Ep. 13: Mailbag Episode: The One About Money

Welcome to the Pub Date Podcast, the show where two book broads discuss what should happen before, during, and after your book publication date. Brought to you by Broad Book Group with your host Vanessa Campos and Jen Dorsey.

Hello, hello everyone! Welcome to another episode of the Pub Date Podcast.

Hi Jen, how are you doing? Hi Vanessa, I am great. Happy Friday, how are you?

I'm happy because it's Friday. I'm also happy because I get to talk to you, but I'm even happier that we're going to talk about money.

Oh my gosh, I love money. I love money so much, I want to talk about it all day long with you.

All day. It's one of those things where you wonder why you ended up in book publishing, and this is where you realize it's like you gotta love what you do because the money comes in. It comes in, into, in different formats. It comes in at the beginning, it comes in at the end, it comes in in the middle. Um, money for book publishers is, is an interesting thing, especially when they're distributed.

100%. Yeah. And authors, how do they make money? Oh my goodness. And do they make money? We are going to answer these burning questions today, talking a little bit more about how all that works. I'm excited. Let's uncover some mysteries.

Yes. So let's start with the one thing everyone asks when they, uh, when they try to get an agent to get them, uh, an agreement with a Big Five or an independent press or a midlist publisher. The big question is, how much am I going to get paid? So let's talk about that.

Oh, let's do!

What, Jen, is an advance?

That is a word that we need to define, and I think a lot of people think they know what that means, but I don't think they know what that means. So let's talk advances for a minute. Um, That's probably the word that you hear the most when you're— when you talk about the topic of how authors get money and how you can make a living writing books. So an advance is exactly what it sounds like. It's an advance payment against potential sales of your book. So when you sign with the publishing house, whether it's a very large publisher or even a small independent, you're going to get some money up front for your book. And this can range. I mean, the range is huge. The range is from $500 to $20 million, right? Right. It's all over the place. But I want to tamper or temper— sorry, not tamper— temper with your expectations a little bit. We all hear those $20 million stories and, you know, it's people like John Grisham and it's people like Deepak Chopra and all, all those people get those kind of advances. And while we all think that we're amazing writers, we are not all going to get that kind of advance. It's very, very rare. So I like to always kind of bring people back down to earth and remind them that most likely you can make a nice living writing books, but you probably won't retire off of it. So when you, you know, when you think about getting an advance, I would think, especially for a new author, more in the low thousands is probably what you're going to be hitting, right? So usually a publisher— well, not usually, all the time— a publisher looks at your proposal if you're nonfiction, or they look at your full manuscript if you're a fiction person, and they say, okay, here's how many books we think we can sell at such and such a price point. They run this big financial model called a profit and loss statement, better known in the industry as a P&L, and they determine how many books they think they have to sell to break even. And they base your advance amount in that equation. So it's, it's built into the math. The math has to math. So, you know, we don't just offer people money because we love a book. That's part of it, but it's a business. People still have to make money to keep the lights on. So your advance is really based on what the market looks like, where, you know, how much they think you can help sell, how much they think they can sell. And they give you this money upfront. Now, that being said, the advance money is usually broken up into multiple payments. So a lot of the time you'll get some of that money when you sign your contract, and then you'll get the remainder of it either when you complete final manuscript, or maybe if you're turning in your book in chunks, maybe like at the 25% point and the 50% point of manuscript being turned in. Publishers all do it differently. But that's really what an advance is. It's an advance against those sales. So, excuse me, when your, when your book is ultimately published, you won't get royalties for a while because your book has to do something called earn out. And that means it has to earn out that advance before you start getting then more money. So they, they sell books and sell books, and someday we'll have to do a whole show on how book selling works and what those percentages look like. But every time your book makes a little money, it goes against that advance. So your first couple of royalty statements, you might not make any money because you're still earning against that advance that you've already received. So that's kind of the, the quick and dirty of what an advance is.

So in your experience in working at different publishing houses, what percentage of authors actually earn out their advance?

