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How do authors get paid for their books?

By Jill Steves

While all (most?) of us stick to writing our manuscripts month after month because it's a labour of love, it'd still be nice to get paid a little something at the end! But how exactly does a publisher or literary magazines pay their authors? Is a debut writer paid (and rich!) before their first book even arrives in stores? Read on to learn more about author compensation for both novels and literary magazines.

So how do writers get paid for their novels and short stories?

First, let's define a few terms:

  • Advance: (Or, an 'advance on sales' or 'advance on royalties'). This is an amount a publisher gives you usually at the beginning of your deal with them, although you won't usually get it all at once (see 'Traditionally Published' below).
  • Royalty: This is your share of each sale, usually a percentage (e.g., for every $9.99 copy of your book sold, you might receive a $1 royalty). If you received an advance, your initial royalties will go to your publisher to "earn out" your advance (that is, to pay back the advance). Then, once you have earned out your advance, you start getting royalties! This should last forever as long as your book keeps selling
  • Bonus: Any extra payment or compensation you might receive above and beyond your advance and/or royalties, possibly on signing a contract or due to exceeding sales expectations! It could be a lump-sum, an increase in royalty rate, or some other arrangement.

The short answer is that short stories sold to magazines tend to be bought for a fixed fee with no advance and no royalties, self-published authors get paid a percentage of any sales minus expenses (such as printing cost and transaction fees), and traditionally-published authors will often receive an advance (although this isn't always the case anymore) as well as royalties for copies sold.

Selling a short story to a literary magazine

As mentioned, magazines tend to buy your stories outright for a fee and don't pay royalties, but they do pay by the word!

Some examples of pay rates are:

  • Analog SF: 8-10 cents per word for short stories (up to 20k words), and 6 cents per word for serials (40k-80k)
  • Asimov's Science Fiction: 8-10 cents per word up to 7.5k words, then 8 cents per word there after.

Their writer's guidelines can be found here for Analog and here for Asimov's.

They also pay varying rates for poetry and factual articles.

So, for example, a 10,000-word short story would net you approximately $800-$1,000 USD, which isn't too shabby!

What about pay rates for self-published authors?

Self-publishing on a third-party platform

If you self-publish on a platform like Kindle Direct Publishing (KDP), the process is fairly straight-forward with you receiving a percentage of the sale price (minus expenses), although there could be a three to four month delay between a book being purchased and you receiving your money. (Kindle Direct Publishing is Amazon's service that lets you upload your manuscript and have it available on their service as an eBook and a print-on-demand physical copy, both hard- and soft-cover.)

The example that KDP gives on their website is for a 333-page paperback sold for $15 USD. The raw royalty would be $9 minus the printing cost of almost $5, so your actual royalty would be a little over $4 per copy sold.

So, unlike publishing through a magazine, you have the chance to make a lot more money! But there are also a lot of up-front costs you will have to bare before you make a single sale, such as paying for a copy-editor and cover designer.

You're probably also wondering why there's such a long delay in payouts. This is to account for any returns, and is common (and worse!) for traditionally-published authors. The basic schedule for payouts is at the end of each month, but is sixty days after the month in which that the book is sold. So, for example, for a book sold in January you would receive your royalty at the end of March (meaning the royalty from a book bought on January 1st wouldn't reach you for nearly 90 days; although, a book bought in January 31st would only take about 60 days). For a book sold in July, it's royalty would reach you at the end of September.

Each online-selling platform will have their own specific timetables and pay-out rates - and they may change from time to time - but you should expect something similar to the above.

Publishing your book on your own author website

The situation is a little better if you're selling your book through your own website, but you will still have some payout delays.

You'd end up taking payments with a 3rd-party service like Stripe or PayPal, each of which have both pay-out minimums and delays. For newer users, Stripe will hold onto your money for up to a week or more, but once you make some sales and become more trusted, they'll flag your account to receive "instant" payouts (although there may still be a day or so delay in receiving your actual bank transfer). You will also be able to set for yourself how often you want a bank transfer (say, once per week or once per month, but there wouldn't be any sixty-day delay like with KDP).

One very important thing to note is that you're still responsible for any refunds and charge-backs! So if one of your readers demands a refund (either from you, Stripe, or their credit card company), that money has to come out of your account one way or the other, so some writers will prefer to leave money in their accounts for a few weeks to cover these costs and any unforeseen issues.

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How do publishers pay traditionally-published authors?

This publishing method has the most convoluted method of getting paid!

