Why most books don’t earn out, and what that means

What does it mean to “earn out” an advance? #

Earning out an advance means that the royalties generated from book sales have surpassed the initial advance payment provided by the publisher. For example, if an author receives a $10,000 advance, they need to earn $10,000 in royalties before they start receiving additional payments. According to industry standards, this is often calculated based on the royalty rate and the book’s sales. For instance, if the royalty rate is 10% of the list price for a $20 book, the author earns $2 per sale. Therefore, they would need to sell 5,000 copies to earn out the advance.

Why don’t most books earn out their advances? #

Several factors contribute to most books not earning out their advances. Firstly, advances can be quite substantial, especially for authors with a proven track record or a promising manuscript. Publishers may offer large advances to secure the rights to a book, hoping that the book’s sales will justify the investment. However, the reality is that many books do not achieve the sales necessary to surpass the advance. Additionally, the costs associated with publishing, such as editing, cover design, and marketing, can be significant. For instance, a developmental edit for an 80,000-word novel can cost between $4,000 and $5,840, and a cover design might average around $880. These expenses, combined with the advance, create a high bar for royalties to overcome.

How do publishing costs affect earnings? #

Publishing costs play a key role in determining whether a book earns out its advance. These costs include editing, cover design, interior formatting, ISBN acquisition, and audiobook production. For example, a copyedit of an 80,000-word novel can range from $2,400 to $4,000, and audiobook production can cost about $300–$400 per finished hour. These expenses are typically covered by the publisher but are factored into the overall profitability of the book. If the book does not generate enough royalties to cover both the advance and these costs, it will not earn out.

What are the typical royalty rates for different formats? #

Royalty rates vary depending on the format of the book. For hardcover editions, authors typically receive 10% of the list price for the first 5,000 copies, 12.5% for the next 5,000, and 15% thereafter. Trade paperbacks usually earn around 7.5% of the list price, while mass-market paperbacks start at 8% and increase to 10% after approximately 150,000 copies. E-books generally earn 25% of the publisher’s net receipts, although the Authors Guild argues that 50% is a fairer rate. Audiobook royalties are commonly around 25% of net receipts. It’s important to note that royalties on net receipts are calculated after the retailer’s discount, which can significantly reduce the author’s earnings compared to royalties on the list price.

How do advances vary across genres and deals? #

Advances can vary widely depending on the genre and the specifics of the deal. According to Publishers Marketplace, a “nice deal” might be up to $49,000, while a “very nice” deal ranges from $50,000 to $99,000. A “good” deal is between $100,000 and $250,000, a “significant” deal is $251,000 to $499,000, and a “major” deal exceeds $500,000. However, reliable public data on per-genre advance averages is limited, as most deals are under non-disclosure agreements (NDAs). This variability makes it difficult to predict how likely a book is to earn out its advance based on genre alone.

Frequently asked questions #

How common is it for a book to earn out its advance?

Earning out an advance is not common for most books. The median income for working authors is relatively low, and the costs associated with publishing can be significant, making it difficult for many books to surpass the initial advance payment.

What happens if a book doesn’t earn out its advance?

If a book does not earn out its advance, the author is not required to pay back the difference. The advance is essentially a non-refundable payment for the rights to the book. However, this may affect the author’s future advances and deals, as publishers will consider the book’s performance when negotiating new contracts.

How are royalties calculated for e-books and audiobooks?

Royalties for e-books are typically calculated as a percentage of the publisher’s net receipts, often around 25%. For audiobooks, royalties are also commonly based on net receipts, with rates around 25% as well. These calculations are made after the retailer’s discount, which can significantly impact the author’s earnings.

Can an author negotiate for higher royalties or a lower advance?

Authors can negotiate for different terms, but the specifics depend on the publisher and the book’s potential. Some authors may opt for a lower advance in exchange for higher royalty rates, hoping that the book will sell well and exceed the advance. However, this is a strategic decision that varies based on individual circumstances and market conditions.