The Truth About Royalties and Advances: What Publishers Won’t Tell You

Royalties and advances—this is what the publishing industry calls the payments made to authors for the right to publish their work. Not knowing what you should expect from author payments can be a worry for some authors who don’t know what to look out for.

Royalties are a percentage of each book sold in which the author receives payment for. Agent Rachelle Gardner explains that the exact percentage each author will receive isn’t the same in all cases, as each author is different and the determination of the percentage varies on several different factors such as:

  • Size of the publisher and their own criteria

  • Author’s platform and marketability

  • The “market rate” set by other authors and publishers in your genre

Based on your contract with the publisher your royalty percentage rate will vary for each format: hardcover, large print, audio, trade paper, ebook, and mass market paper, etc. that is sold.

A rule of thumb is the advance payment that is made to the author is based on how much revenue the book will earn in its first year of sales. The amount given to authors as an advance varies with similar factors as royalties. Some publishers don’t give advances and will pay royalties after the author earns them.

What happens when an author sells more books than expected?

When a book’s earnings surpass the money advanced, a book is considered to be “earned out.” Publishing expert Valerie Peterson explains that after a book has earned out, authors then begin to receive royalty checks based on the additional amount of incoming revenue.

If royalties are calculated in the retail price, then the author will receive a straight percentage for the amount listed on the book jacket. So if they get 10% of a book with a list price of $26, that’s $2.60 a book. If royalties are on net revenues, then the author receives a percentage of what the publisher receives after the wholesalers and retailers take their cuts. This cut is often 50% percent or more of the list price. So if the publisher receives $13.00 for that $26.00 book, the author paid net royalties gets $1.95/book.

Payments made to authors are typically on a schedule based on the publisher’s contract--typically quarterly or twice a year. Even before a book is earned out, the author will also receive a royalty statement that informs the author of their earnings based on the number of books that have been sold throughout that pay period. If an author has an agent, these statements and payments are sent to the agency first. Many publishers provide an “author portal” to the author so they can track sales online and access these statements.

What happens if a book doesn’t “earn out”?

If a book doesn’t sell the amount as expected by the advance given, the author isn’t required to pay back the unearned royalties. Not earning out is common, and as many as half of books published by the major publishers don’t earn their advances. Don’t let it get you down if you don’t earn out your advance.

It’s a widespread myth that authors who don’t earn out won’t get another book deal. Authors should worry instead about reviews and the market reception of the title. If a book doesn’t sell at first, but is critically acclaimed and loved by readers, it’s likely they’ll definitely get another shot.

Send me an email, and I’ll send you a little calculator to help you figure out your earnings!

Of course, no author wants this to happen. Having a marketing strategy ahead of finishing your book will demonstrate to your publisher that you’re doing your part in building the audience for your work. If reviews are good and you did your marketing, not earning out the advance is on the publisher.