We’re doing “Ask the Agent” this month — your chance to ask that question you’ve always wanted to discuss with a literary agent. Someone wrote me to ask, “What does an average first book deal pay? And can you explain how money is paid on a traditional publishing contract?”
Happy to explain it. First, when you sign to do a book with a legacy publisher, most authors are paid an advance against royalties upon signing the contract. There’s a long tradition of publishers paying advances to authors, since it allows the author to survive while he or she is working on the book. This isn’t free money — it’s sort of a no-interest loan that will be earned back after your book releases.
Let’s say the contract calls for a total advance of $15,000. Typically you’d get one-third of this on signing, another third upon turning in the completed work, and the last third upon publication. (That said, there are a million ways to divide the advance. Some pay half on signing, some pay a percentage when the author completes the bio and marketing forms, Random House wants to pay a portion when the book flips from hardcover to trade paper, etc.) So when your book releases, you’re now in the red $15,000 with the publisher. You’ve been paid that amount, but you haven’t earned anything back yet. Again, that’s not a loan that needs to be paid back, but it’s advance that needs to be worked off — or, in the parlance of the industry, it needs to be “earned out.”
Second, it’s really tough to determine an average first-book deal. Nobody shares the numbers. And the deal points have so many factors: the author platform, the potential media exposure, the timeliness of the topic, the bigness of the idea, the quality of the writing, etc. I’ve done first-book deals for as little as zero (no advance was paid) and one first-book deal that ran into seven figures (that’s not an exaggeration, by the way — but it was a very unique situation). Debut fiction tends to pay less than debut nonfiction, in my experience, and the size of the publishing house makes a difference — the bigger houses tend to pay a larger advance on a first book. And if you’re working with a small press, they may not pay an advance at all. So it’s hard to determine an average — you have to think in terms of economies of scale.
Okay… so have I begged the question enough? Then I’d say if you’re getting an advance on your first novel, it’s most likely going to run somewhere between $5000 and $15,000, depending on the publisher and the story you’re telling. And if you’re getting an advance on your first nonfiction book, it’s most likely going to run somewhere between $5000 and $20,000, depending on your platform, credentials, and the cultural interest in the topic. I really don’t like giving those numbers, since I just agreed to a debut nonfiction book for $50,000… but the author has huge media interest, so publishers were willing to pay more. AND I just agreed to a debut novel for $20,000… so you never know. Whenever I think I’m sure of the value of a project, I get surprised by the only interest being some lowball offer, OR surprised by a publisher going crazy for the idea and offering far more than I thought we’d receive. Again, it’s just hard to take the hundreds of debut books each year and say “this is what you can expect on your first contract.”
Third, as your book sells you are credited with money for each sale. That’s your royalty money, and with each sale it slowly reduces that $15,000 debt. Most trade publishers in the general market (that would include Penguin Random House, HarperCollins, Macmillan, Simon & Schuster, Hachette, etc.) pay a standard royalty on hardcover books: 10% of the book’s retail price on the first 5000 copies sold, 12.5% on the next 5000 copies sold, and 15% thereafter. Royalties for most trade-paper books are 7.5% of the retail price, and mass market books pay a bit less than that. Be aware: Many newer publishers, including most CBA publishers, don’t pay on the retail price of the book — they pay on the net price, which is the amount of money the publisher actually receives from the bookstore. In that case, you negotiate royalties on each book. Though those royalties may seen higher, you’ll have to do some calculating to determine which method will pay you more money.
Let’s do the math: If your book is a $25 hardcover, and you’ve got a traditional book contract with a legacy publisher, you’d be making $2.50 for each of the first 5000 books sold. (Did you see how I got that figure? $25 x 10%.) What happens is that the publishing house keeps track of that figure, and applies that as a credit to your account. So if you sell one book, you no longer are in the red $15,000 — they credit you with $2.50, so you’re now in the red $14,997.50. After the first 5000 copies have sold, your earnings jump to $3.12; and after 10,000 copies have sold, you are earning $3.75 per book. With every book sold, they credit your account the appropriate amount. Eventually you erase the $15,000 negative balance (you “earn out”), and you begin making money that will be sent to you a few times per year. Now you’re in the best possible situation — a company is going to send you checks on a book you finished a year or two ago. There’s no better feeling than getting a healthy royalty check and remembering that you’re making money on a project you’re no longer working on.
BUT be aware that not everybody is going to sell your book for the full retail price. Barnes & Noble is going to discount all new hardcover titles by 30%. WalMart is going to use their random-number generator and charge readers $18.74. Every time the sale price changes, your royalty earning changes. (Yeah… it’s a pain.)
Fourth, keep in mind that each version of your book will have a different royalty, so the industry standard ebook royalty for legacy publishers is 25%, which sounds great when compared to print royalties, but in effect is low in terms of the percentage of profits. (That’s why indie publishing aficionados tend to be so negative about traditional publishing.) And remember that different companies will offer different contracts. So a hardcover book with, say, Tyndale Publishers, doesn’t use a traditional royalty structure. You might negotiate a deal for 16% of the net price. So if your $25 hardcover book is bought by Barnes & Noble for $12.50, you’d be making $2 per book ($12.50 x 16%). If WalMart buys a slug of them for $10 each, you’re only making $1.60. In other words, the financials on a net contract are completely different than on a traditional retail sales contract. You have to negotiate them, and keep a close watch on your royalty report. AND, just to confuse this even more, many of the new era publishers are paying more often, or paying a higher royalty. Some of the start-up publishers are paying authors 50% of net on ebooks, and anywhere between 10% and 50% of net on printed books. Some of the smaller print houses are paying a very small royalty on print books. Amazon publishing is paying 30% on ebooks. It can seem like the Wild Wild West at times, so you have to make sure you’re comparing apples to apples. Sure, Amazon is paying authors 70% of the sales price on most self-published titles, and they’re sending the author a check every month… which means it’s a great deal if you can sell books. As with anything else, if you can sell your product yourself, you’ll make more money, but you’ll also have more responsibilities. It’s why I’m happy to talk about the financials with authors — they can be confusing if you don’t know what you’re doing.
Fifth, understand that every company will have its own payment schedule. Some publishers pay once a year, some twice a year, and some four times per year. Whether or not your book has earned out, you should be receiving a royalty statement from the publisher for each pay period, stating exactly how many copies of your book sold, what your earnings are, and either (A) the amount of money you are being paid or (B) the amount of money you’re still in the red. And by the way, I’ve used the terms “debt” and “in the red,” but again, an advance is really not a loan, in that you’re not required to pay back an unearned advance. Finally, the rise of ebooks has created a decline in overall advances, making it harder than ever for an author going the traditional route to make a living. Advances are down, but opportunities are up, and that means authors have more choices to make and more things to consider when trying to map out a career.
Whew. That’s a lot of information. Does all that make sense for the basic economics of getting paid? Feel free to ask me follow-up questions.