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LJ flooding part 2

janni's question about earning out your advance: I know a lot of people who have, in fact, earned out their first book advances.

So. If your advance does earn out, are you in fact underpaid?

There are many people who argue that you are being underpaid. Given how long it can take for royalties to reach you, given how long it can take before a publisher decides an advance has earned out, this is not as unreasonable as it first appears. Some publishers hold a very large reserve against returns.

What does this mean? It means that when they ship their 30K copies of your book -- in whatever format it's published in -- they 'withhold' some of that against the returns that will inevitably come in. The amount of the reserve varies from publisher to publisher (I also use the word house to mean publisher in all of these ramblings). When the returns received come out of the reserve, this is more than fair, in my mind -- but there are some major publishers that take the actual returns out of the shipping number, rather than the reserve held, and they'll hold that reserve for two full years, although the returns will all but be decided in the first year (realistically, in the first few months, imho).

So… of the 30K shipped, your reported sales would be 9K, if they held back 70% for returns (this isn't entirely unreasonable, given the previous example). If they start getting returns, they can do one of two things: they can decrement the 21K they're withholding, or they can subtract from the reported 9K. The first is what should be done.

But this process, as I mentioned, can take two years, and it will be two years until they release the reserve, and you get the royalties on that reserve. Do you want to wait two years for the rest of your money? Probably not. Therefore, if the publisher does end up owing you money -- i.e. you earned out your advance because you earned enough royalties that they exceed what you were paid -- there is some feeling that you should have got that money up front.

This is the author's view on the subject.

The other point is that while it's true that there are cases in which an author can earn money while a publisher loses money, it's also true that a publisher can earn money if an author doesn't earn out their advance. It depends on many things, not the least of which is the size of the actual advance.

I am so the Queen of Digression.

In the early '90's, it was a seller's market in many ways. Now, it's considered a buyer's market. For those who haven't done the house thing, it means pretty much what you think it does -- the publishers are less in want of titles than the authors are in want of places to publish.

In the early '90's, it was very, very common not to earn out an advance. It's probably common now. One of the differences would be in the size of that initial advance.

I'm by nature a cautious person. I could also be called a coward <wry g>. I personally prefer the smaller up front advance because in the end, I don't want to be in the position of having the invisible P&L statement tilted in the wrong direction. I call it invisible because I've never seen one that had anything to do with me <wry g>. I like stability. Adore it, in fact. Why, you might ask, am I then a writer?

But no, this was about earning out advances.

I think that if a publisher does everything right and I somehow earn out my advance, it's not unreasonable to ask for a slightly larger advance. I also think that penalizing the publisher for doing everything right so that I somehow earn out my advance by then asking them to up the ante and the fiscal risk by putting out way more money is, actually, unreasonable.

[Am I saying this in public? Is my agent reading this? I'm beginning to understand why LJ users so seldom use their real names <wry g>.]

There is a theory, however, that states clearly that the more a publisher invests in your novel, the more they'll spend in order to make sure that the P&L statement doesn't stink. Therefore, the higher the push for a large advance, the more certain you'll be to get those crucial placement dollars. I'm of two minds about this.

And, because it's late and I still have a 1,000 words to write (as in, words that are heading toward a deadline), I'll let those two minds simmer. Ummm, and finish the last of the bookstore related rambling, too.


( 13 comments — Leave a comment )
(Deleted comment)
Aug. 1st, 2004 06:23 am (UTC)
I'm in the process of making a deal with myself whereby I'm allowed to ramble endlessly on LJ only after I write a minimum number of novel words.

Because, you know, when I'm in this particular frame of mind, even a small question like janni's will turn into 2 long posts <wry g>.

Otoh, I have the relative luxury of being able to both now, something I could not have done three or four years ago, when my youngest was, well, younger.
Aug. 1st, 2004 04:32 am (UTC)
This is seriously great stuff. :)
Aug. 1st, 2004 06:26 am (UTC)
This is seriously great stuff :)

Thank you <bg>.

I'll take this space to just add that everyone who has worked in any part of the industry will have a take that is a variation on this. And that some people will look at the same facts and draw different conclusions than I do, depending on their situation. I am, of course, responsible for my own opinion <g>.
Aug. 1st, 2004 07:35 am (UTC)
You're right -- everyone in the industry will have a slightly different take. For me, it's all trade-offs. I do agree that the more a publisher invests upfront in a writer (the higher the advance, in other words), the more incentive there is for the publisher to actually promote the book. A low-to-normal advance generally means that you'll get nothing but the usual marketing... and so it's up to luck, word-of-mouth, and what efforts the writer can put into promotion for book sales.

