author royalties

The Myth of the Unearned Advance

by

This post by Steve Laube originally appeared on his The Steve Laube Agency blog on 6/13/11.

A common myth permeating the industry is that a book is not profitable if the author’s advance does not earn out. I would like to attempt to dispel this myth.

First let’s define the term “Advance.” When a book contract is created between a publisher and an author, the author is usually paid an advance. This is like getting an advance against your allowance when you were a kid. It isn’t an amount that is in addition to any future earnings from the sale of the book. Instead, like that allowance, it is money paid in advance against all future royalties, and it must therefore be covered by royalty revenue (i.e. earned out) before any new royalty earnings are paid.

The advance is usually determined by a series of assumptions that the publisher makes with regard to the projected performance of each title. The publisher hopes/plans that the book will earn enough royalty revenue to cover the advance within the first year of sales.

A NY Times essay a couple years ago casually claimed “the fact that 7 out of 10 titles do not earn back their advance.” Of course they did not cite a source for that “fact.” But I have seen it quoted so often is must be true! (and it isn’t.) The implication then is that a book isn’t profitable if it doesn’t earn out its advance. The publisher overpaid and has lost money. The author is the happy camper who is counting their cash gleefully celebrating the failure of their publisher to project sales correctly.
– See more at: http://www.stevelaube.com/the-myth-of-the-unearned-advance/#sthash.NsjuD9CI.dpuf

 

Read the full post on The Steve Laube Agency blog.

January 2015 Author Earnings Report

by

This post originally appeared on the Author Earnings site on 1/28/15.

Executive Summary
AuthorEarnings reports analyze detailed title-level data on 33% of all daily ebook sales in the U.S.

30% of the ebooks being purchased in the U.S. do not use ISBN numbers and are invisible to the industry’s official market surveys and reports; all the ISBN-based estimates of market share reported by Bowker, AAP, BISG, and Nielsen are wildly wrong.

33% of all paid ebook unit sales on Amazon.com are indie self-published ebooks.

20% of all consumer dollars spent on ebooks on Amazon.com are being spent on indie self-published ebooks.

40% of all dollars earned by authors from ebooks on Amazon.com are earned by indie self-published ebooks.

In mid-year 2014, indie-published authors as a cohort began taking home the lion’s share (40%) of all ebook author earnings generated on Amazon.com while authors published by all of the Big Five publishers combined slipped into second place at 35%.

 

Full Report
U.S. ebook sales have plateaued — or are even declining, relative to print — declare some widely-cited industry statistics. Publishing pundits opine that readers’ Kindles are all “full” now, and talk about the “glut” of ebooks. News articles imply that consumers are abandoning ebooks and are returning to print books, and then those articles speculate about whether ebooks were “just a fad.” Other pundits assert that indie authors will no longer be able to compete with the Big Five traditional publishers, now that those publishers have begun to price some of their ebooks lower.

Lots of speculation. Lots of flawed studies based on 2008 methodologies. Lots of inaccurate statistics. And very few facts.

As always, we turn to the data for real answers.

 

Read the full post, which includes numerous charts and graphs with accompanying analysis, on Author Earnings.

 

Paying Writers What they Deserve

by

This post by Hugh Howey originally appeared on his site on 7/12/14.

Traditional Publishing is no Longer Fair or Sustainable. This was the sad but accurate headline in The Guardian this week. It followed a report on author income from the ALCS, the results of which led Nicola Solomon, head of the UK’s Society of Authors to declare:

Authors need fair remuneration if they are to keep writing and producing quality work. Publisher profits are holding up and, broadly, so are total book sales if you include ebooks, but authors are receiving less per book and less overall due mainly to the fact that they are only paid a small percentage of publishers’ net receipts on ebooks and because large advances have gone except for a handful of celebrity authors.

This comes right on the heels of The Daily Mail’s piece about Hillary Clinton’s latest book. The memoir has sold well by most measures, moving 161,000 copies in the first three weeks and 86,000 in week one, but the book has dropped in the charts, and it appears Simon & Schuster will take a loss due to the $14,000,000 advance paid to Hillary.

Forteen million dollars.

By publishing math, this advance was warranted. Her previous book sold well enough for the bean counters at S&S to come up with what seemed necessary to both retain Hillary and turn a profit. But this methodology flies in the face of recent rhetoric about the role publishers play in the protection of literature and the nurturing of “the writing life.”

