the shortest ever explanation of how an author makes money

I’m writing this post because I’m in real danger of falling asleep (at 9:30 in the morning) and missing Bunny’s vet appointment. So if I’m a little disjointed, that’s why.

Lauren’s question:

I’ve got a question about book purchasing. I buy from everywhere (Amazon, B&N, Borders, B.Daltons, Target, Costco, used bookstores,, library sales, ect, ect) but I never really gave thought to the author, I truly beleived that the publisher paid up front for the book, x amount of dollars, and then they paid to print, distribute, & advertise and the author didn’t get paid residuals for each book sold. Was I incorrect in this? I know you went over this before, but I couldn’t find it. I’ld love to know your take on this, in your opinion, wheres the best place to purchase?

I can only tell you about my own experiences, but I think they are pretty typical. Also, I can’t tell you where to shop. Or at least, I don’t think it would be right of me to try to tell you where to shop. Opinions? Sure. I’ll share some of them.

So this is how it works.

My agent goes to a potential publisher with (a) a finished manuscript or (b) a partial manuscript or (c) an outline and story idea. She does this by approaching the editor in the house who she believes is most likely to respond to the book and fight for it.

If she’s right, and the editor likes the book enough and finds it marketable enough, the editor goes to the editorial board and pitches the book. I don’t have much insight into this part of the process, but I do know what comes out the other end: an offer, or nothing.

If the publisher wants the book they sit down and crunch numbers. Given the market, the author’s Q factor, current production and distribution costs, how many copies of this book could they realistically sell? They come up with a number. On the basis of that number (10K or 50K or whatever number of book sales projected) they put together an offer and present it to the agent.

The agent looks at the numbers, talks to the author. they make a decision.

The deal will look something like this:

on signing of the contract, the author will get an advance. That advance is based on projected sales. It can be anywhere from $500 to millions (if you’re a consistent number one NYT author). But the advance is just that: an advance on royalties.

The contract stipulates how much money you get for each book sold. Usually the arrangements are pretty complicated, depending on format, and often there’s a sliding scale. The more books sold, the bigger the author’s percentage. So when a book sells for a cover price of $25, where does that money go? About 12% of that $25 goes to the author (and 15% of the author’s 12% goes to the agent). The rest of the money is the publisher’s to spend on editing, book design, printing, marketing, promotion — which a profit margin tucked in there too. Of course. This is a business.

The publisher makes deals with chain stories. Order xxxx copies of Book X and we’ll lower the cost to you. This is how Amazon can offer 30% off the cover price of a brand new book, because they’re buying bulk and they get a discount.

The author only gets money from the first sale of the book. The first time it’s purchased at the full cover price, or at a discount, the author gets her 12% of the stated cover price of $25. This is why small bookstores complain about the chains: the chains can negotiate lower rates, and thus lower the cost of the book to the consumer. It’s hard to pass up thirty percent off.

If a book is read and sold again as a used book, there’s nothing in those subsequent sales for the author. In fact, the author won’t get any more money at all until and less the advance “pays out”. That means, if you took home an advance of $20,000, enough books have to sell so that the royalties that accrue to you meet that $20,000 mark. If the book flops and it doesn’t sell at all, that’s still your money — the publisher takes the loss. However, you’re unlikely to get another contract with that publisher. So you live off your advance in the hope that the book will move beyond the projected sales. If not, you have to produce another book, or go work as a bank teller. Something thrilling, and far more regular and easier than writing.

I know I’ve left questions unanswered I’m too sleepy to have possibly done everything that needed doing. So speak up if you’ve got more questions on this.