SHOW ME THE MONEY – Advances in Publishing Deals (Part 1)

An “advance” is the money an author receives “up front” on a publishing deal.

Not all authors receive advances, and not all publishers offer them. For many first-time authors, the advance is simultaneously a mystery and a treasure, “manna from heaven” that falls at the publisher’s whim.

Not so.

In most cases (though rare exceptions do exist) the advance represents an advance payment against the author’s future royalties. After publication, the author will not receive any royalty payments until the royalties earned exceed the amount of the advance.

Yes, this means we’re doing math. Stick with me.

If Abby Author receives a $1,000.00 advance on her new novel, AARON THE AWESOME AARDVARK, her royalty clause gives her 10% of every retail sale, and the publisher sells the novel at $10.00 per copy, how many copies must be sold before Abby starts receiving additional royalty distributions?

(We’ll take a break while you (a) recover from the shock of seeing word problems on a writing blog and (b) call your algebra teacher and apologize for your failure to believe that you really would use it later in life.)

Everyone back? Good. Let’s move on.

At a 10% royalty rate (for the record, that’s high), Abby’s royalties on a $10.00 book are $1.00 per copy sold. If Abby received a $1,000.00 advance under standard contract terms, she won’t receive any additional royalty payments until the 1,001st copy of AARON THE AWESOME AARDVARK is sold and accounted for.

When that 1,001st copy sells, and Abby starts receiving additional royalties, it means that AARON THE AWESOME AARDVARK has “earned out” its advance. From the publisher’s perspective (and Abby’s too) this means the book is a financial success by at least one important measure. There are other factors involved in determining whether a book is successful, but earning out the advance is a good way to start.

Viewed from this perspective, it’s easier to see what the advance represents. An advance is the publisher’s “minimum guess” at a novel’s profitability. Publishers don’t offer advances to be nice, and they don’t offer large advances to first-time authors unless they really believe the book will sell. Conversely, small advances (or no advance) doesn’t mean the publisher lacks faith in an author’s work.

Some publishers don’t offer advances at all. Others have smaller budgets, or simply prefer to work with a lower advance. Sometimes publishers will offer an author a higher royalty rate if the contract contains no advance.

Many authors look to the advance as the “end-all” term in a publishing contract. If the publisher doesn’t offer one, or if the offer isn’t high, the author considers the contract a dismal failure. This is misguided thinking. An author who earns out a small advance is often considered a bigger success than one whose novel fails to “earn out.” Earning out – and the resulting profitability of your work – is important if you want to be offered another deal. Instead of focusing on the advance, try to look at the contract as a whole. A publishing deal – like a novel itself – must be evaluated by the sum of its individual parts.

Next week we’ll continue the “Show Me the Money” series with a closer look at royalties and royalty calculation with not one but two posts. On Wednesday, we’ll be taking a look at royalty percentages and how they vary with format. On Friday March 9, I’ll be guest-posting at Writers in the Storm, and my topic will be the all-important royalty calculation clause.

In the meantime, and as always, if you have questions about this or any other publishing law issues, please post them in the comments or ask me on Twitter, @SusanSpann, using the #PubLaw hashtag!