Figures don't lie, but liars figure. --Samuel Clemens
No matter which publisher you choose, your royalties will be stated in the form of a percentage. But a percentage of what?
With traditional publishing, royalties are generally computed as a percentage of net sales, which is defined as gross sales (the total amount of money your book brings in), minus returns (money refunded for books that, for one reason or another, are returned to the publisher). A typical royalty rate is 15%. This sounds relatively low, but remember that in this form of publishing, the publisher assumes all of the financial risk, and you assume none. Nontraditional publishers take on much less of the risk. Therefore, they should and do pay a higher royalty rate, typically stated as 50%. But hang on, because this probably is not a percentage of gross sales but of net revenues (gross sales minus print cost). This is a different animal, and it somewhat overstates what you will actually receive. Let's take an example using some round numbers for convenience.
As computed by a traditional publisher, the author's royalty would be 0.15 * 18 = $2.70. If you compare this with the nontraditional publisher's stated royalty of 50%, you might expect the figure to jump to $9.00. But the actual royalty will be 0.50 * 10 = $5.00. This surely is better, but not as wonderful as the 50% figure might imply. It is actually equivalent to about 28% if computed the other way. If the total publication cost was $1000, then the author will need to sell 435 copies before the higher royalty rate translates into more money and offsets his risk.
Note that we are not really casting aspersions on anyone here. Both calculation methods are legitimate. But at E&C we state the royalty rate both ways to make sure the author is fully informed. At present, we pay 75% of net revenues, which is equivalent to 42% from a traditional publisher. In the above example, the author would receive $7.50 per copy sold.
