How to Speak Publisher: E is for Earning Out

This post, by Stroppy Author, originally appeared on the Stroppy Author’s Guide to Publishing blog on 5/24/12.

‘Earning out’ is what you hope your book will do. Remember the advance? It’s what the publisher paid you a very long time ago when you started/sold your book. We talked about the advance at the start of How to speak publisher.

Your book earns out if/when it has earned enough in royalties to cover the advance the publisher paid you. Here’s a bit of simple maths. Simple, I said. Don’t hide behind the sofa, there. Maths is your friend – don’t leave it to the publisher or your agent.

Stroppy Author gets an advance of £5,000 – hurray!

This means that to earn out the advance, the book needs to earn £5,000 in royalties

Stroppy Author’s book sells for £10 a copy.

Stroppy Author gets a royalty of 10% – hurray!

This means that the royalty on each copy is 10% of £10 = £1

So to earn £5,000, the book would need to sell 5,000 copies at its cover price.

These are not real figures; this never happens – but that’s the principle.

While we’re on maths, let’s do a spot of counting.
The press likes to shout about six-figure advances. This is to confuse people, who usually assume that a six-figure advance is a million pounds/dollars/euros. It isn’t – a six-figure advance is one represented by a number that has six digits, so it is £100,000 (or $100,000) or more. Count the figures: a 1 and five 0s, that’s six. Don’t count the comma. So if you hear that an author has a five-figure advance, that means they have £/$10,000 or more, which is not necessarily very much. Obviously £99,000 is quite a lot; but $10,000 is not.

Some books never earn out their advance and are not even really expected to. If a publisher pays an advance of £300,000, this is largely to grab a lot of publicity. The book might earn out, but no one will be hugely surprised if it doesn’t because a lot of these gambles don’t pay off. To the author, the big advance seems to be a sign that the publisher is certain their book will be a bestseller. In fact, it’s a sign that the publisher hopes their book will be a bestseller and thinks there’s a pretty good chance it will be. But it’s cheaper to pay an advance of £300,000 and get lots of free press coverage than to invest in posters all over the underground and buses. The publisher can still make a huge profit even if this book doesn’t earn out.

How quickly your book earns out depends on the following factors:

  • how large the advance was in the first place
  • the royalty rate
  • the price the books sell for.

There is a lot of room for wild variation here. Advances range from zero to £/$1,000,000. Royalty rates range from less than 1% to 10% (sometimes even higher after some massive number of sales – but very rarely). Books sell for anything from cover price to 90% discount. At some levels of discount, the royalty might disappear completely. This is generally to cover the publisher shifting the remaining copies for next-to-nothing when they’ve decided to give up on it.

 

Read the rest of the post on the Stroppy Author’s Guide to Publishing blog.

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