Advances

I think the answer is that they are giving smaller advances on average than they were a a few years ago. Yes, some authors are getting big advances, but the average advance is smaller.

My understanding is that for most authors the advance is based on how much the publisher thinks a book will sell, within a range and taking into account other details of the contract (some authors might get better terms in exchange for a smaller advance, for example)

Keep in mind that with the way royalty rates work, authors continue to make money if their book is more successful than originally expected. In fact, some might argue that you'd be better off with a small advance. With a small advance, it doesn't take much for your book to earn out and be considered a success. With a large advance, if your book doesn't earn out, then that could be considered a black mark when publishers are considering your next book.

Basically, publishers will always pay the smallest advance they can get away with. The only way they ever pay a lot for a book is if other publishers want it and a bidding war develops; or if they're given the chance to make a preemptive bid and they believe that if they don't make a good enough offer, they'll lose the book in auction.

In most cases, there's no auction or any threat of one. When I was an agent, which was quite a while ago, we had a formula for figuring out what the advance should be in that case. We'd ask (or estimate for ourselves) what the first print run would be, figure out the royalties that would be due if the printing sells out, and ask for half as an advance.

http://blog.nathanbransford.com/2009/11/economics-of-publishing.html

Here is a post by Nathan Bransford about how publishers make money on a book that I found interesting.

I haven't seen any drop at all in advances. There are fewer "take a chance" advances where the publishers gives an advance well above the average.

Advances on books are based on expected sales of that book. Contrary to what Lynn Viehl seems to think, publishers never, ever make the kind of profit she seems to think, unless the writer does, as well. She obviously knows nothing at all about how publishing works, or how much it actually costs the publisher to get and keep a book on the market.

After expenses, publishers make just slightly more on a book than the writer makes. Very slightly. In some cases, the writer makes considerably more than the publisher. But overall, the publisher must make more than the writer in order to pay for all the books that flop and lose money.

The profit, however, is nowhere near, not even in the same universe, that Viehl seems to believe.

Anyway, advances really haven't dropped on average. Not with any of the publishers I know about, at least.

What has dropped with some publishers is royalty rate. This is far worse than a drop in advances. Only the top selling writers ever earn a living off advances. The rest of us earn a living off royalties, and the higher the royalty rate, the easier it is to do this.

But it's not a problem, really. Publishers still offer good advances, and if your book is successful, you'll rake in the dough. If it isn't successful, you shouldn't make earn much money.

Book costings are projected over a period of time and are based, as mentioned here, on estimated sales figures. The publisher will factor in editorial, design, production, publicity and advance/royalty costs + include a slice for overheads. This is all subtracted from the cost price to booksellers (usually 40-50% discount).

Getting to the point, it's all a bit of a cashflow gamble and that's why most advances tend to be small. I'm going back a few years, but advances for YA in the UK usually landed anywhere between 3K and 20K (the 20K was for established authors) - most came in at 5-7.5K for UK rights + the odd £2K here and there for overseas rights. Of course, Twilight could have changed all of this so they could be higher now. Auctions will also impact on the advance figure.

cspradbery said:

Thanks for the feedback. So going with the figures mentioned here, let's say for the sale of argument an author receives a 5k advance. What would the average projected royalties be, all going as expected with sales?

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The average would be no royaties at all. On average, only about one first book in four pays back the advance and starts earning the writer royalties.

But averages mean nothing, anyway. Your book might not sell five hundred copies, or it might sell five million. Sales numbers work on a book by book basis, not on averages.

Everything depends on how well you tell a story, and on how well you develop empathetic characters. This is a Good Thing for all of us.

I forget where I read it, but it was said you know you have a good agent when you never earn royalties from your books.

Most royalty agreements that I came across were based on 7.5% net receipts, not published price so it would take a fair amount of sales to earn out an advance of £5K on a book selling at £6.99. I'm afraid I can't quite remember the model so my maths might be way out, but I'm thinking that it took approx sales of 16-18K cps to breakeven after the bookseller discount. Royalties would be paid after this time.

Big authors can negotiate 7.5%, 10% or higher on published price so the payback is faster and higher.

Hope this helps. It may not be fully accurate though as it's been a while since I was involved in this kind of thing!

According to editor Ari Lewin at SCBWI a few weeks ago, advances are bigger than ever (she does children's, so I'm not sure if this carries throughout). More books are selling at auction than ever, and the prices are being driven up. That's not a good thing though, because it makes publishers more hesitant and have more risk.

gideonna said:

Most royalty agreements that I came across were based on 7.5% net receipts, not published price so it would take a fair amount of sales to earn out an advance of £5K on a book selling at £6.99. I'm afraid I can't quite remember the model so my maths might be way out, but I'm thinking that it took approx sales of 16-18K cps to breakeven after the bookseller discount. Royalties would be paid after this time.

Big authors can negotiate 7.5%, 10% or higher on published price so the payback is faster and higher.

Hope this helps. It may not be fully accurate though as it's been a while since I was involved in this kind of thing!

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Is this in England? I'd never sign a contract that paid royalties on net receipt. That's asking to be robbed. Mine are always on cover price.

Theo81 said:

I forget where I read it, but it was said you know you have a good agent when you never earn royalties from your books.

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If you're a bestselling writer with a solid track record, this is often true. If you're a new writer with no track record, this is sometimes true, and sometimes the end of your career.

If you receive a huge advance, and the book flops, you're in trouble.

In answer to your question, James. Yes - these figures are for MG/YA in the UK, although I am going back a few years (7 or 8) so the market may have changed.