With that sum of money, you could pay 500 writers $28,000 to enjoy a full year of the writing life. Or you could pay 250 writers $56,000 if they don’t understand how to squeak by as a starving artist. Not only that, Hillary Clinton doesn’t need another penny for as long as she lives. She didn’t need to be supported while she wrote the book. So how exactly are publishers the patrons of the literary arts? Nicola Soloman nails the problem with the current blockbuster model of entertainment: The rich get richer and the poor get poorer. We shovel money at the outliers and drop everyone else.

 

Click here to read the full post on Hugh Howey’s site.

 

The Great E-book Pricing Question

by

This post by David Gaughran originally appeared on his Let’s Get Visible site on 4/17/14.

There’s more guff written about pricing than almost anything else, resulting in an extremely confusing situation for new self-publishers. I often see them pricing too low or too high, and the decision is rarely made the right way, i.e. ascertaining their goals and pricing accordingly.

 

Price/value confusion

Before we get to the nuts-and-bolts, it’s time to slay a zombie meme. Much of the noise on this issue springs from conflating two concepts, namely price and value.

Authors often say something like, “My book is worth more than a coffee.” Or publishers might say, “A movie costs $10 and provides two hours of entertainment. Novels provide several times that and should cost more than $9.99.”

Price and value are two different things. From Wikipedia:

Economic value is not the same as market price. If a consumer is willing to buy a good, it implies that the customer places a higher value on the good than the market price.

The price is something we, as self-publishers, attach to the product. The value is the worth the consumer places on it (not the author or publisher). In simple terms, unless your price is lower than the value a reader places on your book, they won’t purchase.

Marketing isn’t simply about reaching consumers but also about convincing them to place a value on the product higher than the price-tag. The higher the price, the harder that job will be.

In other words, it’s a lot easier to sell a book at $2.99 than $9.99.

 

Doesn’t price influence value?

 

Click here to read the full post on Let’s Get Digital.

 

Scribd.com: Opt-in, Turn-on, Opt-out?

by

This post by Rich Meyer originally appeared on Indies Unlimited on 3/7/14.

For those of you who may have missed the news, Smashwords.com is now distributing their books to Scribd.com, an online e-book subscription service. If you’re not familiar with Scribd, think of them as the Spotify or Netflix Streaming of e-publishing: Subscribers pay a monthly fee and then can download and read as many books as they want. Authors will get a percentage of that, depending on how much of their book was read by the end consumer.

Here comes the first kick-in-the-pants for authors. If you compare things to, say, Spotify, the popular on-line music service, you’ll easily find references on the Internet to popular performers having their songs played millions of times and getting royalty checks in whole TENS of dollars. Supposedly, if Scribd is anything like the Oyster service, Smashwords authors will be getting 60% of the price of a book borrowed by a reader, as long as nearly 20% of the book is read. So unlike the great deal where an author using Amazon’s Kindle lending library through KDP might get $2 per lend for a 99-cent e-book, a Scribd book will net a writer 59 cents. And that’s only if the person reads 20% of it. Which is something I will come back to in a bit.

Scribd has actually said things will work out fine “if most readers read in moderation.” Umm … a reader who would consider a subscription service for books is more than likely not one that would read in normal “moderation,” whatever the hell that is. I consider myself to be a slightly-above average reader, and I’ve already read over sixty books since the first of the year. Imagine how many some of the power readers could do? Of course, if they read the whole book, then at least the author gets a bit o’ dosh for it. Unless … well, again, more later.

 

Click here to read the full post on Indies Unlimited.

Then, to get Smashwords’ side of the situation, please also see this post from Smashwords founder Mark Coker announcing the Scribd distribution deal and explaining the particulars.

 

Does What You Paid For A Book Affect How You’d Rate It?

by

This post by Jane Litte originally appeared on Dear Author on 2/23/14.

When I first started buying my own books some twenty plus years ago, I had very little money. My favorite authors were starting to come out in hardcover (Julie Garwood, for example) and unless I wanted to wait to be the 80th person at the library to read the book, I had to fork over $22.00 or more which, at the time, was a lot of money for me. It basically meant I wasn’t going to be able to buy another book or maybe even eat anything but ramen and macaroni for the month.

Most of the time, however, I bought my books used at the Half Price Bookstore or some other used bookstore that sold romances for $0.10 or $0.25. And when I bought the hardcover, I knew that I was sacrificing at least four other reads for that one book.

