Lesson 8: Understanding your advance
Every new book represents a risk to the publisher, who is gambling tens of thousands of dollars that it will sell enough copies to earn a profit. As much as a third of all books published lose money, while another third only cover their costs or earn a small profit. Books by unknown authors present the greatest risk, because they have no following. Therefore, publishers have to keep costs down by offering small advances.
An advance is money paid to the author in return for the right to publish his or her book, before any books have been sold. Ie, it’s advanced against future royalties, and the author doesn’t receive any money from sales of the book until the advance has been earned back by royalties from sales. The advance is seldom more than half to two-thirds of what the publisher expects the book to earn in royalties. This is insurance in case the book sells badly. For example, say the book retails for $20 (plus tax), the author’s royalty rate is 10% and the publisher expects to sell 5,000 copies. If it does, the book will earn the author $20 X 0.10 X 5,000, i.e. $10,000 in royalties. With this expectation, the publisher would normally offer an advance of between $5,000 and $7,000 and the balance would be paid in royalties at a later date.
Nonetheless, a high proportion of books flop and don’t earn back their advances. In any year, the major global publishers will each have millions of dollars in unearned advances on their balance sheets, and eventually these losses have to be written off. If losses are too high for too long, the publisher will go out of business. Therefore, advances have to be kept to a minimum.
Most book advances in Australia, the UK and the US are less than $10,000. Surprisingly, average advances in the UK and US aren’t significanty higher than here, despite the much bigger markets. Why not? There are far more titles published, there’s much more competition and, in the case of the US, more fragmented markets.
If you’re writing children’s fiction, advances are typically lower, partly because kid’s books sell for a lower price and partly because, since Harry Potter, everyone’s writing children’s fiction and the competition has driven advances down. Partly offsetting that, those few books that do sell well can stay in print for a long time.
For literary fiction, which may get the reviews and the awards but doesn’t sell well, expect advances to be lower again: maybe only $1,000 – $3,000. Not much for the year or two you’ve spent writing the book.
When you finally get the advance, don’t spend it on something wasteful like food, clothing or rent. You’re going to need every penny to promote your book, because the chances are that no one else will. I’ll cover this topic in a future lesson.