I went through the awesome list of question we received during our AUT ARC giveaway and pulled this one out: john green has brought a lot of attention to advances vs. royalties lately on his blog. i haven’t seen any agent comments there, so i’m wondering what your thoughts are.

This is another great question that had me considering the perfect way to answer for a few days. John Green  isn’t the only one who has been talking about advances on his blog.  Susan Beth Pfeffer  has also offered her thoughts and broken down the advance and royalty aspects of publishing on her blog. Even the media at large has weighed in on what and how authors are paid. For example, Boris Kachka wrote an article for New York Magazine last fall about the end of the publishing industry and in it he talked about the pros and cons of huge advances.

 All of these blog posts and articles have opened the flood gates to so many questions and issues related to how authors get paid and how books make money.  So much so, that I’m worried I will overlook something crucial in my answer.   Still, I’d like to give it a try.

Here we go:

First off, I’d like to talk about how an agent gets paid.  Most agents are members of the Association of Authors’ Representatives (AAR), which means that they adhere to the association’s cannon of ethics. This cannon states that agents cannot charge reading/evaluation fees to clients or potential clients.  I’m telling you this because I want to underline the fact that an agent’s financial compensation is directly tied to that of their authors. We don’t make money unless our authors make money.  As Susan Beth Pfeffer pointed out in her post , agents typically get 15% of what an author makes domestically.  We’re talking advances, royalties and any domestic licenses (audio, for example).  Percentage breakdowns vary for foreign and film licenses, but for the purpose of this post, let’s stick to domestic advances.  Agents will get 15% of a huge advance, or 15% of a small one, or 15% of any royalties earned after a huge or small advance is earned out. 

Now I’d like to address a few things that these other posts and articles have mentioned: huge advances (good, bad or no big deal?), advances and how they relate to the marketing of a book (if you get more money upfront, will a publisher spend more money on promotion?), advances vs. royalties (is it better to get a bigger advance or earn more royalties?), what agents look for when making a deal (is money all that matters?) and the more royalty-focused publishing model (it’ closer than you think).

Huge Advances

Authors need money to live and a bigger upfront advance might mean more opportunity to do so comfortably.  But truthfully, one book and one advance does not a career make.  For every author who sells well and can quit their day job to write, there are many more who can’t. And publishers have long ago stopped viewing advances as a salary for writers. This is more poignant since debut fiction is typically sold on a completed manuscript, which means you’ve (probably) already balanced a job and your writing for a number of years! Your average advance (and by that I mean advances that are not the result of a bidding war between many houses or are not negotiated by agents in any way) is based on a publisher’s past success with similar projects and how well they think the project in question will sell. For the most part, it’s guesswork. Informed guesswork, but guesswork still – and right now publishers are being rather conservative.

Agents want their authors to be well compensated, no doubt.  But let’s put the concept of what a manuscript and an author’s time and talent are worth aside and look at advances from another perspective. We live in a time when authors can’t escape their sales numbers.  These numbers are now electronically monitored and readily available to editors/publishers/agents.  Though they are not 100% accurate, they are accurate enough to provide a sense of how well a book is selling.  This means that unearned advances and low sales are, to an extent, public knowledge.  Sure, a good agent can work around them, but there’s only so much we can do. We are currently living in tough economic times and low sales and unearned advances can translate to demotions for future advances. 

Now let’s look at huge advances from yet another perspective: some authors simply don’t do well with the pressure of bigger advances. More money to earn out and more books to sell might equal more sleepless nights, more panic and less writing.

Advances And Marketing

It can be argued that the more money a house spends on a book, the more they will spend to promote it.  That’s not necessarily true.  When we hit hard economic times, one of the first things to get cut at publishing houses is the marketing staff and budget, which means that there is less money to go around, period.  There is also a double-edged sword associated with higher advances since publishers are now looking for authors to become more involved on the marketing side of their book’s journey. This means everything from blogging to hiring an outside publicist, all of which costs money or time (some might say that time = money). Also, check out John Green’s editor debt breakdown  for another take on the subject.

Advances vs. Royalties

Is it better to get more money upfront or earn out a smaller advance? Both John Green  and Boris Kachka  make interesting and valid points regarding this issue and I won’t reiterate their arguments. But, from an agenting point of view, let me just say that we have more leverage for future books when an author earns out an advance than when they don’t.

What Agents Look For

I think that agents sometimes get the bad rap of middlemen who push for big upfront payments, take their 15% and don’t worry about the future of the book.  Nothing could be further from the truth as far as I’m concerned.  I’m not saying that there aren’t wheeling and dealing agents out there who live and die by the financial aspects of a deal, there must be. But most of the agents I know are committed to growing an author and maintaining a long-lasting relationship with their clients. To that end we want to make the right deals for our authors so that they are in the best position to sell as many  books as possible.  I’m not going to pretend that money isn’t part of the right deal. It is. We want our authors to get paid what they’re worth and we want them to be well compensated for their effort, time and talent.  We also like it when many publishing houses are interested in an author’s work and we have an auction.  But we don’t want our author saddled with the pressure of earning out an “unearnoutable” advance. That’s why we look for more than money when we make a deal. We also look for the right editorial fit, the right marketing support and, most importantly, the right environment for the book to reach audiences. Remember, there is no sure-fire approach to making a best-seller on either the advance or marketing side. Trust me, we’ve looked.

The Royalty-Focused Publishing Model

There are some in the publishing industry who are trying to take a new approach to book publishing. One such imprint is HarperStudio, a part of HarperCollins.  Here is a breakdown of their mandate as it appeared on Shelf Awareness on January 26, 2009 :

-The HarperCollins division wants to sell to as many accounts as possible on a nonreturnable basis.

-It is offering authors lower advances than many New York houses in exchange for a higher-than-usual share of profits and is signing up titles with “constituencies” and built-in marketing and media opportunities.

-HarperStudio aims to market and publicize titles and authors online as widely, creatively and effectively as possible.

-The division wants to encourage buyers of its books also to buy the audio and e-book versions of the same book for just a few additional dollars.

You can also check out the publisher’s website  to learn more.  Will it work? It’s hard to say. But, P.S. In the spirit of full disclosure, I can’t help but mention that HarperStudio did pay a reported 1million dollar advance for a 10 book non-fiction deal in April.