Book Deal 101: How do Authors Get Paid?

What are advances, royalties, payment milestones, and sales escalators? What are foreign translation rights and film/TV options? And how much commission do agents take?

This week, we’re going to look inside the black box of book deals (fiction) with traditional publishers* and I’ll explain how—and when—authors get paid. I’ll cover:

1. Advances

2. Royalties

3. Payment milestones

4. Sales escalators

5. Subrights - including English publishing rights worldwide, translation rights, and film/TV rights

6. Agent commissions

This is a lot, so let’s get started!

*Note: I focus on Big 5 traditional publishing (US) in this piece because that’s where my career has been based. For information on payment structures/nuts & bolts of other publishing options, I recommend

The Author Stack

as a great place to start.

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1. The Advance

An advance is the main way authors are paid. This is money that the publisher gives you, that you never have to give back (as long as you actually write the book they are paying you for).

Let’s say your novel is called Awesome Book. Your agent sends Awesome Book out to six editors, and Editor A falls madly in love with it and wants to publish it. Hooray!

Editor A will call up your agent and say, “I need this book in my life, and I want to pay your author $10,000 for it.” (I’m using $10k because it’s a nice round number and will help us later in this article when we start doing a little bit of math).

That $10,000 is the advance. If you agree to the deal, the publisher will write you a check for that money and it is yours to keep, no matter how many copies your novel ends up selling.

Sell 1 copy? That $10,000 is still yours. Sell 100 copies? $10,000 still stays in your bank account.

(Ok, it’s not that simple, because there are payment milestones and agent commissions, but we’ll get to that soon enough. For now, $10,000 = the advance, and the advance is yours to keep.)

How Do I Know if the Advance They’re Offering is Good?

This is where it’s great if you have a literary agent, because they pitch books all the time and know the going-rate for novels like yours.

However, you can also do your own research on Publishers Weekly’s deal announcements, which will often have a coded phrase like “Editor A has acquired Awesome Book by Fabulous Author, in a good deal…”

Not all announcements contain this, but when they do, that’s a reference to the size of the advance.

• “nice deal” $1 – $49,000

• “very nice deal” $50,000 – $99,000

• “good deal” $100,000 – $250,000

• “significant deal” $251,000 – $499,000

• “major deal” $500,000 and up

You can look up recent book deals for novels that seem similar to yours and get an idea of the range the author got for it.

Don’t forget to check out:

Recent newsletters: How to Write a Killer Query Letter

Writing Vivid Settings that Pop

First Lines, First Paragraphs, First Pages

2. Royalties

Royalties are the percentages of each book sale that you will receive. Your contract with the publisher will list out the specific percentages for every format of your novel that they are going to sell. For example:

• 10% on hardcovers

• 7% on paperbacks

• 25% on audiobooks

• 25% of ebooks

These percentages are somewhat negotiable by your agent, although there’s generally not much wiggle room. (We will talk about sales escalators in the next section below.)

The royalty percentage is calculated off the list price on the book cover.

You know how when you walk into a bookstore and pull a novel off the shelf, there’s a price already printed on the cover?

• Let’s say it’s $20.00 for a hardcover. (I know the prices aren’t usually that round, but for the sake of easier math, go with it.)

• If your royalty rate is 10%, then you will receive 10% of $20.00 = $2.00 per hardcover copy that is sold.

This means that your royalties don’t change just because a bookstore decides to run a massive sale on your books. If they want to charge $5 per book, it doesn’t matter to you. You will still receive 10% of $20.00.

But here’s the catch—you don’t receive royalties right away, if ever.

Wait, what??

That sounds terrible, but actually, it’s to the author’s benefit. Remember the advance? that is shorthand for “advance on royalties.” When the publisher pays you an advance, they’re basically saying, We think you’ll sell at least X number of copies, so on good faith, we’re just going to give you that money. And once you match that amount, then we’ll start handing over additional royalties.

Confused? I’ll use our previous numbers as an example.

• Your hardcover has a list price of $20.00

• The royalty rate is 10%, so for each book, you earn 10% of $20.00 = $2.00 per book

• Your publisher gives you an advance of $10,000

  • $10,000 is equal to the royalties for 5,000 hardcovers ($10,000 divided by $2/book)

  • So this means your publisher is giving you money ahead of time for 5,000 books, before any are even sold. They are paying you for 5,000 books.

