SHOW ME THE MONEY

20 Jan

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

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20 Responses to “SHOW ME THE MONEY”

  1. Julie Eshbaugh January 20, 2011 at 12:56 PM #

    Thanks Mandy! You are so good at demystifying the publishing world! 🙂

  2. lbdiamond January 20, 2011 at 1:00 PM #

    Great info! Thanks, Mandy! And congrats on your success!!!!

    • mandyhubbard January 20, 2011 at 3:25 PM #

      Thank you! 🙂

  3. brandimziegler January 20, 2011 at 1:08 PM #

    Thanks for the info, Mandy! I try not to think about this part of things because contracts make me nervous. Well, signing anything makes my palms sweat. It all started when I bought my first car when I was 18 and the thought of signing a document with that many 0’s on it made me want to puke. The commitment crippled me, especially since I was doing it by myself without the help of family or friends. I didn’t know where the engine in my car was located, let alone how often I should fill it with fluids, lol. Anyway, I’ll try not to break into a sweat when I sign a contract with a literary agent (gotta get that far first before I even consider a book deal).

    • mandyhubbard January 20, 2011 at 3:21 PM #

      Luckily, a contract with an agent is much simpler (1 page to 3 pages, as upposed to 10-20 with your publisher) and you’re not agreeing to anything money-wise, outside of the percentages they earn by seling your work. 🙂

  4. Feliza January 20, 2011 at 1:26 PM #

    Great article. There HAVE been a lot of mega-deals in YA lately, and when you combine that with most people’s reluctance to talk about specific dollars and cents, it’s very easy for us unpubbed folks to get inflated expectations.

    Not that I would ever say that a big advance for a first-timer is impossible–every day of the week, Publishers Marketplace proves that this can happen. But I do think that throwing out 10K as a possible advance for a single book is great for managing author expectations.

    • mandyhubbard January 20, 2011 at 3:25 PM #

      Yeah, those mega-advancese make 99% of debut authors feel like they failed. In reality it’s maybe 1 of every 200 deals that top six figures for a debut.

      And remember: if its a six figure deal but its for three books, it could be just $35,000 per book.

      (I wont get into the fact that some houses/agents will report deals in a higher category based on bonus clauses which may never kick in.)

  5. Wendy Delfosse January 20, 2011 at 1:58 PM #

    Thanks, Mandy! Follow-up question: If Amazon sells a book for under retail they take the hit and the author still earns full royalty… What about when Amazon offers books for free? Is that all on Amazon or Amazon & the publisher?

    • mandyhubbard January 20, 2011 at 3:23 PM #

      Free books are generally a promo item that you and your publisher have agreed to do. (i’ve actually never seen them free on amazon, but through various other websites.) Amazon usually requires a ninety-nine cent price.

      If for some rason amazon was giving away your book without you and your publisher being on board, they’d still be buying it from your publisher(then giving it away, thus taking a loss) and you’d still be getting royalties.

      The only free books I’ve seen on amazon were classics, in which the copyright has expired.

  6. Patricia Beaudin January 20, 2011 at 2:34 PM #

    Thanks for the info, bookmarking this one for safekeeping.

  7. Alexander M Zoltai January 20, 2011 at 3:14 PM #

    Mandy,

    I wonder if you’ve ever contemplate self-publishing?

    ……..

    I’m going over to post this on Facebook and Twitter 🙂

    • mandyhubbard January 20, 2011 at 3:28 PM #

      Hi Alexander,

      No, I never wanted to do self publishing. For several reasons:

      A) Its very unlikely I’d ever walk into a random bookstore/library and spot my book sitting amongst all of my favorite authors.

      B) I want the notoriety/respect that comes from being published by a big house.

      C)I want to spend my time writing my next book, not trying to promote my self-published book in order to get it into the hands of readers. To be successfully self-published, most authors have to do this, becuase readers wont discover the book themselves at the aforementioned stores/libraries.

      I think it can be a great way to go for many people, but it didn’t fit into my vision of what I wanted for my career.

  8. Megan January 20, 2011 at 3:16 PM #

    This is one of the more interesting posts I’ve read on here, maybe because I’ve read such little about it elsewhere. It’s heartening to know that if you don’t make the “earn out” you aren’t necessarily dead in the water.

    Maybe you would know this, maybe not, and perhaps you could post/have posted about this on LTWF before and I just haven’t found it yet, but what experience do you have with ebooks, especially in terms of those publishing contracts? I read somewhere that new authors need to be careful when it comes to signing because you don’t want to lose internet rights or future publishing options down the line. Are ebooks an option now when you land that contract?

    • mandyhubbard January 20, 2011 at 3:30 PM #

      Hi Megan,

      When it comes to ebooks, any major (and probably most medium sized / indie presses) are going to expect/demand that eobok rights be in the contract. It doesn’t mean you “lose” the ebook, it means that they have the right to publish it and you get royalties. The big hoopla these days is figuring out what is a fair/standard ebook royalty rate. One second they’re offering 25% and then next its 15%. Once upon a time the big pubs didnt ask for those rights at all becuase they didnt exist. Some authors have been able to then “selfpub” the ebook version and make a huge profit.

      That doesn’t happen any more– if you refuse to grant ebook rights, a publisher would probably walk away. It’s more about getting a fair royalty.

  9. Martha Ramirez January 20, 2011 at 4:26 PM #

    This was awesome info, Mandy! Thanks so much for taking the time to post it.

  10. Rebecca Mugridge January 20, 2011 at 9:38 PM #

    thank you for this, as a published author who is completely confused by it all this was really informative and helpful!

  11. Susan January 20, 2011 at 11:57 PM #

    Oh wow…very interesting stuff, Mandy! Thanks for all the info. I didn’t know all that about foreign rights when the publisher owns them — I’d been wondering how a person might be earning out before their book comes out!

  12. Kelly Polark January 21, 2011 at 5:23 PM #

    Wow! Extremely informative post!

  13. Abbe Tykwinski January 27, 2011 at 7:42 PM #

    This is an awesome post. I’m light-years away from having to worry about selling my book but I’ve always wondered how advances and royalties worked. Thanks!

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