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Freelancing Is Not For Free

Royalties vs. Word Rates

by Lloyd Brown
Oct 13,2005

 

Royalties vs. Word Rates

One of the things you consider when deciding which project to work on is how much you might earn for each one. Unfortunately, not every publisher uses the same measure for compensating writers. Some pay royalties. Some pay by the word. Comparing the two is tough.

It's much easier if the publisher tells you how many books he expects to sell. Unfortunately, he can't do that very well based on a title and a summary. He might be willing to give you sample sales figures for several other books. From that, both you and the publisher speculate on how many copies your book might sell.

Even if you're not writing for royalties, taking into consideration how many copies the book will sell might affect your decision as well. Writing a book for a product line with a long tail and good support might be worth more than one that pays just as well but sells to a narrow group of players who are unlikely to see your work elsewhere. That name recognition has some value that you can capitalize on with your next project.

One note about these averages: they come from a multitude of sources, mostly from the middle-tier RPG publishers whose names you'd recognize if I shared information that might have been given to me in confidence. I'm sure many publishers can chime in and claim that their situation is different. We know that; that's why we call them averages.

How Much Each

Part of the royalty rate is the figure in the dividend: will you receive your rate based on the suggested retail price or based on the sale price? Sales through distribution earn about 40% of the retail price, so a $20 book that sells through distribution earns its publisher only $8. In this case, 10% of SRP ($2.00) is equal to a 25% royalty rate calculated on sale price.

As a very rough estimate, you can assume that about 10% of a large-ish publisher's sales will be direct--through conventions, its own website, etc. In the case of smaller publishers, a larger percentage of sales comes in at full retail through direct sales. Some copies might go through the book trade, and the rest sell through game distribution. If you're figuring your royalty based on sale price, you can use any number from 50-55% of the retail price for your average.

I'm sure you immediately see that it's more profitable to write a $40 book than it is to write a $20 book. If all other factors were equal, you'd be foolish not to. However, the word count of one product is likely to be considerably higher than the other (probably around double). Factors other than page count affect the price. A hardcover $35 book might require the same amount of text as a $27-$30 perfect bound book. Also, hardcovers tend to sell better than softcovers.

How Many

Let's assume that the core title for any product line is the baseline for our calculations. That book's sales figure is 100% of itself. Most of its sales (and this applies to all RPG books) come within the first year, although the lifespan of some books is shorter. We'll use a hypothetical Faust: the Summoning as an example.

In the case of separate player and GM books, the GM book ("The GM's Guide to Devilish Pacts") sells about 80% as well as the core player book.

A book that contains the bulk of the most essential optional or additional player information ("Player's Guide to F:tS," or a "F:tS Player's Manual," etc.) usually sells 50-60% of the core book's sales.

Secondary but still key sourcebooks ("the Demonomicon") sell in the 30-50% range. A product line often supports no more than 2-3 of these titles. Initial lesser sourcebooks sell in the 15%-30% range ("Contract Law in the Middle Ages"). Depending on how long the line's "tail" grows, it could have a large number of these titles.

A splatbook is one of a series of race books, clan book, class books, etc. They begin at about 30% and might or might not decay rapidly (see below).

Adventures sell 5-15%, but they have a short lifespan in the current market (very short in the case of D20). Exception: it's common to bundle an adventure with a GM screen. GM Screen/adventure bundles sell at about a 20% rate, but the company only needs one of these, and they often write them in-house rather than freelance them out.

The author is one variable that widens the range between each of these numbers. The combination of writing talent and name recognition can cause these numbers to wiggle, usually within the ranges I've given.

The Death Spiral

The more time has passed since the main book's release, the lower the sales (hence one reason for printing a new edition). An adventure released in November of one year sells more copies than an adventure released in November of the next year, all other variables the same. Briefly, the reason is this: a distributor makes buying decisions based partially on success of previous products. If the distributor bought 72 copies of the last supplement but still has 12 left, he'll buy 60 copies of this one, hoping not to have wasted money tied up in inventory. If he has 14 left in inventory when supplement 3 comes out, he orders one fewer case again. And so it goes. The distributor's customers, retail stores, order on the same principle (nevermind that they might have re-ordered since the original order).

Hence, while the first splatbook for a game might sell 30% of the core book' s figure, subsequent sales might look like this: 28%, 32%, 24%, 26%, 23%, 19%, 24%, and 17%. Even with the occasional deviation from the trend, sales still drop over time.

