outline clearly why you think the statements are incorrect. For example, if you have evidence that purchases were made between certain dates, document that, and match it up to the reporting schedule as best you can. Make it obvious where you believe the problem lies, and what you're asking the publisher to double check. If the amount of the royalties don't match what's promised in your contract, check your math, and spell out the calculations for your publisher step by step.
This is far more effective than saying, “I don't think these statements are right,” and expecting the publisher to divine why you think they're wrong.
Auditing the printer
If the publisher does not address your concerns adequately, you can ask for an audit. For print-on-demand sales, this often takes the form of a printer audit, in which the printer provides a list of all the copies of a given title they have manufactured. You can compare this to your sales and question any discrepancies between the two.
These printer audits may also identify specific copies by serial numbers in the back of each book. This information is invaluable when trying to find out what became of that copy your friend says they purchased. And be aware that on more than one occasion, a friend who said they purchased a book has sheepishly admitted, “Well, I'm going to buy it this weekend, I just haven't gotten around to it yet…”
You can also request copies of the retailers' statements that are given to your publisher or distributor. This may be your only way to reconcile digital sales.
Lastly, you can purchase copies of your book from various retailers to confirm that those sales and royalties are being accurately reported.
Check your contract and know your rights
Most legitimate publishers have an explicit clause in their contracts that allows the author to inspect their books. And, unsurprisingly, many vanity presses do not. Some companies may require you to inspect the books on the premises of the publisher, or they charge a nominal fee for administrative costs.
Hopefully, you've already examined this clause before you signed the contract, but it's a good idea to review the terms to see what your rights are if a dispute should arise.
Help! My royalties are incorrect! — @johndopp Share on X
The article is full of good info but what if you ask the distributor how many books were printed and who ordered them and he says he has no way of getting that info from the printer. Like the order has to go through the distributor….right ?
Then what ?? You don’t consider that suspicious ?
Tom
When helping author friends look at their royalty statements, the one they usually don’t understand is Amazon. I had a friend recently who had been selling very well on Amazon and during that time simply didn’t look at her statements. Then she had a couple months in a row with significantly lower sales and looked at them. She called saying she was being robbed and how could they do that. She had done a basic calculation of books sold (this was for ebooks) times the 70% royalty and come out with a significantly higher number.
What she’d forgotten and most authors forget is the download fee Amazon charges, which over thousands of books can make a huge difference. Yes, her sales were down significantly but not because she was cheated. Amazon charges $0.15 per megabyte (MB)—the file size of your Kindle eBook—for each book sold priced between $2.99 and $9.99. There is a minimum charge of $0.01 and delivery fees vary by country. My ebooks, which average about 65K words and 250pages tend to run about 8.5MB . So that means $1.35 is being subtracted from my royalties for each book. That does add up. So for a $3.99 book at a straight 70% royalty I would expect $2.79. But when you subtract the download fee and then apply the 70% royalty calculation, the actual payment is $1.84. So, instead of a 70% royalty, I’m really getting a 46% royalty on that $3.99 book.
No other distributor (at least that I use) charges a download fee. It’s important to always understand exactly what each vendor is promising and not apply the same calculation across all vendors.