Yesterday, I promised to update the blog with a very mathy and impossibly boring post explaining why publishers are better off with higher royalty rates, and decimating their argument that with a 20% hardcover royalty, they "wouldn't make any money."

There will be no such post, for three reasons:

1. Really, how many editors read this blog? And how many of them will be convinced by the calculations of a total amateur? (On the other hand, if any editors privately want to be blown away by how not-almost-out-of-business they would be if they'd emphasized royalties instead of advances the last five years, they can email me at sparksflyup --at-- gmail dot com.)

2. The more I played with the numbers, the more I felt that my original proposal was...well not wrong, exactly, but overly simple. The upfront costs to publish a book are so significant, and they decrease so much over time, that starting the hardcover royalty rate at 20% now seems unreasonable* to me. (Although less unreasonable than six-figure advances for first novels.)

3. I don't trust my math, and my resident mathematician Daniel Biss is unavailable.

It's been very interesting to see all the ideas in comments for improving efficiency in publishing and bringing transparency to the relationship between author and publisher. I will try to post about that soon.

But for now, let me just say: I really believe that if we write with an eye toward book deals or royalty structures, we are screwed from the start. The business is important, because writers want to make a living and want to share their work with the biggest possible audience. But writing itself never works for me unless it feels like a gift, something I am trying to make for people. And you don't make gifts for money. You make gifts in the hope that they will matter to the recipients.

So I'm going to go to the coffee shop now and try to write something you'll care about.



*For publishers, I mean. For authors, it's a goldmine.

(If you don't want to read a long and boring blog post about the business of publishing, scroll down for a delightful video in which I help two nerdfighters get engaged. The couple is awfully cute. She's a writer; he's in the USAF.)

Thanks to everyone--nerdfighters, first-time authors, old salts, anonymous editors, heroically nonaonymous editors--who commented on my blog post arguing that smaller advances with better royalties would be better for publisher and author alike. Three counterarguments emerged:*


1. "The only way to quit my day job is to get a big advance."

It was interesting to read Nancy Werlin's reply to this, that she finds having a day job helpful. I think Nancy and I are alike in this respect, but for writers who need to quit their jobs to write the best books they can, large amounts of upfront money may make sense (although I still think it's a bad bet financially in the long run, at least in my currently-imaginary world).


2. "The royalty structure you propose is impossible and unthinkable and will never work and you understand nothing about how much books cost to publish."

It is neither impossible nor unthinkable (and in fact it is an open secret that it's already working at several big publishing houses). But I'll post about that tomorrow, with math and everything. Ooh, math. I know, right?


3. "Big advances are important because they lead to big marketing budgets, which in turn sell books."

As I pointed out in comments, this may or may not be true, but it certainly shouldn't be true if publishing companies behave rationally.

(Obviously, no corporation behaves rationally, or else Citigroup's stock wouldn't be trading at $2.97, but let's at least begin thinking rationally, and then we can move on and try to think like a publishing company.)

Let's say that Editor A is publishing two books in the Fall of 2010.** One book, A, was advanced $10,000; one book, B, was advanced $100,000. For which book will she fight harder? Which book will she badger sales staff to read and promote?

The only rational answer is that she will fight harder for whichever book she thinks can sell better. Editor A is functionally in debt $110,000. It doesn't matter which of her two books makes back the lion's share of that $110,000; it only matters that the money is made. If she thinks the $10,000 book has a bigger audience, that is the book she should push.

Which is, in fact, precisely what happened to my first novel, Looking for Alaska. Dutton paid $8,000 for LfA, but my (amazing brilliant etc.) editor Julie Strauss-Gabel thought it could have a big audience. Sales and marketing agreed. And so there was a sizable (not huge, but significant) marketing push behind the book, and it became the lead YA title on a list full of much more expensive books.

Certainly, a book with a huge advance is more likely to get a marketing push than a book with a small advance. BUT BUT BUT BUT BUT BUT the reason for this (again, if we're being rational) is not that big advances cause big marketing budgets, but because publishers usually pay more for the stuff they think has a big audience.^

So if an editor thinks highly enough of a book to pay $100,000*** for it, she probably still likes it enough to give it a big marketing push when it comes time for publication.

Big advances do not cause big marketing budgets. Expectation of sales cause big marketing budgets (and often cause big advances). This is why turning down money will not hurt your marketing budget, if a publisher is behaving rationally.****

As for the other point, proffered by the talented and wickedly funny Ally Carter, that a big advance is buzz in and of itself: True enough. But it's overpriced buzz. And it's important to note that for every Twilight, there are dozens of books that sold for mid-six figures that never approach profitability.

