Thursday, April 09, 2009

Earning Royalties

What's the story with earning out/royalties?

I have often heard that only 1 in 5 novels earns out its advance. I've always wondered about this figure, because if publishers were paying too much for 80% of their books, they should presumably know that and start offering lower advances across the board. But, at the same time, I read that "very, very few books make much on royalties" (this is from your Contracts 101: More on Advances post), so I wonder if maybe it's true after all that most books either don't earn out or earn 50 cents over the advance.

What's going on here? Are publishers overpaying for their books? Or is the answer that the publisher can make a profit even if the author doesn't earn out his advance, so the fact that the *author* makes no royalties doesn't mean the *publisher* is doing poorly? What should an author realistically expect (or hope for), on average, on the royalties front?

I have heard all sorts of crazy figures when it comes to the number of books that earn out. The truth, though, is that I’ve never, in all my years of publishing, actually seen any facts. That means that I can’t tell you for sure what the statistics are on books that earn out. I haven’t even gone through the titles I’ve sold over the years to determine how those figures might compare. I do know that a good number of our books are earning or have earned royalties at some point, even if some of those books haven’t made much over $100 or so. At least they earn something, right?

While we’ve all seen million-dollar deals posted and wonder how those books will ever earn out, I think the truth is that most of the time, for most of the books, publishers are fairly conservative with their money and I’m sure many of my published readers will agree that “overpaying” hardly seems to be the problem. I think the real problem is that every single book is a risk. If a publisher is buying a book by an established author they already have sales figures to look at and can base estimates on those—estimates of how many books will sell and how much a book will earn. With debut authors, however, and there are a lot of debut authors every year, those estimates are really more of a guessing game based on how other similar books have done in the market and the publisher’s enthusiasm for the project. Sometimes those estimates are just plain wrong and other times the market changes so dramatically (think our recent recession) from the time a book is sold to the time it is published that outside forces change the estimated success of the book.

I can’t say what an author can realistically expect or hope for from royalties. That depends on what you’re writing, how much of an advance you were paid, and what the market is doing. I think the smart thing for an author to do is worry about selling books and not making royalties, at least at first, and to not expect that the royalties you earn will pay much more than a utility bill or two. It’s always nicer to be surprised with a bigger than expected check than it is with a smaller check.

When you sell your book, ask your agent if she has any idea what you might expect. Knowing the inside workings of a contract can help in making that estimation. Also keep in mind that royalties usually include subsidiary rights sales from foreign rights to book club rights, serial rights, etc., and the more of those your agent or publisher sells on your behalf the higher your “royalty” check will be. There are a lot of variables into how royalties work and how they’re paid out that I haven’t even touched on here, but if you work at writing really good books, know your market, and do some publicity, I would hope that most of you will see some additional money down the line.



Martin Willoughby said...

Soooo...if you want to earn money from a book become a publisher or an agent.

Or am I just being too cynical. :-)

Carol Doane #pearlofcarol said...

Most writers spend a lot of time in their heads, so aligning expectations with reality is an earthy experience. There is much to be said about being grounded when it comes to the business aspect of writing careers. Nice of you to point the direction towards facing facts not fantasies.

PurpleClover said...

"not expect that the royalties you earn will pay much more than a utility bill or two."

oh lord...if something can magically pay a utility bill or two I'd be in heaven! Must. Get. Pub'd. Now. lol.

Thanks - Great points. It does seem like they are paying big bucks for some books that you wouldn't expect a return. But I wonder how many books that sold well over the initial advance and they are banking the profit minus maybe it's a wash. I'm sure they must have limits based on past sales too maybe??

Bonnie R. Paulson said...

A question to follow up this post would be:
Would it be beneficial, for the author, to ask for a lower advance? Would that potentially cross over into the royalties or allow for a (hopefully?) higher percentage?

M. Dunham said...

Really interesting. I don't suppose you'd be interested in playing with some facts from your own published pool to give us an idea? *grin*

Devon Ellington said...

