It’s a basic principle of economics that you can’t get something for nothing. As they say, there’s no such things as a free lunch.
When a self-publishing company (or a “hybrid” publishing company or whatever other term they’re now misapplying) offers a 100% NET contract, it’s a bad idea.
I am absolutely a proponent of self-publishing for many authors. Over the past ten years, I’ve helped hundreds of clients successfully self-publish their books. Two-thirds of my clients are profitable, and many of them have won awards and achieved bestseller status.
There’s a right way and a wrong way to self-publish. Working with a company that claims to provide a valuable service yet also claims to pay you 100% of their earnings is almost always the wrong way.
NET is a common term used in the publishing industry. It represents the total amount of money left over after the publisher’s expenses to print and distribute the book. Printing, freight, discounts offered to the retailer, and sometimes labor costs or even marketing costs are deducted from the sale price of the book to find the “Net” price. NET is the leftovers after everything has been paid.
For most publishers it’s simple. The publisher provides the book files to the distributor, like Ingram, who handles all of the printing, shipping, fulfillment, etc. The distributor handles all of the costs and sends the publisher a check for whatever books have sold, less all of those costs. That check amount is typically the “NET.”
Royalties are usually calculated as a percentage of NET. The publisher is saying, “Whatever we make, we’re going to give you X percent of that.”
For a traditional publisher (a Big Five company), a standard first-time author contract offers 7% of NET.
For a small press, an author might receive 7%-35% of NET.
There are a few ways to self-publish. When I say self-publish, I mean any book production process in which the author is the primary financier or the ultimate decision maker.
As a self-publisher, you may self-distribute. You will do the work of getting the right files to distributors like IngramSpark or Amazon’s KDP platform, and you’ll manage the process, troubleshoot, and do some customer service. In this case, you’ll receive and keep 100% NET. Everything that comes in is yours to keep, and that’s great.
Or you may hire a company to do these things for you. It’s not for everyone, but there is a lot of value in having someone else provide these services. It’s easier, it frees you up to do the things that only you can do, and in many cases, a professional distributor can achieve better sales results.
Companies that perform these services typically split the NET with the author or publisher. That’s how they get paid to provide these services. Depending on the company, the author may receive anywhere from 20%-100% NET.
If you’re investing money into the publication of your work and taking financial risk in the project, you deserve to receive the lion’s share of the financial proceeds from your work. The risk-taker deserves the reward.
However, while you should receive the majority of the NET when your book sells, if a self-publishing company publicizes an offer of 100% NET, be suspicious. This is a huge red-flag that the company you’re considering working with isn’t on the up-and-up. More is not always better.
Here are three reasons why you should be leery of any company offering 100% NET:
First, it’s a lie. Distributing your work and providing other valuable services requires resources. It requires human bodies to provide customer service and correct problems, and it requires a business infrastructure with overhead and taxes due.
If a company is saying they provide 100% of NET, it simply means that they’re charging you for those costs in another way. Those costs could trickle down to you as high annual fees or other hidden costs.
In many cases, “fees” are deducted from what the company receives before your net is calculated. So “100% NET” really means, 100% of what we give you after we take some out. “You get 100% of what we give you,” is really what they mean.
The company needs income in order to provide great customer service. So there’s nothing inherently wrong with them collecting money some way or another to do that. However, the idea that you’re receiving 100% NET is often dubious or disingenuous. If the company is willing to make claims like this, what other less-than-forthright claims are they making?
Second, even if the first point isn’t true, then their business isn’t sustainable. It takes money to keep the lights on. If they’re truly offering a service at no charge to you, how long can that last?
A Ponzi scheme relies on new investors. New investors sign up and invest cash, which the scam artist pretends to invest, but really uses to pay out exaggerated returns to earlier investors. The scheme works for as long as new investors are signing on, to pay dividends to the earlier investors.
A 100% NET claim can be much the same. If the company is truly paying out 100% NET to you, that means that they’re absorbing the cost of the labor and resources required to distribute your book by padding it into the packages they’re selling new authors.
That means that you’re paying too much on the front end. But more importantly, if the stream of new authors signing with the company ever stagnates, the whole system is going to come tumbling down. The number of authors who need customer support is always going up and becoming more demanding, so it doesn’t just take a steady stream of new authors, the company actually has to continually increase their acquisition rate. The rate of sales can never just stabilize and float—if it ever stops growing things get bad fast.
When a publishing company crashes (self-publishing or otherwise), it gets sticky. It’s hard for authors to get their titles back, or in some cases those titles can even be sold to another company with different publishing terms. Sometimes, by mandate of the bankruptcy court, there is an Insolvency Test. When you sign with someone, it should be important to you that they’re operating ethically, but also operating sustainably so that it doesn’t cause you big headaches in the future.
Third, even if somehow you find a company claiming 100% NET and reasons one and two aren’t true, the only way to reasonably do this would be to provide zero services. They’re not taking anything because they’re not doing anything, in which case why add a third party and complicate the system?
You can distribute your own work. But there is value to hiring a professional company to do this for you, assuming they’re actually doing anything. Professionals bring expertise, and their tips and tricks can have a huge impact in total sales over the life of the book.
Even more critical, self-distribution can be a real pain in the butt. Amazon and other retailers list titles as “out of stock” randomly and seemingly for no reason. When you self-distribute, you will on occasion spend long amounts of time on hold, waiting to talk to someone in India who can solve the problem. You will spend time sending emails, only to get canned responses back. It’s annoying and frustrating. You have better things to do, like market your work or write the next book.
A professional company has two really important things working for them. They have backchannels. They don’t just call the 1-800 number and wait on hold, they often have direct contacts who have authority to make things happen, so resolving your problems is much easier.
And they have leverage. Good companies have lots of titles out in the world. Retailers have more to lose when dealing with a larger company. When you call up Amazon about your out-of-stock title and threaten to discontinue your relationship with them, they say “Shucks, we’re really sorry to hear that.” When somebody with thousands of titles that generate real revenue for them makes a phone call, they’re a lot more likely to be interested in finding a solution.
And when you have professionals working for you, even if they don’t have backchannels or leverage, they’ll at least do the calling and waiting on hold, the emailing and banging their head against the desk. You have better things to do.
But a company truly offering 100% NET can’t provide any of these things. If they’re not making the money off of you somewhere else, the only way to sustainably distribute and give the authors ALL of the money would be to devote zero labor to post-release customer service and distribution.
There’s great value in having someone assist you with the production and distribution of your book. At Columbus Publishing Lab, our authors perform 1000% better on average than their DIY counterparts. That’s worth paying for. It’s surely better to have 80% of 10x, than 100% of 1x.
This isn’t a sales pitch for CPL, but simply an example of doing it right. There are other companies who do things well, too.
When you work with people, you want to work with people who get paid enough that they have the bandwidth to do a great job. And if their livelihood is tied to your success, even better. When you share a small portion of your NET with your publishing company, you incentivize them to resolve your problem because their income is tied to your ability to sell books.
So what’s the balance point? In my experience running self-publishing companies that perform ethically, profitably, and treat authors well, self-publishing companies can typically offer 70%-80% of NET.
If they offer any less they’re keeping money that belongs to you, the risk-taker. If they’re offering 100% NET, something smells.
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