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.

The End of Magic challenge – week 1

Last week I made a big ol’ public declaration to sell a thousand copies of my fantasy novel The End of Magic by Christmas, and I promised to keep folks in the loop with the ups and downs of sales and marketing with a weekly update.

A few caveats…

  • I can only do this in the USA… Unbound have the UK rights and I have no visibility on sales other than the twice yearly statements.
  • I’m going to stick with Kindle and Kindle Unlimited.
  • I’ll be counting both Kindle and Paperback sales.

Here’s week one!

I’m starting from a position of very few sold already, so my also boughts on Amazon at the start of the week were basically Back to Reality and a handful of self-pubbed fantasy compilations. Not much to give me a clue as to where I should target my campaign. However, there was a VE Schwab title in my also boughts, and one of the USPs of The End of Magic is that it’s a stand-alone.

I fired-up Publisher Rocket to generate a few keywords and started putting together a couple of campaigns to test the water. 

First up was the VE Schwab, which seemed straightforward enough. I figured a quote from the lovely RJ Barker would help readers click on the buy button. So far… not a sausage…

Next was the stand-alone. I used Publisher Rocket and some lists on Goodreads to draw up a list of similar one-and-done fantasy books. And the sales…? Zip.

This was slightly dispiriting, but I realise that these ads sometimes need a little time to get going and may need tweaking. I also ran ads aimed at an indie also bought (the Flame ad with the fab James Barclay quote) and one for Terry Pratchett fans (with a great quote from Julian Barr), but again no sales.

However, I knew one place where I’d had some success with Back to Reality. The mighty Bookbub and their excellent newsletter ads!

Following the instructions as per David Gaughran’s excellent Bookbub Ads Expert, I started daily campaigns. The first two were aimed at fans of Tad Williams and Brandon Sanderson. The results were poor. Just a few clicks and a handful of sales.

Then I decided to target Terry Pratchett readers. I had an excellent quote from the wonderful Julian Barr to tempt them with… 

This seemed to do the trick! Daily sales were picking up, and I had a 1.15% CTR (click through rate), which isn’t bad (anything over 1% is deemed good). I started to run this ad on a daily basis. They peaked after a couple of days, then tailed off. By then my also boughts were improving and I noticed Marie Brennan was second only to Back to Reality, so I tried a campaign targeting her readers. No sales!

That was yesterday. Today I’ve gone back to Sir Terry.

In the meantime, I’ve also been getting great support from folks on my newsletter, on social media and listeners to the Bestseller Experiment podcast. Here’s what the daily sales are so far (that peak on 7th July is when my newsletter went out)…

And here are the Kindle Unlimited pages read…

204 in total so far

And here’s a breakdown of sales and spend so far…

Kindle units sold: 37

Kindle Unlimited Pages read: 204

Royalty: $14.14

Advertising spend total: $163.07 – that’s broken down as…

AMS: $10.65

Bookbub: $152.42

Only 963 units to go!

Let’s see, a hundred and sixty-two days till Christmas (taps calculator)… I need to sell about six copies a day to make my target. That feels do-able, though at this rate of ad spend, I could be bankrupt by Halloween.

I’ve had kind messages of support and I’ve been delighted when folks tell me they’ve bought the book, or that they’ll feature me in a newsletter. These will all help and I shall be forever grateful.

If you would like to help, then do please do any of the following:

Buy a copy here in the USA, or here for the UK/rest of the world.

Leave an honest review on Amazon or Goodreads

Tell your friends about the book

Buy 963 copies for your bookclub… worth a try.

If you have any thoughts or comments on what I might be doing wrong, do please leave them below! Until next week… onwards, upwards, sideways, backwards!