ASK AN EDITOR: All About the Money, Honey

Dear SheWriters,

I haven’t heard from any of you this week! I’d be really proud if that meant my first two columns were so informative and comprehensive, there were no questions left to be answered, but I’d miss writing to you each week—I’m really enjoying it!

I’ll be hoping for a very full mailbox this week, but in the meantime, let’s talk money.

Publishing is an odd industry. As far as I know, there’s no other product that a retailer can return to the company that made it. If Bed, Bath & Beyond doesn’t sell the 350 punch bowls they ordered from Party Animals, Inc., they can’t send them back. Bed, Bath & Beyond has to discount those unpopular punch bowls and take the hit to their own bottom line. But if The Book Shoppe doesn’t sell as many copies of the biography of a Swedish ambassador as they’d hoped, they can send the unsold copies right back to the publisher.

The financial agreement between an author and the company who publishes her book is equally strange.

If a publishing company offers you $50,000 for the right to publish your book, that sum is your “advance.” This money will be paid to you on a schedule. Generally, you’ll receive part of the sum when you sign the contract, another part when you deliver the manuscript and the publisher accepts the work (called the delivery and acceptance payment), and the remaining sum when the book is published, though your advance may be doled out in more pieces (satisfactory progress, delivery of one half of the manuscript, a final payment twelve months after publication, etc.).

Once your book goes on sale, madly flying off the shelves in bookstores across the country, you start “earning out” your advance. For each copy of your book that’s sold, you earn a certain percentage of the cover price. That percentage is your royalty rate, and is relatively standardized, though the rate for hardcovers is higher than that for trade paperbacks, and the royalty rate for mass market paperbacks is the lowest. Also, in many cases, the more books you sell, the higher the royalty rate.

Let’s say that you earn a flat rate of 7.5% of the cover price of each copy of the trade paperback edition of your book that sells. With a cover price of $15, you’ll have to sell 44,445 books to earn out your advance of $50,000.

15.00 x .075 = 1.125

50,000 / 1.125 = 44,444.44444444…

Once you’ve sold those 44,445 copies, you’ll have “earned out” the advance payment, and for every book you sell after that, you’ll make $1.125. Yay!

But what if you don’t earn out that advance? Well, you certainly don’t owe the money back to the publisher. You still get to keep it. But when you try to sell the publisher your next book, they may not be interested if they lost money on your previous book. But perhaps they love the idea for your next book, and think this really might be the one to hit it big. In that case, you’ll probably still get a smaller advance than you did for the last book.

How else can you earn out your advance? Subsidiary rights! If you granted other rights to your publisher (translation, audio books, electronic books, excerpts in magazines, etc.), you’ll make a certain percentage of those sales too, and they’ll be applied to your advance. For example, if a Spanish publisher purchases the right to publish your book in Spain, your take will be applied to your advance. If a magazine purchases the right to print a chapter of your book in the September issue, your take will be applied to your advance.

What do you want to talk about next week? The pros and cons of large advances (yes, there are cons)? Self-publishing? How to negotiate with your publisher if you hate the cover/title/change your editor made to page 253? I won’t know if you don’t tell me, so send me your questions!

Have a great week,

Lea Beresford

The Girl with the Red Pencil

***Please note that although I work at Random House, this column represents my own thoughts and opinions and not necessarily those expressed or endorsed by my employer***

Views: 32

Tags: #process/craft, #publishing, Girl with the red pencil, Lea Beresford, editor


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Comment by Jennifer Crews on September 9, 2009 at 12:59pm
Hi Lea. I just joined She Writes and I am so glad to have come across your column - I learned a ton already.

Just a quick comment about selling products on consignment. That is actually a prevalent practice in retail for other products in addition to books, especially if the producer is new to the marketplace or is a small business. I am a business advisor with a focus on the small business marketplace, and having to sell products on consignment is a challenge that many of my clients face because of the obvious cash flow issues. So, if it makes you feel any better, it's not just the authors that have to deal with that issue!

Thanks for a great column. As far as future topics, self-publishing is always of interest as well as tips for beginning authors, especially in terms of building credibility.
Comment by Lea Beresford on September 7, 2009 at 1:15pm
Thanks, all, for your comments and questions. I'll be posting ASAP.