  • Even if you sell less than 5,000 copies of the novel, you will get to keep that $10,000.

• If you sell more than 5,000 copies, you have “earned out” your advance. So for every copy after that, the publisher will start paying you 10%.

  • If you sell 5,001 copies, the publisher will give you $2 (since they already paid you for the first 5,000 copies).

    • 5,001 - 5,000 = 1 book

  • If you sell 10,000 copies, the publisher will write you a check for $10,000 (since they already paid you for the first 5,000 copies)

    • 10,000 - 5,000 = 5,000 books

    • $2 x 5,000 copies = $10,000

Real talk: Most authors never “earn out.”

Don’t worry if you don’t sell more copies than the advance accounts for. The vast, vast majority of authors never earn out. Publishers know this, so your reputation won’t be penalized for it.

Just think of the advance as free money if you don’t earn out.

Most authors never earn out, but that advance money is yours to keep.

3. Payment Milestones

All right, remember in Section 1 where I mentioned that advances aren’t quite as straightforward as the publisher writing you a $10,000 check as soon as you sign the contract?

That’s because the advance will be payable in portions, based on when you hit certain milestones.

I’ve heard rumor that advances used to only be divided into two. But when I signed a book deal for my debut novel, The Crown’s Game, in 2016, the industry standard was three milestones. Now, sadly, publishers seem to be pushing to divide up advance payment into four milestones.

The amounts payable at each milestone can be negotiated, but they are commonly just evenly divided. So you can probably expect a payment schedule like this:

Four Payment Milestones:

• 25% at Signing of Contract

• 25% at Acceptance (this means you and your editor have revised the manuscript as many times as necessary to get the character, plot, and rest of the story right, and all that is left is proofreading for grammar and punctuation and typos)

• 25% at Publication of Hardcover

• 25% at Publication of Paperback or One Year after Publication of Hardcover, whichever is sooner

Ooof… did it just hit you that it’s hard to make a living as a writer? Yeah. Unfortunately, that’s the truth for any artist. And that’s why I never think anyone should have to be convinced to write a book. (“Oh gosh, that’s such a great family history. You must make it into a novel!”) Honestly, it’s not an easy business to make money in. But if you love writing—like I do!—then it’s worth so, so much to get to wake up every day to a job I adore and look forward to. You just have to go into this industry with your eyes wide open. Which is why I’m laying out all these financial details for you.

It’s hard to make a living as a writer. But if you love writing, it’s worth it, in my opinion. But you have to go into this industry with your eyes wide open and be aware that you might need other income streams.

4. Sales Escalators

If royalty rates aren’t terribly flexible, is there a way to negotiate more money?

Yes, and this is where a good agent can really fight for you. They can get creative in their negotiations for sales escalators, and I’m going to explain the two most common types:

• staged royalty rates

• sales bonuses

Royalty rates aren’t terribly flexible, but some publishers will negotiate sales escalators.

Staged Royalty Rates

Some publishers are willing to negotiate higher royalty rates if you sell more copies of your novel. This is all decided in the contract, before the book is published.

Unfortunately, the industry rates on audiobooks and ebooks are pretty much fixed at 25% (interestingly, Judge Pan called this out as potential evidence of antitrust in last year’s huge lawsuit about the Penguin Random House-Simon & Schuster merger, but that’s a whole ‘nother topic.)

However, there is wiggle room in the royalty rates for hardcovers and paperback. So you agent could try to get the publisher to agree to different stages, based on sales.

For example (and I am totally making these stages up, just for illustration purposes):

Hardcover Royalty Rates:

• 10% on the first 50,000 copies

• 12% on the next 50,000 copies

• 15% on all hardcover sales thereafter

Paperback Royalty Rates:

• 7% on the first 100,000 copies

• 8% on all paperback sales thereafter

Again, I just made up those sales thresholds, but it gives you an idea of what staged royalties can look like. And it is true that the sales thresholds for paperbacks will always be higher than for hardcover, since it’s easier to sell paperbacks since their list price is lower.

Sales Bonus

More rare than staged royalty rates—but still possible—are sale bonuses.

In our original example above, the publisher paid you a $10,000 advance for Awesome Book. If the publisher thinks your book might be very popular and have a great chance at earning out, your agent can negotiate a sales bonus, which is basically an additional advance.

