Book Advances: What Are They Really For?
Sunday, November 13, 2011 
Guest Post by Irene Watson
Hearing about an author getting a book advance from a traditional publisher, especially from a major one, often stirs up wishful thinking in first time or unknown writers. As authors, our ultimate goal would be to land a contract with one of these publishers and get a substantial advance.
But, there are misconceptions that revolve around an advance. Basically, an advance is just that; it's an advance on something to happen. Many authors don’t understand that the word “advance” means advance against royalties. This means royalties for the actual sale of books will offset the advance. The publishers take an estimate on their projected sales for the first year. As well, they try to estimate how much it's going to cost them to do the editing, make the cover, pay for binding/printing, and shipping costs. Then they figure out how much the author might make based on the royalty percentage ending up with the advance they offer. Keep in mind the typical royalty rate for paperbacks is 7.5% although some do pay as much as 10% or even as high as 12.5% if the author is very well known. Depending on how much the book is sold for, the average royalty could be anywhere between $1.00 to $2.00 per book sold. The average royalty for a hardcover is about 15% for important authors but range between 10% to 12.5% for all the rest.
But, that's not where it stops. The huge misconception is that traditional/big time publishers promote authors. They don't...unless you have an important name. When the author gets an "advance" it doesn't mean the money goes into her or his pocket and he or she can take a trip they've always wanted to make. It means that the marketing/publicity expense has to come out of it. The author is expected to hire a publicist, attend signings/events (sometimes even arranged for by the publishing company,) travel, stay in hotels, promote, promote, promote, and it all has to come out of the advance. As well, the agent takes 15% off the top. So, when we hear that an author got $800,000 advance, that's all it is; it's an advance for all the expenses and the higher the advance, the higher expectations for promotion by the author will be.
For example, an article in The New York Times says:
As for his profits, Mr. Eggers's ''Acknowledgments'' provides a rough breakdown of the costs that consumed most of the $100,000 advance from his hardcover publisher, Simon & Schuster. He promised to distribute some of the remaining $39,567.68 by sending $5 checks to the first 200 readers who mailed in a proof of purchase.
The percentage of authors that make a living off writing books is pathetically small unless the names are Brown, King, Evanovich or Steel. Because of the dismal income in the end it's one reason many savvy writers turn to self-publishing or, those that do have traditional publishers, keep their day jobs. After chatting with a few agents about this they all agreed that the authors get to keep less than 10% in the end. If the author gets $8 - 10,000 out of the $100,000 advance into his or her pocket it's exceptionally good. But, from what I hear publishers pay an average of $15 - 20,000 in advances but as low as $3 - 5,000 for first time authors. So...do the math - in the end your take is pocket change and just blows out the window for those unbudgeted incidentals and before you know it, you'll be dipping into your own pocket to support a book that is published by a publisher you received an advance from.
And remember, no royalty checks will be paid out to the author until the total amount of royalties and other income generated from sales exceeds the amount of the advance. This is called earning out. This means if you have a $10,000 advance, and your royalty statement shows that you have sold enough books to generate royalties of $8000, then you will not get any royalty payments until you have earned an additional $2000 to offset the advance. And, depending on the sales of your book it may not happen.
But, there are possibilities as well. An article in Writers Weekly says:
Many best-selling authors achieved their success by investing their advances in their own campaigns. Hiring your own publicist will cost $10,000. Purchasing mailing lists can cost more. By spending all or most of an advance on self-promotion, an author is banking on his or her long-term future. It's a common practice - one that publishers are coming to expect. Dorothea Benton Frank spent over half of her $50,000 advance on postcard and flyer mailings to over 80,000 addresses and on her own regional book tour, a strategy which premiered her first novel at number nine on the New York Times best-seller list. She then signed a two-book contract for $100,000 each.
But that outcome is rare. Peter Lance, a novelist who also began in mass paperback, spent similarly, exceeding his $8,000 advance four times over in order to pay for his own ads, travel expenses, mailings and even a personal assistant. He sold out most of his 55,000 first run quickly, but to little effect. He lost money, and his press was slow to issue a second edition.
So...yes, an advance sounds prestigious and gives you bragging rights but the reality of it isn't prestigious at all. Bottom line: keep your day job.
