“Advances” – technically, advances against royalties, are lump-sum payments some publishers pay to authors “in advance” of publishing the author’s work.
More simply, 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. Small and micro-publishers often pay smaller advances than larger houses—though this isn’t always true. Let’s take a closer look at what an advance represents and how it should—and shouldn’t—impact an author’s willingness to sign a publishing contract.
Generally, an advance represents an advance payment against the author’s future royalty earnings. This means that after publication of the author’s work, the author will not receive any royalty payments from the publisher until the author’s total share of sales proceeds (“royalties earned on sales”) exceeds the amount of the advance.
To illustrate this, we’re doing math. Stick with me.
If Abby Author receives a $1,000.00 advance on her new novel: MATTHEW THE MANATEE, and the royalty clause in Abby’s contract entitles her to 10% of the publisher’s gross receipts on sales of the work, and the publisher receives $10.00 per copy of MATTHEW THE MANATEE sold (which probably means this book is a hardback selling at $25.00 retail), how many copies of MATTHEW THE MANATEE have to sell before Abby starts receiving additional royalty distributions from the publisher?
With apologies for sneaking a word problem in on you…let’s work this through.
At a 10% royalty rate (and, for the record, that’s high—but I didn’t want to make you do the math with uneven numbers) if the publisher receives $10.00 on every copy of MATTHEW THE MANATEE sold, Abby’s royalty share is $1.00 per copy. (Less returns…but I’m assuming, for the sake of the math, that nobody ever returns this book.)
Given that Abby received a $1,000.00 advance, she won’t receive any additional royalty payments until the 1,001st copy of MATTHEW THE MANATEE is sold.
When that 1,001st copy sells, and Abby starts receiving additional royalties, MATTHEW THE MANATEE has “earned out” its advance.
A book that “earns out” is considered financially successful, at least by one important measure in the publishing industry. (There are other factors that also play a role in determining whether a book is successful, but earning out the advance is a good way to start.)
Publishers don’t offer advances to be nice, and publishers generally don’t offer large advances to first-time authors unless they really believe a book will sell. At least with many publishers, an advance represents a publisher’s guess at the novel’s profitability point. However, a small advance (or no advance) doesn’t necessarily mean the publisher lacks faith in an author’s work. Some publishers don’t pay advances at all. Others have smaller budgets, or simply prefer to offer lower advances.
During negotiations, authors should be aware that sometimes publishers will agree to a higher total royalty rate if the contract contains no advance (or a very small one).
Many authors consider a contract with a small advance, or no advance, a dismal failure. This is misguided thinking. Earning out a small advance is often considered a bigger success than failing to earn out a massive sum.
Instead of focusing on the advance, authors should look at the contract as a whole.
No amount of money makes up for inappropriate contract terms or a publishing house that lacks the professionalism and experience to treat the author and his or her work with industry-standard care and respect. It’s always better to take a lower advance from a better publishing house that offers industry-standard terms (including out-of-print status based on royalty bearing sales, clear author termination rights in the case of publisher breach, and other important legal protections) than to follow the money into a contract you later regret.
Remember: the advance is only one small component (and usually rather small, indeed) of the deal the publisher offers. Protecting your rights requires evaluation of all the relevant terms, and making decisions based on the publisher and the contract as a whole.
Do you have questions about advances? What would mean more to you in a contract than an advance? Do you have other contract questions you'd like Susan to write about?
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Susan Spann writes the Hiro Hattori Novels, featuring ninja detective Hiro Hattori and his Portuguese Jesuit sidekick, Father Mateo. The fourth book in the series, THE NINJA’S DAUGHTER, will release from Seventh Street Books in August 2016. Susan is the Rocky Mountain Fiction Writers’ 2015 Writer of the Year, and a transactional attorney whose practice focuses on publishing and business law.
When not writing or practicing law, she raises seahorses and rare corals in her marine aquarium. Find her online at http://www.SusanSpann.com, on Twitter (@SusanSpann), and on Facebook (SusanSpannAuthor).