Craft post: How authors get paid

Current work: Modern Heat
Listening to: various show tunes
Reading: Crazy for You, Jennifer Crusie (enjoying so far)

My mate Carol Townend made a comment on a post a few days back that most people don’t understand how authors get paid: great idea for a topic, Carol, so thanks for giving me a prod.

There are an awful lot of myths about authors being as rich as Croesus. People see news reports about J. K. Rowling being a millionaire, and then they think: hmm, if I write a book, I can retire. In times of recession, people love the idea of being able to write a book and make a fortune. Ditto forming a band and being top of the charts. There have been some seriously silly figures bandied about re how much winners of televised talent shows will make - but I skimmed some articles about former Britain's Got Talent entrants and discovered that the reality is very different. One lot said that they get 0.2p per record sold. So for a million records, that's £2,000 earned (less tax and NI) - blimey. I'm not entirely sure whether the £2,000 has to be divided among the entire band, or whether that's £2,000 per person - it wasn't clear in the original article - but the perception is very different from the reality. The same is true with the perception of rich authors.

Rowling’s wealth is news PRECISELY because it doesn’t happen very often in this business. Very few authors make that kind of money - as you'll see if you look at the Authors’ Licensing & Collecting Society (ALCS) survey, published in 2007, about authors' earnings in 2005. The average author (median, i.e. put the list in order of lowest-paid to highest, and this is the exact middle of the list) earned £4,000 a year. The mean annual income (i.e. total sum earned divided by number of authors) was £16,531 – which was 1/3 less than the ‘average’ UK wage at the time. (See the full report here.)

Sadly, there is no such thing as getting rich quick in publishing. You have to put the hours in and keep your writing as a second job until you've got your break and made your name. And even then you still have to put the hours in, because books don't write themselves.

So how does an author get paid? It's through royalties, i.e. the publisher will pay you a certain amount for each book sold.

How much will you get? It depends on your contract but, since the demise of the Net Book Agreement (which means that supermarkets can sell a £15.99 book for £3.99 as a loss-leader – that’s marketing speak for enticing someone into the store with a bargain and then they buy other things on impulse while looking round, so the retailer makes a profit from the total shopping basket), many royalty rates are based on ‘net receipts’ rather than cover price.

‘Net receipts’ is the amount your publisher gets for each new book sold.

How much is that? Let’s use round figures for ease of calculation. (Please note, these are not actual figures – they’re to make the maths easy and to show how the system works.)

Say the book retails at £10. This is what the BOOKSELLER gets from the reader.

The bookseller buys the book from the WHOLESALER at something like £7. (So the bookseller makes £3 - out of which need to come overheads such as staffing, premises, marketing.)

The wholesaler buys it from the PUBLISHER at something like £4. (So the wholesaler makes £3 - out of which come overheads such as distribution costs, staffing, premises etc.)

And that £4 is the publisher’s ‘net receipts’. Note, this is a lot lower than the cover price. And out of this the publisher pays overheads such as author's royalties, production costs (typesetting, proofing, artwork, printing, shipping to wholesaler), marketing, staffing, premises etc.

The bit you're interested in is the author's cut. Now, if your contract says you get 10% royalties of the publisher’s net receipts, you get 10% of the £4, not 10% of the £10 cover price. So your cut is 40p a book, not £1 a book.

Bear in mind these are round figures, and who buys a book at £10 nowadays? Think of the £3.99 deal the supermarket gives you for that blockbuster paperback, and it’s easy to see that the publisher’s net receipts for each book is more likely to be £1, so the author in that case would get say 10p a book… and actually, a 10% royalty rate is a bit high for a mass-market paperback edition.

Book clubs and supermarkets go for high volume sales at low prices, which means an author’s royalties will be even lower (it's known as a high-discount sale - and you'll probably find in your contract that a high-discount sale comes with a lower royalty rate). Reality: we're talking pennies per book. As in less than 10p per book.

Anyway, in the example above, our author gets 40p a book. Selling 1,000 books gives our author £400. Selling 10,000 books gives our author £4,000 (incidentally, the figure from the survey). Note that first novel sales are likely to be quite a lot lower than 10,000. JKR sold something like 2,500 of the first edition of Harry Potter. That first-time bestseller that sold millions? Er… it’s news because it's so rare. Something like 75 miles of new shelving is needed in the British Library each year just to house a single copy of each new book published that year. Only a handful of those books are million-sellers, and usually they're by authors who have already made their name.

Say it’s a 100,000-word book. That will take the best part of a year to write. I have seen people say online that authors are lazy, because at a typing speed of 60wpm a book will take, say 28 hours to write. Er… You're missing the point, love. Typing speed has nothing to do with how long it takes to compose a sentence. You need to structure the book, flesh out your characters and give them strong motivations, make your conflict believable yet interesting, make the dialogue realistic as well as moving the plot forward/shedding light on characters… and that takes time. It might take 28 hours of physical effort to type the book out once it’s finished (assuming that the author writes in longhand in the first place – I prefer working straight to screen), but the author will spend many, many more hours thinking, revising, deleting, replotting.

