What Does it Mean When an Author Earns Out?

Aspiring authors dream of seeing their books on shelves while earning enough to make writing their full time job.

Yet, the reality is, many authors may not even “earn out” their advances. But what does this mean?

Upon securing a book deal with a publisher, an author receives compensation in the form of an advance against future sales—commonly referred to as an advance against royalties.

Advances are carefully decided on by publishers, who create a profit and loss statement for each book they wish to acquire, which sets out the outgoings, such as manufacturing costs and the income from estimated sales. These figures enable the publisher to calculate the level of advance they can offer.

Let’s adopt an optimistic outlook and after securing an agent (a monumental task considering it’s currently easier to get into Harvard then it is to secure an agent: Harvard: 4.7%, signing with an agent: 0.002%) BUT, let’s assume you, author, sign with an agent and they successfully sell your book to a publisher for $100,000. This means that even before your book hits the shelves, you would have made $85,000.

(Why only $85,000? Literary agents typically receive a 15 percent commission on author earnings. While this percentage may vary for different agents, 15 percent remains a standard figure.)

The advance may be disbursed either as a lump sum or in installments tied to specific publishing milestones, such as signing the contract, submitting your manuscript to the publisher, and the book’s official release.

Let’s envision a scenario where these three events unfold over approximately two years. In that case, you would receive $28,333 three times within the two-year period. Can you see how even a substantial advance might not be sufficient for an author to say goodbye to their day job? And this doesn’t even factor in taxes!

Now, on to ‘earning out’ which signifies that a publisher must sell enough copies of the author’s book to recover the initial investment in the author.

In simpler terms, the publisher needs to generate $100,000 in sales before the author sees additional earnings from their book.

Considering that an author might earn around $2.50 per hardcover book and less for other editions, the publisher would need to sell a minimum of 40,000 books for the author to recoup their $100,000 advance.

According to Jane Friedman, well-known reporter in the book industry, 70 percent of authors do not earn out their advance.

To further twist the financial knife,  only when publishers have earned back their $100,000 does the author (and agent) ‘earn out’ and begin receiving royalty checks on top of the advance. However, this scenario materializes only 30 percent of the time.

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