Chip MacGregor

April 20, 2016

Ask the Agent: What does an average first book pay?


We’re doing “Ask the Agent” this month — your chance to ask that question you’ve always wanted to discuss with a literary agent. Someone wrote me to ask, “What does an average first book deal pay? And can you explain how money is paid on a traditional publishing contract?”

Happy to explain it. First, when you sign to do a book with a legacy publisher, most authors are paid an advance against royalties upon signing the contract. There’s a long tradition of publishers paying advances to authors, since it allows the author to survive while he or she is working on the book. This isn’t free money — it’s sort of a no-interest loan that will be earned back after your book releases.

Let’s say the contract calls for a total advance of $15,000. Typically you’d get one-third of this on signing, another third upon turning in the completed work, and the last third upon publication. (That said, there are a million ways to divide the advance. Some pay half on signing, some pay a percentage when the author completes the bio and marketing forms, Random House wants to pay a portion when the book flips from hardcover to trade paper, etc.) So when your book releases, you’re now in the red $15,000 with the publisher. You’ve been paid that amount, but you haven’t earned anything back yet. Again, that’s not a loan that needs to be paid back, but it’s advance that needs to be worked off — or, in the parlance of the industry, it needs to be “earned out.”

Second, it’s really tough to determine an average first-book deal. Nobody shares the numbers. And the deal points have so many factors: the author platform, the potential media exposure, the timeliness of the topic, the bigness of the idea, the quality of the writing, etc. I’ve done first-book deals for as little as zero (no advance was paid) and one first-book deal that ran into seven figures (that’s not an exaggeration, by the way — but it was a very unique situation). Debut fiction tends to pay less than debut nonfiction, in my experience, and the size of the publishing house makes a difference — the bigger houses tend to pay a larger advance on a first book. And if you’re working with a small press, they may not pay an advance at all. So it’s hard to determine an average — you have to think in terms of economies of scale.

Okay… so have I begged the question enough? Then I’d say if you’re getting an advance on your first novel, it’s most likely going to run somewhere between $5000 and $15,000, depending on the publisher and the story you’re telling. And if you’re getting an advance on your first nonfiction book, it’s most likely going to run somewhere between $5000 and $20,000, depending on your platform, credentials, and the cultural interest in the topic. I really don’t like giving those numbers, since I just agreed to a debut nonfiction book for $50,000… but the author has huge media interest, so publishers were willing to pay more. AND I just agreed to a debut novel for $20,000… so you never know. Whenever I think I’m sure of the value of a project, I get surprised by the only interest being some lowball offer, OR surprised by a publisher going crazy for the idea and offering far more than I thought we’d receive. Again, it’s just hard to take the hundreds of debut books each year and say “this is what you can expect on your first contract.”

Third, as your book sells you are credited with money for each sale. That’s your royalty money, and with each sale it slowly reduces that $15,000 debt. Most trade publishers in the general market (that would include Penguin Random House, HarperCollins, Macmillan, Simon & Schuster, Hachette, etc.) pay a standard royalty on hardcover books: 10% of the book’s retail price on the first 5000 copies sold, 12.5% on the next 5000 copies sold, and 15% thereafter. Royalties for most trade-paper books are 7.5% of the retail price, and mass market books pay a bit less than that. Be aware: Many newer publishers, including most CBA publishers, don’t pay on the retail price of the book — they pay on the net price, which is the amount of money the publisher actually receives from the bookstore. In that case, you negotiate royalties on each book. Though those royalties may seen higher, you’ll have to do some calculating to determine which method will pay you more money.

Let’s do the math: If your book is a $25 hardcover, and you’ve got a traditional book contract with a legacy publisher, you’d be making $2.50 for each of the first 5000 books sold. (Did you see how I got that figure? $25 x 10%.) What happens is that the publishing house keeps track of that figure, and applies that as a credit to your account. So if you sell one book, you no longer are in the red $15,000 — they credit you with $2.50, so you’re now in the red $14,997.50. After the first 5000 copies have sold, your earnings jump to $3.12; and after 10,000 copies have sold, you are earning $3.75 per book. With every book sold, they credit your account the appropriate amount. Eventually you erase the $15,000 negative balance (you “earn out”), and you begin making money that will be sent to you a few times per year. Now you’re in the best possible situation — a company is going to send you checks on a book you finished a year or two ago. There’s no better feeling than getting a healthy royalty check and remembering that you’re making money on a project you’re no longer working on.

