The world of book publishing is very exciting but it also can seem bewildering for its many intricacies. Among these are the concepts of royalties and advances. Aspiring authors often raise numerous questions in an attempt to understand these mechanisms. What is the difference between an advance and a royalty? How do they work? What is a fair deal? This article will explain the basic functions of royalties and advances, hear guidance from contemporary bestselling authors, and suggest additional factors that might be important in negotiating fair deals with publishers.

Understanding Royalties

Royalties are the primary means by which authors receive compensation for their work. When a book is sold, the author earns a percentage of the price paid for the book. This percentage, known as the royalty rate, is part of the agreement made between the author and the publisher, and is written into the publishing contract.

The royalty rate varies greatly depending on factors such as the format of the book (hardcover, paperback, e-book, Braille), the sales channel (brick-and-mortar stores, online retailers), and the author’s negotiating power.

Royalty rates for print books generally range from 8% to 15%, with the average falling between 10% and 12.5%. E-book royalties can vary widely, ranging from 25% to 70%. Audio-book royalties are likely to range from 20% to 25%. These rates are calculated based on either the book’s list price or the publisher’s net receipts.

For example, an author who negotiates a royalty rate of 10% on a physical, printed book with a list price of $10 will earn $1 for each book sold.

That same author – selling the same work as an E-book priced at $6 – might earn a royalty rate of 25% but this will be taken from the publishers’ net receipts. In other words, the author will receive 25% of what the publisher earns after the publisher has deducted their expenses.

A publishing contract will set out many royalty rates – sometimes requiring several pages of the contract – and each one must be considered with care before the contract is agreed. If you have an agent, they should help you negotiate these rates. More information about literary agents here.

Understanding Advances

An advance is an upfront payment made to an author by the publisher before the book is released and sometimes before the book is completed. Advances indicate that the publisher has confidence in the book and the author. Payment of an advance allows the publisher to ‘own’ the book while they develop the cover, a marketing plan and a working relationship with the author. Authors derive immediate income from an advance, which is usually a great relief! An advance can also incentivize the author while they complete and then edit their work.

The size of an advance will vary greatly depending on factors such as the author’s track record, the size of the market, the book’s genre, and the expectations the publisher has for book sales.

As the name indicates, an advance is money paid to the author before it is earned from book sales. This means that the author does not receive additional royalty payments until the amount of the advance has been earned. A tally is kept and appears on the author’s royalty statement, which is usually delivered twice each year.

Guidance from Contemporary Bestselling Authors

1. Stephen King: Renowned author Stephen King is known for advocating fair treatment of authors. In his book “On Writing,” he suggests that authors should negotiate for a fair balance between advances and royalties. King emphasizes that receiving a reasonable advance is essential to ensure that authors can focus on writing without the burden of financial stress.
2. J.K. Rowling: As one of the most successful authors of all time, J.K. Rowling negotiated a unique royalty structure for the Harry Potter series. Instead of receiving a traditional advance, Rowling receives a higher royalty rate (estimated at 15%) on each book sold. This arrangement allowed her to benefit greatly from the success of her novels, demonstrating the potential advantages of negotiating a custom-made deal.
3. John Grisham: Bestselling author John Grisham has mentioned in interviews that, early in his career, he received modest advances for his legal thrillers. However, as his popularity grew, so did his advances. Grisham highlights the importance of building a solid track record of successful book sales and then leveraging it to negotiate better deals in the future.

Negotiating Fair Deals

While royalty rates and advances are important, other factors also play a role in securing a fair publishing deal. Here are some key considerations:

1. Track Record: Publishers often base their decisions on an author’s past success. A history of writing books that are well-received increases an author’s bargaining power for higher advances and better royalty rates.
2. Genre and Market Trends: It is important to understand current market dynamics and the trends within a specific genre. Authors who pay attention to these movements can more readily align their expectations to suit the climate. Genres with high demand for new material allow authors to negotiate more favorable terms.
3. Agents: Having a literary agent can be instrumental in negotiating favorable terms with publishers. Agents know the industry, keep a database of contacts, and hold expertise in contract negotiations. They can generally help authors secure better deals and are usually nice people, too!
4. Digital Publishing: E-books and audio-books have become significant revenue streams for authors in recent years. Negotiating fair percentages for digital sales is crucial to an author’s earnings. Bearing in mind that older contracts often did not place enough importance on them, authors should pay close attention to the royalty rates and terms specific to these publishing formats.

Royalties and advances are critical components of the book publishing world. Talk to other writers and use the experiences of successful authors to gradually acquire an understanding of how these mechanisms work. If you can, find an agent who is eager to work with you. The aim is to negotiate a fair deal, where the publisher is remunerated for their considerable role and you are compensated for your creativity, persistence and hard work, both now and in the longer term.

References:

• King, Stephen. “On Writing: A Memoir of the Craft.” Scribner, 2000.
• Rowling, J.K. “The Casual Vacancy.” Little, Brown and Company, 2012.
• Grisham, John. Interview with Publishers Weekly. “John Grisham: A Nonlawyer’s Advice to Lawyers,” 2006.