LJ flooding part 2

[msagara]

janni's question about earning out your advance: I know a lot of people who have, in fact, earned out their first book advances.

So. If your advance does earn out, are you in fact underpaid?

There are many people who argue that you are being underpaid. Given how long it can take for royalties to reach you, given how long it can take before a publisher decides an advance has earned out, this is not as unreasonable as it first appears. Some publishers hold a very large reserve against returns.

What does this mean? It means that when they ship their 30K copies of your book -- in whatever format it's published in -- they 'withhold' some of that against the returns that will inevitably come in. The amount of the reserve varies from publisher to publisher (I also use the word house to mean publisher in all of these ramblings). When the returns received come out of the reserve, this is more than fair, in my mind -- but there are some major publishers that take the actual returns out of the shipping number, rather than the reserve held, and they'll hold that reserve for two full years, although the returns will all but be decided in the first year (realistically, in the first few months, imho).

So… of the 30K shipped, your reported sales would be 9K, if they held back 70% for returns (this isn't entirely unreasonable, given the previous example). If they start getting returns, they can do one of two things: they can decrement the 21K they're withholding, or they can subtract from the reported 9K. The first is what should be done.

But this process, as I mentioned, can take two years, and it will be two years until they release the reserve, and you get the royalties on that reserve. Do you want to wait two years for the rest of your money? Probably not. Therefore, if the publisher does end up owing you money -- i.e. you earned out your advance because you earned enough royalties that they exceed what you were paid -- there is some feeling that you should have got that money up front.

This is the author's view on the subject.

The other point is that while it's true that there are cases in which an author can earn money while a publisher loses money, it's also true that a publisher can earn money if an author doesn't earn out their advance. It depends on many things, not the least of which is the size of the actual advance.

I am so the Queen of Digression.

In the early '90's, it was a seller's market in many ways. Now, it's considered a buyer's market. For those who haven't done the house thing, it means pretty much what you think it does -- the publishers are less in want of titles than the authors are in want of places to publish.

In the early '90's, it was very, very common not to earn out an advance. It's probably common now. One of the differences would be in the size of that initial advance.

I'm by nature a cautious person. I could also be called a coward <wry g>. I personally prefer the smaller up front advance because in the end, I don't want to be in the position of having the invisible P&L statement tilted in the wrong direction. I call it invisible because I've never seen one that had anything to do with me <wry g>. I like stability. Adore it, in fact. Why, you might ask, am I then a writer?

But no, this was about earning out advances.

I think that if a publisher does everything right and I somehow earn out my advance, it's not unreasonable to ask for a slightly larger advance. I also think that penalizing the publisher for doing everything right so that I somehow earn out my advance by then asking them to up the ante and the fiscal risk by putting out way more money is, actually, unreasonable.

[Am I saying this in public? Is my agent reading this? I'm beginning to understand why LJ users so seldom use their real names <wry g>.]

There is a theory, however, that states clearly that the more a publisher invests in your novel, the more they'll spend in order to make sure that the P&L statement doesn't stink. Therefore, the higher the push for a large advance, the more certain you'll be to get those crucial placement dollars. I'm of two minds about this.

And, because it's late and I still have a 1,000 words to write (as in, words that are heading toward a deadline), I'll let those two minds simmer. Ummm, and finish the last of the bookstore related rambling, too.

Comments

[msagara.livejournal.com]

You're coming into it from the same trajectory I was -- bookstore experience first, writing next, selling after <g>. I'm happy you've found these useful -- putting things together is another way of feeling less isolated. Not more in control, but where there's no control, knowledge is still helpful <g>.