Chip MacGregor

April 25, 2016

Ask the Agent: Can you explain how my agent gets paid?


Someone wrote to ask, “Can you explain how an agent gets paid? Does the publisher send the author’s checks to the agent? Or does the money go to the author, who writes the agent a check? And is all this done before or after taxes?”

Happy to explain this. Traditionally, when it was time for the publisher to send money, they would send the entire amount to the agent, who would then deduct his or her commission (the standard is 15%) and send a check for the balance to the author within ten days. This was the system that was in place for years, and many agencies still work with that system. The strength of it is that the agent knows the author has been paid, and paid the full amount. This is all pre-tax money, so at the end of the year the agent would send a 10-99 form to the author, detailing how much money was paid.

When I started working as an agent 18 years ago, I was working for Alive Communications in Colorado, and they used a different system — divided payments. With that system, the publisher cuts TWO checks. The first is sent directly to the author, for 85% of the deal. The second is sent to the agent, for 15% (along with some sort of evidence that the author has been paid his or her amount). To my way of thinking, that was a better system. The author got paid faster. There was less bookkeeping for me. I didn’t have to fill out the 10-99’s. And, most importantly, I would never get a phone call from an author saying, “Hey, you big doofus — the publisher says they sent you my money two weeks ago! Where’s my check?!” I’ve found too many fights in business occur over money, and I prefer that the authors I represent feel as though we’re on the same side, and we have no reason to fight over money. (That’s why I’ve never charged back any expenses to an author… I don’t want to have to call anyone and say, “Um, gee, do you think you could maybe send me that seventeen dollars and fifty-two cents?”) So when I started my own company ten years ago, I decided to keep in place the “divided payments” system.

Both work. Neither is better than the other — they’re just different. Think of it like this: some agents are great at editorial work, others are great at contracts and negotiations, others are really strong at marketing, others are strongest at career development. Nobody is great at everything, and you want to find the agent that fits your style. It’s the same way with payments — either system can work well. I use the one I’m most comfortable with.

By the way, I’ve occasionally heard other agents say that not everyone will do divided payments. But in my years of doing this full time, I’ve only had a handful US publishers refuse to cut two checks. However, few of the foreign publishers want to be bothered with cutting two checks, so if your agent is doing foreign deals, that money will most likely be paid to the agency and forwarded on to you.

Back to getting paid: Publishers used to all pay your advance half on signing, half on delivery. Now most pay a third on signing, a third on delivery, and a third on publication (with the people at Random House fighting to pay a quarter on signing, a quarter on delivery, a quarter on publication, and a quarter when the book flips from hardcover to trade paper… sigh… another sign of the apocalypse — they’ll soon be asking for a quarter to be paid upon the CEO becoming eligible for social security, no doubt). Of course, an advance is all recoupable against your royalties, so with each book sold some money is credited to your account. You earn back your advance with royalties, then when the book earns out the publisher starts setting your money aside and will send it to you either quarterly or semi-annually, depending on your contract.

What other questions do you have about the money side of book publishing?

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  • Patrick Bunn says:

    Good info! Thanks.

  • John Howard Prin says:

    Your candor about up-to-date methods and trends for getting paid sync with my experience. Authors get squeezed a lot. From my perspective, authors are the Golden Geese of publishing — we are the ones who lay the golden eggs that everybody needs to do their side of the business. No eggs (original books), nothing to do. And like the fairytale of the farmer who owned the Golden Goose and squeezed it for more eggs, and cajoled it to lay more, and beat it until it died . . . well, we need good agents who stand up for us to keep us going and keep us alive (who negotiate best possible terms and enforce those terms). A strong sense of partnership and mutual respect is a must!

    • chipmacgregor says:

      Well said, John. I appreciate you coming on to join the conversation.

    • John Howard Prin says:

      Glad to be aboard! You’re doing something meaningful, Chip, and the heart of your personality comes through.

  • Angela K Couch says:

    Thanks for the great information! Other money questions? What is a reasonable royalty rate for print and e-book respectively with a large legacy publisher? I’m with two smaller houses at the moment, so I’m interested to know how they compare and what you consider a fair rate. 🙂

    • chipmacgregor says:

      Love the question, Angela. May I tackle it in a blog post?

    • Angela K Couch says:

      I’ll watch for it. 🙂

    • Angela K Couch says:

      If you’re looking for any other questions (not money related), I would ask what is the most professional way to approach an agent at a conference if you were not lucky enough to get an appointment with them? I know you touched on talking to agents and how following them to the facilities is not such a great idea, but what is the best way to let them know you wouldn’t mind pitching to them without leaving a bad impression and infringing on their space. Something better than, “Nice to meet you Mr. Macgregor, you are looking especially tall today, do you have two minutes to listen to my pitch?” 🙂

    • chipmacgregor says:

      Actually, that would work with me, Angela… :o)
      Okay, I’ve thought about this a lot, and tried to figure out what has worked with me over the past few years. I think I agreed to look at the proposals of authors with whom I got into discussions over industry stuff, book ideas, things I was presenting, etc. I think having a conversation (and therefore letting the agent know you’re relatively normal) OR getting an introduction by a mutual friend might be your best bets. Does that help?

    • Angela K Couch says:

      That’s perfect. It’s about what I figured and makes perfect sense. Nice to get an inside perspective, though. 🙂 Thanks for all your great answers this month!

    • Angela K Couch says:

      And loving your book! 🙂

    • chipmacgregor says:

      Thanks very much, Angela.

  • “another sign of the apocalypse…” needed to laugh this morning! I appreciate how you give the facts without tiptoeing around. Thanks!

  • Lynn D. Morrissey says:

    Chip, I really appreciate your time here and detailed explanation. Likely, others wanted to know, too. Thank you!
    Can you talk about kill fees in your response here?

    • chipmacgregor says:

      Sure. Kill fees are generally paid when a deal doesn’t work out, and it’s a way to find fair middle ground for everybody involved. So, for example, let’s say you were a collaborative writer working with a speaker on a book, and you generated a proposal and some chapters. If the speaker wasn’t happy with your work, she could pay you a certain amount of money stipulated in the contract as your kill fee, then you’re off the project with no more claim to it. You’ve been paid something for your work, and the speaker is free to go find someone else who can better capture her voice. Make sense?

  • Interesting to see how different literary agencies handle
    the funds. When I worked in showbiz, my acting agent handled my earnings in the
    traditional manner which, like you said, creates more paperwork on the agent’s
    part. Very informative post, Chip.

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