Thank you for your interest in Lake 7 Creative, LLC. We are a small, two-person company based in Minnesota. When we communicate with potential authors—and anyone else, for that matter—we strive to be as transparent as possible, especially when it comes to royalties. There is no reason to do it any other way. We always discuss money and sales potential before an agreement is ever signed.
With that in mind, please review the following information. This should give you an understanding of how our royalties are paid.
Percentage of Actual Cash Received
We generally pay our authors 15% of actual cash received for a given title. (Co-authors would split this amount.) It means that authors get 15% of the money Lake 7 gets paid. Let’s use a $10 book as an example and estimate what an author might end up earning.
- The seller (e.g. a bookstore) earns about 50% of the retail price.
- Our warehouse/distributor earns about 25% of the remaining 50%.
- The remaining balance is paid to Lake 7.
- The author receives 15% of the balance paid to Lake 7
The math for a $10 book looks something like this:
- $10 x 0.50 = $5 for the bookstore
- $5 x 0.25 = $1.25 for the warehouse/distributor
- $5 – $1.25 = $3.75 for the publisher
- $3.75 x 0.15 = $0.56 for the author
NOTE: These are not exact numbers. A variety of factors might cause the percentages to vary slightly.
Admittedly, $0.56 is not an overwhelming figure. But we typically print around 4,000 copies of a title to start. If that sells through, the author in this scenario would earn about $2,240. Then, hopefully, we would sell another 4,000 copies… and so on.
Some authors achieve further financial gains by choosing to sell their books at special events and/or on their own websites. In those situations, the author becomes the seller and earns the seller’s 50% plus their royalty. (That would be about $5.56 per book, using the above example.)
Other Royalty Payment Methods
We want you to know up front that this is not the traditional method for calculating royalties. Many smaller publishers do pay royalties based on actual cash received—often because that’s all they can afford. However, some larger publishers might pay royalties based on the retail price. In our example, an author for a large publisher might earn 8% to 10% of the retail price, or $0.80 to $1.00 per book sold.
Unfortunately, we are not yet big enough to make those numbers work. Because we typically publish fewer than five titles per year, our per-unit costs are much too high.
Where Does the Money Go?
An author might assume that most of the money goes directly into the publisher’s pocket. That simply isn’t the case. Let’s take a look at the costs and profits of a sample book (assuming the entire print run sells through).
A. Publisher Revenue
- Books Printed: 4,000
- Retail Price: $12.95
- Total Revenue*: $18,648.00
*Books Printed x Price x 50% (retail stores get 50%) x 75% (distributor gets 25%) x 96% (to account for a 4% fluctuation in retail store costs due to discounts, special offers, etc.)
B. Publisher Costs
- Author Royalty (15% of Total Revenue): $2,797.00
- Book Production: $1,000.00
- Marketing: $500.00
- Shipping (from printer to warehouse): $450.00
- Printing: $5,000.00
- Artwork: $1,500.00
- Total Costs: $11,247.00
C. Total Profit Per Book Sold
- Author: $0.70
- Publisher: $1.85
Hopefully, you agree that those numbers seem fair—especially when you consider that the publisher risks more than $8,000 with no guarantee that any books will sell.
Payment Schedule
Lake 7 pays royalties twice a year, in February and in August. Per our current agreement with our distributor, we are paid monthly—but payments are 4 months behind sales. (For instance, we are paid in May for January sales, in June for February sales, and so on.) For this reason, an author’s February royalty payment covers the months of March–August (payments we receive in July–December); an author’s August royalty payment covers the months of September–February (payments we receive in January–June).
If you are interested in being considered for an upcoming project, please read our submission guidelines.