Whoa, that would be a really interesting project. I would love to do some research and find out what that number looks like. Um, I don't know the answer to it, but I think the majority of people either don't, or they come close, or they go just a little bit over. Um, you really have to sell well into the upper thousands for you to not only earn that advance out, but then, you know, make more royalty money on top of that. So it just depends. Obviously, for very big-ticket books, those are most likely going to earn out their advance. However, when you're paying millions and millions of dollars to one of those big high-profile authors and something happens— Governor Cuomo will be a really good example here. Yeah, sold a very big book about his pandemic response for a whole lot of money. And then things kind of went sideways with his career, and I am guessing that that book may not earn out. Um, you know, it's— things happen. So, uh, even for big ticket people, it doesn't always happen for you.

That is true. And I think one big thing to note is that even if your book doesn't earn out, your, your advance you get to keep. So that's kind of a nice thing. I like the break-even. Option in the model here, because to me that means two things. One, the publisher earned out what they thought they would get from working with you as a, as an author and as a partner, and you met their expectations. So let's talk about expectations, um, just kind of like sidestepping here a bit, because I do want to put that in people's minds. What is the average midlist sales for a business book?

Oh, that's a good question. I think in my experience that average would be probably in the $5,000 to $8,000 range, um, and I'd say maybe that's even a little on the high end. Um, conservatively I would say $3,000 to $5,000 is a very solid midlist business book. When I consider a book successful, I factor a lot of things into that. But if I'm basing it on sales, if we hit 5,000, um, I consider that a very solid performance because the business category in particular, as we both know, is really challenging. Um, it's a very flooded market. There's a lot of the same out there in the business book category, so you have to really find your niche and have a unique selling proposition and a unique voice to stand out among all of these leadership books that are all saying very similar things, right? So that's always what I consider a success. What about you? What do you think?

Yeah, I was gonna say something like that. I'm, I'm, I'm, I'm not a gambler, which is always a thing where it's like when you start looking at book publishing, it's, it's a little bit of a gamble. So I like to stay very conservative. I think the 3,500, $5,000, $5,000 quantity mark is a sweet spot for me, and I am so happy when we hit that. Now, when we say when we hit that, are we saying 3,500 in the first 30 days, 90 days, lifetime of a book? What does that P&L look at, really?

Yeah, I mean, everyone's P&L looks different because we all use different modeling, but I usually look at like the first print run and second print run, which really ideally takes you through the first maybe 18 months. So if we do that 3,500 in year 1, I'm super stoked. I'm super happy about that because usually as you go back, as the publisher goes back to print more books, those print runs tend to shrink over time. So let's say publisher does a 5,000 run for the first print run, they print 5,000 books. The second time they might, based on the modeling of how quickly the rate of movement— which is a fancy way of saying how quickly the books are selling— works, um, you know, they might dial it back and maybe do 4,000 on the next run, and then 3, and then 2, until it ages out a little bit.

Right, so you, you bring up a good point, and I realize that we need to talk about the types of royalties based on the formats, aka a print book, a paperback print book, a hardcover, an ebook, an audiobook, foreign rights, translations, subsidiaries. All of these things are part of that major agreement that you work with, um, on and negotiate with a publisher. So Right now, the numbers that we're talking about, we're talking about the physical print, right?

Right. And that's just part of the pie, that's a piece of the puzzle.

And I would say that it's the biggest piece of the puzzle. That's the one where we're betting our P&Ls and our break-evens on. So how do— how should an author look at these additional formats? So I call them additional, but it's like the cherry on top, the ebook, the audiobook, the foreign rights.

