Royalty Conundrums

By Wendy Lawton

A few conundrums in our industry have caused my brow to furrow a little more of late. No, I’m not worrying about them, but I am seeing some trends that bear watching. As you know, the author is paid by royalties off the book when sold. There are a few glitches in the system. I wanted to share some of them here to get your take on them.

Conundrum #1 Read and Return:

As I’ve flown lately, I’ve come across more airport booksellers offering to buy your purchased book back at your destination airport for a portion of the original cost. Here’s how the program works. You buy the book in, say, San Francisco, read it on the flight across country and return it in New York for 50% of the sales price. Or you take the book home to read and on your next flight you bring it back for the refund. Nifty little promotion right?

It wouldn’t be so bad if the authors’ payday wasn’t based on each copy sold. Not to mention that bestseller lists use number of copies sold to determine standing and your publisher and/or future publisher scrutinizes your sales numbers very carefully. How does the author get paid for that read? He doesn’t. And, speaking of worst case scenario, what if after “selling” the book four times (and making their margin four different times on the one single SKU), the bookstore rips the cover off the book and sends it back to the publisher as a return? You not only have missed out on royalties off four different sales, but that return is deducted from your royalties. Hopefully, publishers have addressed this by making sales into those Read-and-Return shops final, but does anyone know if that’s the case?

Conundrum #2 Returns:

Now that I’ve opened Pandora’s box, let me address the issue of returns as well. Coming from the toy industry, with a similar distribution structure, I was flabbergasted when I learned how the majority of books are sold to retail bookstores. In essence the bookstores technically enjoy a no-risk scenario. They place their order with their publishers’ sales team, get the books on the shelves and, if the book doesn’t sell, they pack up the books and send the lot back to the publisher for a credit. Or, even easier, rip off the covers,  return the cover and discard the book. It’s true that bookstores receive a smaller margin for the privilege (40% margin instead of the tradition retail keystone of 50%), but that short margin causes the problems we are seeing in indie bookstores across the country now–no one can operate a retail operation with skyrocketing employee costs, insurance, taxes and commercial rent on a margin of 40%. Do the numbers. Unless an Independent bookstore owner owns the property outright and works the store himself, the numbers just don’t add up. But I digress.

This model leads to all kinds of problems. A few years ago I went into my independent Christian bookstore to buy a recent title from a bestselling novelist. I couldn’t find it on the shelf. The clerk told me she was sure they had it. When she checked the computer, it showed they had indeed had it but had packed it up and sent it back to the publisher. I know the people in the store very well, so I questioned her further about why they would short themselves on a popular title. Her answer? Money was tight, and the bill was coming due and the only way to pay on time was to take as much as possible off the shelf for credit toward the bill.

Conundrum #3 Used Book Stores: 

We all love used bookstores but the same issues exist with them. A reader picks up a book and takes it to the counter. The first person who originally bought the book online or from a brick and mortar store ensured that the author got her share. But he sold it to a used book store. It was sold again and read again, but the author received nothing from this read. I’m not sure we should be concerned about this, because that new reader may become a fan– good thing– buying many books from that author in the future. The same with passalong books. Authors always smile when a group of four friends come to a signing with one book which they’ve all read and loved. 🙂

As an agent, my job is to see that my authors get paid. But doesn’t it feel like everyone keeps chipping away at our little piece of the pie? I look forward to your comments. Am I missing something here? Anybody else seeing the conundrums when it comes to the publishing industry?