Once upon a time, the reserve against returns was kind of necessary. Books only sold in print. All those print books were fully returnable. Sometimes 70% of the copies were returned.
But now, books sell digitally, with very few returns on ebooks and downloadable audio. Printed books are still fully returnable, but for a great many books, sales through channels that lend themselves to especially high return rates have dwindled. I'm not saying reserves are entirely unnecessary. I'm saying it's time to push back on doing things this way because they've always been done this way, accepting reserves in any quantity when they no longer serve their original and intended purpose.
There are too many business practices tilting against authors, and we can't continue to accept all of them.
Dear CEO:
I hate arguing about pennies, but I also don’t understand why publishers want to keep pennies from my authors for no reason, holding reserves on titles where none is necessary.
I’m attaching the summary page of the just-received royalty statement for [book by my client] by [client name], as the quintessential example of this.
Please notice the book earned $1750 in ebook royalties.
So how can you justify the 92 copy reserve on the trade paperback?
The trade paperback royalty per US copy is $1.20. If the ebook royalties were to drop by half on [book by my client], [you] would still have $875 to credit to the author’s royalty account on the next royalty report. That is a sufficient reserve to cover the return of 730 trade paperback copies. The actual returns on the trade paperback were 46 copies.
This isn’t reasonable. It’s time for your contracts to acknowledge that, and to renounce the right to hold reserves against returns when ebook income can reasonably be expected to cover print returns, as is clearly and abundantly the case on this royalty report, and on so many others.