Royalties can be a flat percentage of the rates apply to amount or they can increase based on an escalator.
Royalty Rate (%) for all copies sold
The royalty rate % for all copies sold is a flat rate. The royalty is the (Royalty rate %) x (Rates apply to selection).
Royalty rates can escalate (increase) based on specific criteria. The escalator is usually quantity sold or net receipts. The escalator can include sales for all products linked to this contract or just sales for specific editions or rights. Royalty rules can exclude sales from the escalator.
Escalation Based on
In our royalty software the escalator can be based on:
- Net receipts
- Quantity sold
- Royalties earned
- Unit net price
- Unit retail price
Most publishers base escalators for physical products; hardcover and paperback editions, on quantity sold. Escalators for eBooks are usually based on net receipts because eBook prices can fluctuate widely over time due to promotional campaigns.
For Copies sold for this
The escalator number can be based upon:
- Author contract
- Sales type
- Edition (ISBN)
- Group (author group)
Author contract means that the escalator is based upon all sales for all editions (products) linked to this title. For a book publisher this means that it would include sales of eBooks, hardcover, and paperback editions.
Right means that the escalator includes only sales covered by the Applies to criteria for this royalty rule. If the rule is for paperback normal discount sales the escalator would include only sales covered by this rule.
Format includes sales activities only for editions (products) with a specified format. The format is specified in the Applies to tab. If you have rules for paperback normal discount and paperback high discount the escalator would include sales from both royalty rules.
Edition (ISBN) escalator includes sales only for each edition.
Group refers to different titles linked to an author group. Author group is created by linking selected author titles; and all their products. Author groups are created in the Data & functions > Authors view.
After defining the escalator basis and copies sold for this criteria the escalator breaks and the applicabe royalties are specified. Escalating royalties can be a:
- Percentage of the Rates apply to selection
- Per copy fee (royalty)
- One time fee (royalty)
Example 1: Escalator based on Quantity sold for this right (royalty rule).
Example 2: Escalator based on Net Receipts
Escalator Exclusion Option
The Do NOT add sales or activities that fall under this right to the escalation tally option excludes sales activities covered by this rule from all royalty escalators.
This option is often used with royalty rules for free copies (not covered by entry type Promo (free), below cost sales, and eBook sales.
A royalty rule is created for eBook sales. On the Royalties tab a flat royalty rate of 25% is specified. eBook sales are excluded from royalty escalators by selecting Do NOT add sales or activities that fall under this right to the escalation tally. eBook sales will not be included in quantity based escalators for other products, even if the escalator applies to copies sold for this author contract.