Passive Income: Cashing in on Publishing Royalties

Have you ever wanted to make money without having to work for it? No, I’m not talking about identity theft, mooching, or getting yourself a sugar daddy or sugar momma. I am talking about using your brain a little and creating a way in which you can make a passive income. Passive income can be a lucrative form of income, or it can be a hit and miss, depending on how you are earning the income. Passive income is basically money you make after setting up a system that doesn’t require much maintenance.

In this series of blog posts on passive income, we will discuss four different ways to gain passive income—publishing royalties, rental income, internet marketing, and winning the lottery. In this blog post we will talk about making an income through publishing royalties.

What’s So Royal about Royalties?

According to the almighty online brain trust, Wikipedia, royalties are: “typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item…” In layman’s terms, royalties are a form of passive income that you obtain through the sale or use of something you own. Royalties are the bread and butter of the entertainment industry with actors, screenwriters, novelists, musicians, producers, and artists getting a cut of money for every CD, DVD, comic book, novel, movie script, image, or trademarked catchphrase that is bought, sold, or used in print or visual media.

Although there are royalty gains in other industries, we will focus on print publishing royalties because they would probably be the easiest for you to obtain.

Mainline Publishing

Mainline publishing is the kind of publishing that every dewey-eyed poet or paranormal romance writer dreams about. Authors like Stephen King, Christine Feehan, Anne Rice, Dean Koontz, and James Patterson are bestselling authors that are earning massive royalties through their work with mainline publishing houses.

A few mainline publishing houses are:

  • Random House
  • Putnam Berkley
  • Harlequin
  • HarperCollins
  • Avon
  • Bantam/DoubleDay/Dell

While you might think that your very first book will earn you millions of dollars when published through one of these houses, you should consider that mainline publishing only offers royalties of 5 to 25% of each book sold. So, if you sell a book for $12.95, you will only get $0.65 of it. While that might not seem like a lot, if you sell enough over the course of the year, you can get a pretty healthy passive income without actually having to stand outside the bookstore and hawk your own book.

Vanity Press aka Self-Publishing

Vanity press publishing is just a fancy name for self-publishing, and there are thousands of self-publishing companies that offer aspiring authors the chance to see their work in print … for a fee. Because there are no large overhead costs (leasing an office, hiring a large staff, marketing, leasing warehouse space for book storage), you can typically count on getting more in royalties—about 30 to 70%. That does sound like a lot more money, but you have to consider that you’ve already SPENT hundreds of dollars to get your book published, so a lot of the initial money you get in royalties is basically putting the money you spent back in your wallet.

Also, when publishing through vanity presses, you have to do your own marketing, which means that you are spending more of your own money in order to gain back that $3.88 in royalties.

Gaining a passive income through self-publishing actually takes more work than you’d think.

E-Publishing

One of the hottest and fastest growing industries online is the e-publishing industry. These publishing houses are much like their brick and mortar cousins, but instead of publishing in paperback, they publish strictly for e-book readers. No, you cannot pay them to publish your book. They are just like mainline publishing companies, the editors have to like what you’ve written, and if they do, they will offer you a publishing contract.

A few e-publishing companies are:

  • Eirelander
  • Red Sage
  • Lyrical Press
  • The Wild Rose Press

Unfortunately, most e-publishers are pretty hush-hush about the amount of money their authors receive in royalties, but it’s safe to say that it’s probably more than mainline publishers offer, but not as much as you’d get from publishing your book yourself.

Overall, gaining a passive income through publishing royalties is all about how you choose to publish your book. If you can make it big in the publishing world, you can make a substantial income without much work (except for the actual writing of the book).

Have you ever published anything? How did it go? 

2 Responses to Passive Income: Cashing in on Publishing Royalties

  1. My self-published coffee table book (a total vanity project, but also a proof of concept) has yet to pay for itself.
    With self-publishing, a lot of your profits will depend on whether you’re working with a print on demand supplier or if you can take advantage of economies of scale and order large print runs from a more traditional printer. The advantage of POD is that people can buy your book online and the printer will ship it to them, and you simply get a check at some point. POD programs also often have a distribution system in place making it much easier to sell you book on Amazon or through retail stores.
    If you are self publishing and want to be able to sell via retail, one way or another you will have to pay for an ISBN number and distribution.

    If you are publishing through a publishing house (traditional or e-), the other thing to remember is that an advance is exactly that- an advance on your royalties. It is not a bonus. You won’t earn a penny in royalties until your advance has been paid off, and if it doesn’t get paid off in a certain amount of time, you owe that money back.
    My writing teacher always advised to use the advance as a negotiation point- offer to take a smaller advance for a greater royalty percentage. Just be aware that if you are a first time author, you’re not going to be able to get much above minimum, no matter what you do.

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