Net vs list royalty basis
This clause explains how your royalties will be calculated: either based on the book's list price (the cover price) or on the publisher's net receipts (the
In plain English
This clause explains how your royalties will be calculated: either based on the book's list price (the cover price) or on the publisher's net receipts (the money the publisher actually receives after discounts, returns, and other deductions).
What it means in practice
In practice, if your contract uses net receipts as the basis for royalties, you will earn a percentage of the amount the publisher actually receives, not the full list price. This often results in a lower royalty payment compared to royalties calculated on the list price, as the publisher deducts various costs and discounts before calculating your share.
What's standard
It is standard for e-book royalties to be based on net receipts, while hardcover and trade paperback royalties can be based on either list price or net receipts, depending on the publisher and negotiation.
Red flags
A clause that defines "net receipts" in a way that includes excessive deductions
Lack of clarity on what specific costs are deducted from the list price to arrive at net receipts
A royalty rate that is significantly lower when based on net receipts compared to list price
What to ask for instead
Ask for royalties to be calculated on the list price, especially for hardcover and trade paperback editions, as this typically results in higher royalty payments. If net receipts are used, ensure the contract clearly defines what is included in the deductions and that the rates are fair and competitive.
This is information, not legal advice. Contracts turn on their exact wording and your circumstances — before you sign, have a publishing lawyer or a body like the Society of Authors or the Authors Guild review the actual document.