"Okay," you say, "but publishers don't behave rationally. If they behaved rationally, they wouldn't be massively overcommitted to a business model that has failed so spectacularly that many of them would be in real danger of bankruptcy if they were not owned by gigantic media corporations that can absorb the losses."

Oh, you. With your overlong and underpunctuated sentences, you could almost be me. But right, yes. This is very true. Do editors push books merely because they foolishly paid too much for them? Maybe somtimes. But am I the only person who worries that exploiting that irrationality for our short term gain is harming our business at the very moment of its greatest fragility?



* Well, I'm sure others emerged that I just didn't understand; you can reiterate them in comments.

** I know that in this day and age, no editor would ever publish a mere two books in a season; I'm just simplifying the math.

*** I realize this sounds like a lot of money, like an unreasonably disgusting amount of money, and the fact that I keep using this dollar figure in and of itself makes you a little bit sick to your stomach. But bear in mind that if an author pays for her own health insurance and publishes a book every two years, a $100,000 advance works out to a pretax annual salary of about $32,500. (I'm assuming a 15% agent commission and $10,000 a year for health insurance.)

**** However, there is something I kinda skirted in my previous post because it causes a huge problem for my argument: If an author gets a 20% royalty, the publisher--while they still make money--makes less per book than they would with a 10% royalty, and thus is less motivated to sell the book than they would be with a standard royalty. So you can make your $110,000 back faster by selling Book A. This is a real problem. (But so, of course, are big advances.) And I will address it in a massively boring mathy post tomorrow.

^ UPDATED attempt to be more clear: If the $100,000 book earns $100,000 and the $10,000 book earns $10,000, that is EXACTLY the same thing as if the $100,000 book earns $10,000 and the $10,000 book earns $100,000.

Tomorrow, a follow-up post to the much-discussed stuff below about the publishing business. But today, I facilitated an adorable marriage proposal. And she said yes. And I am happy. And I love my job.

UPDATE thanks to comments from Diana Peterfreund and Justine Larbalestier (both brilliant): I am not imagining here a world that exists. I am imagining a world that I think might exist, and I think experience better and more consistent growth, if authors and editors and agents collectively decided to make it so. Also, I am radically oversimplifying the way that advances get paid out, although I don't think it affects the overall argument.

I'm going to argue today that big book advances are almost always bad for both authors and publishers. I'll try to stay active in comments (if anyone's interested) and edit the post as needed. First, some background:

1. Authors are usually paid an advance against royalties; i.e., when they sign a contract, some money will be paid to them in advance of the book's publication. Then they'll earn 10% (ish) of the hardcover price for each book sold. So if a book sells for $20, the author gets $2 per book. To "earn out" a $10,000 advance and start getting royalties, you'd have to sell 5,000 copies. After 5,000 copies, the author starts to make royalties at $2 a book, which are paid to the author in a lump sum twice a year. (For a variety of reasons, including discount stores, the actual math is much more complicated.)

2. The definition of "big advance" changes if you have a proven sales record. But we'll just say to make the math easier that a $100,000 advance is "big." (Which, I mean, it is.)

3. In all this, it's important to remember that the publishing business has become very blockbuster-focused, because it's a better way to generate short-term revenue. So they're chasing blockbusters right now.

Let us imagine a book called The Unicornians about a secret race of unicorn-people. A young writer with a job and a family has been working on The Unicornians for years in her limited free time, and she is finally pleased with it, having polished the love triangle between a Unicornian boy, a Werewolvian boy, and a human (but special!) girl. So the author sends The Unicornians off to agents, and some hotshot agent picks it up.

The agent is really high on The Unicornians. She thinks it's the next Twilight. So she submits it to several editors at once. Editor 1 comes back offering $300,000 for three books. Editor 2 offers $30,000 for three books but with a significantly better hardcover royalty. (Say, 20% instead of 10%.)

Putting aside the (very important) questions of which editor would be a better fit and which publisher is doing a better job with Unicornian-esque books, I would argue that the author of The Unicornians is always better off signing with Editor 2.

Let's say that The Unicornians is not a tremendous success. The first book in the trilogy sells 8,000 copies in hardcover; the second two sell 6,000*. With Editor 1, the author gets her $300,000^^, but The Unicornians comes up $240,000 short^^^ of earning out. With Editor 2, the author only makes $80,000 on the series, but $50,000 of that is royalty, and the publisher has also made a (modest) profit. The publisher will likely ask the author for another series, perhaps something focused in on the werewolf dude.

Some people would rather have money, but I suspect what most authors want is longevity. (e.g., I assume that everyone would rather make $300,000 in a career that contains 30 books than $300,000 in a career that contains three books.^)

Okay, so now let's say The Unicornians IS successful. Let's say the first book sells 250,000 copies in hardcover**, because they make a movie, and teens squeal about how hot the unicornian boy's horn looks. The second and third books also sell 250,000.*** With Editor 1's deal, the author earns back her advance and makes $1.2 million, for a total of 1.5 million dollars. With Editor 2's deal, the author earns out and makes $2.7 million in royalties, for a total of $3 million.****

So that's why it's better for authors, but why is it better for publishers?

