Understanding author money

What you need to know before you sign your first contract

¹Recently, I’ve seen some discussion about advances, payout structure, and royalty statements. I know other authors who’ve covered author money before (here are a few: 1, 2, 3, 4, 5), but I thought I’d share a super basic breakdown of what it looks like from the author side.

Here are some terms you need to know for this post:

• Royalties: This is your share of the book money. For a lot of authors, it’s about 10% of the hardcover price. So a $20 book ends up with $2 going to the author. (The rest is split between the publisher and retailer.) Different formats (like ebook and paperback, and different genres like picture books with author/illustrator splits) will have different percentages, but we’re going to keep it simple today, for the sake of my brain.

• Advance: This is technically an advance on future royalties. For most of us, when a publisher calculates an advance for a book, it’s based on how much they think the book could make back in royalties — that percentage we talked about. There’s a lot that goes into calculating the advance,² but that’s a topic for another post.³

• Earning through/out: This refers to all your royalty percentages adding up to the full amount of the advance.⁴ Once you earn through, you get royalty checks — more payments because you exceeded the advance. Those checks will come along with your royalty statement. (They’re usually direct deposit these days, but “royalty direct deposit” is not as satisfying to say.)

• Royalty statement: This is a document that gives you information about how your book has sold. It’ll tell you how much you have to go before you earn through your advance — or how much the publisher owes you in further royalties.

• Payout structure: This part describes how your advance will be paid out, because it always comes in chunks over the course of a year or more, when various parts of the contract have been fulfilled, either by you or the publisher.

• Delivery and Acceptance / D&A: This is when you turn in the final manuscript (delivery) and it’s officially accepted. From here, it goes into copyedits and production.

• Reserve against returns: On the royalty statement, money held back in case stores return books. (More detail on this later.)

Okay, are we together on all of that?

When you get an offer from a publisher, it will include advance size, payout structure, royalty rates, and delivery schedule. All of that will be knowable to you even before you’ve accepted an offer. (Way, way before a contract has been signed.)

In fact, these terms can still be negotiated by your agent, particularly if you have more than one publisher interested in the project! For example, if you have a similar sized offer from two publishers, your agent can see if one publisher will give you a better payout structure, or other improved terms that I’m not going to cover in this letter.

Let’s say you have an offer. Hurrah! The first things you’ll usually see are the advance size and how the payments will be broken down. The payout structure is, mostly, to protect the publisher. Obviously they don’t want to pay you all the money if you haven’t fulfilled your end of the deal — but you need some right away, so that you can, you know, buy groceries, so you’ll (almost always??) get a sum shortly after you sign the contract.

One thing to remember: you are agreeing to this when you accept the offer, and you are legally agreeing to it when you sign the contract. If you don’t turn something in, you don’t get paid.⁵

Here are a few examples of how payout structures can work. Keep in mind, there are lots of different setups. These are just a few I’ve had.

For Incarnate, I sold a three-book deal in 2010. My advance was paid out in three chunks per book: signing the contract, D&A, and publication.

So there were three payments per book, with three books, so nine payments total. I got three of those payments upfront — 1/3 of each book was scheduled as a signing payment. Which meant I basically got 1/3 of the entire contract about a month after I signed the contract. (Timing can vary between publishers, but mine was quite prompt.) It was the biggest payout I ever got for that series.

Let’s break this down into years:

• 2010: Signature payment

• 2011: D&A payment for Incarnate

• 2012: Publication payment for Incarnate and D&A payment for Asunder

• 2013: Publication payment for Asunder and D&A payment for Infinite

• 2014: Publication payment for Infinite

The Orphan Queen series (two books) had a bit different of a payout structure. They were split in half: one on contract, and one on D&A. (Nothing on publication.) That meant my payment schedule looked like this:

• 2013: Signature payment (half of the entire advance)

• 2014: D&A for Orphan Queen

• 2015: Orphan Queen published (no payment) and D&A for Mirror King

• 2016: Mirror King published (no payments on this series at all)

• 2017: Orphan Queen earned through its advance and I got my first royalty payment!

You can see where I had payments for two different contracts in 2013 and 2014. I sold Before She Ignites (trilogy) in 2016, so even though I didn’t make anything from Incarnate or Orphan Queen then, I did get a signature payment on the new series.