BUT be aware that not everybody is going to sell your book for the full retail price. Barnes & Noble is going to discount all new hardcover titles by 30%. WalMart is going to use their random-number generator and charge readers $18.74. Every time the sale price changes, your royalty earning changes. (Yeah… it’s a pain.)

Fourth, keep in mind that each version of your book will have a different royalty, so the industry standard ebook royalty for legacy publishers is 25%, which sounds great when compared to print royalties, but in effect is low in terms of the percentage of profits. (That’s why indie publishing aficionados tend to be so negative about traditional publishing.) And remember that different companies will offer different contracts. So a hardcover book with, say, Tyndale Publishers, doesn’t use a traditional royalty structure. You might negotiate a deal for 16% of the net price. So if your $25 hardcover book is bought by Barnes & Noble for $12.50, you’d be making $2 per book ($12.50 x 16%). If WalMart buys a slug of them for $10 each, you’re only making $1.60. In other words, the financials on a net contract are completely different than on a traditional retail sales contract. You have to negotiate them, and keep a close watch on your royalty report. AND, just to confuse this even more, many of the new era publishers are paying more often, or paying a higher royalty. Some of the start-up publishers are paying authors 50% of net on ebooks, and anywhere between 10% and 50% of net on printed books. Some of the smaller print houses are paying a very small royalty on print books. Amazon publishing is paying 30% on ebooks. It can seem like the Wild Wild West at times, so you have to make sure you’re comparing apples to apples. Sure, Amazon is paying authors 70% of the sales price on most self-published titles, and they’re sending the author a check every month… which means it’s a great deal if you can sell books. As with anything else, if you can sell your product yourself, you’ll make more money, but you’ll also have more responsibilities. It’s why I’m happy to talk about the financials with authors — they can be confusing if you don’t know what you’re doing.
Fifth, understand that every company will have its own payment schedule. Some publishers pay once a year, some twice a year, and some four times per year. Whether or not your book has earned out, you should be receiving a royalty statement from the publisher for each pay period, stating exactly how many copies of your book sold, what your earnings are, and either (A) the amount of money you are being paid or (B) the amount of money you’re still in the red. And by the way, I’ve used the terms “debt” and “in the red,” but again, an advance is really not a loan, in that you’re not required to pay back an unearned advance. Finally, the rise of ebooks has created a decline in overall advances, making it harder than ever for an author going the traditional route to make a living. Advances are down, but opportunities are up, and that means authors have more choices to make and more things to consider when trying to map out a career.

Whew. That’s a lot of information. Does all that make sense for the basic economics of getting paid? Feel free to ask me follow-up questions.

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  • Joel Gunderson says:

    Chip, this was incredibly helpful! Question for you: I’m writing a non-fiction book, detailing the unprecedented rise of the Boise State Broncos football program – a real-life David, slaying real-life Goliaths. I’ve decided (since I don’t have an agent) to do the bulk of the research and interviews first, then seek help, armed and ready. I have 72 interviews done (end goal: 200), with major players and sharp storytellers from the program’s past. I also live just two short hours from Manzanita. Is it inappropriate to try and set up an in-person meeting with you to talk about my project? It’s no urinal visit (great story!), but it’s still more than a simple submission. Thanks for your time, and keep up the great work!

  • Reginald Barnes says:

    I need a phone number, to publishers, who give advances!? Thank you.

