Before becoming a writer, I had no idea there are different ways authors earn money. I’d heard about royalties mainly in connection with musicians. I’d also heard authors get advances but wasn’t completely sure what that meant. But I had no clue how complicated the system is until I started learning more about the business and based upon my own very limited experience.
There are three ways to pay an author. What most people are familiar with are royalties and advances. The third way is more common in short story and poetry markets and that is being paid up front. I’ll briefly explain each one as well as give pros and cons as I see it.
Advances: Advances are money paid to an author by the publisher ahead of a book’s publication. Most commonly it’s “advance against royalties” meaning the amount of the advance is paid based on what the publisher thinks the royalties will be.
Advances can be small for new authors to several millions for a best-selling author. Factors used to determine the amount are: size of the publisher (smaller publisher means a smaller advance), historic performance of similar books, author’s track record (newer author vs. established author), and the book’s topic (some genres and topics traditionally perform better than others). Usually the advance is paid in installments based upon manuscript milestones such as a signing bonus, when the manuscript is completed, when it’s accepted, and so on.
One advantage of an advance is the author earns money before even selling a single copy. Another pro is it encourages the writer. I imagine it’s a thrill to know a publisher has enough confidence in your work that they want to pay you even set one word has been written. Another positive is as long as the author meets all the agreed upon expectations, their advance is guaranteed even if the book doesn’t sell enough to cover the advance.
One of the biggest cons is advances are it’s becoming less common. Paying money to an author banking on a book is successful enough the publisher recovers at least the advance is risky. There are thousands, millions of books competing for readers and very few become best sellers. Few authors are consistent best sellers so have earned their advances. Another con is if an author does get an advance, it’s going to be smaller then what the average advance used to be. Again, the publisher is taking a financial risk and a newer author without a track record is a bigger gamble then an established author. One more downside is if you have an agent, which most traditionally published authors have, you don’t keep the entire advance. An agreed upon percentage is taken out by the agent. Another con is if your book doesn’t make back the advance, you may not get another advance from your publisher for subsequent books.
Royalties: A royalty is a payment made to an author based upon the number of books sold. If an author has received an advance, royalties are paid after the publisher has sold enough copies to cover the advance. Easy enough concept to understand, however, in practice it’s the most complicated method of payment and the one which can lead disputes between author and publisher. The reason why it’s complicated is because royalties often operate on a sliding scale. This means an author’s royalty percentage depends on how many hardbacks vs. paperback vs. eBooks are sold. The list price of each version is also factored in.
The biggest advantage of royalties is this is where a bulk of authors earn their money. Royalties are paid out on an agreed upon schedule so the author will earn money as long as the book continues to sell.
While royalties have a big advantage, they have a number of complications. Where the book is sold affects the royalty rate. Ever see a book at a chain bookstore then see it at your local grocery store a couple of years? By the time the book reaches the grocery store, the list price is much lower thus impacting an author’s royalty. Another complication is the percentage the publisher calculates for potential books returned. This causes the author’s royalty to go down. And what if the book tanks? Thankfully you’ve got the advance but if you don’t sell many copies, no more money.
Upfront Payment: With upfront payment, a publisher or literary magazine states on their Submission page how much they pay for an accepted piece. Payment varies from a few dollars to several hundred dollars. Instead of paying a set flat rate, others will pay per word up to certain dollar limit.
What’s great about upfront payment is an author gets paid upon either acceptance or publication. No need to wait around for royalties paid each month, quarter, half a year, whatever the terms of the contract are. Another plus is this makes the most sense for submitting short stories or poetry.
A negative is you take a chance the story could be worth more. Many places are only able to pay anywhere from $5 to $25 dollars, which is still better being paid nothing. It’s possible you could earn more if the story or poem were submitted to an outfit offering royalties especially if accepted by a big publisher who knows they can sell a lot of copies. Of course, with multiple authors in an anthology or chapbook everyone shares in the royalties. Naturally if a collection of your stories or poems is published then you don’t have to worry about splitting royalties.
A brief look into how authors get paid. Personally, I prefer upfront payment vs. royalties for short stories. One of the anthologies I have a story in is set up for royalty payment. In hindsight I realize that’s not a good idea since the royalty will be split amongst all the authors thus resulting in a potentially smaller payment. I can see where a royalty payment for a short story anthology can be lucrative but only if there are big name authors or if it’s the type of anthology the publisher knows will sell well. However, anthologies don’t sell as well as novels though with Kindles, iPads, Nooks, and other electronic reading devices becoming common place, anthologies have seen resurgence in popularity. As I aspire to become a novelist, the idea of advances and royalties are attractive. After all, it’s a relatively steady source of income and one which has the potential to grow over time.