Advance and Retreat

I was looking over some stuff this past week (well, two weeks really) about book advances being incomparable to the advances we were seeing 15 years ago (okay, the book advances others were seeing 15 years ago… I was still in college then and had no clue I was going to be a published fiction author one day) and I caught myself wondering why anybody would want to give ground to a publisher on the topic of advances. I mean, I hear people bemoaning the fact that a lot of people are getting less and less for advances, and that sucks. But these are also people who deal with the Big 5, people who have agents to deal with the bean counters at the major publishing houses.

So the agents have been negotiating smaller advances on behalf of their clients? Considering that agents only get paid a small percentage of what they negotiate, this seems to be a strange business strategy.

Nonetheless, there are advantages to having a small advance. You can earn it out faster, which could inflate your sell-through percentage and cause the bean counters to take a closer look at your “successful” novel (MATH TIME!!! 10000 copies printed and you “only” sell 7500, that’s a 75% sell-through rate… which is a fabulous percentage in today’s market) and an author could build up from there. They can use that high sell-through number and call for a higher advance on the next book (theoretically).

Of course, this scenario assumes that the publisher is going to help out with marketing and actively try to push the author’s name out there. We’re talking front page interviews on the company’s website, free snippets, ad space in Publisher’s Weekly… the list is long. The author will also be expected to do some promotional work like signings (signings are awesome!) and also push their book harder than Atlas does while holding the world up.

A few years back an author named Elizabeth Kostova wrote a book called The Historian. It was a decent book, in my opinion, but the main news behind it was the $2 million advance it received. A $2 million advance meant that the publisher was putting a lot behind a book from an unknown author to be a huge success (they were banking on the Twilight fans to crossover and the Anne Rice fans falling in love with it, I believe). With that size of advance, the publisher needed to make sure that there were a ton of books out there to recoup their advance. If the publisher is going to pay roughly $1.50 per hardcover book sold (which is about the average I believe) then they’re going to have to sell 1.3 million copies of the book.

But… huge but… you have to factor in sell-through rate. Remember when I said that a 75% sell-through was amazing? I’m guesstimating that Little,Brown (the book’s publisher) pumped out something like 4 million copies of the book to send out to bookstores so it could potentially hit a high sell-through rate. This seems like a lot, but you also need to remember that the publisher has put a lot of faith and money into this book and author. That $2 million doesn’t even begin to cover the marketing spree, the extra payments to be on end caps at bookstores, media blitzing, various TV shows… You can assume that the publisher probably matched the $2 million advance with a $1 million promotional budget. Sound absurd? Depends on who you ask.

Ms. Kostova’s The Historian was on the NYT bestseller list for 18 weeks. That’s pretty damn awesome, quite frankly. Assuming that the average sale per week to make it onto the NYT bestseller list is something on order of 10,000 books (again, pretty impressive numbers), after 18 weeks on the bestseller list she would have conservatively sold 180,000 books. Optimistically, let’s say that she sold 30,000 books per week and call it 540,000 books sold.

4 million in print, 540,000 sold… that puts her sell-through rate at 13.5%.

Ouch. That return rate had to hurt the publisher.

There is a reason that Little,Brown did not push her second novel. Oh, you didn’t know she wrote a second novel? She did. It was actually much better than the first. It’s called The Swan Thieves. Go check it out.

Now, an author can be set for a long time on that initial $2 million advance. But part of being an author is being in business for yourself. If you’re first novel tanks (ignore the NYT bestseller list and focus on the part that the publisher pays attention to, which is the sell-through), it’s going to be very, very hard to sell your next book to any publisher. Especially if you come in and try to get a similar advance.

Smaller advances can be good for young authors, as I was reminded today by Larry Correia’s wife. They can help build that sell-through rate and make the author more appeasing in the eye of a publisher. At the same time, though, it means that the author has to continue producing. Writing a book and getting paid peanuts for it means that you can’t be a “one and rich” author (not that there are a lot of those out there… most authors who are wealthy worked their butts off to make it happen). That’s why the really successful authors have a backlist of books. Larry Niven has something like 100+ books and short stories in his backlist.

That’s impressive.

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34 responses to “Advance and Retreat

  1. In my hick town flyover-state road apple opinion, outsized advances are a bad idea across the board. Saddling an author — any author — with an outsized advance, is like declaring a band will hit platinum, before the album has even been cut. Now the author has to stare at that high, hiiiiiiigh bar that’s been set, and even a very healthy sales clip may not guarantee that the book will reach the bar — much less surpass it, and bring in royalties. Technically, the publisher will actually break even before the earn-out point is reached. But the more money up front, the farther away the break-even mark (for the publisher) will be. Failing to meet that mark, much less earn out, means the book has lost money for the publisher. Authors — especially new authors — who lose money for their publishers, tend to not be publishing through those publishers after too much red ink has been spilled.

