Specific points to negotiate

1. The royalty rate
It’s normal for a publisher to offer a low rate to
first time authors. If your attempt at asking for it
to be increased doesn’t work for your first book,
you should ask for a higher royalty rate if you are
subsequently contracted by them to write a
second book. Suggest an increase of one or two
percentage points on their offer.
The basis for calculating the royalty rate is
either a percentage of the book’s cover price or a
percentage of net income from sales. Basing the
rate on cover price harks back to an earlier age
when bookshop discounts were small and
consistent. The last twenty years have seen shops
demanding ever higher discounts, but the old
royalty calculation system meant that authors
received the same amount of money per book
sold regardless of the price at which it was bought
by the bookshop. This can lead to the ridiculous
situation where the publisher makes a loss
because it has to pay the author more than it
received for the sale of the book. This is usually
avoided by switching to a reduced royalty amount
when discounts hit a certain level, usually 50–55%.
Royalties based on cover price have
traditionally averaged 7.5% for a paperback and
10% for a hardback (profit margins are higher
on hardbacks). But from the publisher’s point
of view it’s much fairer to give the author a
percentage of whatever they earn. Since they give
away up to half of the book’s cover price in
discount this means the author receives a slice of
a smaller cake, so to make up for it the percentage
is usually higher, ranging from 10–15%.
Modern publishers don’t bother
distinguishing between rates for
paperback and hardback editions, but
traditional ones may still offer a higher
percentage for hardbacks.
Some contracts include an option clause giving
the publisher the right to acquire the author’s
next book on the same terms. Don’t agree to this
if you want to keep your negotiating options open
for the next book.
2. The threshold at which the royalty rate
increases
A book has a break-even point. This is a number
of copies that need to be sold before the publisher
has made any profit.
It isn’t possible to say that the first copy sold
has a profit margin of 10%, for example. The first
copy sold has a loss of 10,000%! But the losses
decrease as sales increase until eventually enough
copies have been sold to cover the costs of editing,
design, printing, marketing, a share of the office
administration and rent, and the author’s
advance. Depending on the publisher’s overheads
and the price of the book this break-even point
can happen at sales of between 1,000 and 10,000
copies.
To reflect the greater financial exposure the
publisher faces prior to reaching the break-even
point it’s normal to offer a lower royalty rate on
the first few thousand sales. The rate will increase
by one or two points once sales exceed, for
instance, 5,000 copies, and may then increase
again if sales exceed 10,000 or 20,000 copies.
Having covered the initial investment, the
publisher’s only significant ongoing costs are the
reprints, which are cheaper per copy for
successful books due to economies of scale. The
bulk of printing costs are incurred in setting up
the presses, and once they’re running it’s cheap
to keep them going a little longer to produce
more copies.
So publishers should always offer a higher
royalty for books once they have broken even,
unless they were generous enough to start on a
high rate at the beginning.
If you don’t get offered a rising scale of
royalty rates, ask for one. The publisher will
have a figure in mind of how many books
they expect to sell, and if the royalty
increases above this amount then they won’t
mind agreeing to it because they won’t
expect sales to trigger it. But if you have
written a surprise bestseller then the financial
reward will be significant.
3. The royalty advance
An advance is not money paid in addition to your
royalty: it is your royalty. The publisher takes a
chance that the book will sell by paying a chunk
of your royalties to you before the book is even
printed. You won’t get any more money until the
advance has been earned back through sales.
Once this has happened you will receive
payments once or twice a year. But it’s common
for an author to receive nothing from the
publisher after the advance. This happens when
the advance was particularly high or when the
book didn’t sell too well.
The advance is usually split into two or three
payments. A chunk is paid upon signature of the
contract, followed some months later by another
chunk when you deliver a complete manuscript
of acceptable quality, and then you’ll get the rest
when the book is published. If the book is already
complete at the time of signing the contract then
the full amount is split between the advance on
signature and the advance on publication.
It might be worth asking for the percentages
paid on each occasion to be weighted towards
the earlier dates so that you get most of the money
sooner, but for business cashflow reasons it’s
unlikely that the publisher will agree to give you
the entire advance immediately.
Size matters when it comes to royalty advances.
Indirectly, a large advance means that the book is
more likely to be a success. By ‘large’ advance, I
mean an amount that is large for the publisher
concerned. It could be a four, five or six figure
sum, depending on the size of the publishing
house. Books do tend to sell better if the author
is paid more up front. Hooray, you’re thinking –
surely that’s in everyone’s best interests and so
you’re bound to get a high advance for your first
book? Ideally that would be the case, but
publishers would quickly run out of money.
By definition, not every book can be a
bestseller. Not every book can be hyped up by
the publisher as the next Harry Potter. They have
to select a small number of lead titles to focus
their sales campaign on. And the lead titles are
usually those for which the highest advances were
paid. Publishers will only offer large advances on
books they think have the potential to be their
lead titles, and having committed so much money
it’s in their interests to work hard to make sure
they earn it back.
If a publisher offers you a low
advance, it might reflect the low
priority they have set for your book.
Their risk is lower so they have less
incentive to push your book hard. If
you can persuade them to pay you
more then they will have to work
harder to earn their money back and
you have a greater chance of being a
bestselling author.
4. The percentages for rights sales
The contract will usually contain a long list of
rights that the publisher will try to sell for your
book, together with the amount you will receive
from any such sales. The rights include large
print, translation, film, extract, merchandising
and others. You shouldn’t receive less than 50%
of the publisher’s net income from any of these,
and depending on the size of the company you
can potentially go far higher with your share of
some of the rights: ‘first serial rights’ can be as
high as 90%. But bear in mind that most books
don’t sell most of the rights in the list. The most
likely ones to be sold are translation rights, but
unfortunately those rights tend to offer the lowest
rates.
5. The accounting period
This is the length of time you will have to wait
between royalty payments. If this is set at one
year you should ask for six monthly reports, at
least for the first couple of years of the book’s
life.
6. The number of free copies sent to you
This is usually set at ten free copies. It’s a
reasonable quantity for an expensive hardback
book and for larger paperbacks, but if your book
is a small or cheap paperback then it’s worth
asking for the contract to be changed to allow
you to receive twenty copies instead of ten.