As I got older, I was able to buy more books but my reading habit got to be really pricey so I instituted a book budget of no more than X amount of dollars to be spent a month. Because I read three to five books a week, I was only able to purchase about eight titles a month new and the rest would have to be library lends or used book store purchases. During the heydey of chick lit, I was really struggling!

Price has always been a big thing for me when it comes to books and from what I’ve heard from industry professionals, mass market purchasers are very price sensitive. Most romance readers are mass market purchasers although the new readers coming in to the market after Fifty Shades are probably not.

There’s an interesting concept called anchoring. Anchoring is the tendency of humans to rely on the first piece of information offered. In economic terms, anchoring means that the first price a consumer encounters for widget A is likely the price that the consumer believes she should always pay for widget A. (Widget is an official economic term. No lie.)

 

Click here to read the rest of the post on Dear Author.

 

Author Earnings: The Report

by

This post by Hugh Howey originally appeared on Author Earnings with a publication date of 2/12/14. It contains some pretty shocking and encouraging book sales data, at least where indie authors and small publishers are concerned.

It’s no great secret that the world of publishing is changing. What is a secret is how much. Is it changing a lot? Has most of the change already happened? What does the future look like?

The problem with these questions is that we don’t have the data that might give us reliable answers. Distributors like Amazon and Barnes & Noble don’t share their e-book sales figures. At most, they comment on the extreme outliers, which is about as useful as sharing yesterday’s lottery numbers [link]. A few individual authors have made their sales data public, but not enough to paint an accurate picture. We’re left with a game of connect-the-dots where only the prime numbers are revealed. What data we do have often comes in the form of surveys, many of which rely on extremely limited sampling methodologies and also questionable analyses [link].

This lack of data has been frustrating. If writing your first novel is the hardest part of becoming an author, figuring out what to do next runs a close second. Manuscripts in hand, some writers today are deciding to forgo six-figure advances in order to self-publish [link]. Are they crazy? Or is signing away lifetime rights to a work in the digital age crazy? It’s hard to know.

Anecdotal evidence and an ever more open community of self-published authors have caused some to suggest that owning one’s rights is more lucrative in the long run than doing a deal with a major publisher. What used to be an easy decision (please, anyone, take my book!) is now one that keeps many aspiring authors awake at night. As someone who has walked away from incredible offers (after agonizing mightily about doing so), I have longed for greater transparency so that up-and-coming authors can make better-informed decisions. I imagine established writers who are considering their next projects share some of these same concerns.

Other entertainment industries tout the earnings of their practitioners. Sports stars, musicians, actors—their salaries are often discussed as a matter of course. This is less true for authors, and it creates unrealistic expectations for those who pursue writing as a career. Now with every writer needing to choose between self-publishing and submitting to traditional publishers, the decision gets even more difficult. We don’t want to screw up before we even get started.

When I faced these decisions, I had to rely on my own sales data and nothing more. Luckily, I had charted my daily sales reports as my works marched from outside the top one million right up to #1 on Amazon. Using these snapshots, I could plot the correlation between rankings and sales. It wasn’t long before dozens of self-published authors were sharing their sales rates at various positions along the lists in order to make author earnings more transparent to others [link] [link]. Gradually, it became possible to closely estimate how much an author was earning simply by looking at where their works ranked on public lists [link].

This data provided one piece of a complex puzzle. The rest of the puzzle hit my inbox with a mighty thud last week. I received an email from an author with advanced coding skills who had created a software program that can crawl online bestseller lists and grab mountains of data. All of this data is public—it’s online for anyone to see—but until now it’s been extremely difficult to gather, aggregate, and organize. This program, however, is able to do in a day what would take hundreds of volunteers with web browsers and pencils a week to accomplish. The first run grabbed data on nearly 7,000 e-books from several bestselling genre categories on Amazon. Subsequent runs have looked at data for 50,000 titles across all genres. You can ask this data some pretty amazing questions, questions I’ve been asking for well over a year [link]. And now we finally have some answers.

 

Click here to read the full, lengthy report (including many informative graphs) on Author Earnings. This report should be required reading for anyone who is, or hopes to become, a published author.

 

Ten Things You May Not Know About Ebook Prices

by

This post by Rachel Willmer originally appeared on TechCrunch on 1/15/14.

How much should you pay for an ebook? $9.99? $0.99? $0? And how much should you price your ebooks? I’m going to tell you what people have actually paid for their ebooks, based on some hard data from Luzme. You can set the price of your book to be anything you want; what really matters is what someone will pay for it!

