Book authors' compensation is a tricky and detailed matter, with many countervailing considerations, and authors should not sign a book contract lightly before extensive reflection. Authors are typically paid a small "advance," or cash payment, by the publisher, to cover their immediate living expenses and research costs. But the bulk of their compensation comes in the form of "royalty" payments, calculated as a percentage of the publisher's gross receipts from all future sales of the book. While the author will want to negotiate the highest possible advance and royalty percentage, there are many other variables that should be considered.

First, authors should read their contract to be sure royalties are calculated based on the "list"(cover) price, not the wholesale price, and not the publisher's net receipts. This is because bookstores buy their stock for resale from the publisher at a \(45\) % discount from the list price. Much of the book receipts are applied by the publisher to cover its cost for editing, manufacturing, advertising, selling, shipping, and warehousing the book, as well as its overhead, such as rent, general payroll, and utilities.

The lion's share of the author's compensation depends on strong book sales. But unfortunately, after the book is written and the book contract is signed, there is not much more the author can do to increase sales. The book's success will depend largely on the publisher's efforts at distribution. If the publisher fails to advertise the book widely, or cannot get many bookstores to carry it on their shelves, the book will earn little despite its quality, since potential readers are unlikely to even realize that it exists. First time authors may assume that publishers have every incentive to promote the book effectively, since their profits also depend on book sales. But this is not always the case, for several reasons. Some large publishers seek to gain prestige in the industry by publishing a wide assortment of diverse themes, even though they believe many of these will not be profitable.

Consequently, they will not promote vigorously those books they assume are loss leaders. Also, some publishers large and small concentrate the bulk of their advertising budget on promoting a few projected bestsellers, while leaving the other titles to split whatever is left. Finally, some smaller publishing houses simply lack the sales force, contacts, and territorial reach to promote a book effectively. If the book fails to sell well for any of these reasons, the result may prove financially disastrous for the author, since bookstores, seeking to carry the newest titles, will often remove from their stocks, and return, any copies unsold after 1-2 months.

For the following question, consider each of the choices separately and select all that apply.

1. According to the passage, in which of the following cases would a publisher not be motivated to advertise or market a book?

A. The publisher's overall strategy with regards to the allocation of advertising budget does not favour this book
B. The author's intention behind writing this book was not to generate incremental sales but to gain acclaim or popularity
C. The publisher does not have an adequate sales force at its disposal to inform potential buyers about this book.



Select a sentence in the passage that identifies an assumption experienced authors are unlikely to make.





Which of the following assertions is best supported by the information in the passage?

A. There is no difference between wholesale price and net receipts of a publisher
B. It is possible in some cases for the net receipts to be greater than gross receipts
C. Net receipts do not include advertising and selling expenditure
D. Gross receipts do not include the expenditure incurred on editing the book
E. An author may gain more by fixing royalties on the wholesale price than on the gross receipts