There's nothing to compare to the warm, fuzzy feeling that a royalty check creates! I'm always delighted to see my royalty checks; however, I don't figure them into my budget (except for the plays, because, depending on the contract, it's a fixed amount per performance and can be budgeted).

I simply bust my behind trying to sell as many books as possible while writing the next books and hope it shows up in the checks.

I have an off-the-topic of this post anecdote to share with you: I was recently in negotiations with a potential client who wanted to hire me to critique/polish a manuscript. Terms seemed to fall into place until the writer said, "Once you've done the final polish, I expect you to recommend it to you agent and have your agent represent me."

Uh, no. You don't get an agent to get you an agent -- your work needs to be strong enough so YOU can get the agent.

I explained I was not the right person for the job and passed. I'm curious to see where this manuscript lands, if anywhere.

Anonymous said...

Yet another signal to not give up your day job if you want to be an author. It would be really interesting to see the statistics on this stuff. I'm assuming that publishers average out all of this stuff between their best-sellers and debuts and the steady midlisters. They know they are going to lose money on some books, and many won't make very much on others. They've been at it long enough to have a pretty good idea on what they can put out for advances on certain kinds of books. And then, like most authors, they hope for some luck and get those surprise books that make a lot more than expected. Because, they know to, that some will tank. My understanding is, they have a pretty tight margin on books, which is why earning out is such a big deal. Still, it's kind of discouraging to think that the typical debut author won't expect to see much of anything beyond the advance. I know some pubs are playing around with the ratios now, offering smaller advances for higher royalty rates, but as a debut author, is this in our best interests? It shifts at least some of the burden of marketing/publicity/etc. to the author, making what you potentially earn more your responsibility than under the typical arrangements. Digital publication also is probably having an effect on all of this, but I don't know enough to even comment on how this might effect the whole advance vs. royalties issue. It is however, good information for writers to be informed about. With so many more (or so it seems) vying for publication these days, I tend to think that a lot of them are under the false impression that getting published means making money,which those of us who are at least somewhat informed about the industry, know not to be true. The problem is, there's always the exceptions that buck the odds and sell and make good money as debuts, whether tradtionally or self-pubbed, and it's these examples that writers glam onto. It's that glimmer of hope that you'll be the 1% success story, and in this business, hope goes a long way.

ryan field said...

It's almost impossible to predict royalties.

Devon...the same thing happened to me with an editing client a year ago. I did the same thing you did.It was also this client's sense of entitlement that made me pass.

Devon Ellington said...

Ryan -- hmm, wonder if it was the same writer?

Jim Duncan -- I disagree about not giving up the day job. Writing IS my job -- don't have a day job. And I love it, as uncertain as the monthly budget is every month.

Arthur Miller (Yes, THAT Arthur Miller) once told me that I'd never be a full-time writer until I had the guts to give up the day job and depend on writing for my income -- and he was right. It took me quite a few years to work up the courage, but my writing, my attitude, and my income from the work have all improved since I made the leap.

Dara said...

Thanks for the post! I only slightly understood the whole royalty and advance thing, but this makes it a little clearer. :)

Liana Brooks said...

Interesting stuff to keep in mind. Right now we live off my spouse's pay, so anything I earn becomes bonus money for college funds for the kids. I hadn't given royalties much thought.

It seems sage to keep on that path. Sell the book and hope the next one sells too seems the best way of doing things.

My question is: Do you need to earn out your advance on the debut novel to have a shoot at selling a second novel? Or will the negative figures make you a pariah?

jbstanley said...

Having eight published books in circulation, I can honestly tell you that I don't count on royalty checks to any of my bills. I've earned anywhere between $24 and several hundred dollars on royalties, but even once you've earned your money, publishers tend to take their time sending their checks out. Most authors receive checks twice a year and it takes weeks and weeks for these delightful pieces of paper to be printed and mailed to our agents. When they finally arrive, they're useful for some utility bills or perhaps a tank of gas!

