What to Look for in a Subsidy POD Contract

Royalties. This is the percentage that an author is paid after a book is sold. Royalties can be based on the gross sale (cover price) or the net sale (after trade discount, printing, tax, shipping, handling, or whatever charges are specified in the contract). Some publishers rave about royalties that are 20% of net. They claim this generous royalty is over three times higher than a royalty paid out by a traditional publisher, which is around 6%. But they are comparing apples and trucks. A traditional publisher pays 6% royalties because they are paying for everything else, i.e., printing, editing, marketing and advances. Now what is a subsidy publisher paying? Zero. Royalty payments can be paid quarterly or monthly. To illustrate, here are a few computations. All books are the same price with the same number of pages. Taxes, shipping and handling charges are not included.

On Gross Sales
Company 1. Offers a 10% royalty on the gross sales of a $15.00 book. $15.00 x .10 = $1.50 royalty.
On Net Sales
Company 2. Offers a 20% royalty on net sales. $15.00 (book) - $8.25 (55% trade discount) - $3.90 (printing cost) = $2.85 (net) x 20% = $.57 royalty.
Company 3. Offers an 80% royalty on net sales. $15.00 (book) - $8.25 (55% trade discount)- $3.90 (printing cost) = $2.85 (net) x 80% = $2.28 royalty.

The computations show the difference in royalty rates. A 10% royalty on a gross sale ($1.50) is less than an 80% royalty on a net sale ($2.28). And the worst deal is a 20% royalty on a net sale ($.57).
In contract speak, understand that gross may be written as retail or cover, and net may be written as what the publisher actually receives from which the trade discount, shipping/handling, printing and returns costs are deducted. Royalties can also be computed from wholesale (after trade discount) or from invoice (after shipping and handling).
When evaluating a contract ask: Are royalties paid on gross, wholesale, invoice or net sales? What are the specific deductions? What percentage rate does the author receive? How often are royalty payments paid?

Author Copies. This is the cost of a book when an author orders it. Author copies are used for marketing purposes, to send out for review and for resale. The cost of author copies can be figured down from the cover price or up from the printing expense. It is more advantageous to purchase author copies that are priced up from the printing cost. This is similar to going into a car dealership and negotiating up from the dealer cost rather than down from the inflated sticker price.
This is a difference that matters. The cost of author copies is very important since selling books directly to the reader has the best return rate.

Publication Format. Delineates who’s responsible for the appearance, price, production and manufacturing of the book. After you’ve written the darn thing, these aspects may be of little interest to you, but take the extra time to consider them. These facets make a huge difference. Here are four areas to evaluate.
First, check out their books. Go to Amazon and search the publishing company. Click on Books and type the company’s name into the Search field. Review them. How do they look, both inside and out? What are the cover prices? If the books appear lackluster or are overpriced, don’t give this subsidy publisher your business. Also, if you can’t find any of their books on Amazon, this may spell trouble. You’ll need to check further to see how their books are distributed.
Second, do you have input into the interior layout and size of the book? Besides text, a book’s layout – chapter headings, margins, line spacing, font size, overall measurement – determines the number of pages in a book. If author copies are based on printing costs, fewer pages equals lower printing charges, and lower printing charges increase the profit margin. Also, POD books, to stay competitive, should not be more than 300 pages. This can be problematic if you have a manuscript over 100K words. However, if you have input into the book’s formatting, layout adjustments can be made to accommodate more text.
Third, do you have a say in the pricing of the book? The price of the book is important for two reasons. Cover price affects the marketability of a book and, depending on the contract, determines the cost of author copies. The cover price is best set by the author. Subsidy publishers often overprice books so that they can overprice author copies. When a subsidy publisher refuses to tell you the cover price of your book before you sign the contract, don’t sign. Some publishers will not be so obvious, and instead say that it depends on the number of pages. Again, don’t settle for a non-answer. They’re in the publishing industry and should be able to look at a manuscript and come up with the number of pages with a fair amount of accuracy. To be competitive, a cover price must be comparable with traditionally published books.
Lastly, it is important to find out who distributes the book (i.e., Ingram Book Group, Baker & Taylor), and how much of a trade discount the subsidy publisher is offering. A discount of 55% off the cover price is generous and is an incentive for retailers to sell books. A hefty trade discount is one reason why some books on Amazon sell for less than retail. Again, when you review books on Amazon, check the cover prices. If they are discounted, you may sell more books.

Rights. Rights are ownership of your work. There are different kinds of rights – to name a few: print, electronic, foreign, movie – that can be passed from author to publisher. Nonexclusive rights are rights that remain with the author and are not given to the publisher. Exclusive rights are granted by the author to the publisher. It’s important to read the entire contract. Rights may be granted in more than one area of the contract. An advantage of self-publishing is that you maintain all rights, at all times.

Cancellation. Also known as Termination. Cancellation can be requested by either party. Read carefully for stipulations that may extend beyond the cancellation period.

Yearly Fee. Also called a maintenance fee. This fee, according to one contract, is based on the current information displayed, at the time of the charge, on the publisher’s web site. In other words the fee is in payment for the book space provided on the subsidy publisher’s web site. This is a fee that pays for their marketing. Avoid this charge.

Return Policy. Accepting returns are offered by some subsidy publishers. Not having a return policy is one reason why many retail outlets do not stock POD books. Return policy, if offered, should be clear.

Submission Cost. In the excitement of getting published, you may throw all caution to the wind and spend more money than is necessary. Assuming you keep start-up costs reasonable and select a company that has an author friendly contract, breaking even is doable, especially when you sell directly to readers. However, if your main selling outlet is retail, you’ll have to sell a lot of books. To figure out how many books you’ll have to sell to break even, take your royalty per book then divide this into the amount you’re spending to publish. Let’s say you publish for $1000 and your royalty is .57 (20% of net shown earlier on a $15.00 book). To recoup you’d have to sell more than 1754 books (1000/.57). And that’s a lot of books.

Related Fees. Unspecified related fees located anywhere in the contract need to spelled out. Galley edits, those changes done after the book is laid out, may be a type of related fee.

In summary, the ideal contract will allow you to: set the cover price, have a royalty rate of 80% or better on net sales, keep all rights (nonexclusive), have input into the size of book and number of pages, cancel at any time with no stipulations, have your book distributed and available to retail stores with a trade discount of 50% or more, purchase author copies that are priced from printing costs, not incur any yearly maintenance fees, and accept returns.

Beyond the ideal contract, there’s one more thing: the ideal subsidy publisher. This company will answer your questions, work with you, be available and give proper counsel. A writer should ask for no less.