How Authors Get Paid: Understanding Author's Advance, Royalties, and Foreign Rights Sales
1) Rights: When a publisher purchases a manuscript with the intent to publish it, what they're actually purchasing are the rights to that manuscript. These rights can be narrow or grand, and the author's advance is typically commensurate to the scope of the rights the publisher acquires. Whatever rights the publisher doesn't take are still available to author and can be sold to other entities.
2) Author's advance: The money that the publisher pays to an author for their book is called an advance, and what this really means is "in advance of royalties." When making an offer for print rights, the publisher sits down, does some math and figures about how many copies of the book they believe they can sell. Sometimes they underestimate, sometimes they overestimate, but based on this figure, they make the author an offer.
Assuming the author accepts and the contract is finalized, the advance is the author's to keep whether the book sells zero copies or a million copies. If the book doesn't sell, the publisher takes a loss. If the book sells well, then everyone is happy. However an advance is not paid out in one lump sum but split into percentages paid out when specific targets are met. The percentages and targets will vary according to the publisher and the specifics within the publishing contract. A common payout would be something like 25% upon contract signing; 25% upon manuscript delivery and acceptance (which means the book has gone through the editorial process and put into production); 25% upon publication; 25% a year after publication. Depending on the date span between contract signing and publication it could be as long as two years or more before an author receives the full advance.
Regardless of how well the book sells, or doesn't, the author will not receive any more money from the publisher until the author's share of book sale proceeds matches the money the publisher paid for the author's advance. When the author's portion of the proceeds matches or exceeds the author's advance it is called "earning out." Larger advances require many more books to be sold for the book to earn out.
Since the author has already been paid for the work and that money is his/hers to keep regardless of how the book actually sells to the public, why should he/she care if the book earns out?
Most authors hope to be able to see more than one book go into print. If a publisher has overpaid for the previous book, or if the book didn't sell well, the publisher may be hesitant to take on another book by this author--and if they do, they're going to offer far less money for it. The vast majority of books earn just enough for the publisher to recoup expenses, but not enough to earn out.
3) Royalties: The proceeds of each book sale are split between publisher and author according to the terms of the publishing contract. The percentages are more-or-less standard based on type of book (hardback, trade, mass market, eBook, etc.) and quantity of each format that is sold. The author's share of the proceeds is called a "royalty." The royalties are applied against the author's advance. If and when a book earns out, then the author will begin to receive additional checks from the publisher. These royalty checks are the author's share of the proceeds above the advance and are typically paid twice per year.
4) Foreign Rights: When a publisher makes an offer on a manuscript, they specify which rights they want included in the sale. For the most part, publishing contracts are rights grabs whereby the publisher tries to get as much as they can for as little as they can. The agent, negotiating on the author's behalf, is trying to get the largest amount of money while giving up the fewest rights. One of the biggest rights inside a publishing contract are foreign print rights. When a publisher takes world rights, this entitles them to print the manuscript in any language, anywhere in the world. In practical terms this means the publisher will try to sub-right the sales. For example, no matter how excited a U.S. based publisher may be about a title, chances are slim that they will translate and then print and distribute that book in, say, Croatian. By making these sub-rights available to Croatian publishers, they have the possibility of reaching the Croatian market should they find a buyer. They also have the possibility of recouping from foreign sales a portion of their own investment in the book.
When a publisher purchases world print rights, the proceeds are split between publisher and author in the same way book proceeds are split between publisher and author. The division of proceeds is spelled out explicitly in the publishing contract. The intricacies are many, but industry standard has most foreign sub-rights split at net 25% to the publisher and net 75% to the author.
There are pros and cons to an author giving up world rights, but if those rights were part of the deal, then with 75% of each foreign sale being applied toward the author's advance, it makes it far easier for the book to earn out. It's even possible, with large foreign sales and/ or a small advance, for a book to earn out before it goes to print. If a book does earn out in this way, the author will not see any royalty income until after the book has been published. Depending on time frames, this could be up to six months after publication day.
Taylor Stevens is an award-winning and New York Times bestselling novelist who—by odds and expectations—should never have become either successful or published. Like many aspiring authors Stevens had no credentials or platform, and no direct route into the publishing world. But, unlike most, she was also limited by a life of cultural isolation and a sixth-grade education.
Born into an apocalyptic cult and raised in communes across the globe, Stevens grew up as a child laborer, cooking and cleaning for up to a hundred at a time, caring for younger commune children, or out on the streets begging on behalf of commune leaders. Books, movies, music, and pop-culture from the outside world were strictly forbidden, and she finally gained unlimited access to fiction after returning to the United States in her early thirties. Her books have since been published in over twenty languages, with The Informationist optioned for film by James Cameron’s production company, Lightstorm Entertainment.