Anyway, back to that £4,000. You don’t get it all in one lump. It starts with an ADVANCE.

Typical advances for a first novel are £1,000 (and for nonfiction, particularly if it's a specialist market, it can be zero). But do note that a real commercial publisher will NEVER EVER ask you to pay towards costs. That’s vanity publishing and you’d be much better off spending your money on an appraisal by someone like Hilary Johnson, learning where you need to do more work to make your book saleable, and putting the hours in to get it right.

You get a chunk of your advance on signing the contract and then, depending on the publisher and your contract, another chunk when the book is accepted (note, you may have to do revisions first - very few books go straight from your computer to acceptance) and possibly another chunk when the book is published. Some publishers hold back a bit of the advance until foreign rights are sold.

Say your book is accepted in January 2009 (bear in mind you will already have spent a year writing it and another year trying to get an agent/publisher and doing revisions). It’s published in January 2010. Your publisher’s accounts are done at the end of December 2010 and the royalty statement for 2010 sales is issued in March 2011. Now (still using the figures above), say you’ve sold 10,000 copies and the royalties are £4,000: your advance has already been paid to you so that has to be taken off. OK, that leaves £3,000 to come to you – but the bookseller can return unsold stock, so your publisher will keep RESERVES for another year (i.e. the publisher holds on to royalties in case some of the ‘sold’ books are returned and the royalties are therefore no longer due to you – so don’t bank on getting all of that £3,000). For a first novel, reserves could be as high as 60%. So that’s £4,000 royalties minus the £1,000 advance paid in 2009/10 and minus a further £2,400 in reserves. Which means your royalty cheque in 2011 is £600. (You may get some of the reserves released in 2012 or even 2013.)

So far, over the course of two and a bit years since your book was accepted (plus the two years you spent working on it and waiting for responses before then), you’ve been paid £1,600 for your book… and you have to pay tax and national insurance on that, by the way. Authors are paid gross of tax rather than net. (There are of course expenses - paper, postage, stationery etc - which can be offset against tax. ALWAYS keep your receipts to prove said expenses, and check with the tax authority/your accountant to be sure of what is and what isn't allowable, or you could end up paying a fine: ignorance of the law is no defence.)

Not enough to live on for all that time, is it? This is why experienced authors advise new authors not to give up the day job for at least five years. There are exceptions, but for the majority it takes at least that long to build your name. And that’s also assuming that your sales are good enough for you to get further contracts from your publisher. (Mid-list positions are scary, particularly in times of recession.) In the meantime, as you’re self-employed, you will not get sick pay or holiday pay or employers’ contributions to your pension: you cover all those costs yourself. If you have a baby, you will be entitled to statutory maternity pay (but it will be the same amount as an unemployed person gets, despite the fact that you've been paying taxes and national insurance; you won't get the 90% of your earnings that employed people get). You also won’t get an annual pay rise or a bonus for working hard because your earnings – royalties – depend on sales, and the only real control you have over your sales is to write the best book you can.

Now, this isn’t my way of saying to people, don’t be a writer. What I’m saying is be realistic in your expectations.

Go into the business because you want to make tons of money really quickly, and you’re setting yourself up for disappointment. Apart from anything else, if you don’t care about your characters, your readers won’t, either – and your book won’t be satisfying and it won’t sell. The characters and the story really do have to come first.

Go into the business because you feel that, when you don’t tell stories, it’s like being unable to breathe, and that’s an entirely different thing. Yes, you will need another source of income until you’re established (and even when you're established there are no guarantees that you'll earn squillions - refer back to that report), but you’ll also get a great deal of satisfaction out of your job.

Had I stayed in my rat-race job, I would probably be earning more than double what I earn now. But money isn't the only consideration in a job: there's intangible stuff that needs to be thought about, too. I have flexible hours so I can drop everything when the kids are ill or there's a family crisis and I'm needed to fix it. (Touching wood, here: I've had enough of those in the last 18 months.) My commute is between rooms of the house (depending on where I'm working, and it might be the garden if it's really warm) so I'm not stuck in traffic for an hour or squashed on a train (particularly on hot days when, ahem, some people could do with being introduced to the concept of deodorant). I really love what I do (and even the self-doubt is good, in a way, because it stops me taking my job and my readers for granted – see post from earlier this week about crows).

I can’t think of any job I’d enjoy as much (well, except maybe an archivist or a curator, and both jobs have a writing aspect to them). And I can't think of another job where I could put sunshine into people’s lives: one of the nicest emails I’ve ever had was from a reader who said that when she’s having a bad day, she reads one of my books and by the end she feels that the world is a good place after all. You really can’t put a price on being able to do that. It’s special – and it’s also humbling, too. I love what I do; and I appreciate that I’m lucky enough to be able to live my dream.

Though on the luck front it's also worth remembering Jefferson. ‘I find that the harder I work, the more luck I seem to have.’

Indeedy.