Advance Earnings
Thursday, July 14, 2011 Question of the day: I saw that you mentioned on Twitter that your debut is close to earning back its advance, many years after publication. Hoping this isn't a dumb question, but can you explain what exactly that means?
Not a dumb question at all! In fact, I'd venture to say that a lot of authors - published authors - don't even fully understand the economics of this industry. Your question is easy to answer, but some of the specifics are still murky, even to me, now on my fourth book.
But what I meant by that comment is this: when your agent sells your book, the publishing house offers you a check up front. (Well, not totally upfront. It's broken down into three or four installments, depending on the size of the check, and they dole out these payments over the course of the book's publication.) But this check - this lump sum of money - for easy math purposes, let's say 50k - is yours to keep. Even if you sell zero copies. Publishing houses put your book through all sorts of formulas to determine what they should offer you as an advance (the sad truth is that the average advance for a first-time author hovers somewhere closer to 10k, I believe), and whatever this number is, is about what they expect for you to sell. You must then EARN BACK that number via sales, before you ever see any more money from them again.
Now. This is a really strange industry, and if my finance-husband had anything to do with it, he'd scrap this formula entirely. Why? Because something like 7 in 10 books DO NOT EARN BACK THEIR MONEY. This doesn't mean that the publisher doesn't make money on it (a confusing angle, I know), but rather, somewhere, their formula didn't turn out correctly.
If you really don't come close to earning back your advance - say, you were paid $250,000, and you only sell about $50k worth, your next advance will suffer. If you have the opposite - low advance and huge sales numbers, your agent will demand a much bigger advance for your next book. Even better: once you've "paid the publisher back," you start getting royalty checks. In essence, once you've earned back this deficit, you profit off of every book sold (barring returns), and you get a lump sum of this money every six months. Which sounds wonderful (and it is!), but before we get too excited, remember that pesky 7 in 10 figure.
I think there's a much bigger discussion to be had as to whether or not the whole advance-thing needs to be rethought. Especially in light of how much this industry is struggling. But I'm trying to stick to your specific question for now. I'm also trying not to get too bogged down in the minutia such as percentage that you earn on each book, each format, foreign sales, etc, because a) it's very complicated, and b) there are smaller aspects that still confuse me.
But that's the general scoop on what earning back your advance means....Hope I clarified rather than raised more questions!
Reader Comments (6)
Lately I've been questioning the advance-royalty structure too. Or really, just the amount of the advances. I'm HUGELY in support of authors making a living off their writing, but there's a difference between "a living" and "enough money to buy 3 houses and travel by private jet." (Okay, a slight exaggeration, but hopefully you get my point.) I don't have the answers, but I think the questions are worth raising and discussing, especially (as you said) given the state of publishing and the economy.
Things in publishing are so dicey right now. I agree that the current structure doesn'twork. Does anyone have any ideas how it could be better?Because that's the part that stumps me!
I was so pleased when my agent got me what I considered a fabulous advance but now I have to live in fear that I'm one of those 7 out of 10. It's hard to know how many books have to be sold to ensure the publisher makes money on me.
David - it's a tricky balancing act between wanting a great upfront payoff and living with the worry that if you don't earn it out, you'll never get that kind of money again. In hindsight, I am so glad that I worked my way up with each book, but who's to say that I wouldn't have been happy the other way? I think an agent tries to get you as much money as possible (as such they should!), and then it can really do great things for you...or become a bit of an obstacle. There's no good answer or way to know for sure...
This was a great answer, and very helpful. Thanks! In fact, I'm loving all your answers.
By the way, I followed a link over here from Shari's site, and I'd love to subscribe but I'm not finding a link to an RSS feed anywhere. (It's not coming up in my browser, or when I do a search, or when I search via Google Reader.) I thought you'd want to know, since I may not be the only one having that problem.
This was a very interesting post, Allison! I'm assuming the publisher keeps track of all that and how many books sell, etc. But, do you, as an author, get some sort of statement from them (or your agent) every month or quarterly to show you how many copies have sold and how much you still owe on the advance? All this is very interesting. Thanks.