Kobo Plus royalties are paid out of the pool of revenue earned from subscribers to this program. The royalty rate for Kobo Writing Life authors is 60%.
How does it work? Let's look at an example.
Let’s say in a particular month there are 1000 subscribers paying €9,99, and they read a total of 500 books (reading at least 20% of each book counts as a "read"). The retail price of the book is €17.99.
The payout is based on several factors. First, we calculate Reading Activity Value, i.e. what the revenue would normally be for a book.
Reading Activity Value = Total number of ‘reads’ x price of eBook
Reading Activity Value = 500 x €17.99 = €8,995 (all numbers VAT excl.)
Next, we calculate the Price Factor. Price Factor is the ratio of total subscription revenue (subscription price x number of subscribers) to Reading Activity Value. It determines how many times revenue was earned by subscriptions compared to what would have been regular ebook revenue. The higher this number, the bigger the royalty payout will be.
Price factor = Total revenues for the month ÷ Reading activity Value
Price Factor = €9,990 ÷ €8,995 = 1.11 (all numbers VAT excl.)
Subscription revenue was only 1.11 times more than what regular ebook revenue would be. So Kobo would pay publishers 1.11 times more than what they'd normally earn from an ebook being bought at a regular price.
Kobo pays publishers/authors out of the total subscription revenue. Now we can calculate publisher share by Reading Activity Value (what would have been regular ebook revenue) x Price Factor
[€17.99 x 500] x 1.11 = €9,990
Publisher/Author receive 60% (for example) = €5,994
Retailer receives 40% = €3,996