Time is Money

One other factor you must consider is how long it'll take you to recoup your money. If you write for a word rate, you typically receive payment upon publication, usually within 30 days of the release date. Depending on the publisher, you might be able to negotiate one or more partial payments earlier. With royalties, it's different. No publisher that I know of pays an advance, which means that you have to wait for a royalty period to come up (usually divided into calendar quarters, so January through March is Q1, April to June is Q2, etc.) and then wait up to 30 days for a check to arrive. The numbers I'm using in this article are lifetime sales, not first-quarter sales. Your first check will be the largest, but it won' t be the full sum. Expect a substantial drop with each quarter.

Risks of Royalties

The publisher could lose an artist, possibly dropping the artistic quality of the product line and throwing off your sales figures. The publisher could face financial problems later down the road for a variety of reasons, making it difficult for them to pay royalties they owe you. A distributor's cash-flow problems could mean an inability to re-order your books, keeping them out of many stores. A printing error could cause your book to be released six weeks late. Essentially any risk the publisher faces is now also your risk.

Because of these last two reasons (the delay of your income and the risk of losing some or all of that income), a royalty based payment should be somehow more attractive than a word rate that seems to promise a similar amount.

A Comparison

Let's say you have two different manuscripts you'd like to develop. One is a superhero RPG adventure for which the publisher offers $.04/word. He's not able to provide any sales numbers because the core book isn't out yet. You expect your adventure, "Attack of the Bat People" to come out around the 80,000 word range. That's a $3,200 check.

The other project you want to work on is a monster book focusing on (of all things) demons for F:tS. In addition to stats and descriptions, you intend to offer a chapter that expands on the core book's section on summoning and binding demons. Since this is the line's first and largest monster book, you hope to make it an "evergreen" title, or one that stays in print. You' re hoping that the additional material you provide beyond monster stats places the sales closer to that 50% mark than the lower range of the scale (at 30%).

The publisher's terms are 15% of sales price and he confides in you that the F:tS core book has sold 6,000 copies in its first eight months of publication. You propose a 240-page hardback, which you expect the publisher to price at $35 because you did your research and discovered that that's a marketable price for a book with that page count and this publisher 's quality. Using tried-and-true methods (asking, counting existing works, checking the website), you find that the publisher's preferred formatting yields about 900 words per full page, minus four pages for editorial use (the copyright page, the table of contents, etc.), and deducting about 20% for art, you're expecting to turn in about 180,000 words and allow them to cut and trim it back to fit the actual count your calculator gave you of 169,920 words.

More math (15% royalty times $17.50 average sale price) gives you a payment per book of about $2.63 per book sold. You extrapolate that by the time your book releases, F:tS will have reached 7,500 copies sold. Counting the low range for this sourcebook gives you (30% x 7,500) a figure of 2,250 possible sales; a middle-of-the road figure of 40% yields sales of 3,000 copies. Similarly, you guess the upper limit to be around 3,750 (50% x 7,500).

Therefore, the total earnings for each estimate are $5917.50, $7,890, and $9862.50, which translates into $.033/word, $.044/word, and $.055/word. If the first estimate turns out to be correct, you make less money per word than you would have with the superhero book. If the second number is accurate, you make about the same, but you might have to wait a year or more for the installments to add up to the value of the superhero book's check. Only in the third, best-case scenario, does the pay for this book clearly outweigh the other option.

Some writers tend to speculate wildly on higher numbers. "What if my book is so good that it sparks interest in the core book and adds hundreds or thousands of players to the pool?" Supplements do, in fact, spike core book sales, but at that point on the sales graph, a "spike" might only be a few cases--36 or 48 books. If a core book sold 3,000 copies, don't think you might be the exception that sells 7,500 copies of a 64-page adventure. Bet the odds.

So how would I call it? I wouldn't want to have to make this decision! If it came down to it, I'd probably choose the larger project because of the higher total payoff and the potential for continuing revenue stream. I'm here for the long run, and if I have enough $30 checks coming in five years down the road, they'll add up. If you have a shorter attention span, or if you know superheroes like nobody else, choose the adventure.

I'm A Writer, Not An Accountant

You might not have thought about all this number-crunching as part of a writer's duties. You're certainly welcome to crank out adventure after adventure if you want to, or to support games that have only sold 100 or 200 copies of their core book. Just remember that if you're writing for royalties, stopping to do a bit of math while you consider which book to write next could mean a few thousand dollars in the bank. That's not a bad reward for spending 15 minutes with a calculator.

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