Thursday 24 May 2012

How to speak publisher: E is for Earning out

'Earning out' is what you hope your book will do. Remember the advance? It's what the publisher paid you a very long time ago when you started/sold your book. We talked about the advance at the start of How to speak publisher.

Your book earns out if/when it has earned enough in royalties to cover the advance the publisher paid you. Here's a bit of simple maths. Simple, I said. Don't hide behind the sofa, there. Maths is your friend - don't leave it to the publisher or your agent.

Stroppy Author gets an advance of £5,000 - hurray!
This means that to earn out the advance, the book needs to earn £5,000 in royalties

Stroppy Author's book sells for £10 a copy.

Stroppy Author gets a royalty of 10% - hurray!
This means that the royalty on each copy is 10% of £10 = £1
So to earn £5,000, the book would need to sell 5,000 copies at its cover price.

These are not real figures; this never happens - but that's the principle.

While we're on maths, let's do a spot of counting.
The press likes to shout about six-figure advances. This is to confuse people, who usually assume that a six-figure advance is a million pounds/dollars/euros. It isn't - a six-figure advance is one represented by a number that has six digits, so it is £100,000 (or $100,000) or more. Count the figures: a 1 and five 0s, that's six. Don't count the comma. So if you hear that an author has a five-figure advance, that means they have £/$10,000 or more, which is not necessarily very much. Obviously £99,000 is quite a lot; but $10,000 is not.

Some books never earn out their advance and are not even really expected to. If a publisher pays an advance of £300,000, this is largely to grab a lot of publicity. The book might earn out, but no one will be hugely surprised if it doesn't because a lot of these gambles don't pay off. To the author, the big advance seems to be a sign that the publisher is certain their book will be a bestseller. In fact, it's a sign that the publisher hopes their book will be a bestseller and thinks there's a pretty good chance it will be. But it's cheaper to pay an advance of £300,000 and get lots of free press coverage than to invest in posters all over the underground and buses. The publisher can still make a huge profit even if this book doesn't earn out.

How quickly your book earns out depends on the following factors:
  • how large the advance was in the first place
  • the royalty rate
  • the price the books sell for.
There is a lot of room for wild variation here. Advances range from zero to £/$1,000,000. Royalty rates range from less than 1% to 10% (sometimes even higher after some massive number of sales - but very rarely). Books sell for anything from cover price to 90% discount. At some levels of discount, the royalty might disappear completely. This is generally to cover the publisher shifting the remaining copies for next-to-nothing when they've decided to give up on it.

I have books that will never earn out the advance. This is not because the advance was large, but because the royalty is pitifully small and it's a royalty on nett receipts (what the publisher actually gets, rather than the cover price) from books sold at massive discounts. I can think of a book that will have to sell 100,000 copies before I receive any royalties, and it's only sold about 40,000 so far in four years or so. It doesn't much matter, as I knew this was what would happen and was happy with the advance. In this case, you have to think of the advance as being a fixed fee and then if the book does earn out, the extra money is a bonus. Hooray!

On the other hand, I have a book that earned £1,000 royalties in the first two weeks - because it sold at cover price, had back orders and had a very small advance. Again, I knew this would happen - but it's more of a gamble because if the projections were wrong, or the publisher went bust or decided to discount the books, I'd earn very little from the book.

Understanding what you are getting is crucial. You might feel it's OK to accept a small advance if (a) you can live without the money for now and (b) you are confident you will get enough in royalties to make the deal worthwhile in the long run. Do the maths, though - how much will you really get?

Let's look at that hypothetical book at the start, the one with the £5,000 advance. Assume there is no advance. How many copies have to sell before you earn £5,000? Five thousand? No.

Cover price = £10; copies sold at (say) 40% discount, so nett receipts = £6 per copy
10% royalty = 60p per copy.
On that, your agent takes 15% + 20% VAT (in the UK) = 9p + 1.8p per copy = 10.8p per copy.
So for each copy sold, you get 60p - 10.8p = 49.2p.
That means it takes 10,163 copies for you to get £5,000.
(Of course, your agent would also take 15% + VAT of your advance, so your £5,000 advance comes to £4,100 in your bank. You need the book to sell 8,333 copies to make that.)

(You can use these sums in other territories. Swap £ for $ or Euros and p for cents.)

All this means that you need information in order to make a sensible decision about the contract you're offered.

In particular, you need to know the print run (how many copies the publisher will print), when they expect to reprint and how much they expect to sell the books for. Ask how long you expect it to take for the book to earn out the advance. A good publisher will be willing to tell you the print run and should be able to give you an estimate of the last two.

It's sensible to base your decision on the first print run - after all, if the publisher was certain the book would sell more copies, they would probably order a larger print run (but not necessarily - warehousing printed copies costs a lot, and there is cashflow to consider).

That book that earned £1,000 in the first for fortnight: I know that if the first print run sells out, and the average discount is 30%, the royalty will be nearly £9,000. The book will almost certainly reprint. I've written books that won't earn out, and have taken as long to write, for an advance of less than £9,000.

The lesson is, as always, ensure you have all the information you can get and make a decision based on it (and maths, if necessary).

