This post, from Editorial Ass, appeared on that site on 5/20/09.
My mother has read and loved a particular book I edited. Last week, she called me and asked, out of curiosity, how much money that favorite author of hers might make off the book. Well, I said, there’s an advance, I said, but really what matters is royalties, but you can’t just assume those are rolling in every six months, since there’s a reserve against returns, but then there’s rights sales that are straight pocket change, but there’s a fee for the…
As I spoke, her eyebrows came down into her nose and her mouth pursed fretfully as she tried to follow me. Watching these changes come over her face, I started listening to myself and the malarkey I spoke. I realized that royalty accounting must be SO mysterious to anyone unpublished. Or published. Or anyone. I realized even I didn’t really know what I was talking about.
So here is my imperfect attempt to describe to you an author’s possibilities for making money with her/his books. I don’t claim the final word, and I welcome amendments. But I think everyone deserves to know how they might profit from their work, because it might help them make good decisions about their writing and publication processes.
Let’s try to go in rough chronological order.
The Advance
What does "advance" mean: It’s money "advanced" to you against royalties, meaning it’s a loan the publisher gives you in a lump sum under the assumption that your book will make enough money for said publisher that the advance will be recouped. This means that you will start earning royalties when and only if your book makes enough money that your publisher’s advance to you it paid back, using your negotiated royalty percentage as a marker. If your advance is $10,000, your royalty is 10%, and your cover price is $25.00, you will need to sell 4,000 copies of your book before you start making additional royalties. This is called earnout.
How the advance is divided: Either in half of thirds–usually. If it’s a smaller advance (or your agent manages to force them to agree to this), your publisher might agree to pay it in two lumps, often half on signing, half on delivery and acceptance of your final manuscript. If it’s larger advance, you’ll probably get a third on signing, a third on delivery and acceptance (or d&a), a third on publication.
The Royalties:
What are typical royalty percentages: Standard royalties for new books are as follows: 10% for hardcover, 7% (or sometimes 7.5%) for trade paperback, and 5% for mass market. Often, publishers will agree to incentive escalators (usually only on hardcovers). Here’s a very typical hardcover example:
10% on the first 5,000 copies sold
12.5% on the next 5,000 copies sold
15% thereafter
When royalties are paid: As we mentioned above, you’ll only start earning additional royalties when your advance has earned out. Supposing your book has earned out, royalties are (at most companies) paid every 6 months, in statements that go directly to agents.
Read the rest of the post, which includes information about ‘reserves against returns’, rights sales and some what-if scenarios, on the Editorial Ass blog.