Chip MacGregor

November 22, 2008

Authors Getting Paid


I've had several questions lately about how authors get paid…

Deonne wrote and asked, "Can you explain what an advance is, and how it is paid?"

Happy to. When an author signs a book deal with a publisher, he or she is usually paid an advance against royalties. Think of that advance as getting a loan against your future earnings. If the publisher has, for example, agreed to pay you a $25,000 advance, it means you're in the red that amount. As each copy of your book sells, your account is credited the amount you've earned. At some point, you sell enough copies that your book has "earned out" its advance. (So if you were paid $25,000 and you're earning $1 in royalty on each book, you'll earn out your advance when your book has sold 25,000 copies. Clear?) From that point on, you're making new money on each book. Your publisher will settle with you either quarterly or semi-annually, sending you a check for the money owed due to book sales.

Most advances are paid either in halves (half upon signing, half upon delivery of the manuscript) or in thirds (one-third upon signing, one-third upon delivery, one-third upon publication). Lately, publishers have been pushing authors to accept being paid in thirds, since it spreads out the payments a bit.

Dreema asked, "If my book doesn't earn out the advance, do I have to pay back the unearned advance?"

This is a common question, and the answer is "not normally." An advance is a shared risk — the publisher is risking that the author is going to write a good book, deliver it on time, and it's going to catch on with readers. The author is risking that he or she is going to take months out of life in order to create the book, then hand it over to a publisher who will do a good job of selling it. So assuming you turn in the manuscript and the publisher produces it and puts it onto store shelves, if the book does not earn out, the author is not required to pay back the unearned portion.

That said, there's one exception to this rule… With a handful of houses, the publisher may try to hold the rights hostage. That is, if your book goes out of print, those publishers will ask that you pay back the outstanding advance before reverting rights back to you. Thomas Nelson is perhaps the most visible publisher who practices this in CBA. I love the team at Thomas Nelson, and I think they're a very well-run company, but this is a practice that drives agents and authors crazy… As noted before on this blog, an author should not equate "unearned advance" with "losing money." A book may not earn out its advance, but that does not mean the publisher lost money on the deal. I've gone over those numbers on this blog in the past.

Cheryl wants to know, "What is an average advance and royalty for a new author?"

This isn't a a state secret, as some have pretended… it's just not an easy number to pin down. For a large publisher, an advance can range from a few thousand dollars to as much as $25,000 for a new author. It could be even greater if the author has a large platform, or a very unique idea, or there is a lot of organizational enthusiasm for the project. The number isn't pulled out of thin air; it's based on the number of copies the publisher thinks he can sell. For a smaller publisher, an advance could range from a few hundred dollars to a couple thousand dollars. Some small publishers are not able to pay an advance.

Royalty rates for most general market publishers are fairly standard. Hardcovers pay 10% of the retail price of the book for the first 5000 copies sold, 12.5% for the next 5000 copies, and 15% thereafter. Trade paper books will pay a flat 7.5% of the retail price, and mass market books will pay around 6%. So if you're working with a general market publisher and doing a $12.95 trade paperback, your earnings will be about a dollar per book ($12.95 x 7.5% = 97 cents).

There are two differences when dealing with CBA publishers. First, they pay based on the net price of the book, not the retail price. The net price is usually defined as "whatever the publisher receives for the book, " so the author's payment will vary based on the deals the salesmen make with bookstores and other retailers. Second, they don't have a fixed percentage that everyone pays, so CBA houses will negotiate their royalty rates. Think of the low end of a trade book as 12-to-14%, and the high-end royalty as 22-24% for best-selling authors. It's a huge range, so it's fairly obvious that having a good negotiator sitting down to represent you can come in handy (trust me: the publishers have teams of experienced accountants and lawyers on their side, so it's not a bad idea to have someone who knows what they're doing looking after your interests).

Thomas wrote this: "I have an organization that can sell a lot of books. What is the standard buy-back rate for an author to purchase his or her own book? And is that rate negotiable?"

In my experience, just about everything in a publishing contract is negotiable (except maybe the name and address of the publisher). The standard buy-back rate for most publishers is about 50% (that is, the author can purchase copies of the book for 50% off the retail price). Some houses start with a 40% discount and negotiate upwards. And many are willing to give significant buy-back discounts to authors who can move a lot of copies. Again, this is easy money for a publisher — the author is guaranteeing to buy books, they are generally not returnable, and the publisher makes a profit on these copies without investing a lot of sales or marketing time. So yes, this is certainly negotiable.

One important thing to understand about author buy-backs concerns the printing side of the publishing biz. Adding on extra copies at the end of a scheduled print run will significantly lower your costs. Think of it this way: if the publisher is intending to print 5000 copies of your book, and you order an additional 1000 copies, all they have to do is "leave the machine on a while longer." In other words, they simply ask the printer to run an extra thousand. The publisher doesn't have to invest warehouse time, or deplete their stock — and, in fact, that extra thousand copies actually lowers the printing cost of all the books, so the publisher is making even more money on those copies. So it's sometimes possible for your agent to negotiate a great buy-back rate if you agree to purchase a large quantity at the end of a print run.

If you've got a question about writing and publishing, let me know and I'll try to make up an answer…

Share :

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.