Authors wear two hats, that of the artist and that of the business person. Most of us don’t like that second hat one little bit. We don’t like the look or feel of it. It never seems to fit quite right. Most of all, it’s just so freakin tacky. Tacky and scary.

Dollar signs. Decimal points. Numbers. If we could look at numbers without getting the shakes, would there have been that vexatiously ignominious—that downright opprobrious—two-hundred point gap between our math SATs and our verbal SATs?

As I pointed out in last month’s column, From “The Call” to the Published Book, the big problem for most of us when we finally—Hallelujah!—score that first book contract is that we find ourselves hurled headfirst into an industry we know very little about. They shove a twenty-page contract under your nose and say sign all three copies and send it back, and you say, “Um… What’s the human translation of all this pub-speak, anyway?”

“Pub-speak.” Just made it up. What do you think? I’m referring to publishing jargon here, obviously, not saloon slang, in which most writers are already fairly conversant.

And it’s not just jargon. There are business conventions that are unique to the publishing industry. It’s a really good idea, even if you already have an agent (and if you haven’t at least been trolling for one, you need a spanking) to have a passing acquaintance with these conventions before The Call actually comes.

Standard caveat: This article isn’t about electronic publishing, which I wish I knew all about, but don’t. It isn’t about publishing short stories or poems or magazine articles. It’s about traditional book publishing—specifically the publication of novels, although nonfiction authors will find nuggets of usable info herein.

Caveat #2: There are many, many book publishers in the world, although they are increasingly being subsumed by larger corporations, such as Time Warner, The Pearson Group, Rupert Murdoch, Bertelsmann, and Holtzbrinck. Each of these publishers has its own unique business practices. My aim isn’t to cover all the possible permutations in this one short article, but rather to explain the most generally accepted practices.

Also: In last month’s column, I discussed the pre-publication process as it relates to the author: the role of the literary agent, revisions, the editing and proofreading process, cover art, cover copy, etc. This piece is going to focus more on the economics of publishing and what you’re likely to find in your contract.

When people find out I’m a novelist, they sometimes ask, “What publishing company do you work for?” Actually, we working writers are in the enviable position of being sole proprietors of our own creative businesses; we make something which another company manufactures and sells. More specifically, we produce a written product in which we own the various rights of reproduction, derivation, translation, and so forth, those rights as a whole being known as our copyright. When we go to contract with a book publisher, we’re licensing certain of those rights—those specified in the contract—to the publisher in return for remuneration in the form of royalties.

The operative phrase in that sentence is “in return for remuneration.” The publisher pays us for the right to publish our book. We never, never, never pay the publisher. A real publisher will never ask you for a cent. Ever. If you pay a vanity press to “publish” your book, you’re forking over enough money for them to manufacture it (without editing it, by the way) and make a profit on it without actually selling it. Because they don’t sell it, not in any real sense. It is never properly disseminated to the public, which is the very definition of “publication.” It’s worth noting that vanity “publication” is not the same as self-publication, a legitimate process in which the author acts as his or her own publisher, contracting with various vendors to manufacture a book which he is then responsible for getting into the bookstores. For more excellent information on the scams to which aspiring authors are susceptible, go to Writer Beware.

Royalties. Okay, so what are they, exactly, and how are they calculated?

Royalties are a percentage of the cover price of your book. For every book that’s sold, you get that amount of money. For example, if the price on your book jacket is $25 and your royalties are 10%, you get $2.50 for every book sold. That’s the simple definition, but of course nothing’s ever that simple.

Royalty rate. First of all, what royalty percentage are you likely to get? That generally depends on which format your publisher chooses for your book. (And it’s entirely the publisher’s choice, based upon genre and potential sales; you have no say in this decision.) The three standard formats are:

1. Hardcover. You’ll get 10% or more up to a certain number of copies, after which the rate will escalate.
2. Trade paperback. These are the oversized paperbacks that usually sell in the $10-$15 range. The standard starting royalty (before escalation) is 7.5%.
3. Mass market paperback, the small ones that fit the racks in mass market outlets like grocery stores and airports. A typical starting royalty would be 6% or 8%.

These percentages may seem unfairly low, but the profit margin in publishing is so slim that the publisher often ends up losing money on the deal. Sometimes, as with poetry and small literary novels, they actually know going into it that they won’t turn a profit.

The Advance. When you go to contract, you’ll be paid an advance right up front, regardless of whether you’re selling on the basis of a proposal or a completed manuscript. It could be $2,000 or $2 million, depending on the book and your publisher’s plans for it. (The advances for first sales of most mass market genre novels are in the $5,000 to $10,000 range per book, more for books deemed “bigger.”) This isn’t separate from your royalties; it’s actually an advance against royalties, which means you don’t start receiving royalty payments until you’ve “earned out” your advance.

