Quote:
Originally Posted by HarryT
It's the small number of successes, though, that pay for the rather larger number of books on which the publisher makes a loss. Most books don't make back the advance that's paid to the author.
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1- Earning out is something of a smokescreen because, with the low royalties and switch to "net" instead of list, it takes the author far longer to repay the payday loan than it takes the publisher to recover their investment and start making money.
2- The big name titles never earn out because the advances are designed not to earn out at the nominal "industry standard" royalty rate. (Does anybody really believe that the likes of Patterson only get a 15-17% cut of sales?) What they do there is calculate how much the book will really net and pay an advance equal to half (or more) of that amount. It's really a lump sum rights sale instead of the royalty-driven licensing deal it pretends to be. It's also why the millionaire authors don't object to low royalties--even Shatzkin admits that the effective royalties they get are in the 50% or higher range. Their cut gets bookkept as a loan instead of as a royalty. Probably helps drive their taxes down, too.
In Hollywood no movie ever makes net profits because their accountants ensure all the money that goes to the "right people" gets bookkept as costs (salaries and commissions, contract services, etc) and they make sure there is no net left over. In corporate publishing they play the same games with the advances for the big boys.
3- The third reason midlist titles "never earn out" is the reserves against returns and the deep discount clauses that eat away at royalties to the point where a book can sell tens of thousands of copies and generate zero income for the author, especially now that some of the corporate publishers are applying those clauses to ebooks.