Thursday, June 26, 2008

Michael Bourret asks, "What's in an advance?"

If there’s any topic in publishing that’s the most controversial, it has to be the advance. For those not in the know, in the most basic terms, this is the money the publisher pays an author for the right to publish his book. The advance is paid “against royalties,” meaning that an author must “earn out” his advance through book sales before he starts making money above and beyond the advance. That said, you do not have to pay the publisher back should you not earn out your advance (despite what you may read elsewhere on the internet).

Now, let’s be honest: we all like to make money, and I’m sure we’d all be happy if all books had million dollar advances, but those super-sized advances are rare. Advances (for first books) range from the nonexistent (literally zero dollars) to several million (for certain public figures), and they can fall anywhere in between.

I think what’s most of interest to authors, though, is how publishers decide what to pay. Generally, they do a P&L (profit and loss statement), where editors enter all sorts of information: the projected trim size, price point, royalty rate, and estimated first year sales based on comparative titles and their performance. By doing a little bit of math, they figure out what they think they can pay as an advance that will be earned out. Then they offer you less than that. That way, if you have any sort of leverage, they’ll have room to raise their offer while still being in their comfort zone. At many houses, the sales and marketing departments review the P&Ls and add their two cents. They can quickly kill any house interest if they don’t think the book works – after all, they have to sell it. But they can also up the numbers based on what they think they can do with a project.

Competitive bidding situations can certainly affect the limits that publishers have, but even then, they have a maximum advance calculated. No matter the enthusiasm or excitement about a book, the advance offered is a business decision.

But what, you ask, is a good advance? “Good advance” means different things to different people. Some authors want the largest advance possible, thinking it will mean instant superstardom. But as many writers can attest, a big advance doesn’t necessarily mean big sales. So, some people think a good advance is a modest advance, since this means that it is more likely that the advance will be earned out. And, a publishing career is based on expectations. If you’ve received a million dollar advance and sell 20,000 copies, you’re a failure. Selling that next book suddenly looks a whole lot harder. If you receive a $5,000 advance and sell 20,000 copies, the publisher will be clamoring for your next one – and you’ll be asking for more than $5,000!

The idea most people have is that the books with the biggest advances that get the most attention from the publisher, and books with small advances can languish with no support. That’s true to an extent. But it’s certainly not always the case. Publishers won’t throw good money after bad – if the book’s not working, it’s not working. And a smaller book showing some traction may get more support later in the process.

And now, with publishers like Vanguard, HarperStudio, Berrett-Kohler, and others, getting no advance may be a good thing! These publishers work on a model where little or no money is paid in advance in order to share better royalty percentages and more marketing dollars with the author. It’s not for everyone, but when it works, it can actually be the most lucrative in the long run.

So what’s the best advance? Provided you want a career, it’s the one you can earn out. Which might be big and might be small, but if the publisher’s expectations are met, then all is well.

18 comments:

  1. I want the best editor, and then the best advance I can earn out.

    Thanks for explaining it!

    High advances cause high expectations with readers too. I just read THE ART OF RACING IN THE RAIN and I have to admit that after reading the story to publication and its 1.2 million dollar advance, I had high hopes for it. I wasn't disappointed, in fact, I loved the book, but it's true that I expected a lot more from it than I might have if someone had just handed it to me and said, "Oh, you've got to read this. It's great!" Of course, most people outside of the publishing biz (i.e. regular readers) don't know anything about advances anyway.

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  2. Thanks for the clear explanation!

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  3. Hey, great information. I have to admit, I never choose a book based on the advance it pulled, but maybe I'm just old-fashioned. I can see how a huge advance can garner attention, but I'm glad to know there are other avenues to a great selling book and news of a huge advance isn't the only way to pump up the sales.

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  4. Excellent!
    This year, we interviewed an author who pulled in a 1.5 million dollar advance. He still has his day job, and frankly, I wonder how he finds the time to write given that he's on endless tours and visitations.