    And here is the kicker: the book could be a very good book, the author could be a very good author, and the audience could love the book — and the book will be declared a “failure” (and the author along with it!) because said publisher front-loaded expectations to an unrealistically lofty degree.

    On the flip side, a modest advance says nothing about a book’s quality, or an author’s prowess. The modest advance — especially with new authors — sets the author up for success, because it doesn’t take a colossal number of buyers to reach both the break-even and the earn-out point. Thus the publisher can be in the black much more quickly, and the author will see royalties much more quickly; even on a book that’s not a bestseller.

    Of course, the low-advance model is not sexy. It won’t make headlines. The low-advance model looks at sell-through. Low-advance, but high sell-through, means both the publisher and the author are making money. Assuming a string of books with reasonable advances and high sell-through, that money becomes substantial — in some cases, far more than the author might have gotten with a whopper advance. It’s just parsed out over royalty periods.

    In other words, it’s the tortoise and the hare.

    • As I understand it, Baen takes the ‘modest advance to encourage earn out’ approach. And since they seem to be doing well they have to be doing something (several somethings actually) right. 😉

    • To play devil’s advocate, the low advance model depends on the publisher acting in a professional manner, with a business interest in the product. That is, the publisher must give the book the best cover to reach the readers (not some stock art modified by an intern), thoughtful concept editing, a good copyedit and great formatting, and then carefully place the book for maximum advantage within genre, with some advertising and co-op at bookstores.

      The horror stories of Big 5 publishers reserving these basic functions only for their bestsellers have become… the base expectation of how those publishers operate for anything below bestseller. At this point, savvy career authors are pushing hard for big advances because they know the houses (except Baen) only put marketing push behind books that have a high enough advance to force the publisher to have skin in the game.

  2. The business model that yanks books off the shelf and sends them back after a couple weeks to be assigned to obscurity is crazy. Books are not kumquats that suddenly go bad. The idiots return books faster than the initial purchasers could read it and recommend it to friends. So they fail to tap the most obvious sales cycle. I introduced a new book on Oct 7 and sales went up each day and didn’t peak until Oct 23. They’ll stay up for two months before there is a gradual decline if past experience is repeated.
    Electronic books are enjoying good sales for many reasons – but the fact they aren’t snatched off the market if they aren’t an instant huge success is a big factor. If I sold only in print my older books would likely not be available on the shelf, and I made twice the surge sales of older releases than the new one, when the new book went on sale.

    • Uncle Lar

      Which I suspect is one of the reasons that trad pub resists the whole concept of e-books so vehemently. They belong to an entirely different business model from dead tree books. No sell through, no return. Once the setup is done and the file put up for sale the only expense is infrastructure and promotion. Totally different business, and they are gob smacked by it.
      The sad truth that they have made a complete hash of their old standard business model by allowing unreasonably short return cycles is in itself most strange indeed. One would think they wanted to kill the industry.

  3. Larry Niven is not really a good example. As the standard jape around LASFS goes, he was born with a silver spoon in his mouth — the size of a snow shovel. He didn’t *need* to succeed as a writer to pay the bills. (That he succeeded anyway is a testament to Larry himself.)

    As to agents somehow not managing to secure bigger advances for their clients despite being on a commission… funny how the shrinking advances coincided with the typical agent’s portion climbing from 10% to 15%.

    As Brad points out, the shrinking advances may be nothing more than a market correction to get away from red ink (or at least, to shift the red ink from the publisher to the writer). But consider what a minor part of the whole economics of dead-tree books that advance really is. Riteturn makes a good point — why are publishers leaving so much backlist money on the table? I’d guess there’s two reasons: the fact that shelf space in the chain stores has to be purchased for each book, but more because the stock market demands positive quarterly reports, and corporate beancounters make that next promotion and bonus by showing short-term gain to impatient stockholders — even if it’s at the expense of long-term financial viability. Backlists are a longterm asset, thus useless to the quarterly-report beancounters.

    • Regardless of Niven’s background, 100+ books on a backlist is impressive.

      • Paul (Drak Bibliophile) Howard

        I don’t think Larry Niven ever hid the fact that he didn’t have to worry about a day job while learning to write.

        Of course, the number of books & stories shows that he definitely learned to write. [Smile]

    • Larry Niven was born with a trust fund, but he was apparently raised with the idea that he shouldn’t touch it or act rich in any way. (It’s the “old money” thing that allows money to stay old as opposed to becoming poor.) He made it as an sf writer by working hard and submitting often. That’s it.

      The only time he ever deployed his status in everyday life, that I have ever heard of, was his famous “negotiation” with an LA convention hotel that was harassing and trying to drive out the sf convention and particularly the ladies (ie, pretending they thought the women members of the con were prostitutes, and not letting them roam the hallways or go to the bar). On that occasion, he assisted the convention committee by chivalrously informing the hotel manager that he owned the ground upon which it stood, and that he was perfectly willing to pull the hotel’s lease. At which point the hotel became willing to honor its contract with the convention.

