SHOW ME THE MONEY

There’s a lot of confusion (even amongst published authors) on the money side of publishing—particularly when it comes to earning out an advance. It seems no one really knows until the royalty statement arrives how they are doing, and whether they have any hope of earning out.

But let me back up—what is an advance? It’s the payments made by your publisher for the purchase of your book. Yes, payments, as in plural, because you don’t see it all at once.  Your publisher pays an advance, roughly based on how well they think the book will do. When the book comes out, you begin earning royalties, which are first credited towards earning back that advance–or as it is more commonly known: earn out.  If a book has “earned out,” than it means enough copies have sold to pay the publisher back for the advance.

First, let’s make sure you understand the basics about GETTING your advance:

Let’s use some numbers here. A very average first time advance is about $10,000. This would be divided into either two payments or three, but it’s becoming increasingly more common to be divided in three, so let’s go with that. We’ll also assume it is a single book deal.

The publisher calls you (or your agent) and makes an offer. You pop champagne, you negotiate basic contract points, and you agree to the deal. It will take your publisher anywhere from a few weeks to several months to send you the contract.

Once you have signed the contract and mailed it back, they will process your first check. In this case, $3,333. Assuming you have an agent, it is routed through your agency, they take their 15% (about $500) and send you a check for $2,833. Don’t go blow it all, though, remember you have to pay taxes on that money. Also, you might need a professional website.

Anyway, your next payment would come when your book has been delivered and accepted. This means all major revisions are done and the book has been sent to copyedits. Then along comes your $2833.

The last payment comes, most commonly, on publication. And yes—that is 12-24 months after they make that offer. So you’re clearly not getting rich here.

Next, let’s look at royalties:

Royalty rates vary widely, especially when you consider that some publishers pay on retail price and some pay on net received. We’re going to go with some very average numbers here, all based on retail.

One point of confusion—even for published authors—is that your retail price may be $16.99 but Amazon is selling it for $12.99. It doesn’t matter, though—your royalty is calculated on the full retail price. It’s amazon who is taking the hit here.

If your book comes out in trade paperback, chances are your royalty rate is between 6 and 8%. For hardbacks, it can vary between 8% and 12%. Generally your contract will also have escalation clauses—like, If you sell 25,000 copies, your royalty goes from 10% to 12%. So you can imagine that it gets complicated.

So, to keep it simple, let’s say your book comes out in trade paperback original, with an 8% royalty rate. If the list price is $9.99, you’re getting about eighty cents a book. You need to sell 12,500 copies in order to earn out.

What happens if you don’t earn out? Is your career done for?

If your book fails to earn out its advance, it doesn’t mean your career is over- not necessarily. Your original publisher is the one with all the information and they may or may not want to publish your next book. If they do, you have a whole new chance to break out. Also, remember that just because YOU didn’t earn out, doesn’t mean your publisher hasn’t made a profit.

If they don’t buy your next book, it means you’ll be submitting it more widely.

Here’s what to remember—other publishers can look up your bookscan data (which is a paid service that provides sales data that covers about 70% of sales to consumers, but isn’t always accurate) but they DO NOT know what your advance was. They DO NOT know what your print run was, what your royalty statements say, etc.

Lately, we’ve seen A LOT of mega deals in the YA world. Some mid-six figure deals, even. And that’s a lot of pressure to earn out, and it’s easy to fail at such a mighty task. But that doesn’t mean you’re sunk. If you needed to sell 200,000 copies to earn out that gigantic advance, and you sold 75,000, you’re not even close. But to an outsider, if they do not know what your advance is, 75,000 is a pretty solid number.

A mention on world rights:

The last thing to keep in mind is subrights—audio, foreign, etc. Many of those mega deals are for world rights, which means your publisher submits and negotiates translation/foreign deals. You split that money with them—anything from 50/50 to 90/10. A real average is 70/30. (70 to the author, 30 to the pub). SOME of those mega deals have earned out before they are ever published, based on foreign deals alone.

Earning out based on foreign rights and not on sales doesn’t mean you’re a raging success, but it alleviates much of the risk for your publisher, and it, too, may play a part in whether they buy another book from you.

Ultimately, it’s good to understand the numbers, but authors have little to know control over whether a book does well. Focus on writing your next amazing book instead.

Mandy

Agent, D4EO LITERARY

Author

www.mandyhubbard.com

@mandyhubbard