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  5. I'm not too fussy about advances.
    I figure that if the book sells, I'll get it eventually anyway
    or is that messed up thinking??

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  6. I liked your explanation of advances. One thing that was missing, though, was the difference between earning out the advance and making money for the publisher.

    In hardcover, the royalty and publisher profit is split pretty evenly. In paperback, the publisher gets two or three dollars for every one to the author royalty account.

    So a book that sells lots of paperback copies can be solidly profitable for the publisher even if it has not earned its advance out yet.

    In both cases, though, there is a level at which the book is profitable, below the level at which it earns its author royalty. A book that's profitable may garner its author a solid next deal even before it has earned out.

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  7. John: Thanks for your comment. It's true that earning out and being profitable for the publisher are not necessarily the same.

    And, congratulations on your book!

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  8. Ah amazing advice. So SO glad I came across your blog....I'm working a query right now in regards to a recent blog a couple days ago tht received 107 comments. I realized it struck a chord with my readers, as do most my blogs...so I'll be frequenting your blog often for more gems. CHEERS! Happy 4th ;)

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  9. Thanks so much! You've answered a lot of my own questions with this post.

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  10. It's hard for me to imagine making a million dollars and then saying to myself, "I'm such a failure."

    But I appreciate this info. it's really hard to find any info on this subject.

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  11. One thing I've read is that with greater advances come increased expectations for author marketing. Just how much, and to what extent is an author expected to promote his/her novel?

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  12. Allison Knight22/7/08 12:24 PM

    Very interesting information. It is reassuring that, as an author who is interested in the children's paperback business, I can interest a company by making money for them! As I write fantasy/adventure, I don't expect everyone to buy my first book, but building a reputation is extremely valuable to my own sales as I intend to write a series. Mary Pope Osborne is not worrying about her first advance, now that she is on book #34 or so... Thank you for explaining it.

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  13. This doesn't tell me anything I don't already know (but then again, I'm 49 and have been around the block more than a few times so I can plausibly lay claim to some advance knowledge.).

    Nonetheless, this blog post raises several good questions as well as issues.

    The advance, it's commonly understood, is not only an upfront payment against royalties, it's also supposed to allow the author to take at least a year or so from the rat race so they can write their next book.

    But since newbies often get shit from publishers in the way of advances, that kind of queers the chance for a multibook deal, which can benefit both author and publisher.

    My former friend Alex Kava, when Phillip Spitzer got her signed at Mira books, got her a three book deal in the low six figure range. And she was a firsttime author (I read A Perfect Evil, her debut novel, when it was still in ms and I persuaded her to not 86 Spitzer when she was losing patience with him). The advance allowed her to get the followup, Split Second, on her publisher's desk within the allotted 6 month time frame.

    Of course, a low advance is as bad as no advance. Not only are you working against royalties but if the publisher and its sales and marketing depts in their P&L can only muster a half-assed advance, chances are the PR press kit will also suck like an Olympic pool drain and leave the book to twist in the wind.

    But that's a rant for another day...

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  14. Some authors who might not be raking in huge advances make a lot of money on speaking engagements. Years ago, my first editor at St. Martin's predicted that I'd have a good career through money earned that way which most years would likely surpass book earnings themselves. Since 1991, I've been lucky to speak across the country at colleges and universities, book fairs, churches and synagogues, libraries, foundations and do quite well financially from year to year. And then there's this: if 50+ people come hear you at a college and you get your expenses paid plus a speaking fee, you're way ahead of where you'd be if you had a book store event. I discovered years ago that most of those gigs are a waste of time (except for making connections with the staff) because too many stores over-schedule.

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  15. I appreciate your level-handed explanation about advances. But... I believe a larger advance would motivate the publisher to put more marketing dollars behind promoting the book to help it earn back its investment.

    A book that did not have a large advance would not provide that incentive.

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  16. This was so interesting. Thank you for taking the time to explain. :)

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