Example:

• Original advance is $10,000, the equivalent of 5,000 hardcovers

• Sales bonus: if Fabulous You sells at least 5,000 hardcovers within 365 days of the initial on-sale date, then Publisher will pay an additional advance of $2,500.

• That $2,500 sales bonus is yours to keep, even if you never “earn out” that additional advance.

5. Translation Rights, Film/TV Rights, and more

English around the World & Foreign Translations

First things first, let me define some of the kinds of subrights you’ll hear about in book deal announcements and in your contract negotiations:

• World Rights - the publisher has the right to publish your book around the world in all languages, including English and all translations

• World English - the publisher has the right to publish your book around the world in English; you retain the rights to have translations published in all other languages

• North American English - the publisher has the right to publish your book in English in Canada and the U.S. only; you retain the rights to English in the rest of the world (England, Australia, New Zealand, India, etc.) and also have the rights for translations published in all other languages

Most book contracts will fall into one of those types. Now I’ll go into the pros and cons of each kind in more detail.

World Rights

At first glance, you might think that World Rights is the best, because the publisher loves your book so much, they want to publish it all over the world! But that’s only part of the truth, and in reality, World Rights is the default bargaining position for publishers and is usually not the best deal for authors.

Why?

Because once a publisher holds all the rights to your book, they have no obligation to actually publish it anywhere other than the United States. They can just sit on those rights if they decide it’s not worth the effort for them.

Instead, I greatly prefer if my own literary agent can sell translation rights (and other English rights), because she is incentivized to do so. She gets a commission every time she makes a sale. And that means she is always pounding the pavement and always trying to get me the best deal possible, for every region of the world and language.

However, it’s not always possible to keep your language subrights. Some publishers will dig in and refuse to give up World Rights. (This has happened to me before). In that case, I want to explain how compensation is paid to you:

If your publisher gets World Rights to you book:

• You get your advance, as normal

• The U.S. publisher will try to sell the rights for your book to other publishers around the world. This is similar to what your own agent would do if you’d retained the rights, but the payment is different.

  • If the U.S. publisher succeeds in selling your book to a foreign publishing house, that publishing house will pay your U.S. publisher a small “advance.” That foreign advance gets credited toward your book sales on your U.S. publisher’s internal balance sheet and helps you earn out faster.

Hypothetical example:

• U.S. Publisher gets World Rights to Awesome Book. They pay you a $10,000 advance, which at a 10% royalty rate, is equivalent to 5,000 hardcover books.

• U.S. Publisher then sells the Spanish translation rights of Awesome Book to Casa Editorial. Casa Editorial gets the rights to translate your book into Spanish and sell the Spanish version all over the world. For this, Casa Editorial pays U.S. Publisher $1,000.

• U.S. Publisher logs $1,000 onto their internal balance sheet, as if you’ve sold 500 hardcovers. You don’t get that $1,000 (because U.S. Publisher has World Rights, so this is their money), but it’s credited toward your book sales. So even before the book goes on sale, you already have 500 books “sold.” Now you only need to sell 4,500 copies to earn out.

World English and North American English

The ideal would be to sell only North American English rights to the U.S. Publisher, but I will tell you that this is honestly difficult to do. I’ve sold 10 novels to traditional publishers (some to be published in the future), and out of all of those, my agent has only ever been able to negotiate North American rights once.

To understand why it’s preferable to sell limited English rights and keep your translation rights, let’s repeat the example above, but change some of the facts:

Hypothetical example:

• U.S. Publisher gets North American English to Awesome Book. They pay you a $10,000 advance, which at a 10% royalty rate, is equivalent to 5,000 hardcover books.

• Your agent then sells the Spanish translation rights of Awesome Book to Casa Editorial. Casa Editorial gets the rights to translate your book into Spanish and sell the Spanish version all over the world. For this, Casa Editorial pays you $1,000.

  • Unlike in the World Rights scenario, in this case, you actually get that $1,000. It’s yours. It’s another advance. You never have to pay it back.

  • However, your U.S. Publisher does not log $1,000 onto their internal balance sheet as if you’ve sold 500 hardcovers. Because they didn’t get the money. You did. Still, this is all-in-all a lot better for you, because remember, that $10,000 U.S. advance is yours to keep, too. Earning out is nice. But earning out is not necessary.

