Royalty contracts often have royalty rate escalators. With escalators royalty rates increase based on the quantity sold, revenue or retail price.

EasyRoyalties supports escalators based on sales for a contract, royalty rule, product format, ISBN and product group. Escalator rules will often exclude free books, deep discount sales, sales to the author from the royalty rate escalator.

Example 1: By Contract

For all products sold under this contract royalty rates is 10% of net for the first 5000 units sold, 12.5% for 5001 to 10,000 units and 15% thereafter. Free books, books sold at greater than an 80% discount and sales to the author are excluded from the escalator quantity.

Escalators based on a contract include sales of all products linked to this contract; Audiobooks, eBooks, paperback and hardcover unless a format is specifically excluded from the escalator.
Escalators based on a contract (i.e. sales of all products linked to a contract) are not common.

Example 2: By Format

For all paperback products sold the royalty rate is 10% of net for the first 5,000 units sold, 12.5% for 5,001 to 10,000 units and 15% thereafter. Free books, books sold at greater than an 80% discount and sales to the author are excluded from the escalator quantity.

This escalator totals the sales of all paperback editions linked to this contract. If there is a 2nd paperback edition the escalator level includes sales from the 1st edition and the 2nd edition.

The royalty contract may call for basing the escalator only on sales for the edition seperately. If this is the case, many publishers will create a new royalty contract for the new edition or create an escalator based on ISBN (see example 4 below).

Example 3: By Rule

For all paperback books sold at a discount of 55% or less the royalty rate is 10% of net for the first 5,000 units sold, 12.5% for 5,001 to 10,000 units and 15% thereafter. Free books, books sold at greater than an 80% discount and sales to the author are excluded from the escalator quantity.

A rule-based escalator only includes sales that fall under this royalty rule. For example, this example excludes paperback sales that were applied to a foreign royalty rate or a high; greater than 55%, discount.

Example 4: By ISBN

For Product 425 the royalty rate is 10% of net for the first 5,000 units sold, 12.5% for 5,001 to 10,000 units and 15% thereafter. Free books, books sold at greater than an 80% discount and sales to the author are excluded from the escalator quantity.

A by ISBN escalator is used if the royalty contract escalator resets for each edition (2nd edition, 3rd edition, etc.) of the product.

Example 5: By Group

For product 425 and product 525 the royalty rate is 10% of net for the first 5,000 units sold, 12.5% for 5,001 to 10,000 units and 15% thereafter. The escalator quantity is the total quantity sold for both products. Free books, books sold at greater than an 80% discount and sales to the author are excluded from the escalator quantity.

Escalators based on product groups are used if the escalator combines sales from products listed on multiple contracts. This may occur if you assigned related products to contracts to track royalty advances on each product separately.

Tip: To exclude sales;such as export sales or deep discount sales, from an escalator create a royalty rule for those sales and select the check box for exclude sales for this right from royalty escalators.

Tip: Royalty escalators for paperback and hardcover books are usually based on quantity sold. Escalators for eBooks are usually based on revenue.