Author Advances, Earning Out and Royalties explained…

There’s been all kinds of scuttlebutt online regarding a blog piece by the author Heather Demetrious on how she burned through book advances of several hundred thousand dollars and ended up back working in a day job. I’m simplifying her story massively here, so do give it a read.

It’s a fascinating and honest piece, for which she has received all kinds of sneering abuse online, most surprisingly from other authors. At the root of this is an assumption that she should have known what an advance was, how royalties work, and have an understanding of publishing practices that, frankly, are a bit weird and arcane.

Publishing is an industry that has been slow to progress in many ways. It’s still very white and middle/upper class, and the people you work with will assume you’ve been to the same private schools and universities and that we all read the trade magazines and publishing news feeds.

And, like me and Heather, if you come from a working class background you can throw in a feeling of imposter syndrome when you mix with publishing types. And that can mean you’re afraid to ask even the most basic questions. Here’s the thing…

NEVER BE AFRAID TO ASK A STUPID QUESTION

Also…

DON’T STOP ASKING STUPID QUESTIONS UNTIL YOU GET ANSWERS THAT MAKES SENSE

“If you can’t explain it simply, you don’t understand it well enough.”

Einstein

Here for you, dear reader, is a quick rundown of some of the terminology associated with publishing advances…

An Advance

This is a sum of money paid to an author in advance of the publication of the book. It is usually paid in three stages: on signing the contract, on delivery of the manuscript, and on publication.

It is NOT a salary.

Payment will come through your agent (if you have one) and they will deduct their commission, which can be from 10-20%.

Then, like all income, you will have to pay tax on what remains. If, like me, you’re baffled by taxes I would advise getting financial advice to help with your tax return.

Here’s the big thing to bear in mind… You will not receive any further money from the publisher until your advance has been “earned out”. So what the hell does that mean?

Earning Out

Think of your advance as a debt to the publisher. If they’ve given you ten thousand pounds in advance, you need to pay that ten grand back before they give you any more in royalties (we’ll come to those in a minute).

How do you do that? Simple. Sell enough books to cover the advance. Ideally, you should do that in the first twelve months after publication.

This is harder than you might think. If books are going to sell they need to be marketed and promoted and that will mean heavy discounting. If your eBook is selling for 99p in Kindle promotions it will take longer to earn out that advance. If your eBook is on sale for £9.99 and not being promoted then the chances are it’s not selling that many copies at all.

You see the problem here.

Very few books earn out in the first twelve months after publication.

But let’s say you do – woohoo! – now it’s time to earn some…

Royalties

These are the payments you earn from book sales once you have earned out your advance. They are usually paid twice a year.

Yes.

Twice a year.

Not monthly, like a salary.

Twice a bloody year.

And the payment will be accompanied by the most baffling document in written history: The Royalty Statement.

Ask your agent (or, if you don’t have an agent, contact the Society of Authors) to explain what it all means, and make sure they check it because it will almost certainly be wrong. My agent discovered an error in my last statement with VAT payments on eBooks and got me an additional £300.

Twice a year.

Bastards.

THE CURSE OF THE BIG ADVANCE

Advances are changing. It used to be a spectrum based on predicted sales, now it’s all or nothing: huge advances or piddly little ones. Publishers used to be a bit rubbish at predicting sales, because it was usually done solely by the editor based on little more than their enthusiasm for the book. While this was all very admirable, it wasn’t terribly scientific and led to huge advances for authors who had no bloody chance of earning out. For example…

Case Study 1: Debut author of a literary fiction masterpiece gets half a million quid for world rights in advance for a book that the editor is head-over-heels in love with. The book gets some buzz, but ultimately fails to sell more than a few thousand copies. That author now has a ton of red ink in their profit and loss statement. The author still has the advance (yay!), but the publisher now sees them as an expensive loss and writes them off. The next book is either rejected, or the advance is tiny in comparison to book one. The author’s career never recovers.

These days the advances are calculated by an unholy cabal of sales, editorial, rights, production and marketing and they’ve become a lot better at using data to predict sales. And their predictions err on the cautious.

But… this does mean that if they’re willing to give you a big advance that they’re far more more confident that it will earn out. For example…

Case Study 2: Debut author of a commercial thriller gets half a million quid for world rights in advance for a book that the editor is head-over-heels in love with. Because the sales, rights and marketing departments were involved in calculating the advance they are more engaged when they sell it in. The buzz is great, and the rights are sold all over the world, including the movie rights. A miracle! This means the book has earned out its advance before it’s even published! Every book sold will earn the author a royalty and for the next deal they will be able to to negotiate a higher advance. Hurrah!

The above is an unusual outcome, but it does happen. Publishers need a handful of these every year, otherwise they would go out of business.

However, here’s what most deals are like these days…

Case Study 3: Debut author of a genre book gets a few grand for world rights in advance for a book that the editor is head-over-heels in love with. Because the sales, rights and marketing departments were involved in calculating the advance they are more engaged when they sell it in, but… they also have that commercial thriller with the big advance at the top of their priority list, so they give less attention to the genre book with the small advance. The author has to work harder to get publicity and marketing, they pay out of their own pocket to go to festivals, and have to write the second book while holding down a day job and bringing up a family. The rights are sold to France and Germany for a small amount. No one buys the film rights. But… after twelve months the book earns out and over five to ten years the author slowly builds a profitable and credible career.

No one said this would be easy, and you should not give up on your dream of becoming a full-time author, but the odds are it will be a long journey with all kinds of ups and downs. My advice is to keep writing and never, ever be afraid to ask for advice. Speaking of which…

Need advice?

I’ve worked in bookselling and publishing for over twenty-five years and I offer all kinds of bespoke services for writers, from reader reports to full edits. Drop me a line here for a free consultation.

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