The payment structure for book contracts is often incredibly complex, so it’s not surprising that there’s a lot of confusion about where authors actually get their money from. I’m going to try to demystify that a bit by delving into the different ways a traditional book deal can generate income for an author.



The advance

Firstly, and most famously, there’s the advance.

An advance is a sum of money that a publisher offers an author in order to secure the rights to publish their book. This can range from pretty much nothing (contracts with no advances do exist) to extremely large sums, which are usually reserved for high-profile authors who the publishers are confident will generate enough sales to earn back the investment. Unfortunately there’s no average I can give you here – the amount of the advance really does depend hugely on the book, the author, the publishing house, the agent and the timing of the deal. But bear in mind it’s not always a case of the bigger the advance, the better a book sells. Plenty of books have received modest advances and gone on to do very well.

Once a contract is signed, the publisher is legally bound to pay the promised advance to the author, regardless of how well their book sells. So as long as the author meets the terms of the contract (by delivering an acceptable manuscript within the given time period), then they will definitely be paid the advance.

The advance is sometimes paid in one instalment, but usually it’s split up over the lifetime of the book, often into three or four separate payments. So for example, a £10,000 advance might be paid as follows:

£2,500 on signature of the contract



£2,500 on delivery and acceptance by the publishers of the completed manuscript



£2,500 on first publication of the book (usually hardcover)



£2,500 on the mass-market paperback publication of the book



This means that it can be years after landing a book deal before the author has received their full advance.

Bonus advances

Above I mentioned that a traditional advance is not dependent on how successful a book is, but in order to tempt an author into accepting a lower advance, a publisher might offer them some bonuses. These are advances that are not guaranteed to the author, but which the author will receive if their book reaches certain specified sales targets.

For instance, the above example advance might have the following added to it:

£2,500 in the event that sales of the book reach 10,000 copies within the first 12 months of publication



It’s important to note that the bonus advance is still an advance and not a fee. This distinction will become important in the royalties section below.

Royalties

What are royalties?

Royalties are the proportion of a book’s revenue that is passed on to the author from the publisher. In most cases, the royalty split is skewed largely towards the publisher – with the author often only receiving about 10% of the income.

Agreeing royalty splits is a large part of what agents negotiate with publishers when handling a new contract. We fight to make sure that our authors are receiving a fair deal from their publisher, using our knowledge of what makes a good royalty rate. Agencies have ‘boiler-plate’ contracts with each publishing house. If a publisher offers a lower royalty rate than our boiler-plates show, then we’ll be in a strong bargaining position to negotiate them upwards.

One of the main disadvantages of signing a publishing contract without an agent, therefore, is that without this knowledge and bargaining power the author is unlikely to get as good a deal as an agent could have negotiated for them.

How does the advance relate to the royalties?

This is a really important question, and it’s the reason I mentioned above that an advance is not the same as a fee.

Authors do not start earning royalties on sales of their book until they’ve earned out their advance. The easiest way to explain this is with an example. In reality royalty payments are more multifaceted than this, but for the sake of explanation let’s say that your contract is as follows:

£10,000 advance



10% royalties (percentage based on the recommended retail price of your book)



Book sold at a recommended retail price of £10 per copy

In this example, for every copy of your book that is sold, you will receive £1 in royalties (10% of the £10 retail price). As such, in order to earn back the £10,000 advance the publisher paid you, you’ll need to sell 10,000 copies of your book.

So, for the first 10,000 copies, you will receive no royalties. For every copy sold over and above 10,000 units, however, you will now earn £1.

It is very common for authors to never earn out their advances, and thus never begin earning royalties on their books. In these cases the advance payment will be all that the author makes from their book deal.

Different types of royalties

A book contract will rarely have just one royalty rate. In reality, they probably have dozens. Usually there’ll be a royalty rate for hardcover editions of your book sold in the home market (e.g. UK for London-based deal), then another rate for that same edition sold for export, then another for that same edition sold at a high discount, and then all of these again for the trade paperback and mass market paperback editions! Confused yet? It gets very complex – the royalty section of a contract can go on for pages and pages.

To complicate this even further, when negotiating royalty terms we often use what we call royalty ‘escalators’. These allow an author to receive a higher royalty rate the more copies their book sells. That might look like this:

Hardcover royalty for copies sold in the home market: 10% to 10,000 copies sold; 12.5% to 20,000 copies sold; 15% thereafter



Please note that these rates are just an example and are not the standard – there is no standard.

Needless to say, if you’re negotiating a book deal without an agent then you’ve got a lot of homework to do!

What is your royalty a percentage of?

Above I mentioned that your royalties might be a percentage of the recommended retail price listed for your book. This is used a lot, but royalties are also often based on the publisher’s net receipts or price received for each copy of your book – the amount they’ve actually been paid for it. This safeguards the publisher from having to give you a high royalty when they’ve sold your book at a discount. So that’s another thing to look out for in contracts.

Subsidiary rights (sub-rights)

Finally, we come to sub-rights. When a publishing house buys a book, in addition to the standard volume & ebook rights that allow them to publish that book themselves, they are often also granted a handful of subsidiary rights that they can licence to other publishers. Penguin might, for a fee, sub-licence the audio rights for one of their titles to Audible, for example. The author will then receive a proportion of the income from this deal, to be set against their advance (along with their royalty earnings).

Common subsidiary rights include audio, translation, serialisation, quotation, large print and book club rights (as well as many others).

Agents often try to keep hold of key rights (translation, audio, film/TV), because if we’re able to sell these rights directly then our client will receive a bigger proportion of the money from those deals. However there are many reasons why for particular books it may make more sense to licence such rights to the main publisher, rather than hanging onto them.

Final words

As you’ve probably gathered from the above, the payment structure for publishing deals can be very complicated. I hope I’ve shed some light on it here, though of course without looking closely at several different book contracts it’s hard to get a good idea of how it all works.

TL;DR: the advance is the only income that’s guaranteed with standard book deals. Everything else comes down to how good your contract is, and how many books you sell.