Writing Advice #29: Money

This week, we’re going to talk about money. I get asked about money a lot — how much do authors make? What percentage of the book’s price comes back to the author? How do royalties work? Well, I’m going to try to de-mystify this voodoo a little bit.

Realize that everything I say in this article is being vastly simplified. Publishing accounting is an arcane art (though not as bad as Hollywood accounting!), and I want this to be comprehensible and fewer than 100 pages! So, with that caveat in mind…

A typical deal works like this: The writer gets X amount of money up-front. This is called the advance. Then there are royalties figured in. Royalties are an amount of money paid to you based on sales — you get Y% of each book sold. (Usually Y = anywhere from 8-15%, depending on a whole slew of issues, such as total number of books sold, how good your agent is, whether your book is published in hardcover or paperback, etc.). Now, before you can get those royalties, first you have to earn out. This means that you need to earn in royalties an amount equal to your advance. Then, whatever you earn over and above that advance is new money in your pocket. See, the advance is CALLED an advance because it’s not free money — it’s an advance against future earnings. It’s like the publisher is saying, “We think your book will sell enough that you will earn AT LEAST X amount in royalties, so we’ll give you that much at the start. If it ends up earning MORE than that, we’ll give you the difference when the time comes.”

The great thing about the advance is that not only do you get it LONG before the book even goes on sale, but you also get to keep it, even if the book tanks. (Of course, you don’t WANT your book to tank, but at least no one will take your money away from you!)

Advances, typically, are paid out in installments. The best deal for the writer is when you get 50% on signing the contract and the other 50% when your manuscript has been delivered and accepted (often called D&A, for — you guessed it — “Delivery and Acceptance). These days, though, many publishers are splitting the advance into thirds (on signing, D&A, and on publication) or even into fifths! Your agent will try to get you the most advantageous disbursement, of course.

Now let’s look at a “typical” book and its distribution of money. Be warned: Here there be math!

Let’s say you get an advance of $10,000. (I’m going to use nice, round numbers for everything.)

You get a royalty rate of 10% on your hardcover copies. The cover price is $10.00. (No hardcover is priced at only ten bucks, but it makes the math easier, right?)

So, you would get one dollar for every book sold. You would need to sell 10,000 books in order to earn out.

(Again, this is a very simplified version of reality. In real life, you’d probably have an “elevator clause” in your contract, meaning that if you sold Q number of copies of the book, your royalty would be Y%, but if you sold T quantity (higher than Q), then your rate would jump to Z%, and so on. Again, I’m keeping it simple for the math.)

Let’s say your book sells 9,000 copies in hardcover. Which is not so bad for a new author in hardcover. You’ve earned $9,000 towards your $10,000 advance. You won’t get any more money, but you don’t have to give back that $1000 overage, either.

Now let’s say that your publisher issues a paperback edition of the same book. It’s a year later and they put the book out for five bucks in paperback. Your contract again stipulates a 10% royalty. (In real life, it would be lower and the cover price would be higher, but — again — I’m trying to keep the math simple. For my sake, if no one else’s!)

OK, so your book is out in paperback. It sells 18,000 copies in paperback. (Books almost always sell more copies in paperback, just ’cause they’re cheaper.)

Doing the math, we find that — miraculously (because I cooked the books!) — your royalty on the paperback is the same as the hardcover: $9,000.

So, you add the two together: $9,000 (hardcover) + $9,000 (paperback) = $18,000. Subtract out your original $10,000 advance and you’ll be looking for a check for another $8,000 from your publisher!

Now, as I have been mentioning over and over — this is a vastly simplified model. I just did this to illustrate the general principles at work. There are a LOT of other issues.

For example, when publishers sell books to bookstores, they sell them on a returnable basis. This means that the bookstores can send them back! So, your publisher might send 10,000 copies of your book to the stores, but get 4,000 of them back in a few months or a year! (This is VERY common!) As a result, you’ll only get the royalty on those 6,000 that stayed in the stores (and, presumably, were bought by real, live people). You ultimately earn royalties for books bought by people, not stores. Stores can — and do — send back unsold books.