      (He was very embarrassed to have to let this be known, and no doubt it caused him some annoyance among the sort of LA fans who dated Harlan Ellison and then ran off with his credit card. But fortunately he seems to have had more people sense than Harlan.)

      I like and respect the man. He is a gentleman and a writer, and if he lost his money tomorrow he’d still be a gentleman and a writer.

      • Paul (Drak Bibliophile) Howard

        When I think of Larry Niven and his trust fund, I think of the character in Lucifer’s Hammer.

        Rich kid (actually an adult) who had a hobby of comet searching but also spent time over-seeing the “money people” who managed his money.

        His (the character) thought was that people like him have lost their money because of *not* over-seeing the “money people”.

        Niven’s “hobby” was his writing and he learned to do it quite well.

        • Matthew

          And then he hooked up with Jerry Pournelle, and a legend was born.

          • TRX

            Yeah, that’s pretty much when Niven stopped writing, other than doing collaborations with writers not fit to do his shopping list.

            I’ve heard various stories as to why, mostly centering on contract problems with solo works after that point.

            Niven is still one of my favorite writers… but he hasn’t written anything of note in forty years.

    • Alpheus

      Perhaps Larry Niven isn’t the best example, but I don’t seem to recall Asimov or Heinlein being trust fundies; similarly, Larry Correia certainly ins’t a trust fund baby.

      All three of these, to the best of my knowledge, started their writing careers small, and slowly built up their business to be successful.

      • I don’t seem to recall Asimov or Heinlein being trust fundies

        Asimov had a day-job, as did almost every stf author of his generation. Heinlein has his Naval Retirement; although, I have heard differing accounts as to whether he used that money or passed it on to Naval charities.

      • The Other Sean

        IIRC, Asimov was the son of Russian immigrants who where middle-class. I seem to recall Heinlein being tight on money at several points in his life, based on what I recall of various comment sin Expanded Universe and Tramp Royale.

        • RAH came closer to write(and sell)-or-starve than most. After the war, he became the first to earn his entire income from writing stf only. (Even Asimov wrote a few non-stf mysteries and such; not to mention tons of non-fiction.) Jerry Pournelle says that RAH ‘ran scared’ financially all his life. I doubt that a Lt(jg)’s retirement pay would go very far by the 1950s.

          • Reality Observer

            Yes, the pension was “eating money” (rice and beans level) before he hit his stride writing.

            Now, you might consider it being “passed on” in his later life to charities – but it would have been lost as a rounding error… (My dad’s pension, with a combat related disability on it from WW2, was a whopping $52.73 a month when he passed in 1981.)

            And, yes, RAH was frequently “tight” with cash flow issues, but that was mostly because he believed in spending his money on enjoying life (especially spending money on Ginny). Being childless, why not? There was enough socked away for Ginny to live on comfortably after he passed, and he didn’t leave the horrible estate problems behind that several others like Piper did, where their books went out of print (and stopped earning money) for several years.

    • Actually, there was a change in tax law that made it disadvantageous to maintain any inventory year to year. So instead of building warehouses and having a huge catalog of backstock, they take returns and pulp them.

  4. Since I won’t have to deal with advances (Indie all the way), I just keep telling myself that my backlist needs to be expanded more. 😉

    • freddie_mac

      Exactly. Now that I’ve started buying books in large quantities again, I’ve fallen into a terrible habit: when I decide that I like a new author/series, I dash off to the website and scoop up the remainder of the series and/or a majority of the backlist.

      Eventually I’ll need to set a monthly book budget (it’s been years since I had to worry about that!), but until I do …

  5. Uncle Lar

    Back in the day it was fairly well known among the fen that Larry Niven was well off. When Spider Robinson did a stint writing book reviews and commentary he remarked that Larry was the only author he knew who could afford to dump a half pot of left over Jamaican Blue Mountain coffee and brew fresh. Spider had this thing about good coffee.
    But the salient point generally agreed to was that Niven buckled down and became a hell of a writer in spite of no desperate need to earn a living so common to most of his compatriots.

  6. Christopher M. Chupik

    On a semi-related note, I got my first royalties check last night.

    On another semi-related note, I won’t be quitting my day job any time soon.

  7. Reblogged this on The Arts Mechanical and commented:
    I’ve always understood that advances were nice, but it was royalties and a backlist that paid the bills. Unfortunately it seems as if publishers don’t keep stuff in print, which makes advances more important.

  8. Pingback: Instapundit » Blog Archive » NEWS FROM MY FIELD: Advance and Retreat….

  9. Deoxy

    Crazy-big advances like that are basically a way to give company money to someone you like. Hillary Clinton’s book advance, for instance.

    But even without the political bit (sorry, but it was perfectly relevant), considering the numbers you just laid out, who would EVER give a million+ advance for ANY book? That’s just stupid… from a purely business/financial perspective, which is what tells me there’s something else going on.