Tuesday, June 14, 2011

The Myth of the Unearned Advance | The Steve Laube Agency

The Myth of the Unearned Advance

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.


Rev. Michael Duncan said...

Thanks for this post! It was interesting, and I actually am a bit of a math addict. :) I appreciate having a real view of what takes place concerning the royalty issues. God bless.

Lisa Buffaloe said...

Hi Michael, I'm not a math addict so I really appreciated the post. That one is a keeper. :)

God bless you!

DL Stone said...

This is a very interesting post, but it looks to be a very narrow gap. You mention 7 of 10 don't cover the spread, according to NY times, but how many of the supposed 7 fall into this scenario?

Lisa Buffaloe said...

Hi DL, you can comment directly on Steve Laube's blog. He's answering many of the questions. www.stevelaube.com