Times Book Review on advances, and related thoughts
The NY Times Book Review published a piece on advances online today to which I was first pointed by Twitter early this morning. I couldn’t tell whether author Michael Meyer was “for ‘em or agin’ ‘em”. On the one hand, he seemed to suggest that publishers are inclined to overpay, and he cites Public Affairs head Peter Osnos very forcefully saying that it just isn’t necessary for publishers to get sucked into a high advance by market pressures. On the other hand, Meyer demonstrates through author testimony how little even a $100,000 advance is in relation to the time and effort required to write a book.
Advances against royalties paid by publishers to authors, like returns (one of last week’s topics), are often misunderstood and subject to flawed analysis. Here are a few general thoughts about them.
1. It is critical to understand that an “unearned advance” (that is: a book on which the advance paid by the publisher exceeds the royalties earned by the author) is not equivalent to an “unprofitable book.” Author royalties of 15% of retail (the top “standard” hardcover royalty for a book of narrative writing) amounts to about 27-32% of the publisher’s receipts after trade discounts. Since unit manufacturing cost is about 15-20% of receipts, and the publisher has other direct costs that aren’t based in units sold (design and the 21st century equivalent of “typesetting”, book jacket creation, marketing expenses, and returns and overstock), it is roughly true that the author shares profits with the publisher 50-50. So if the author’s advance ends up delivering a royalty of 17% or 20% or even 25% of receipts, which is the net effect of an unearned advance, the publisher might well still have made money.
2. What publishers really care about (or, at least, really should care about) is how fast their cash turns over. That portion of an advance paid “on publication” might actually only be floated for a very short time. In the case of a book where a publisher has foreign rights to sell, it is even possible for the publisher to make deals that recapture the advance before it is paid. Those situations aren’t common, but they do occur. Shifting the advance payments so that they occur later make advances much easier for publishers to bear. I was involved in one deal where the advance was in quarters and the last quarter was paid on paperback publication, which occurred over a year after the hardcover publication. Some “advances” aren’t paid in “advance.”
3. The publisher quoted as being skeptical of the need to be sucked into paying outsized advances, Peter Osnos, runs a small house that is owned and distributed through a larger network. PublicAffairs doesn’t have to “feed the beast” — provide sufficient volume to cover the high fixed costs of publishing operations: warehouse, infrastructure, and the biggest part of overheads. The CEOs of the major houses have to be sure that enough volume will go through their operations each year to sustain them. That means that “guaranteed” volume is of premium value and agents, knowing that, can command a premium price. The sales coming from mega-books from mega-authors (on which mega-advances are paid) keep the big house’s doors open for everybody else. In other words, a house that pays fixed costs for its operations has a different strategic stake in big books than a house that is distributed on a fee-for-volume basis. Osnos’s advice is very sound for the many thousands of publishers who are smaller than the giants, but it would be suicide for any of the Big Six.
4. Peter Mayer gets the history right about how big money came into the game; it was led by the large advances paid by paperback houses in the late 1960s and early 1970s. That also led to the combining of what were, for more than a quarter century after World War II, two different and separate businesses: trade publishing and mass-market publishing. It isn’t mentioned in this piece, but Mayer (and his marketing director at that time, Bill Shinker) were responsible for moving full-sized books into mass market channels when they sold gazillions of copies of a trade paperback through the rack jobbers (memory unsupported by research says it was “The People’s Pharmacy”.) Bantam then sold the hardcover “Iacocca” the same way and, in another decade, there was no longer a distinction between “trade” and “mass.”
In 1979, Crown sold the paperback rights to Princess Daisy to Bantam for $3.1 million. That remans, today, the highest price ever paid by a paperback house for the rights to an original hardcover; it was the high water mark. So the account of the genesis of large advances is accurate, but trade houses have been on their own on this for three full decades. I see great irony in the history Peter Mayer reminds us of. It was the sub rights departments of hardcover houses that turned this into a big money business, and the agents followed. I know that at the same time, standard practice for agents was just changing from submitting a manuscript to one house at a time, consecutively, to the multiple submissions which are a pre-requisite to competitive bidding and auctions.
So if Peter’s history is right, corporate greed drove entreprenurial greed, not the other way around. I wonder whether there were editors at publishing houses complaining to agents about this dastardly new practice of multiple submissions at the same time that the sub rights department down the hall was setting up an auction for the next big book? (No bloggers at the time to call them on it if they did!)
On much the other end of the continuum, I invented a technique on the very first book I published in 1974 which I am a bit surprised I have never seen since (which doesn’t mean nobody else has done it!) The book was “Amnesty: The Unsettled Question of Vietnam” and it was a 3-author debate (“Now”, “Never”, and “If…”) including Senator Mark Hatfield. The authors each did their part for no “advance”, but instead got a $500 guaranteed first royalty payment, giving us time to get the money from sales to pay them. As things turned out, they would have earned about $350 each on the first payment and ultimately all earned out the $500. And even though they would have earned $350, I had taken in enough to pay them the $500 from receipts. Paperback rights were never sold.
I saw notice of the TBR piece on Twitter this morning, read it, and wrote this piece. Figured it would be Monday’s post…But then an hour later I went back to Twitter and saw that my friend Evan Schnittman, who just started a new blog called Black Plastic Glasses, had already published his rant on the Times piece and it wasn’t even 2:30 on Saturday afternoon!
We have different takes. His is publisher-centric. Hey! He’s a publisher! Enjoy it.
Oh, and this is Monday’s post. It might even have to hold the prime position until Wednesday.