Taking A Look At Advances

This is a continuation of a discussion that began on Friday here with the announcement of Bob Miller's moving to HarperCollins to begin a new imprint with a new publishing model.

As I explained yesterday, when the Associated Press released the story, they opened with this line: "In an ever-uncertain market for publishers, HarperCollins is looking to resolve two of the industry's major concerns: High author advances and the high rate of returned books."

Yesterday we looked at returned books; today we're looking at advances. To make sure we all start on the same page, let's start with a definition.

An advance is money "advanced" to the author prior to the book's publication and release. Those dollars are deducted from the royalties earned through sales until the advance is paid back. Then the author can begin to receive the royalties earned over and above the advance (after the publisher allows for credits on the returned books). An advance does not need to be paid back. If the book doesn't "earn out" the advance, the publisher eats the loss.

Advances are given because it can take between a year and two years for a book to be released after the contract is signed with a large New York publishing house. That's a long time between meals for a writer. Recently advances have been paid out in thirds: one third on signing, one third on submitting a satisfactory manuscript and one third on release.

I was told a year or so ago that the average advance for a first-time author was $5,000. Now "average" can be very deceptive. It includes Bill Clinton's $15 million advance as well as the token advances of $100 paid by some small presses.

Let's talk about royalties for a minute.

In his Term of the Week back on October 10, 2007, agent Jonathan Lyons indicated that the industry standard for paperback royalties was "7.5% of the list price, some are less so (a reservation of rights clause)."

When asked about hardcover royalties, Jonathan went on to offer a caveat that "this is industry standard for major commercial publishers, and for general adult fiction and nonfiction. A few publishers don't adhere to this, and this royalty is certainly not suited for every type of book (for instance, highly illustrated books, romance, children's, and many original trade paperbacks). With the same caveat, industry standard hardcover royalties are: 10% for the first 5,000 copies sold, 12.5% for 5,001 to 10,000 copies sold, and 15% on all copies sold thereafter. Again, this is based on the list price."

Publishers Lunch's article on the new imprint said, "On some of the specific intentions of the new line, a 50/50 profit share with authors (and minimal advances) is a central tenet."

Think about that: a 50% split versus a 15% royalty. And Miller isn't saying "no advance," he's saying "minimal advance." I read that to mean he is opting out of the crazy-making huge advances that are almost impossible to earn out.

I did a story back in January here about Tom Wolfe's leaving his publisher FSG after 42 years because--after Wolfe's previous book didn't perform as well as expected--FSG balked at paying the $5 million advance Wolfe wanted.

There's a huge difference between a $25,000 advance and a $5,000,000 advance. I'm guessing Miller wants to make advances on the lower end of that scale.

Obviously, the mega-authors who command multi-million dollar advances are not going to be rushing to Miller's new imprint. But newbie or mid-list authors might be willing to think about it.

As a newbie author, I'd be willing to consider a 50/50 split on the profits depending on a few things:

1) Miller said a "50/50 profit share." There's a world of possibilities inside that word "profit." Let's assume he's using the definition of "the excess of revenues over outlays." What does that include? Is he talking cash, or both cash and non-cash? I don't want to be covering his depreciation expenses.

Unfortunately, I've seen plenty of creative accounting in my time. It's way too easy for an accountant to make a profit disappear in a morass of expense. If I were considering this deal, one of those expenses would have to include a review by a third party disinterested accountant.

2) Does this mean my expenses for publicity and marketing are included (and reimbursed) in the tally of costs? If we're partners, my expenses are your expenses.

3) How soon could I expect us to settle up? Would there be allowances for interim payments after the release of the book? Right now "reserves for returns" can be held a lonnnggggg time. I'd hate to think of how long the period could be for determining profit on a book.

4) We'd also have to discuss the "out of print" clause. Miller talked about wanting to do multi-media releases to include hardcover, audio books and e-books. Using digitization, POD technology and the Internet, my book could be available for a long time.

Under the traditional "out of print" clause, when sales fall below a certain threshold in a year, an author can request return of rights. Is Miller planning to return those rights, or is he expecting the author to cede all rights to the new "partnership"? If so, there should be some compensation--another expense to be added to the equation.

There are probably other things we'd need to discuss, but those were the ones that first came to my mind.