• Your agent then sells the English version of Awesome Book to Ye Olde British Publisher. Ye Olde British Publisher gets the rights to change “color” to “colour” (and other small English changes) and publish Awesome Book all over the U.K. For this, Ye Olde British Publisher pays you $1,000.

  • Again, this $1,000 is yours! It’s another advance that you never have to pay back. (But don’t spend it all on fish and chips).

  • note: If you gave World English rights to the U.S. Publisher, then they can sell Awesome Book to Ye Olde British Publisher. In that case, the math is similar to the example above for World Rights—Ye Olde British Publisher pays U.S. Publisher the $1,000. Then U.S. Publisher logs $1,000 onto their internal balance sheet, as if you’ve sold 500 hardcovers. You don’t get that $1,000 (because U.S. Publisher has World English rights, so this is their money), but it’s credited toward your book sales. So even before the book goes on sale, you already have 500 books “sold.” Now you only need to sell 4,500 copies to earn out.

Film and TV Rights

Never, ever, ever give up your film and TV rights to a publisher! Keep them for yourself so that your literary agent can find a film agent, who will knock on Hollywood doors for you. Publishers are good at books, not film and TV and streaming. If you give them your film and TV rights, they will just rot in the vault of publisher’s rights that they have forgotten about or don’t really have time to deal with, since their business is in making books, not movies.

I will dedicate an entire newsletter in the future to the process of finding a film agent and pitching studios and streamers with your book-to-screen idea. But trust me that that is its own huge subject.

What you need to know for now is: KEEP YOUR TV and FILM RIGHTS.

Never, ever, ever give up your film and TV rights to a publisher! Publishers are good at books, not film and TV and streaming.

6. Agent Commissions

Good, honest, legitimate literary agents (and film/TV agents) work on commission. They will never charge you any upfront fees for representation. If someone tries to tell you that’s how it works, run the other way screaming. It’s a scam.

Agent commissions are pretty standard in the book world, although I know there is a little bit of variation. Still, this is generally what you can expect:

Literary Agent Commissions:

• 15% of the value of the main publishing contract

• 20% of the value of any subrights

  • this is a higher percentage because they have to split the commission with specialty agents who are working with them

What does this mean in practical terms?

Let’s pull out our hypothetical numbers again, and this time, we’ll pretend you’ve sold World English to U.S. Publisher:

• U.S. Publisher pays you a $10,000 advance for World English

  • Literary Agent takes 15% of that, so 15% of $10,000 = $1,500

• Literary Agent works with Spanish Agent and sells Awesome Book to Casa Editorial

  • Casa Editorial pays you a $1,000 advance for Spanish rights

    • Literary Agent takes 20% (and shares a portion of it with Spanish Agent, who is the one who specializes in the Spanish publishing market and found the deal for you). 20% of $1,000 = $200.

    • You keep $800.

• Literary Agent works with Film Agent and options Awesome Book to Streamflix

  • Streamflix pays you $20,000 for the film option. (This is like an advance. The money is yours to keep, whether they actually make the movie or not).

  • Literary Agent takes 20% (and shares a portion of it with Film Agent, who is the one who knows all the right people in Hollywood and got you the film option). 20% of $20,000 = $4,000.

  • You keep $16,000.

Maybe your first reaction is *grumble grumble*, I hardly make any money anyway as a writer, and now all these agents with their grabby hands are taking my hard-earned pay…

I hear you, and I totally understand that feeling. But I’ve also been around in this industry long enough to be able to tell you, 100% without a doubt, that a good agent is worth it. SO SO worth it.

A good agent will get into doors that are otherwise closed to you. A good agent will negotiate hard for you and get you a deal that is 25 - 50% better than the publisher’s initial offer, sometimes even 100% better!

And remember, your agent’s job is not just to sell the book. That’s only the beginning of your relationship. Your agent will be there for you when hiccups inevitably happen during the publishing process, or when you hate your book cover, or when your editor goes on vacation to Mars and forgets to tell you.

So I never begrudge my agents their commission. Plus, the fact that they only make money when you do means that their incentives are aligned with yours. They want you to succeed, to be paid what you deserve, and to see your books published well.

WOWEE! Are you still with me? Hats off to you! That was a much longer article than I thought it would be. I hope it was helpful!!