Last year, Luzme captured a large amount of ebook price data and reader pricing preferences. I am analysing this data and will share any interesting results.

I do not claim that this is representative of the whole ebook industry, but I hope that some real data might contribute something useful to the debate.

So here is my analysis of the actual prices that people have paid at Amazon in 2013, when they bought via Luzme.

USA
For the US data, I have normalised it against the “standard price” of $10.

Here is the way the various prices worked in terms of units sold. [Click on image to view an enlarged version in a new browser tab/window]

The most popular price points are at the low-end, with a local peak around the $10 mark, and then tailing off as the price increases.

This does not surprise me. But what I did not expect, is how much people will actually pay for an ebook (well over the $10 price! How much do you think the most expensive one went for? I will tell you later…)

Now look at the revenue over the same price points.

[Publetariat Editor’s note: this is where it really starts to get interesting – please click through on the link below to see more charts and an analysis of the comparative net earnings across various ebook price points]

 

Click here to read the full post on TechCrunch.

 

The Self-Publishing Debate: A Social Scientist Separates Fact from Fiction

by

This post, by Dana Beth Weinberg, originally appeared on Digital Book World on 12/4/13.

Is self-publishing an amateurish endeavor, a means of sharing stories, a strategic move in a writing career, or an entrepreneurial activity? To gain insight into this question, I have been analyzing the responses from the nearly 5,000 authors who responded to the 2013 Digital Book World and Writer’s Digest Author Survey in relation to whether an author is aspiring (not yet published), self-published only, traditionally published only, or hybrid (both self-published and traditionally published). In Part 1, I compared the top priorities of these 4 types of authors, and in Part 2, I examined the differences in their stock of published [and] unpublished manuscripts. Now I turn my attention to the differences in their income from their writing.

Not surprisingly, most aspiring authors in the sample reported no annual income from their writing. About 19% of self-published authors in the sample also reported no annual income from their writing, compared to 6% of traditionally published authors and only 3% of hybrid authors. While most of the survey respondents clustered at the lower end of the income distribution, some authors did report earning $200,000 or more from their writing, the highest income choice on the survey: less than one percent (0.6%) of self-published authors, 4.5% of traditionally published authors, and 6.7% of hybrid authors who reported on their income. (In the chart, I have collapsed the top categories to $100,000 or more for better visibility. These aggregated category represents 1.8% of self-published authors, 8.8% of traditionally published authors, and 13.2% of hybrid authors.)

 

Click here to read the full post on Digital Book World.

 

Scribd's New Ebook Subscription Service: Partnering with Publishers, Profiting from Piracy

by

This post, by Michael Capobianco, originally appeared on Writer Beware on 1/9/14.

I was contemplating what to write for my first Writer Beware blog post, when a subject popped up out of the blue, packed with all kinds of fascinating questions.

Some of you may remember when SFWA tangled with the online “digital library” Scribd back in 2007. Scribd was loaded with unauthorized uploads of copyrighted material, but SFWA screwed up big time by sending a sort-of DMCA notice (it wasn’t really) to get works by many sf writers removed from the site. It was an embarrassment for SFWA, and over time made it less and less likely that the organization would do anything directly about illegal uploads, even though a plan had been developed to do so for members who had specifically authorized SFWA to act as their agent.

Since everything to do with online piracy left a decidedly bad taste in my mouth, I decided I would not go looking for illegally uploaded copies of my or other authors’ works, and I didn’t check to see if Scribd was following through on the promises it made at the time to provide real-time checking of works uploaded to the service.

Jump forward six years to now. The subject of Scribd came up on a SFWA forum as part of a controversy that I needn’t go into here, and I decided that it was finally time to check it out.

Six years has made a big difference. Scribd has set out to become a full-fledged bookstore to compete with Amazon and Barnes and Noble, and takes it one step farther with the addition of an all-you-can-eat subscription service that allows access to an unlimited number of ebooks for $8.99 a month. They are now partnering with HarperCollins and various other publishers, such as Smashwords, E-Reads, and Rosetta Books, with the promise of more to come. They cover a lot of ground; not only do they sell ebooks and subscriptions, they offer what look like unauthorized “previews” of many other books, with links to authorized retailers.

But finally, beneath all the new things, the old Scribd–offering not-necessarily-legal user uploads of copyrighted works–is still there. Only now Scribd has monetized them, since you can only see a “preview” of the material for free, and must be a paid subscriber to access the whole unauthorized upload.

 

Click here to read the full post on Writer Beware