I don't of anyone who has the figures (not surprisingly, since writers are understandably reluctant to make public their financial situation), but I'd wager the most books don't make back their advance and begin to generate additional royalties -- which means that the only money the author can count on seeing is the advance.

And there's the trade-off: 1) get a high advance for the house and there are sales expectations (the reaching of which is largely out of the writer's control), and if you fail to meet them, your career is in jeapordy, BUT you at least have your money NOW; or 2) take a small advance which will lower your sales expectations (and your marketing) but may result in a better P&L for the book, and which may mean that two years down the road you might, maybe, get some additional money.

Me, I'd rather take the high advance and the attendant risk. Of course, that requires a publisher actually willing to offer a high advance... :::wry grin::: OTOH, Asimov reportedly never wanted much of an advance at all, preferring to have only royalty income -- of course, that also assumes that the publisher will be honest and timely in their accounting, which is not always a safe assumption.

(Mind you, I say all this as someone happy with his current publisher...)
Aug. 1st, 2004 08:09 am (UTC)
This would be one of the two minds <g>. Thanks for weighing in. Clarke took an advance of 1.00 for contract reasons from Del Rey for most of his tenure there as a single author, at least before 3001 was published, I believe for tax reasons.

I adore my current publisher, which in many ways is why I am often so mixed in my opinions about the field as a whole.

On the run, but I will come back later and continue on the heels of what you've said here.
Aug. 1st, 2004 09:47 am (UTC)
This is wonderfully helpful stuff. Thank you again.
Aug. 1st, 2004 11:00 am (UTC)
Oh, not to mention that many publishing houses' royalty statements are nearly indecipherable or don't contain information that is essential to actually figuring out what your real sales might be...
Aug. 1st, 2004 12:23 pm (UTC)
I'm enjoying these posts, seeing as I need to have The Facts of Life explained to me every so often. Thanks for taking the time.
Aug. 1st, 2004 10:04 pm (UTC)
I'm enjoying these posts, seeing as I need to have The Facts of Life explained to me every so often. Thanks for taking the time.

I do, as well. Sometimes I need to gather all the information in one place and mull it over. Sometimes I need to take a look at what used to be valid information, and examine whether or not it's still valid. The whole field shifts and changes <wry g>.

But I can occasionally have conversations with authors in which the lights suddenly wink out and I realize I've said something that might as well have been in <insert any language you cannot speak, write or recognize here>, and I have to go back, to try to fill in a gap I didn't perceive.

And my husband was nudging me into putting everything sort of into one place, so that I could point at it. I'm not nearly organized enough to actually do that, however. I'm just organized enough to ramble on here when it's late at night and I've finished real work. Which is probably when I'm not at my most lucid...
Aug. 2nd, 2004 09:49 am (UTC)
I do, as well. Sometimes I need to gather all the information in one place and mull it over. Sometimes I need to take a look at what used to be valid information, and examine whether or not it's still valid. The whole field shifts and changes .

Or you feel your career shift and change, and you try to decide what to try next...

Apropos of nothing, where did you get that rockin' avatar? It's really sharp, and having met you at Torcon, all I can say is It's You.
Aug. 2nd, 2004 12:53 pm (UTC)
Apropos of nothing, where did you get that rockin' avatar? It's really sharp, and having met you at Torcon, all I can say is It's You.

It's me 20 years ago <wry g>. A friend who is now a children's book illustrator did a lovely black & white line drawing for what was then dubbed "The Electric Penguin", for a variety of reasons -- a newsletter full of silly things that was passed between friends in University.

I'd forgotten about it, but two of them recently dug it out, scanned it, and coloured it as a suprise for a different on-line forum; after I got over the shock, I decided to use it here. Because I like it. The whole picture was a Moebius riff.
Aug. 1st, 2004 07:03 pm (UTC)
I've been lurking and reading - these are wonderful posts. I've worked both behind the counter at a Barnes & Noble and for profit and non-profit publishers (I'm currently with a profit). Now I'm finishing my first novel, so I'm looking forward to seeing the industry from that angle as well. As much as I think I know about what to expect, your posts have been quite illuminating in putting all aspects of the industry together, so one can see how each part is essential to the other. A leap of faith is also necessary at times: I hope it's taken in my direction in the future. :D
Aug. 1st, 2004 10:06 pm (UTC)
You're coming into it from the same trajectory I was -- bookstore experience first, writing next, selling after <g>. I'm happy you've found these useful -- putting things together is another way of feeling less isolated. Not more in control, but where there's no control, knowledge is still helpful <g>.
( 13 comments — Leave a comment )