My books are in paperback form, so perhaps hardcover authors are making much higher royalties, but I look to my advances as my real source of income. With each new deal, Jessica tries to raise that number on my behalf, knowing that neither of us will be vacationing in the Bahamas on what I make on royalties.

Because I want to keep most of my advance, I have become very selective with promotion and when a royalty check comes, I usually spend it on something fun. As my last check was $24, I took my kids out to lunch.

If I can answer anyone's questions from an author's point of view, I'd be glad to stop by later and check in. I don't mind sharing bottom-lines with aspiring writers. You folks deserve to know what's what.

Don't be discouraged by the numbers talk either. No amount of money can provde the jubilant feeling of seeing one's book on the bookstore or library shelf.

Mark Terry said...

"not expect that the royalties you earn will pay much more than a utility bill or two."

You know, I'm not sure I've ever heard an agent, editor or publisher actually say that.

In my experience it's totally true, unfortunately. Which is why when publishers/writers/agents encourage you to spend your advance on promotion, I would be very skeptical about it, because you may never earn that money back.

There are times--often--in publishing when I am reminded of the expression, "if you want to make money gambling, own a casino."

If you want to make money in publishing, own a publisher.

Or as the bitter joke goes, if you want to make a small fortune as a writer, start with a large fortune.

Unknown said...

My question is, why do book sellers earn 50% of the revenue? Doesn't that seem lopsided?

In any other industry, is this the case? I somehow doubt it.

Kristin Laughtin said...

Thanks for this post, because I've had similar questions, too. Specifically, I always wondered why publishers don't lower advances across the board if only 1 in 5 books really were earning out (although I'd certainly want a higher advance if I could get it!).

Wasn't planning to quit the day job when I begin seeking publication. Another one of those crazy figures I've heard thrown about is that there are only 500 authors or so who can make a decent living solely off their writing. I'm going to library school part time next year on top of my regular job in order to advance in my career, so that will probably delay me from trying to get a novel published for a few years. Although that thought makes me sad, I've got to have something to depend on, even if it means my dream job has to be relegated to part-time status for a while. (At least I'm young, so I figure I likely have time to try to do all of this at some point in my life.) Of course, if I ever am successful enough to earn a living off my writing, I'll definitely renegotiate whether it's necessary to keep the day job!

Elissa M said...

Yvette Davis, 50% is the traditional markup on all retail items. The publisher is the wholesaler, the bookseller is the retailer.

I am an artist. Most galleries take a 50% commission (but some take as high as 60%). So if my painting sells in a gallery for $300, I get $150. Then I have to take out money for taxes, and since I'm self-employed, it's twice what a salaried worker has taken out.

Remember, the term "starving artist" doesn't just apply to painters and musicians. ;)

Kate Douglas said...

The whole "payment thing" with the book industry is just one surprise after another. Even when you sell enough books to earn out your advance, there's that pesky "reserves against returns" clause, where the publisher holds back large sums of your royalty monies to cover any books that might be returned from bookstores--something that can happen months after the titles were ordered. I've learned not to count on royalties, though--I'd rather see those checks as nice surprises that come twice a year. The secret is to write a lot of books under contract and have a steady stream of advances coming in, which makes the royalties a lot less important to the overall budget. It can be done, but it means that you have to think of writing as a full time day job--but if it's something you love, it's not an onerous duty. It is, however, a very demanding career.

Anonymous said...

" bon said...
A question to follow up this post would be:
Would it be beneficial, for the author, to ask for a lower advance? Would that potentially cross over into the royalties or allow for a (hopefully?) higher percentage?"

Why not just give away your book for free? No, it would be crazy to say to your publisher, "Don't pay me so much." You may not have any idea that advances are not huge for the majority of writers. That can be as low as $5000 and then the first time writer is encouraged to spend most of it for publicity.

You don't negotiate the rules. You're getting confused with Brad Pitt in the movie biz able to defer payment in lieu of a high percentage of the profits.

With the industry nervous and affected by the recession, this is the last place where I want to see writers cower and say "Please, sir, give me less money."

