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,
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***