  • Anne Schreiber says:

    Thank you so much for this post, Chip. I’m new to the field and will soon be hunting around for a publisher for a book I am translating (non-fiction; German-to-English). Would you be able to answer two questions? For first time authors, is it generally advisable to find an agent? And, are advances handled differently with translated works? Thank you! Anne Schreiber

  • CEFlint says:

    Thanks Chip, this was super helpful. One question…why, historically, does an author receive such a small royalty from a traditional publisher? I understand that it costs money to publish and promote, but it seems to me like the person who actually created the thing should earn more than 10% at most…

    • boont says:

      Historically, authors received no advance from publishers. This finally meant that very few could afford to write and submit a book, so publishers decided to institute what was originally called a “loan”. That “loan” eventually became called an “advance”. Exactly the same, except that a loan is tax free, and an advance is taxable.

  • johnrobbins says:

    Just been offered a contract by Bloomsbury Methuen Drama to write the second edition of My Actor’s Survival Guide: How to Make Your Way in Hollywood. Not particularly happy with the terms. The question is whether or not I could get a better deal with an Agent or are such academic book contracts pretty much set in stone?

  • Jenny Hays says:

    Even if I were lucky enough to sell 10K copies on a first novel, that’s really only about $18K net. And that’s only if I hit a home run right out of the gate (is that the right analogy? I don’t play any sport that has a ball or club). Anyway, I suspect most people are Googling this question, because, like myself, they are hoping to make a decent amount of money on a year’s worth of hard work. However, $18K net on a long shot, seems like a sad way to earn a living. Your information really helps me to realize that I’m just going to write the book I want, because it really isn’t worth “dreaming about” a measly $18K royalty check. I really should have gotten into IT work.

  • Miyoko says:

    How does one submit their book to a Agent?
    How can I find an agent
    Im having it published, but really want an Agent
    To help me really get it out there.

  • Lisa V says:

    Thank you so much for the detailed explanation. I always wondered if the author had to pay back the publisher if the book doesn’t sell. Thanks for clearing that up.

  • So, for the question of, “What,does the average first book pay?” The answer is, “It depends.” Heh

  • John Howard Prin says:

    Thanks for this info and your helpful insights. I think this Ask The Agent series is awesome!

  • G. Fawkes says:

    Three or four years ago, I was determined to be traditionally published. But now, self-publishing just seems like a no-brainer for me, especially with my background in marketing, design, and book publishing. I’m not saying this article ‘sealed the deal’ for me, but it’s certainly one more nudge in that direction.

    • chipmacgregor says:

      Guy Fawkes Day is six months away! What are you doing here so early? (“Remember, remember, the 21st of April” just doesn’t have the same ring.)

  • M. M. Splinter says:

    Thank you for this information, Chip. I do have a follow-up question, relating to a series of books (yes, I’m still stuck on that). If an author has negotiated an advance and royalty breakdown for one book, but they have additional books being published as part of a series with the same publisher, is a new advance and royalty breakdown implemented for each additional book in the series?

    If yes, would the advance be likely to increase if the first book did well, assuming they see the author as less of a risk?

    M.M. Splinter

    • chipmacgregor says:

      If the author has a series of books planned with one publisher, then there’s going to be a contract in place, MM. It could be one contract for each book (which some publishers do), or it could be one contract for several books (with the money cross-collateralized). And yes, if you do one book and it does well, you can expect the terms for the next book to improve.

    • M. M. Splinter says:

      Oh I see, it varies by publisher. Again, this was very helpful. Thank you, Chip.

    • boont says:

      If you cross-collateralize, your second book advance will be held hostage to the money you still owe from your first book advance. Chip should have told you that, because your publisher will subtract what you owe from the first advance that has not fully earned out yet, from your new advance. Welcome to publishing.

  • Daphne Woodall says:

    Chip this is helpful information. Is it unusual if an author wishes to turn down the advance in lieu of periodic Royalty checks? Or is that a bad idea? It sounds like it is difficult tracking the sales.

    Does the process complicate tax filing?

    Daphne Woodall

    • chipmacgregor says:

      Generally I would say it’s a bad idea, Daphne, but probably for reasons you may not have thought of… With no advance, the publisher (in my view) has far less motivation. I know publishers will disagree with this, and say that they’ll work just as hard on every book, but I used to be a publisher, and I know when we paid out a big advance, we’d all have to MAKE SURE we were going to give our best to make the book work, because we didn’t want to be sitting on a huge unearned advance. (Publishers are welcome to come on and disagree!)