A book deal advance

First, an author signing a deal with a traditional publisher will usually get an advance. The actual value of the advance varies wildly and depends on a lot of factors, such as your status as a public figure or influencer, if there is a bidding war for your book, if your genre is hot right now, etc. For first-time authors, it's not uncommon to hear deals in the low range of $5,000 - $10,000 USD per book for your first deal, meaning if you get a 4-book deal, your advance would be $20,000 - $40,000. (And, again, note that you'll first need to "earn out" your advance before you see another cent from your publisher).

For those writing non-fiction in their field of expertise (namely, PHDs or other experts), or public figures (like many social media influencers these days), you may be able to get a book deal and advance before you've actually written your manuscript, but - for the rest of us - you'll need to have a finished book - and finished to a high, publishable standard! - to get your foot in the door.

But things actually get a little tricky here, because the advance for each book is actually paid out in three stages! 1) 1/3rd when you sign the contract for the book; 2) 1/3 when you submit the full manuscript for each book; 3) the final 1/3rd when each book is actually published. To be clear: this isn't 1/3rd of the entire deal; this is 1/3rd divided by the number of books in the deal.

So for our theoretical 4-book, $40,000 deal (i.e., $10k per book), it might take nearly three years to be fully paid out (assuming one book released per year)! So you'd receive a full 1/3rd of the $40k upon signing for 4 books, plus 1/3rd of $10k because they will have accepted the first manuscript. Then it might be another 4-6 months of copy edits, marketing, and cover designs before it gets published and you make the final 1/3rd for the first book! Although, by that point, you'd hopefully be close to submitting your second manuscript, if you haven't already.

It may also mean that you start earning royalties before your publisher finishes paying out your advance!

It also means that if your first few books aren't selling, your publisher might pull the plug on the rest of the deal before you see the full $40,000. Yes - that's right - there's no guarantee you'll see the entire thing! If books 1 and 2 aren't selling, and manuscript 3 isn't looking all that strong, your editor may decide to cut their losses. The saving grace is that unless something goes really pear-shaped with the contract (such as fraud or breach of contract), you won't ever have to pay back any of the money you've already received.

This all highlights the importance of having a great literary agent to represent you, and to do your research before signing on with one! There are plenty of standard industry terms and conditions that we all have to live with (for now), but a good agent is your advocate in negotiations and, theoretically, knows what is and isn't too much to ask, and can try to get you better conditions.

Also, as your career progresses and demand for your books is higher, you will be able to negotiate (or demand?) higher advances for each new deal you sign.

What will my book royalties be?

A typical rate you'll receive as a royalty is 10%-15% of list price per book. Or - more practically - you'll receive somewhere in the range of $2 - $5 per book (depending on if it's a paperback, hardcover, etc).

And, as mentioned a few times now, you'll first need to "pay out" your advance (meaning, pay it back to the publisher) before you'll start receiving any royalty cheques. This is done simply by retaining any royalties they'd normally have to pay to you, so you never have to cut your publisher a cheque or anything like that. And - to be clear - if your book doesn't sell enough to ever receive royalties, you'll never have to pay back a cent of your advance.

And just in case you thought having to wait sixty days for a payout was bad enough, it's not uncommon for authors to only receive royalty cheques twice per year! I'll say that again: you'll only get paid out once every six months. The other frustrating thing is that it often isn't clear to the author how much will be coming their way until their statement arrives, making your finances hard to plan.

The reason for this large delay is to account for returns. Publishers will sell book stores a large quantity of books for them to put on the shelves, but the book store has the option to return them unsold after a certain point, voiding that part of your advance.

Who gets my royalties?

The standard arrangement is that the publisher will first pay owed monies to the literary agency that made the deal, who will then pay out their clients (i.e., you!). A typical rate for literary agents to keep is 15% of anything the author makes.

Unsurprisingly, this arrangement has lead to instances of theft and embezzlement in the past, as happened to Fight Club author Chuck Palahniuk.

Other sources of income from my book

Generally when you sell a publisher the rights to your book, you sign over the rights to everything: movies, audiobooks, toys, etc. It's then typically the publisher that negotiates deals to further sell on those rights, including international rights to publish your book. But, you get a cut of these deals, too! And, in fact, you usually get much more than the book royalty rate!

It's actually not uncommon for the film/TV rights (called an 'option') of a book to be sold and to net the author a few-thousand dollars! Usually this acts something along the lines of, "We might want to make this into a movie, so we're just going to hold onto the rights." The option usually only lasts for a few short years before it expires and has to be renewed again, with another payment!

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Posted in Learn to Write on 2022-08-23 18:29:41 - how to write a book,writing guide,your first story