Franny, your math is a bit off. If you make .4 royalties on the first 300 books, .45 from 301-500, and .5 from 501 on, you have to multiply the percentages by those specified number of books. So if you sold 1,000 copies at $6, you'd get (300 x 6 x .4) + ((500-301) x 6 x .45) + ((1000-501) x 6 x .5), which ends up being a few hundred dollars shy of $3,000. Hope that helps.
Comment by Sherelle Wallace on September 7, 2009 at 9:34am
Hello Lea, thanks so much for this informative post! I just joined shewrites last night, and this is my first activity here. I'm so happy to have gained some knowledge in the first post I selected to read. I have only self published myself, and for the first three books that also meant printing and binding them myself at my office, and going on the road and selling them. How's that for hard work!

I will look forward to future posts from you and add my experiences as well.

Cheers from the Bahamas!
Comment by Jessica Keenan Smith on September 5, 2009 at 8:04am
Would love to hear more about contracts and creating a buzz before the book is completed.
Comment by Julie Simon Lakehomer on September 2, 2009 at 9:47am
Great article. I'd love to hear what you have to say about self-publishing.
Comment by Ginger B. Collins on September 2, 2009 at 9:16am

I've been wondering about the publicity end of it. I understand that a willingness to be proactive with book promotion makes agents and publishers happy, but how much of that "willingness" needs to come out of your pocketbook? What's a fair contribution on the part of the author?

Ginger B. Collins
Comment by ParaNovelGirl on September 2, 2009 at 8:02am
I'd love to make $50,000 on my first book, but since it's in e-format, I seriously doubt that it's in the cards for a while. I've sold three, one of which is the first in a series of 9 (so that makes it 12) and have seven more at the publishers waiting for approval.

With ebooks you get for example: 40% up to 300 sales, 45% from 301 to 500 sales, and 50% 501 from then on (I think that's the way it works) The pricing (American dollars) is from $1.99, $2.99, $3.99, 4.99 and 5.99 depending on the length. Most of mine are in the latter range.

So, based on say $6 a book, over 1000 at 50%, ($3/book) I'd get $3000 for 1000 books? So...(oh my head. I'm no math-brain) When I'd sell, say a million of them (I can dream, can't I?) that would mean I'd on now...3,000,000 dollars? I'd buy that! Cool
JK Rowling...move over! LOL
Hmmm, movie deal anyone?
Thanks for the update, Lea.
Hope I have that right.
Oh, and my publisher will put it in print, if they deem it saleable, after the sale of 100 books.
I'm game!
Franny Armstrong-ParaNovelGirl
Comment by Nina Weber on September 1, 2009 at 1:13am
oh, I can tell you why you have not gotten any messages:
Because this function is now blocked on She Writes unless one adds someone as a friend. %-)
Comment by Nina Weber on September 1, 2009 at 1:12am
I also find this column very interesting to read - and any of your suggestions above for future topics sounds good. I can imagine a lot of in depth info on each.
(The "How to negotiate with your editor ..." one is not that intriguing to me personally, because I worked as an inhouse-editor and project manager for 5 years ;-) We had seminars on "How to break it gently to your author that ...", grin. But it would be good for authors without a background in publishing, I think.)
I'll put some more detailed questions in a message to you, since you said it is easier for you to keep track of them then.
Comment by Michelle Maisto on August 31, 2009 at 5:49pm
This column is a brilliant idea, Lea! Sooo thrilled to have you as an asset!

I'd love to hear a little more about contracts, from your side of things. So often people asked me, "Are you entitled to X?" "What happens if Y?" And I had no idea. No idea if my book would be coming out as an e-book, no idea if I got paid if someone published an excerpt, no idea how many books I had to sell to get my $1.125... While my agent did tweak some details and make some requests, and a lawyer friend even looked over the contract for me, i really couldn't sign it fast enough — I was just so excited to simply HAVE a contract!

That said, what should writers look out for/ask for/make sure to demand before they sign on those dotted lines?

Thanks in advance!

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