Consequently, most publishers will have something called reserve on returns. This means that they’ll issue you a royalty statement that says, “Well, we sold ten thousand copies of your book… But we anticipate five thousand of them coming back. So we’re only crediting you for the royalty on five thousand.”

Now, before you get all up in arms, realize that this is standard and this is fine. Because on your NEXT royalty statement, you’ll get something like this: “Well, of those five thousand we thought would come back, only two thousand did. So of the three thousand still out there, we think another thousand will come back. So we’ll credit you for two thousand more books.”

And with each statement, you’ll find out how many ACTUALLY came back and the publisher will credit you for any NEW copies sold AND reduce the “reserve on returns.”

This keeps going on, every six months (which is how often you get royalty statements) until all of the books have either sold or come back or some combination of the two. It could be YEARS until you actually get paid for every single sold copy of the book, simply because the publisher has no way of knowing if/when a bookstore will suddenly return a huge quantity of books. They can’t pay you until they know the books have sold. That’s why you get an advance up-front, so that you don’t have to wait for tiny royalty checks every six months for the next ten years. They just give you a chunk of money at the beginning and, if the book does better than expected, you get MORE money later. But at least you have something to start with.

It’s, uh, complicated, as you can tell. Especially once you throw the paperbacks in there. Now you’ve got TWO editions of the same book, where you have to track: How many copies stores bought, how many copies COULD come back, how many copies DID come back, and how many NEW copies were ordered. For each edition.

This is why an agent is very important. You will look at your royalty statement and your eyes will begin to bleed. An agent will look at a royalty statement and immediately find whatever’s wrong.

(I talk about getting my first royalty statement here. I’ve gotten a bunch more since then, but I still don’t understand them. That’s why I have an agent.)

If your book is good and sells well and stays on shelves, you could be getting royalties on it for YEARS! Next time you’re in a bookstore, look specifically for books that were published many years ago. Check out, say, Stephen King or John Grisham. Or Joyce Carol Oates. These folks are still selling copies of books that were written DECADES ago! They earned out a LONG time ago, so every single copy they sell goes straight into their pockets. Stephen King published his first book,Carrie, in the 1970s! Good God, that was olden days, people! But it’s still selling and he’s still making money from it.

Pretty cool, huh? You can write something once and get paid for it for the rest of your life. Assuming, y’know, that it’s good enough that people will still want to read it that far in the future. (That, of course, is the trick!)

Now the question many of you are asking: Is it worth it? Does it work? Can you actually make a living at this?

Sure. I do, and so do lots of other people. It’s not always easy and it doesn’t always happen for everyone and — most important of all — there are NO guarantees. But no one made me do this for a living. This is a tough, tough business. Not everyone can make enough at it to support themselves. Some people spend YEARS publishing books before they earn enough to quit their day jobs. Some rely on family money or a working spouse. Some never make it at all.

In short: If you want to get rich, go to law school and become a corporate attorney. If you want to do something fulfilling and be guaranteed of a living wage, become a teacher. If you want to entertain and enlighten people, become a writer…and be prepared for the possibility that you’ll live on noodles for a long time.

Next week: Questions and answers! I’ve already got some, but ask yours in the comments, too!

Comments

  1. Hey I just wanted to say thanks for writing this 😀 Even if it’s super simplified, it’s way helpful for someone looking to get into publishing a book.

    Besides that, I’m awful at math, so everything being simplified makes it easier to understand.

    Thanks 😀

Trackbacks

  1. […] three posts this morning (one by Laurie Halse Anderson, one by The Rejector, and one by Barry Lyga) say pretty much everything about the money thing, with the exception of taxes. Mandy Hubbard has a […]

  2. […] Writing Advice #29: Money: Ever wondered how authors get paid for their books? Barry Lyga explains […]

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