How Authors (Traditionally) Make Money
We all want to write books that will move and inspire the world. But what about making a living from it? How do authors earn money? Here are a few notes on the potential ways authors can make money from their work.
In this post I will go over:
· Traditional Publishing Houses (Advances, Royalties, and Sub-rights)
· Self- and hybrid publishing (Direct distribution, E-book distributors.
Learning How Authors Earn Money from Traditional Publishing
When an author desires to go the traditional publishing route, a literary agent is typically required. That is a separate post, altogether.
Agents don't ask for payment until they have sold the work, except for extra costs such as copying and postage.
When someone sells a book or other rights on behalf of the author, the agent earns 15% in perpetuity (with domestic rights) and 20% if there are foreign rights.
So, when working out financials for a book project, it's important to remember that 15% needs to be deducted when using an agent (which is always recommended).
How book advances work
When a book publisher is interested in a book project, they will offer the author an “advance,” which is a sum of money for the right to publish the book.
An advance is the authors to keep regardless of how many copies the book sells, as long as the author fulfills the terms of the publishing contract.
Publishers typically pay advances in installments tied to benchmarks in the publishing process, such as signing, delivering, and accepting the final manuscripts (D&A), publishing the hardcover edition, and publishing the paperback edition.
Agents will try to negotiate for the author to receive as much of the money up front as possible.
Splits on the advance vary wildly. Advances may also be for multiple books, in which case there may be further benchmarks as those books move through the publishing process.
A publisher will pay the advance directly to the agent, who will take their commission and send the balance to the author.
How Royalties from Book Sales Work
Royalties are payments derived from book sales, usually predetermined with specific percentages in contracts. These royalties can stem from the list price of a book, or on the amount the publisher received for each sale. Let’s say the cover price of a hardcover is $25.00 and the hardcover royalty rate is 10%. This means that for every copy sold, the author will get $2.50, regardless of how much the buyer actually paid for it. Sometimes the royalty rate is based on what the publisher receives from retailers or distributors. So, if a retailer sells a copy at half of its list price, but the publisher only receives 50% of that, then the publisher would consider the net amount received as 25%.
Authors won't receive additional payments until they earn back the "advance" they received through royalties and sub-rights proceeds. So, if an author has a $25,000 advance, then they must generate $25,000 in royalties before their publisher pays them more money.
Proficient agents strike up “standard agreements” with publishers regarding usual royalties across various formats (another reason you should find an agent).
Sometimes, a publisher may choose to sell certain publishing rights to third parties, known as “sub-rights.” In these cases, the publisher may allocate the proceeds as percentages to the author and include film and audio rights, foreign publication, translations, serial excerpts both before and after publication, merchandise, video games, and other related items. Agents may choose to send sub-rights payments directly to authors upon receipt instead of holding them until the end of royalty periods.
Agencies have either their own internal departments in charge of film and foreign rights, or work with extract agents that specialize in these areas. Film/translation rights offer a great opportunity to earn royalties, and authors without an agent risk not getting the best out of this area. They may miss out on income they don’t even know exists.
Understanding how authors can make money through self-publishing and hybrid publishing.
This can be an exciting, yet confusing, area. If you are a self-published author, then the platforms that publish your book will pay you whenever someone purchases it.
However, the percentage of your earnings depends on the platform. Here are some of the current splits for major platforms:
Amazon Kindle Direct Publishing:
- Paperback: 60% of proceeds
- E-book: 70% of proceeds if priced between $2.99 and $9.99, otherwise 35%
Audible:
- Audiobook: 40% exclusive, 25% nonexclusive
Barnes & Noble Press:
- Paperback: 55% list minus printing costs
- E-book: 65% of proceeds if priced above $2.99, otherwise 40%
Ingram Spark:
- Varies
Kobo:
- E-book: 70% of the list price if priced above $2.99
Amazon also offers KDP Select as a program that grants extra benefits if you only publish through them.
Self-publishing can have its difficulties, but knowing how to navigate these platforms is essential to earning a decent income from your writing.
Besides self-publishing directly, you may choose to use an E-book distributor to widen your reach. Smashwords and Draft2Digital are two of the more popular outlets for distribution. They will charge a fee for their services, which is usually 10% or 10.5% of your list price.
Another route is hybrid publishing; this is where the publisher offers services more akin to traditional publishing but with higher royalties than if done independently. When looking at hybrid publishers, make sure they meet the requirements set by the Independent Book Publishers Association.
Eric Myers
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