How to Build an Understandable Royalty Statement

Constructing an understandable royalty statement is crucial for transparency and for building a strong relationship between author and publisher. Royalty calculations and any periodic adjustments to them can be complex, and making sure that authors receive fair compensation and a clear explanation of payments due is a topic of significant importance.

Below is an example of good format and content. Before any royalty statement is delivered, publishers need to create a document that describes what information the royalty statements will contain, with a clear definition of terms and how they relate to the author. These terms will include critical definitions for fields such as “net sales,” “list price,” “returns,” “complimentary copies” and the rates at which payments will be calculated, so that there is never any confusion later. Each royalty statement should also include important static information such as the contact information for key publishing staff, in addition to all the variable data for that accounting period. It should begin with a brief remittance summary of what is being paid, a statement summary, followed by a detailed breakdown for the period concerned.

Remittance Summary

This shows the net amount that the author is being paid, indicating:

• The sales period in question
• The gross payment amount in the appropriate currency
• Any deductions (e.g., balances carried forward from previous periods)
• The net payment amount for all contracts

Statement Summary

This breaks down the remitted amount into the royalty payments for each contract (or for each ISBN if a contract includes multiple formats or editions, for example). For each contract, it will show the title and any other reference information, the gross payment amount, any expenses (e.g., any adjustments or costs since the balance forward amount in the previous royalty statement), a net payment amount for each contract and finally a grand total for all contracts, tying into the amount in the remittance summary.

Statement Details

For each contract or ISBN (or the lowest level that affects the royalty calculations), this section should show header information such as title, lifetime net sales, and publication date. Below that, it should indicate the detail line items by channel (e.g., territory), showing the sales quantity (net of returns), the net sales value in the core currency (typically $US), and the resulting royalty amount calculated. Each line should indicate the basis for calculating the royalty (e.g., a royalty calculated as a percentage of net sales, or otherwise). Where varying (escalating) rates apply, a separate line should be shown for each different royalty percentage rate. When rights for that contract, or ISBN are licensed to other companies, a subsidiary section should show a separate line item for payments received from each licensee for each type of sale (e.g., reprints, permissions etc.) with the variable data such as language, payment date, the applicable rate and royalty amount for those transactions. This should be followed by a sub-total for each contract.

Finally, it should show final contract values for the period, showing any advances, total earnings for the period, less any other current costs, and the final payable amount this period. If the total of costs or advances exceeds the payable amount, the statement should show the balance to be carried forward to the next period.

In summary, it should be easy for the reader to clearly see:

• A summary of payable transactions by contract
• The detail by channel, territory etc.
• The method of payment calculation for each line item showing units and value
• Deductions such as advances and returns calculations
• Any impact of currency exchange rates
• Income from subsidiary rights and licenses
• Any balances carried forward from prior periods

At knk Software, we can help streamline your royalty management processes, ensuring clear and understandable statements for authors. Discover more about how we can support you with rights and royalties.

 

 

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