Currently, publishers pay for all their bad bets with their good bets--blockbusters like Twilight pays for a lot of $300,000 advances on books that don't sell well. But shifting the incentive away from advances and toward bigger royalty splits would lead to steadier growth across the board instead of surges of growth followed by excessive correction. Better splits would also incentivize authors to do more to get their work to readers, which would help growth.

It seems to me that the publishing business has a lot in common with the mortgage industry: A publisher loans you some money, which they expect you to pay back. And if you don't pay it back, you get a black mark on your reputation and the publisher has to eat a lot of the loss. And we've seen in the mortgage industry that both lenders and borrowers do a lot better when homeowners have an equity stake, and when they've been loaned an amount they can reasonably expect to repay. And I'm increasingly convinced that publishing would be healthier if we moved in that direction.



* A lot of people will say that publishers are more motivated to spend money on marketing a book if they spend a lot of money on the advance. This is true, but only up to a point. In the end, publishers want to make money, and they don't really care how they make it. If they think your book will sell, it doesn't matter if they paid $10,000 for it or $300,000. (I am, to a minor extent, living proof of this.)

Related: These same people might argue that a publisher would be less inclined to support a book if the author were getting a higher percentage of the book's cover price, since they'll make less money on that book. That seems totally plausible to me, but what I'm proposing is that more or less all of us come together and more or less say, "Advances are unreasonably high, but a 20% hardcover split makes more sense than 10%." (Which it does.)


** I am completely ignoring paperback sales only because they make the math more complicated. I don't think they affect the validity of my argument.


*** Real breakout books (like Twilight) in fact sell much more than this, which is why publishers are so gaga over them. Like, imagine a company that publishes Laurie Halse Anderson, Sarah Dessen, M. T. Anderson, Walter Dean Myers, E. Lockhart, Maureen Johnson, Coe Booth, anyone else you can think of other than J.K. Rowling, and me. The combined 2009 sales of that publishing company would be a fraction of the sales of a company that publishes just the Twilight series.


**** Although even in this massively oversimplified example, these numbers still do not tell the entire story, because royalties are only paid out twice a year, and they are paid three months late. So with the current system, one of the big financial advantages to getting paid an advance is that with an advance, the money sits in your bank, but if you earn royalties, the money spends many months in the publisher's bank, where it is not generating interest--or, to be more precise, it is not generating interest for you. But anyway, even putting aside the fact that royalties should be paid more frequently and should include interest, according to my numbers, big advances still don't earn as much in the long run.


^ UPDATE: Sara Zarr points out that the 3 books v. 30 books is not about number of books, exactly--as she says, she'd rather be Harper Lee than James Patterson. And I suppose if one feels that a bigger advance will get this one great book that's in them out into the world in a deeper and more lasting way, then fair enough--although for the record I don't think Ms. Lee was not paid much in advance for TKaM.

^^ UPDATE: Diana Peterfreund, Abby, and others have pointed out that one benefit to the advance is that you have money to quit your job and then work on the next two books in your Unicornian trilogy. True enough.

^^^ UPDATE: In comments, Mary Pearson makes the very astute observation that the risk is a two-way street; the author is giving the publisher exclusive right to publish stuff, and an advance is a way of lessening the author's risk that the publisher totally screw everything up (which of course publishers do sometimes). That's a really compelling argument for advances, I think. (I still feel that excessive advances are bad for both sides of the seesaw, though.)

(Soon, there will be a long post for publishing nerds in which I argue that big advances are almost always bad for almost everyone.)

One of the things I like most about America is our libraries. I like that communities come together to make a commitment to making books and the Internet and periodicals available to everyone. Here is how libraries work:

I agree to give up some money that would otherwise belong to me. And in exchange, I get these amazing centers of learning. These places are obviously good for me in the sense that I can become more engaged and knowledgeable thanks to having free access to a wide variety of books about every conceivable subject. Libraries also good for me in the sense that the more engaged and knowledgeable the community around me is, the happier I am.

There is something profoundly important about our public commitment to making good books (and good Internet) available to everyone, rich or poor. And as you may have heard, the great state of Ohio is on the verge of cutting its library funding 50%. This will cripple every library system in the state, and result in the closure of many libraries.

This is a stupid, counterproductive idea. If Ohio wants the Ohioans of the future to earn enough money to revitalize the state, they need good libraries and those amazing secret superheroes known as librarians.

If you live in Ohio, please consider calling and emailing your elected representatives. (It works!)