Royalties and Advances Explained

Royalties and advances are two of the more complex elements of the writing industry, and there is quite a lot of misinformation out there. When you break down what they actually are, however, both become much simpler, as they are intrinsically linked. In this essay I will look at how both royalties and advances work, and for the purpose of this example we will look at a book being retailed for exactly £10 by shops and assume that the author is both with an agent and medium to large publisher, and getting an industry standard rate of pay.

Royalties

A royalty is what the publisher pays the writer when a book is sold and is roughly 10% of the sale. The first point of confusion is when you’re looking at what you get 10% of. Publishers don’t sell the book for what the customer pays. They’ll sell it at a considerable discount—as the retailer needs to add a mark-up—and usually through a distributor—who also need to include a mark-up—so the sale price is nowhere near the recommended retail price. The publisher will therefore be selling the book to a retailer for about 50% of what the customer pays. For smaller publishers who don’t have good existing relationships with distributors, that can drop to 40% (or even lower) of the RRP, especially on niche books or unknown authors.

Of course, that is only within the native territory, which here would be the UK. For territories within Europe, the USA, and so forth, publishers either use imprints, partners or subsidiaries, or sell the book on to other companies. Add in translation costs and translator royalties for non-English-speaking territories and the sale price gets a lot smaller.

Using the example of a publisher with a pre-existing distribution network, and only considering UK sales, you—the writer—will get 10% of that sale price, which at £5 is 50% of the £10 retail price. Meaning your royalty rate for that book is 50p per copy sold.

Advances

Some publishers will pay an advance when they buy your book. This is an advance on the royalty payments that they expect you to make. One of the key points about an advance is that you have to pay it back to the publisher. There are few edge cases where this repayment will come out of your personal money, but they’re rare and not good practice. If your publisher puts it into the contract that you must repay the advance personally if the book doesn’t sell, then you need to think long and hard if that’s the right place for you. (It isn’t.)

Normally, the publisher will take your future earnings to pay for the advance. If you get a £1,000 advance, they’ll take the first £1,000 of your royalties to recoup it. You will only get royalty payments once that advance has been recouped; you won’t get a royalty cheque for your first 2,000 books being sold because that payment was advanced to you before the book was published. As such, publishers only tend to give advances for books that will sell in high volumes. If your publisher anticipates your book selling 10,000 copies within the first week in the UK, you could potentially get an advance of £5,000. Once 10,000 books have been sold, you would then start accruing royalties, which are then paid at regular intervals—often, though not always, quarterly—in arrears.

Occasionally advances are paid for different territories, meaning you could theoretically get more than one.

Agents

Agents are another element of this process. For sourcing and negotiating the publishing contract for your book, they’ll usually take 20% of your payments, meaning both your royalties and any advance. This rate varies, of course, but it’s around the 15-20% usually.

In practice, if your book is selling in the shops for £10, and discounting any advance, you’re taking home 40p of that every time it’s sold, after the agent’s cut.

What this all means to the writer is that writing books is not the way to make money. To replicate a full-time, minimum wage job, you’d need to sell over 40,000 books a year. If you wanted a bit more of a generous wage of £25,000 a year, you’d have to sell over 60,000 books. That’s a lot of books.

This is a massive oversimplification of a complex topic. Royalty rates, agent rates, the price the publisher sells the books at, international rates, plus things like currency fluctuations and buying trends, will all vary significantly. But, as a starting guide, this is how royalties work. Whether or not a gross income of 4% of the retail price is fair for writers is a completely different topic for another day.