Anonymous said...

Jessica, This is one of the most interesting posts yet. I had no idea the receipt of royalties was so rare. I have to say, first of all, that if I wrote for the money I'd be 1)disappointed and 2) naive. I know this is a business but I really write b/c I can't help myself. I love being published (I am, but it's been awhile since I've submitted anything for publication) and I'd love a royalty check someday, even a nice advance.
This raises a question, however. If it's so unusual for published books to bring in a lot of money, why do agents and publishers avoid previously published authors whose books didn't sell extremely well. I, for example, haven't had anything published for ten years (didn't submit anything) and am now writing an entirely new and different series (same genre, different voice, POV etc). Given what you've told us today, why would my previous sales negatively affect my chances to sell this new series?

Anonymous said...

In case she doesn't comment back, here's my 2c. All they have to go on is your past sales record. You are not competing against all the books that didn't make money, you're competing against writers with better sales track records and the debuts who are unknowns.

It doesn't matter that it's not the old series, you're still in the same genre. And a big question mark for any agent is why didn't you write and submit during the ten years after you were first published? They want to see active working writers, because they don't want you to go away and not write for another ten years. Not worth their investment.

That is going to work against you.

It might be worth considering approaching agents w/o mentioning the previous book from ten years ago that didn't sell well. KWIM?

Sarah P. said...

To answer a question from the original post-- YES, publishers ABSOLUTELY break even and then make money BEFORE the author "earns out" the advance.

Random House was very happy with the way my non-F book sold. Then they reprinted it. Later, I calculated that I won't earn royalties unless it goes to a third printing! Trust me, they know what they're doing. Your "earn out" number and their "break even" number are NOT the same number.

And BON-- the answer to your question is NO! Never argue for a smaller advance, because then, in a pinch, the publisher might decide not to spend any more of their marketing dollars on you. Bad move.


Anonymous said...

I'm a multi-published bestselling author who writes full time for a living and supports my family. Here are my two-cents:

1) Publishers earn money on books before they "earn out." My agent told me this early on in my career when I lamented that--after my first month of sales--I would never earn out. She said, "They're already making money." Since, the book I was worried about not only earned out, but I've been receiving royalties on it.

2) Earning out is not as important for higher advances as it is for lower advances. Major bestselling authors likely won't earn out their advances for years, if ever (before they die.) But publishers are making money on those big authors (particularly if they are big hardcover authors) even though there are no royalties. Every book has a "cost" attached even before printing--overhead, editorial, art, marketing, sales. So you can see why publishers would rather have a "big" author at a large advance--one book, one (or two) covers, one editor, one sell-in--as opposed to ten "little" authors at small advances--ten books, ten covers, ten editors, ten sell-ins, etc. HOWEVER, publishers are always looking to build their lists because they don't know what's going to stick or what's going to skyrocket to the top--or a great book that surprisingly fails. Dan Brown, for example, had three or four books that didn't hit any lists, then Bang! THE DAVINCI CODE. I'll bet he wasn't paid enough advance on that book and is earning hefty royalties. I also bet that he was paid megabucks for his next book, and will likely not see royalties on it for a decade . . . or until he's dead.

3) I heard one editor with a small house say that "advances are against future royalties" (true) then continue, "so a big advance is not important because if the book does well, you'll get paid." Ugh!!! What this editor is saying is that we, authors, should write a book--spending months of our time writing, editing, rewriting our book--for "free." That's what I did before I sold. Yet if you're contracted to write the book, why should you--the producer of the creative material that SELLS the book--have to wait for your money? Is the editor waiting to be paid her salary until your book starts making money? Is the copyeditor working out of the kindness of his heart, hoping the book does well? Is the art director sitting around waiting for his check? No. They all get paid to do their job; so should the author. If the book does BETTER THAN EXPECTED, then you'll see royalties.