    • chipmacgregor says:

      As for complicating your taxes, advances and royalties are simply general income to the author. You’ll get a 10-99 from either your publisher or your agent at the end of the yea, with the amount paid to you listed. No taxes are taken out of royalties, so you need to set aside roughly 25% of earnings to cover state and federal taxes.

  • Lynette Eason says:

    I get asked this question ALL THE TIME. Thanks for this fabulous explanation, Chip. I’m saving the link for this post to pass on to others. You’ve just saved me a lot of talking time. Ha.

    • chipmacgregor says:

      You’re welcome… AND FOR THOSE WHO DON’T KNOW, this would be bestselling novelist Lynette Eason, whose work I happen to love. Great writer of suspense stories. Check out her books!

    • Lynette Eason says:

      I’m honored! Thank you so much, Chip!

  • Lisa Godfrees says:

    Ah, yes. Another fantastic example where having an agent would be beneficial. Hope I can nab one some day. 😉 Thanks for this.

  • Allen says:

    I am a regular lurker on this blog, Soon I will graduate the Macgregor U publishing course phase one. The more I read, the more I know that I need an agent on my side. The business is complex, just like any business and you go out of your way to explain it. There is so much useful info in the blog history, it will answer most of the questions. BTW, you still owe me for the dry cleaning bill, and yes you turned around at the urinal…

  • Pamela S Thibodeaux says:

    Very informative, Chip. Thanks for sharing!
    Good luck and God’s blessings.

  • Amaleka McCall Brathwaite says:

    This is the first time I think I really understand it. Great explanation.

    • chipmacgregor says:

      Thanks very much, Amaleka. Looking forward to working with you on the novel, by the way.

  • James Pence says:

    Great explanation, Chip. Thanks.

    For me, the real shocker came when I learned that returned books counted against my royalty earnings. First royalty period that my novel Blind Sight was out, I got a nice check. I figured I was on the gravy train. Next royalty statement showed me around 2k in the hole because the returns had flooded in. I didn’t know about that part of the equation.

    • chipmacgregor says:

      Yes — sales give the author money; returns take author money away. It’s why in many ways you never really know how much a book has earned until it finally goes out of print, and you can tally up the plusses and minuses. But publishers do that quarterly as best they can, then go back and adjust the next quarter.

  • Robin Patchen says:

    Thank God I have an agent who understands that stuff!

  • Chip, thanks for the detailed answer to a question most authors don’t worry about when they get that first book contract–they’re just excited that someone is going to pay them for writing. By the time they’ve done this dance a few times, they know the questions to ask, but an agent knows them the first time around–just a word to folks who say they don’t need an agent.

  • SteveHooley says:

    Thanks for a very detailed explanation. The best I’ve read.

  • Lynn D. Morrissey says:

    I was just curious: Eons ago was an advance just an advance–in other words, payment for the time put into writing the book, like a type of salary? Did publishers always consider an advance a type of pre-payment that you had to pay back to them in book sales? I hope you understand my meaning; it’s early, and I’m not articulating well. 🙂

    • chipmacgregor says:

      Advances have always had to earn out, so far as I know, Lynn. Thus the term “advance” — an advance payment of expected earned royalties.

  • Iola Goulton says:

    While that’s not exactly straightforward, it’s also the clearest explanation I’ve seen, and the first that differentiates between retail (full retail or RRP), actual retail (sale price), and net. Thanks.

    It does make me wonder why publishers even bother with recommended retail price if every retailer is simply going to apply their own magic formula (aka random number generator) to come up with a sale price. It also makes me suspect you’d need to be a CPA to unravel the royalty statements – the royalty structure seems to rely on a lot of trust (that retailers report the correct selling price to the publishers, and that the publishers report the correct price to the author, and that no one makes data entry mistakes anywhere in the middle).

    • chipmacgregor says:

      It’s about as straightforward as I can make it, Iola. And yes, it can get complicated. Publishers have an RRP because somebody has to set a baseline for sales, by the way. That allows them to work out (i.e.; “guess”) their earnings on the book.

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