Yeah, absolutely. So in my experience, the print versus ebook breakdown is usually about 70/30. That's pretty consistent across the entire industry. So if you look at a publisher's entire catalog and how much print they sell and how much ebook, the breakdown will almost always mirror that pretty closely. So I think when you're thinking about your own book, you can think in those terms too. So yeah, let's talk about it. Print royalty is the first thing on the top of people's minds. Some publishers will do a flat rate royalty for the whole life of the book, like 15%. Some publishers will stagger it based on your sales. So they'll say, okay, we're going to give you 10% for the first 10,000 books you sell. When you get to 10,001, we'll crank it up and make it 12%. And then let's say you hit 20,000. At the 20,001 bookmark, then we'll crank your royalty for those books up to, say, 15%. So you can either do a flat rate or a staggered rate like that on print. So that's that. Why don't you tell me about ebook and how that's different? Because I know you know.

I know, and I love ebooks for so many reasons. One, it's just, it's environmentally just better for everyone. Um, everyone has their preference and device, but ebooks tend to be about 25% in terms of royalty across the board. There is a conversion fee, so we take your print files and then we go through this fancy process to make an EPUB file that makes it reader-friendly for all devices. There is still a cost associated with ebooks, and I want to make that very clear because everyone thinks it's just a PDF and it's not. There is a lot that goes behind making sure that your ebook is going to read correctly, that it's dynamic or static depending on the type of book that you're doing. So there is a cost associated to that with the— from the publisher side. So 25% tends to be, you know, the industry standard. And I think that's pretty fair. I like to think of— and you're right, 70/30 is the break for print and digital. But I like to think of the ebook as your loss leader because You could do a lot with an ebook. It's easy to deliver anywhere and everywhere, and you can use it to attract more sales to your page. So like you could do a Kindle price, so you can downprice it across all the platforms, and usually people will just take that as like an opportunity to get a little bit of taste for what you've got to offer. Um, but then we get into audio So we've worked with a few different options. We've worked with authors who do their own audio and deliver the files to the publisher. We've worked with audiobook publishers that just basically— we, we license the rights to actually produce that. So what does that look like in terms of, of royalties?

So I think it really does depend on if you're going to sort of self-do that, or if you're publisher does it in-house or if they work with a third party. Most publishers will work with a third party, like Recorded Books, like Guilden Media, people who are really good at what they do and this is all they do, so they know how to do it very well. So if your publisher works with a third party, then I can't remember what the specific breakdowns are, but usually there will be, um, you'll get a fee if you do get selected by the publisher to read your own. You'll get like a reader's fee, right? That's usually a flat fee of maybe $1,000. Let's say $1,500, whatever. They don't do that against your royalties. That's just a flat payment to you that is paid from the third-party producer. If, however, they decide to have somebody else read your book, because believe it or not, you do have to audition most of the time to read your own book, because not everybody's voice is made for audio, you obviously wouldn't get that fee. But then there's— they give the publisher a percentage royalty because they are the ones who manage and sell those audiobooks, not your publisher. So for example, if you go on Amazon and you're looking up a book and you see the audio version, you click on it, you're going to notice that most of the time it says it's published by someone that's not the primary print publisher, and that's why. So the publisher gets a cut, then you get a cut of that cut. So it's not a huge, not a huge amount, but it is a nice little extra sales funnel for your book.

So if, as a publisher, your publisher is looking to work with a third party, do those agreements— and they happen with audiobooks and they happen with foreign rights— do those agreements usually come with an advance?

Usually, usually yes. They are not huge advances. So whether you're doing audio or whether it's a foreign rights deal, you should get some kind of advance. Foreign rights deals are kind of all over the place. I've seen some authors sell their titles to different countries, or their agents sell them to different countries for a really healthy advance of like $10,000 to $20,000. Some of those advances in emerging countries are very low, like $500. So again, it's just cherry on top, like you said before, right? It's all over the place. But there usually is some kind of advance, and then there's a separate royalty for those books. Um, most publishers run the royalties through them. It's the same way that the audiobooks are done. So the publisher gets a royalty from the foreign rights producer or publisher, then you get a cut of that. Um, most publishers do it like a 50/50 deal on the foreign rights. You get 50% of what the publisher gets.

