Business Resources for Authors

Who Pays for Affiliate Programs?

NestEgg

The lure of an extra 5-15% in affiliate commissions is very attractive. But where does that affiliate money come from?

Many authors participate in the numerous affiliate programs offered by book retailers and even publishers such as Harlequin. And more affiliate-based book promotion web sites are appearing on the Internet. The lure of an extra 5-15% in affiliate commissions is very attractive. But where does that affiliate money come from?

Depending on your distribution agreement with a retailer or your contract with your publisher, it may come from you.

A quick review of contracts (all the ones we reviewed are publicly accessible on the retail sites) show significant differences in how affiliate commissions affect payments made to self-published authors.

KDP: calculates royalties on the list price of the book, unless they’ve discounted it to price match other retailers. If royalties are at the 70% level, they charge a delivery fee based on the size of the book, but there are no mentions of deducting affiliate fees.

PubIt!: calculates royalties on the list price of the book and makes no mention of deducting affiliate fees.

ACX: (the self-pub audio arm of Amazon) pays royalties based on net receipts, and specifies that it deducts “cash incentives, promotional discounts, sales or use taxes, excise taxes, value-added taxes, duties, and returns” in this calculation.  (Scroll down below the lengthy royalty chart.)

Smashwords: offers an 85% net royalty (after deducting PayPal transaction fees, which they admit can be a hefty portion of an inexpensive book), but if your book is opted into their Affiliate Marketing Program, your royalty is immediately reduced to 70.5%. The affiliate earns 11%, and that leaves an extra 3.5% for Smashwords to pay for the program. Note: with Smashwords, your book is automatically opted into the Affiliate Marketing Program unless you opt-out.

Many publishing contracts calculate royalties, especially from third-party retailers, on net receipts. Any affiliate payment the retailer made is likely to be deducted before the publisher is paid.

Bottom line: be sure to review each contract you sign and understand how your royalties are/will be calculated. Otherwise, you may earn a lot less money than you think.

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2 Comments
  1. Just to clarify the position with Smashwords: the author gets 70.5% if it was sold through an affiliate link. If a book is in the affiliate program, but is not sold through an affiliate link, the author gets 85%.

    In both cases, the percentage is calculated after PayPal fees are deducted.

  2. Thank you, Russell, for the clarification. Sorry I was unclear. Yes, the lower percentage only kicks in when the sale involves an affiliate commission.

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