Monday, 28 July 2008

Earning Out

As I’ve discussed before, a book is said to have earned out when the amount of royalties due exceeds the amount of the advance paid.

Most books—perhaps 70%—don’t earn out and it’s often assumed that they therefore don’t earn a profit for the publishers. This isn’t necessarily the case.

The amount of advance paid is based loosely around the number of copies the publisher expects the book to sell: higher projected sales usually equals a higher advance (and a correspondingly higher promotional budget). When a book earns out, that projected number has been exceeded: from this point on, its writer will receive royalty cheques for every sale made.

However, publishers are business-people, and so are naturally cautious where money is concerned. Before an offer is made they work up a profit-and-loss projection on the book to make sure that they can afford to take it on: and you can guarantee that they’ll be in profit on most of the books that they publish a good way before they earn out.

4 comments:

liz fenwick said...

interesting and well explained...thanks :-)

DOT said...

Kristin at Pub Rants has blogged about some debacle over out of print clauses.

(http://pubrants.blogspot.com/)

I was wondering if you could post an explanation of what out of print clauses mean in terms of author's rights and what the fuss is about.

I guess I should ask Kristin but the issue seems more a publishing one.

How Publishing Really Works said...

Dot, thanks for the suggestion. I'll get onto it as soon as I have some time, but meanwhile you could Google for information about reversion clauses in book contracts, and see what you can find.

How Publishing Really Works said...

Dot, you speak: I obey. I've written a bit about books going out of print and reversion clauses, especially for you.

There was too much for me to cover in one post, so I've now put up an introductory post today, which will be followed tomorrow and the next day by further information on the subject.

God, I'm good.

Jane