Contracts and incomebers, odd-sounding designations, and debits and credits arranged
in bizarre ways, these reports were called "royalty statements." CPAs
and other financial experts found them appalling.
In the last five years authors and agents have begun to rebel.
Writers' organizations have called for reform and have devised
model royalty statements. A committee from the AAR has visited
with executives at major publishers to encourage them to reformat
their royalty statements and provide more information.
These efforts have produced results. Slowly but surely, publish-
ers are beginning to issue more logical and complete statements.
Simon & Schuster and Penguin USA, formerly two of the worst
offenders, now send statements that are far easier to understand
which is not to say that they are simple. Far from it.
To be fair, it must be said that accounting what is due an author
is not a breeze. There are many different ways for books to be sold,
varying royalty rates, many types of rights and subsequent splits to
keep track of, all of which makes the royalty department's job cum-
bersome. Antiquated systems do not help. Many sub-rights depart-
ments, for instance, still keep track of sales on index cards, and
record payments by hand.
In this age of computers and automation, though, there is no
excuse for shoddy accounting. Besides, publishers have a contrac-
tual obligation to accurately pay authors what they are due.
Even with the improved statements, there is a lot of artfulness in
royalty reports. The chief reason for this is the returns system, that is,
the ability of bookstores to return unsold copies. Thus, while 100,000
copies of a book may have been shipped and billed, until all the returns
are in no one can know for sure how many copies were actually sold.
To guard against this potential hit, most publishers hold a
"reserve against future returns" when reporting sales. Formerly, the
numbers of copies printed, shipped, returned, and held "in reserve"
were secret. Today, reformatted royalty statements usually include
most of that information. Even when those figures are absent,
authors and agents can request a "reconciliation to print," which is
a fancy way of saying "figures that tell the whole story."
For authors, the crucial question is What is a reasonable reserve?
British contracts sometimes spell out a reserve formula that allows