How Do Advances and Royalties Work?



Whether you’re considering traditional publishing or self-publishing, you may be wondering what you can expect in terms of advances and royalties.


What Are Advances and Royalties?

  • An advance is a payment a traditionally published author receives from her publisher based on how much money the publisher thinks the book will earn in the long term.

  • A royalty is a percentage of actual book sales paid to the author.

Let’s explore how these payments work depending on which publishing route you choose.


Traditional Publishing


Advances


In traditional publishing, the amount of your advance and the conditions of payment will be established in the contract you sign with your publisher. Some publishers pay part of the advance on signing, part on delivery of the manuscript, part on final acceptance of the manuscript, etc.


Book advances range from thousands to millions of dollars depending on how big the publishing house is, how much the book can be expected to earn based on its target market, and your track record or platform as an author.


Your advance is considered to be paid “against royalties,” meaning you’ll be paid royalties only after your book has sold enough to earn out your advance. If your book doesn’t sell enough to earn out your advance, you won’t owe the publisher anything, but you won’t make any money beyond that.


Read over your contract carefully to ensure you understand what you can expect. If you’re considering traditional publishing, you’ll likely need the help of a literary agent to navigate the system.


Royalties


A royalty is the percentage of book sales you’ll receive from your publisher. As with your advance, this amount will be specified in your contract, but traditional publishing royalty rates range from 1% to 20% depending on the book format (paperback, hardcover, eBook).


For example, if you’re earning a 15% royalty on a hardcover book that sells for $20, you would earn $3 per book. If you were paid a $3,000 advance, you would need to sell 1,000 books to earn out your advance, after which point you would start receiving $3 per book sold.


(This example is much simpler than the royalty agreement you would actually have with a publisher, since royalty rates for the same book can differ depending on the book format and subsidiary rights sales. Check out our infographic outlining traditional publishing payment structures for more precise figures and averages.)


As most books can be returned, be aware that your publisher may deduct from your royalties if this occurs.


After you start earning royalties on your book, you will receive checks, probably twice a year, accompanied by a statement telling you exactly how many books were sold. If you’re represented by a literary agent (which you likely are if you’re traditionally published), those checks will go through your agent so she can take an agreed percentage.


Self-Publishing


When you self-publish a book, you don’t receive an advance, so the only form of payment you’ll need to be concerned with is royalties.


Your royalty rate is set by the platform you use to sell your books, such as Amazon. This royalty rate is much higher than what a traditionally published author would receive. Depending on what type of agreement you enter into with your selling platform, you can expect to receive between 30% and 70% of each book sale. For example, if you had a royalty rate of 70% and were to sell 1,000 eBooks at $3 each, you would earn roughly $2,100.


Each selling platform has specific payment options, so read your agreements carefully so you know what to expect. For example, Amazon’s Kindle Direct Publishing pays out royalties each month through a direct deposit, wire transfer, or check. There is no minimum threshold to receive a direct deposit each month, but authors need to earn at least $100 before Amazon will send a wire transfer or check.

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