Irene Watson is the Managing Editor of Reader Views, where avid readers can find reviews of recently published books as well as read interviews with authors. Her team also provides author publicity and a variety of other services specific to writing and publishing books.
Reader Comments (8)
Thanks again, Irene, for another article of exceptional clarity -- very succinct and informative. To the point, as always, and beautifully written.
You forgot to mention the concept of 'earning out' an advance. In some cases, if the author doesn't sell enough books to recoup the advance, he/she has to return part of it.
Many people think of an advance as a 'signing bonus'. It's not--it's an advance on earnings. Most advances (these days) don't even BEGIN to approach the six-figure mark. An agent/author must pay attention to ALL aspects of the contract. There are some real doozies out there--my agent's hair caught fire while reading some of them.
It's all about the 'author-friendliness' of the contract signed. If the author has a reputable, knowledgeable agent, he/she should know exactly what it means to sign the contract, and should negotiate terms that are favorable to the author. If no agent is involved, experienced help should be sought in evaluating any contract before signing it.
Thanks for putting things into perspective! It seems that getting an advance is not always a good thing...especially if you might have to pay it back!
About the reviews issue: I would rather have reviews from seasoned reviewers like Reader Views than some of the ones that are "allowed" from random readers who may not know anything about the quality of books...not to mention all the ones from friends and family, which are great but not very objective. They really should restrict reviews to qualified professional reviewers and actual purchasers of the book. (Anyone who buys one should be able to offer an opinion!)
Thanks Archer for adding a better explanation on "earning out." It could be a real shock when the money is all spent but the publisher is requesting the funds to be returned. All is not as wonderful as it sounds when it comes to receiving an advance.
And, thanks for emphasizing "if the author doesn't sell enough books" because in reality it comes down to the author selling the book, regardless if the book is published by a publisher giving an advance or self-publishing. It really is up to the author to create the sales.
This article is great and it proves the point, to those who may not yet know, that the business model for the traditional publishing world is broken.
The most important point for the author is that he or she has sold the rights to publish the work to the publishing company in consideration of receiving the advance. If the author doesn't have money [or enough money] to promote the book, the publishing company certainly will not put large sums into its promotion and so the book simply "dies". But the publisher still owns the rights and the author cannot take it to another publisher or self-publish.
One can easily sympathize with the author and denigrate the publisher. But the saddest part in this tale of woe is that the traditional publishing world does not understand the new dynamics at play and cannot seem to respond to a new marketplace with an effective game plan.
It's hard to know what the author should do. Sell to a traditional publisher and take a tiny advance and thereby lose his/her rights to the work? Or self-publish? If you self publish, you will have to spend a lot of money to get any attention at all. I think of the self-publishing world as a massive, chaotic medieval marketplace where everyone is hawking his/her wares.
How does the author ever get heard? Only, I think, by consistently sending out the message in new and creative ways. The good news is that everyone [traditional publishers included] are all trying to adapt to the new marketplace and find ways to be effective in it.
...not to mention the entire outmoded, outdated, degrading industry "grading" system of your pitch and font and paper used in your supplication, and pursuing agents as a victim and beggar of destiny to both them and the mystic "publisher" and distributor and printer and everyone else with a paw out in the wind.
And then you're almost totally dependent upon them to get it right---if they will even deign to speak to you.
Better to self-publish, I say. And nobody controls you.
Yarre, matey....hoist tha mainszl and turn her into tha wind and damn the torpedo reviews too! :)
Thank you for your perspective. Your article was very interesting. The concept of "earning out" is new to me, but the idea that authors don't exactly receive "top notch" treatment, isn't. The publishing industry as a whole is operating from an old model, they've become too laxed in their ways, and they need to revamp their system. Otherwise, they can't do anything but blame themselves for poor growth and earnings.
Very useful and informative post Irene. However, I think your take on what publishers "expect" from authors who accept a book advance may not be representative of most authors'. I have a response over at my blog, http://blog.srstaley.com/2011/11/18/the-reality-behind-book-advances.aspx, where I draw on the experience of authors that I know who have received advances. I think a big takeawy from your article is that authors working with established publishing houses really need to be represented by an experienced literary agent. Authors should by all means take an advance if it's offered, but they should also fully understand its ramifications and implications. Thanks for all that you do for those of us trying to make our way in the publishing world.