Advances, Royalties, and a Closer Look at My Latest Royalty Statement

I’ve posted before about why I got into ghostwriting, and how eliminating the need to market and promote a book after it’s published increases my hourly rate. That being said, I have authored—and continue to author—my own books, both for traditional and POD publishers. So I’m always interested in issues like the size of advances, royalty percentages, and the like.

Today, average advances are shrinking, in part due to the economy (publishing’s a business like any other) and to the ghe glut of “celebrity” books hitting the shelves. When Snooki and The Situation (both of Jersey Shore “fame”) get book deals, that’s bad news for midlist authors like me. The more money publishers shell out for these kinds of titles, the less they have to spend on non-celebrity authors like myself.

Forget the idea of getting rich on royalties. That typically doesn’t happen as 4 out of 5 books don’t "earn out," or make back their advance, which is technically an advance against royalties. Until your book earns out, you won't receive another penny from your publisher--regardless of how hard you work to sell it to potential readers.

To understand how this works, let's take Six-Figure Freelancing as an example. When it sold in 2003, it garnered a $15,000 advance. (Alas, a book on six-figure freelancing doesn’t assure a six-figure advance.) I have an “escalation” clause, which means that my royalty works out to be $.89/book for the first 10,000 sold, $1.12/book for every book thereafter. (I make considerably more, $3.88/book, for its e-version.)

Every six months I receive a royalty statement from Random House that tells me how many copies I sold in a specific six-month period, and how quickly (or slowly) I’m approaching that magic “earning out” figure. Six-Figure Freelancing sold about 4,600 copies in 2005, the first year it was published, and about 1,200 copies annually since then.

Let's take a look at my most recent royalty statement for Six-Figure, which covers the six-month period ending September 30,2010. During that time, I sold 82 e-books (a total of $318.49), and 338 trade paperbacks (for a total of $372.29). Total copies sold during this period? 420. This is the lowest amount of sales I've ever had in a six-month period, but the highest number of e-book sales. (For comparison, during the previous six months, I had sold 40 e-books and 478 trade paperbacks, for a total of 519 copies.)

More importantly, so far, my cumulative sales equal 142 e-books and 11,378 trade paperbacks, a total of 11,520 copies. That's not bad at all. My total royalties are $10,939.83, which includes $273.68 of subsidiary rights income from licensing rights to a book club. But the most important figure to my mind is $4,060.17, or the difference between my earned royalties and my advance. Once the book produces that amount of royalties, I'll start earning additional royalties--but until that happens, it's Random House that's making money right now, not me.

This doesn't mean I'll give up on the book; it's an excellent guide for writers, continues to build my platform as a writing expert, and helps me reach more readers. But realistically I won't see any royalty checks for it for another four to five years...which means I'd better keep making money in other ways in the meantime!

Readers, what do you think? Did this post help you understand advances and royalties better?