So you brought up a really good point. It's either the publisher is selling those rights Or you as the author and your agent retain certain rights to be able to sell to a third party. So maybe you only, you only sign an agreement with a Big Five for print, ebook, and foreign rights, but you want to sell those audio rights for a bigger amount of money. So you and your agent can negotiate that. Sometimes that works, sometimes it doesn't. But let's talk about the agents.

How do they get paid? Oh yes. Oh, this is a good one. And this is a big mysterious thing that I wish wasn't so mysterious for people. Agents get paid when you get paid. Yes. Agents should make 15% across the board on anything you bring in. That's it. If you have an agent who's talking you up about getting them more money or they get a bigger percentage or you have to pay them upfront, Walk away. That is not the agent. That's not the agent for you because they're not a reputable agent. Agents are governed by the Association of Author Representatives, the AAR. That group sets forth rules about how agents have to act and what they have— can charge you. And the common rule is 15%, period, and not upfront.

So if you've got anyone not doing that, Run, run away, run far, far, far away. Um, okay, so now these days with the Big Five— the Big Fours, I keep saying Big Fives— um, you know, buying each other out, and more and more people are turning to smaller presses, indies. Um, I have seen agreements, and I've actually gotten into an agreement with an author with a situation in which there is no advance. Now, this specific publisher has been one of the fastest growing, and Publishers Weekly keeps nominating them. And I think what they're doing is very interesting. So what we've been talking about is really the traditional model, and hybrid publishers are coming up with some really great partnership models that I think are interesting. And we can go into this, um, in a whole different, uh, series Literally could be serious. But I, I did want to talk about that. Like, what are your thoughts on an— on a no-advance, higher royalty agreement?

I actually think it's a really great opportunity for, for both author and publisher to try some new things. Like you said, it's a very innovative model. We have got to get our brains out of the 1990s when advance was king and kind of think more about things. In a partnership way. Gone are the days when the publisher goes and does all the work. Because the authors are being asked to do so much marketing legwork now, they, they have skin in the game. So I— were I an author, um, I think I would almost prefer that model because I would know it's already on me to sell a lot of books. So I would really rather get a heftier royalty on the back end than to get my little $2,500 or $5,000 now and then no one puts a lot of work into it. So the hybrid models are really low or no advance, but much higher royalties on the back end. And we're talking, you know, for the print at least, but anywhere from 25 to 50% royalty. So I think it's a really smart way to just keep everybody engaged and involved in the process. It's not for everybody, and that's totally fine, but I'm interested to see where hybrid goes in that regard.

I agree. I think that you have to, as an author, realize what your priorities are. Do you need a big publisher to help you get into the markets, or do you really, like, what are you bringing to the table? And really, that's, that's the conversation that needs to continue, is, is my publisher, or the person, is the publishing company that I'm looking to partner with actually going to be a partner? Are they going to provide the things that I think they're going to provide? Are they going to provide marketing? Are they going to provide in-store events? And the truth is, a lot of times, unless you are, um, you know, Lewis Howes or one of the bigger names, you're not going to get that. They're not going to spend the money on you. Um, it's sad. It is the reality. And that's why I really am excited about hybrid publishing, the models that are being challenged. Um, I agree, I, I would definitely take no advance up front because I was going to write the book anyway and start earning royalties on my first sale.

Yeah, absolutely. And, you know, just it again, it puts skin in the game, so it's all good.

Yes. So next time that we have another mailbag, I think we need to talk about all the lawyer questions.

Yes, because you cannot talk money without talking lawyers because they are always involved.

Always.

Let's talk contracts next time. I would love to do that.

Let's All right, well, thank you so much, Jen. I really enjoyed picking your brain.

Thank you, likewise.

See you guys next time.

Thanks so much to our producer Paul Roberts and Emily Carpenter-Polskamp. Have a great weekend.

Bye. We hope that you gained some valuable insights into the world of book publishing. Head over to broadbookgroup.com to learn more about us and all our services. And be sure to check out all our social media @BroadBookGroup. Until then, keep publishing.