  • The advantages of a large advance are: you have money in the bank; you feel valued; the publisher is likely to work hard to sell the book because they have invested in it; the money you get (initially) is unaffected by the cover price/discounting.
  • The disadvantages of a large advance are: it takes a long time to earn out; if the book doesn't earn out, the publisher will be less likely to commission your next book; people will be bitchy about you and assume your book is bad.
  • The advantages of a small advance are: the book is likely to earn out, so you get some royalties, which always feels good when the book was written long ago; the publisher is more likely to commission your next book, especially if it sells better than expected
  • The disadvantages of a small advance are: you don't have much money while you are writing the book; you feel undervalued (but that's subjective - work on your attitude!); people will be bitchy about you and assume your book is bad - but this time only if you tell them how large (small) your advance is, because the publisher isn't going to be shouting about it in The Bookseller.
What is not acceptable is for publishers to offer a very low advance AND a very low royalty rate, which is becoming increasingly common. An advance of £400 and a royalty of 2%? (This is a real offer, not from 2012, but recent.) That's ridiculous. Of course, the book might earn out. But you won't have very much money either way.


Friday 18 May 2012

R is for Ridiculous

I have just discovered (you can say I'm slow) that a film needs to have only two swear-words in it in the USA to be R-rated, meaning a person under 17 can't go to the film unless accompanied by an adult. This is astonishing to people who don't live in the USA. Here, my 16-year-old can legally have sex, get married (with my permission), sign up to serve and die in the army, smoke cigarettes... but in the USA she couldn't see a movie with two swear-words in it!? WTF?

If the USA was full of lovely, demure young people who never swore or put a foot wrong, I'd have more sympathy with this restriction. But: American teenagers swear on average 90 times a day; American teenagers are *far* more likely than British teenagers to carry a gun (and turn it on their classmates); on average, American teenagers lose their virginity at 17; there are three quarters of a million teenage pregnancies each year in the USA. And they grow up and make/watch the grossest, most violent movies made anywhere except Japan.

Perhaps a swear-word in a book or film is not really corrupting them very much at all? Perhaps, it is reflecting a little life as they live it?

On the other hand... in 2002 I took my daughter to see a movie that had a rating of only PG (PG-13 in the USA). It had sex slaves, murder and cannibalism in it. No swear-words, though, so that's OK for tender young minds. Is the power of language really so great that a swear word is worse than a caged woman surrounded by the bones of previously cannibalised people? What IS it with American movie people?

By gosh, I'd better go and make some jam before I come over all naughty in this book and say something worse than 'Goodness - my leg seems to have been cut off by a teen psycho who's been watching Saw movies. That's jolly rotten luck.'

Stats on American teenage sexual activity.
Swearing in movies.

Friday 11 May 2012

The vampires get out and about

I let the publication of the seven Vampire Dawn books slip by unmarked here, as self-promotion is not what this blog is for. Still, the vamps put in an appearance at the London Book Fair, and have inveigled their way into Book Maven's place where she has given them a lovely review. I hope she kept a stake handy, just in case.

But don't let them get ideas above their station. They are still bloodsucking parasites and a blight on society.

Tuesday 1 May 2012

A view from the bridge (2): Rejections

Two Maggots logo by House of Sharps
The maggots have been reading submissions to their new e-publishing list. If you need to catch up with this look at the first View from the bridge post.

The maggots still have a few things to read, and all current rejections have been sent, so if you have sent something and not had a rejection, don't worry - none of this is about you!

As writers, we're always unhappy when a publisher rejects a book. This is understandable - we write the books in the hope of earning enough to keep the wolf from the door, and it's a right pain if you spend ages on a book and can't sell it. But that's all it should be: a right pain, disappointing. It shouldn't feel like a personal rejection. That's what everyone says, but it still does feel like a personal rejection. Now I'm going to be really boring and say, in my maggoty publishing hat, that they were right all along: it's not personal.

In the last couple of weeks the maggots have rejected books for various reasons. Some of them of have been fine stories, but they are just not what the maggots are looking for. Reasons for rejection have been:
  • wrong age range
  • wrong genre
  • wrong length
  • anticipated legal problems
  • just doesn't feel right for the list.
None of these is something to despair about. The stories just need to go to a publisher targeting a different age range, or looking for a different length or genre or just a different kind of story.

Another thing authors often gripe about is that publishers reject something without saying what's wrong with it or how it could be improved. It's not meanness; it's economics, pressure of time and the feeling that any feedback might not actually help.

The little maggot reads a story and it's not right for the list; so the bigger maggot emails the author, thanking them for their submission and saying they won't be taking it. The bigger maggot will often give an idea of why, as this is only polite - it's too long, it's suitable for children younger than our target market, etc. There is nothing to be gained by also saying (for instance) 'the dialogue is not convincing' or 'the plot is too weak'. For one thing, why would the author want to change a story in line with the opinion of a publisher who isn't going to take it? For another, such a tiny scrap of feedback, with no help on how to fix it, is probably not very valuable. And the maggots don't have the time to give free professional development advice to everyone. To each writer, it's one story they have spent ages on, but to the publisher it's one of many stories to deal with. Even fifteen minutes on feedback for each story soon gobbles up the working day.

As an author, think of sending out your stories as being like going to a shoe shop. You look at all the shoes. You try on those you like the look of. Some don't fit; some don't look right; some you decide you don't like after all; some don't go with your outfit; some are lovely, but not what you need right now - super winter boots, but no use for a flashy party. The rejected shoes are not rubbish, they're just not what you need. It's the same with editors and stories. You might have written some totally brilliant high heels, but the maggots wanted new Converses.