Let’s say you’re an author and you’re about to sign a deal for a $10,000 advance against a 10% royalty. Would you consider a lower advance in exchange for a higher royalty rate? You can think of it as a “share the risk, share the reward” option – I encourage editors and authors to consider it from time to time. Here’s why:
- It shows the author really believes in the project. Authors often come to an editor with what they think will be the industry’s next bestseller. If an author really believes that, why not take on more short-term risk (lower advance) in exchange for the possibility of greater long-term wealth (higher royalty rate)?
- It helps reduce the publisher’s risk of author advance write-off’s. I’ve mentioned this before but it’s worth repeating: Author advance write-off’s are painful for the publisher! The goal is to pay an advance that does not exceed the amount the author is likely to earn in royalties. If the publisher pays a $12,000 advance and sales of the book result in only $10,000 earning out, the other $2,000 must be written off. The publisher’s overall profitability just dropped by $2,000.
You might assume the publisher has nothing to lose by pushing this option on an author. Although it reduces the initial risk the publisher takes on, every royalty point the author earns comes right off the publisher’s bottom line.
To keep the numbers simple, let’s assume a $30 cover price, an average discount of 50% and a flat 10% author royalty. How much does the author earn on sales of 10,000 units?: $15,000. How much does each additional point of royalty above 10% represent to the author?: $1,500. If the publisher offers you two options, a $10,000 advance against a 10% royalty or an $8,000 advance against a 12% royalty, which would you take? The first one generates $15,000 for every 10,000 units sold and the second option generates $18,000 for every 10,000 units sold.
Maybe you figure it’s not worth giving up that $2,000 portion of the advance just for the opportunity to earn $3,000 more in the long run. But what if the book sells considerably more than 10,000 units? Although it’s easy to assume that a point or two of royalty isn’t going to make a huge difference in an author’s income, simple math says it’s all relative: At the end of the day, you’re making 20% less with the $10K/10% option than you are with the $8K/12% one…unless the book sells so few copies that the author advance doesn’t earn out. That’s where the author has to decide if they really believe in the project.
For the publisher, every percent of royalty paid above the original deal comes right off the bottom line. In the example above, the publisher makes $3,000 less on the title if the book sells 10,000 copies and the author opts for the higher royalty rate. Even though I’m making less in the long run, I appreciate the fact that the author chose to be more of a risk-bearing partner (by accepting a lower advance) and I’m fine paying out a higher royalty…sometimes! There are plenty of cases where the book is such a strong title that the author advance will easily earn out – in that case, there’s no incentive for the publisher to put an alternative advance/royalty model like this on the table.
I also realize that an author needs a certain minimum amount of money up front to justify their time investment in the project. They simply can’t accept a number below that point regardless of the upside that might come with a higher royalty rate. If the author is already at their acceptable minimum level with the advance on the table, there’s obviously no point trying to sell them on this option.
Finally, there are other ways for authors and editors to share the risk and share the wealth. For example, would you be more inclined to accept that $8K advance against a 12% royalty if the royalty jumped to 15% after 20,000 copies are sold? Or, is there some other type of escalating royalty offer that would enable you (the author) to accept a lower advance? If you’re not already having these types of discussions with your editor/publisher you don’t know how much you might be missing out on in the long run.