How to Calculate Your Audiobook Royalties

How to Calculate Your Audiobook Royalties

Let’s dive into the math behind all the different business models.

Selling your audiobook across several business models and distribution partners can be confusing. However, choosing the right array of distributors across retail and library platforms can help you maximize listeners and sales. This post will explain different royalty scenarios to help you understand your options.

Note: To keep it simple, we’ve built our demos with example list prices of $10 for retail and $20 for library. With Findaway Voices, you set your own list prices.

Retail Purchase Models

One-Copy, One-Use Retail

This is the easiest business model to think about. A customer exchanges money for an audiobook. Every time a purchase happens, you’ll get paid between 32% and 50% of your retail list price (depending on the terms set by the distribution partner). You’ll earn the same royalty payment even if the retailer discounts the book.

The royalty formula:

Retail List Price x Royalty Percentage = Royalties Generated

In our example with a list price of $10:

$10 x 50% = $5 royalty

And if a retailer decides to discount your audiobook:

* Author sets list price at $10
* Retailers discounts audiobook to $8
* Customer buys audiobook for $8
* 50% royalty still calculated from $10 list price: $5 royalty, lower margin for retailer.

Credit Subscription

This model is functionally the same as the previous (one-copy, one-use retail), except that the money exchanges hands earlier in the process in the form of a monthly subscription. In return, the customer get a credit every month that can be redeemed for any audiobook in the retailer’s catalog. The author is still paid their royalty based on the list price, not the credit/subscription cost.

* Customer purchases credit for $15
* Retailer lists audiobook price at $10
* Customer redeems $15 credit for $10 book
* Author's royalty is a % of $10

Note: A handful of vendors, including Downpour, Apple, Amazon, and Audible use the same transaction mechanics as the retail models, but hold the power to set their own price and subsequent royalty payout for your book.

Unlimited Subscription Models

In unlimited subscription models, a user will pay a fee to have open access to any audiobook on the platform, and could access as many books they want without any further costs (think Netflix). The benefit of these models is that there is freedom in exploration for listeners, creating a greater chance they will try your book. The royalty amounts tend to be lower than other retail models, but the upside is you get access to a huge new audience who can try your book without the barrier of making a purchase.

That said, Findaway Voices supports two different types business models for unlimited subscriptions, with some significant differences between them.

Combined Portions

In the Combined Portions model, your book is divided into fifths (by runtime) and you are paid a percentage of your list price every time the entire base of listeners combined listens to 5/5ths of your book. So, one listener could listen to 1/5 of your book, a second listener 1/5th of your book, and a 3rd listener 3/5ths of your book and you will be paid the same as if one listener listened to the entire book. This model provides an advantage to you because five individual listeners doing nothing more than giving your audiobook a try can equate to a full sale and money in your pocket.

Pool Subscription

In a pool subscription model, customers pay for access to a service, and a portion of that fee is grouped into a pool. The more subscribers a service gets, the bigger the pool of money is. Royalties for each audiobook is driven by how much listening that audiobook drives. In this scenario, there is no formula tied to a retail list price. The more customers listen to your audiobook, the more money you make, and the more subscribers a service has, the bigger the payout pool is.

Library Models

One-copy, one-use

When you distribute through libraries, the one-copy, one-use model plays out similarly to the retail equivalent where the library buys one copy of your audiobook to put into circulation. However, just like books they have on the shelves, libraries have the right to lend your audiobook an unlimited number of times as long as they are only giving one patron access at a time. To maximize profits with this business model, we typically advise authors set their library list price 2 to 3 times higher than their retail price.

The royalty formula:

(Library List Price) x (Royalty Percentage) = Royalties Generated

In our example with a list price of $20 (2x higher than the retail price):

$20 x 45% = $9 Royalty

Cost Per Checkout

In the Cost Per Checkout (previously called “Pay-per circulation”) model, instead of buying a license to your book up front, libraries can offer your title to patrons at no initial cost, then pay a small amount to you each time a patron borrows your audiobook. This is a fantastic opportunity for independent authors and small publishers who would typically have a hard time convincing a librarians to pay for a license and promote their title.

Wrapping up

Before I button up here, one last note. All of these calculations measure the royalties your titles generate, but don’t forget that Findaway collects a 20% distribution fee. That 20% is put toward adding valuable features, helping you grow sales, and managing distribution to listeners around the world.

If you have any questions or recommendations, don’t hesitate to let us know!

This information may change from time to time, so read the distribution agreement available on the Findaway Voices website!