4) Re: only 500 authors make a decent living. I don't know where this came from, but I don't think it's accurate in the least. That would mean that I personally know every author who is writing full-time and making a living at it. I HAVE heard that only about 10% of published authors make a living on their books. That may be true--I don't. But that would be more like 10,000 authors--or more. And what is "make a living?" For some with families, we need to make more money to "make a living" than a single writer living in middle america. While it's not easy, and it's not incredibly stable when you're up for contract every other year, it's certainly possible to earn a living if you are consistently publishing.

5) If an average debut author is consistently publishing, they'll start making royalties on those earlier books. Your front list sells your backlist. Publishers love backlists. There's also so many other ways to make money if you're solid midlist and above--foreign sales, subsidiary rights, etc. Retain your foreign rights if at all possible. First, if your agent has a strong foreign rights background or a great network of foreign rights sub-agents, you'll make far more money going out with the rights than letting your publisher sell them. Your agent has far fewer authors than your publisher; your publisher is less likely to negotiate in foreign deals; and if they retain the right, it's usually a 50/50 split (as opposed to 80/20 for author/agent.

In a nutshell, earning out is important . . . to a point. But it's certainly not the only thing that's important, or the most important thing. More money up front is almost always (I say ALMOST because there are sometimes other things to consider) the way to go. I never count on royalties, so when they come in, it's icing.

Anonymous said...

re: my anon post above: in #4 I meant to say: "That may be true--I don't know." (I got a call in the middle of typing the post!) I make a living writing, quit the "day job" and work twice as hard now than I did when I had a commute. But I also make more money and I'm doing something I love.

Sharon Page said...

I'm one of Jessica's clients and I earned out on my first book and received some good royalties on my first statement. My advance for that one (my first print book) wasn't huge (4 figures :-)), but it was based on 1 chapter and a synopsis, so I certainly see the publisher was taking a gamble :-)

When a book is published, it's usually the 2nd royalty period before an author sees the first statement--which is a year after the book is on the shelves (approximately). Then the publisher keeps reserves against returns, i.e. the royalties are based on sales to bookstores and the publisher doesn't know how many they will get sent back. So it could be quite a while before the author sees money.

Personally, I'm all for getting the money in the advance :-) That's money up front. Why wait years? I've heard that some very big authors, in the stratosphere of Julia Quinn, do not earn out their advances. To my mind, that just means they are getting a higher royalty rate (than what's actually stated in their contracts) in cases when the publisher is happy with the performance. As was mentioned, if the publisher is still giving contracts, they must be satisfied.

Also, foreign sales can change the equation, where the publisher can make one or more foreign sales, and report those on the royalty statement, which has the author earning out, or brings them much closer to doing so.

Devon Ellington said...

Years ago, I worked for an art book publisher. The contracts contained the royalty clause, which was twice a year (I believe January and July), with the language that the check would be mailed within 45 days of the contracted date.

Accounting ALWAYS waited until Day 45 to cut the check, and if the boss wasn't around to sign the checks, they were late.

Often, they were late anyway, and the agents had to fight with accounting, because the head of accounting felt that it should be 90 days, not 45, no matter what the contract said.

That particular company was notorious for always being late with royalties, which I thought was disgusting (I've actually put late fee clauses in some of my own contracts because of that).

The royalty rate on the hardcovers was higher than the paperbacks, but the paperbacks sold more, so those checks were usually larger.

Again, this is only experience from within one company, but maybe it's a helpful viewpoint.

MarkTerry -- I may not own a casino, but I've definitely earned enough money in between gigs at the racetrack in order to pay the bills! ;)

Yes, I even find playing the ponies a steadier income than royalties.

Anonymous said...

Wow, it has been awhile since I was publishing on a regular basis (I am trying to break back in after a lon g and ill-advised hiatus) but my stuff paid more than a utility bill or two. More like a house. And that was when agents were not necessary the way they are today. If things have gone downhill that much maybe I need to find something else to do. I do wonder, though, if the market is that bad, how do agents stay in business?

Anonymous said...

Anon 8:40, Sarah, Devon, and Sharon, thank you for your informative posts.