Here’s how it works. When your book hits the shelves and starts selling, your publisher starts running a tally of how much you’re earning, based on your royalty rate. Let’s say you’re getting 10% of a $25 book, and your advance was $50,000. At $2.50 per book, you’d have to sell 20,000 books to earn out that $50,000. Once you’ve done so, every book sold represents $2.50 that must be paid to you, usually semiannually.

Did I say nothing is ever simple? Unfortunately, some of that money is going to be held back for a while, because the bookstores and other retail outlets get to return to the publisher any books that don’t sell (or in the case of paperbacks, the stripped covers). The royalties that are held back are called “reserves against returns,” and we hate them.

It would be great if the advance were paid in one nice lump sum upon signing the contract, but alas, it’s generally broken down into several separate payments, such as half on signing and half on acceptance of the completed ms., or 1/3 on signing, 1/3 on acceptance, and 1/3 on publication.

Most book contracts are for two or three books, with each book having its own advance amount. For example, if you sell a finished book, the publisher might include a book #2, which they’ll green-light based on a proposal you send in after book #1 is accepted.

Paying back the advance. Is it yours to keep, or could they ask for it back? Happily, it’s yours to keep unless you do something truly dumb, like not handing in the book, or handing in one that’s completely unacceptable and refusing to fix it. So go ahead and sign that mortgage. Or buy that Whopper, depending on the deal.

Standard Contract Clauses. As I emphasized last month, a publishing contract is written by the publisher’s lawyers for the sole benefit of the publisher. As with any legal contract, if you want what you’re entitled to, you’re best off having it negotiated by a professional who knows about that particular type of contract. If you don’t have a literary agent, I would advise hiring the services of a literary attorney.

A sampling of the clauses you can expect to find in your contract (some of which are negotiable and some of which are not) include:

• The rights you’re granting to the publisher and the territories in which they may exploit those rights.
• When you’re required to turn in the completed manuscript, and in what form (hard copy, electronic, etc).
• Your obligation to provide an acceptable manuscript, and to edit it if it’s deemed unacceptable.
• The publisher’s obligation to publish it within a certain time period and in a certain format.
• Indemnity and insurance provisions in the event of legal actions.
• Your warranties as regards the originality and legality of your book’s content.
• What name you want the publisher to copyright the book in. (They generally register the copyright for you—in your name—with the Library of Congress.)
• Their right of first refusal of your next project, or your next similar project (the “option clause.”)
• Under what conditions the book will be declared out of print and the rights reverted to you.
• And of course, how much you are to be paid, in terms of advance and royalties, and how often. Each of the rights you’re assigning to the publisher has its own rate of payment. The primary edition of the book is the one being manufactured and marketed by the publisher you’re going to contract with, and this is the edition I was referring to when I discussed royalty rates above. Payment for the “subsidiary rights,” in which the publisher grants a license to a third party, are often represented as a “split,” with the author and the publisher sharing in the proceeds. Paperback rights might be split 50/50, foreign translation 75/25 (in your favor), and so forth. Subsidiary rights can be a substantial source of future income for the author and the publisher, especially if the publisher aggressively solicits those rights. There’s nothing like getting a fat check in the mail for the Russian rights to a book you sold twelve years ago. Other subsidiary rights, besides reprint and foreign, include:
  • Direct to consumer
  • Book Club
  • Electronic
  • Performance (as in movie options; we can always dream)
  • Audio
  • Anthology
  • Condensation
  • Serialization
  • Braille
  • Merchandising (I’ve always wanted an action figure)
  • Syndication

  There are other, more obscure subsidiary rights, but those are the ones that tend to show up most often in our contracts. My favorite one, from my first-ever publishing contract, was Strip cartoon and picturization use. Just in case someone wanted to write a comic strip based on the characters from my latest scalding erotic romance. Somehow I don’t think there’d be many parents reading that one to the kiddies on Sunday mornings.

That’s about it, although things being what they are, the one piece of information you really did want to know about the publishing biz is probably the one I didn’t cover. Never fear. There are lots of books out there that will tell you far more than you ever wanted to know. There’s also a good deal of information on the ‘Net, but beware; some of it is alarmingly wrong. I mean, just plain, no-two-way-about-it wrong. You’re best off “polling” the sites that seem most authoritative.

Next month I’ll be segueing from the business end of things to the creative, beginning with Critiquing: To Give and to Receive. Until then, happy trails…

Louisa Burton
January 2008

“FictionCraft” © 2008 Louisa Burton. All rights reserved.