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Royalties: Perception vs. Reality 

Do you remember the scene in the movie "Arthur," when our loveable main character was having a meeting in his father's office? Arthur was told if he didn't marry Susan, he would be cut from the will and lose his $750 million inheritance.

"You know, when the light hits Susan's face a certain way, she really is beautiful," Arthur replied, "Of course, you can't always depend on that light."

Well, that sums up exactly how I feel about royalties.  

If you're a copywriter specializing in direct response, you've probably heard about royalty payments. You take a lesser fee for writing a package. Then, if the test mailing is successful and the package "rolls out", you'll earn anywhere from .01 cent, .02 cents, or even more depending on how many pieces mail.

Rollout quantities differ, but if you take a typical rollout of say, 250,000 pieces and you're earning a royalty of .02 cents apiece, it means an extra $5,000 in your pocket. If your package becomes a top control and mails over 1 million pieces, that's a cool $20,000 on top of your fee.

Not bad, right?

When you hear of copywriters earning six- and seven-figures a year, it's because of royalties. I do earn royalties on some packages. And I'm the first to admit there's nothing nicer than receiving a check in the mail for an extra $5,000 or $8,000 -- and not having to strike a single finger on the keyboard to earn it.

When royalties work, it's a beautiful thing. But, in my experience, you really have to depend on the moon, stars, and plants to line up in a certain way in order for you to receive them.

And I gave up on astrology years ago. 

3 Reasons Why I Prefer Flat Fees 

In most fee + royalty situations, clients (rightfully) expect you to cut your fee anywhere from 20% to as much as 50%, since you'll be paid on the back end.

That is, assuming your package is a success. And these days, that's a BIG assumption.

You see, you can write the best copy in the world. But as far as the success of a package, only 20% is due to the creative. 40% has to do with list selection, and the other 40% is due to the offer -- also known as the famous 40-40-20 rule.

I know many of my colleagues don't agree with me on this one, but I've become so disenchanted with royalty arrangements that I prefer to work on a flat fee. Here's why:

Reason #1: There are simply too many parameters out of the writer's control.

You don't know how large the test mailing will be. You don't have any say as far as the list selection. You can suggest various offers, but the client can easily overrule you with a (less effective) one of his own, i.e. a continuity offer (which depresses response as much as 50%.)

Reason #2. There's no guarantee when -- or even if -- your package will mail.

Budgets are cut. Test mailings are postponed or cancelled. Financing dries up. It happens all the time.

In one situation, I cut my fee by 30% with a promise of .03 cents on the back end. I had assurances from colleagues this client mailed very heavy, and I could realistically expect to make an extra $20,000 in royalties. I handed in my draft, and my client loved the copy. The piece was designed. Only problem? The client decided not to market the product and the package NEVER MAILED.

More recently, a magalog I wrote for a new client (working on a flat fee basis) finally mailed -- one year after I finished the first draft! Imagine if I was waiting with bated breath for royalties on that one?

Plus, the time of year your package mails is important, too. August and December, for example, are horrible months for my area of direct response. If some obscure marketing director mails your package at the wrong time....well, I don't have to tell you what happens next.

A few years back, I wrote a component package for a terrific "comfort food" cookbook. To my shock, the client mailed it in June, right at the start of the summer barbeque season. Naturally, the package failed.

Reason #3: You have to rely on your client to be honest.

When your package mails, it's YOUR responsibility to track down your client and see if you are owed any royalties. Don't expect clients to be proactive about providing you this information.

90% of clients are honest and will provide you with the postal records of how many pieces mailed. But you have to be aware that some will hide this information, too. They can schedule mailings they'll forget to tell you about. They can mail far more pieces than they say. I've even seen cases where clients "cook" numbers to show your package didn't beat the control after all!

And let's say your package does win? A client can decide not to re-mail it because "the average order wasn't high enough" ... "the production costs were too expensive"... or they lost money on the back end. I know of cases where a client changed a few headlines and some body copy, and claimed it wasn't the writer's package at all!

These scenarios don't happen often, but they do happen (in fact, they've all happened to me!) In the end, the client is in control and you have to trust they'll do the right thing. Call me cynical and jaded, but I'm not comfortable with that at all. 

Clients Don't Like Royalty Arrangements, Either 

To be fair, several of my clients have told me their own horror stories with royalty payments. And as a former client myself who has hired dozens of freelancers, I can't blame them.

It was one thing to pay out royalties a decade ago when response rates were a healthy 4% and 5%. But in today's economy of 1% response rates and more competition, clients are now making razor-thin profits on their mailings. So in lieu of royalties, they prefer to offer a higher flat fee, or a flat-fee-plus-bonus structure if the package mails, say, 500,000 pieces.

Also, as a cost-cutting move, marketers like to use portions of a direct response package for inserts, email blasts, or sales support brochures, where keeping track of royalties is next to impossible. One client I regularly work with (a VP of Marketing for a major nutritional supplement company) told me of many run-ins with copywriters who demanded royalty payments when they weren't entitled to earn them. And she wasn't the only one!

The fact that I don't ask for royalties has made clients use me again and again. It's a nice, clean arrangement for everyone. It works for them, and for me.

Sure, if a client offers to pay me my regular fee PLUS .02 per piece mailed, I'd be nuts to turn it away. But cut my fee for a royalty payment? That's not for me. I'm not a gambler by nature, and I can't pay my bills with promises of big royalty payments that may never happen. I like knowing how much my fee will be. I like being in control.

See you next month,

Donna, Victoria, and Beth

The 3Chix