Note: not all payments are broken up evenly in thirds or halves. I also have one that’s broken out with 40% on signature, 40% on first draft, 10% on D&A, and 10% on publication. I’ve also heard of contracts with payments assigned to the paperback release.

So payouts can really vary, and the way it’s decided depends on a lot of things, including the size of the advance (the bigger the advance, the more chunks you’re likely to see) and what the publisher thinks they can get away with. Obviously they want to hang onto as much money as long as they can. And four-payment structures have become a lot more common since the pandemic.

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Now . . . onto royalty statements!

For many publishers, statements are generated twice a year for two periods: January-June, and July-December. Those statements typically come in . . . April and October. (Yeah, it takes a long time to know how you did several months ago.)

Your statement will have lots of information, like the number of books shipped, what format, what your share is, and how much money is left before you earn through your advance. We love to see that number go down.

One really important thing to remember is that royalty statements count books shipped to stores, not books sold to readers.⁶ And in this industry, books are fully returnable — from the store to the publisher. If a store orders five copies but only two sell over a six-month period, they can return the other three for full credit.

Let’s say your advance was $10k for a book. Your first period, the statement says $5k (in your royalties) of copies were shipped out to stores. That's great! You're halfway there.

But! Remember those books aren’t necessarily sold to readers. They’re sold to stores who can still return unsold stock. So to account for that, your publisher is holding $1k in reserve — just in case! Reserve against returns, remember? So the statement will say you still have $6k to go. The publisher doesn’t want to pay you for books that might get returned.

Now let’s say you have a book come out in January; your first period will end in June and your first statement will arrive in October. It will probably be a more accurate statement than your friend whose book released the last week of June. Because your January release will likely already have some returns counted on the statement, while your June friend’s statement will just say a zillion books were shipped out. Even though you’re both looking at the same period, when your book released during that period makes a big difference. (Generally, it takes about a year for your royalty statement to accurately reflect your book’s performance.)

Another possibility is if you sell through your advance in your first period (yay, you rock star!), but it's within the range of whatever they want to reserve against returns . . . so you don't get paid. Because that money is being held in reserve. You'll get it next period, assuming those books don't get returned, but it can be a frustrating to wait for it.

I’m sure some of you are looking at this thinking that’s not ideal, and it must be really hard for an author to make a living with money coming on schedules like this — and you’re not wrong! Maybe it’ll change or improve some day, but for now, I think it’s important that authors understand the standard practices so it doesn’t come as a total surprise when your first book comes out.

Okay whew! I know this is a whole lot, but I hope it helps you have a clearer picture of how publishing money works. Let me know what questions you have! And please feel free to share this with others who you think would find it useful.

1. Thanks so much to Austen and Tim from the Goblin City server for taking a look at this ahead of time. Also, thanks to Erin Bowman and my agent Lauren MacLeod!

2. Advance sizes depend on a lot of things. This isn’t the post to cover how those are decided on, but one thing I want to make super, super clear right now: your advance does not reflect your worth as a writer, only the publisher’s best guess for the market for the book.

You wrote a book. You are a writer. You’re legitimate. Full stop.

3. If you’re selling multiple books, the advance will be per book, followed by a total offer amount. There are two different ways of earning through the advance, but for the sake of this post, we’ll say they’re separately accounted, meaning if you get $10k per book and you have two books ($20k total), you can start making royalties on the first book the moment you earn through $10k, rather than waiting for the whole $20k. This is more desirable for authors.

4. Note that you can also earn money toward your advance with subrights sales, like translations, audio, and so on, depending on the rights your publisher purchased. But again, we are keeping it simple for the sake of my brain.

5. Whether or not this payment schedule and setup is fair — that’s outside the scope of this post. Is it hard to make a living as an author? YES. Is it tough to not know how your book is doing for months and months? YEP. And is it frustrating to wait for payments when you know they owe you money and you need it now? YEAH. But that’s not the point of this post.

6. Keep this in mind: In trade/traditional publishing, your customer, as an author, is the publisher. Their customers are the bookstores, libraries, schools, etc.. And the bookstores’ customers are readers.

In self publishing, an author’s customer is the reader, because authors are doing the work of the publisher and the seller, as well as the work of writing the book.