Illustration of a person using a book similarly to a wallet
Getting published

Book advances and royalties

Writing and illustrating books is a labour of love, but it’s also a job and creators need to make money. So how are authors and illustrators paid for their work?

From headlines, like “author signs six-figure book deal”, it can seem like many authors are having vast sums of money thrown at them. But those headlines are the exception, not the rule, and the reality of advances and royalties - the two ways in which authors are paid for their books by publishers - can be different.

The advance - what it is and how it’s calculated

An advance, Penguin Random House’s contracts director Emma D’Cruz explains, is the “sum of money paid to an author upfront when they sign a contract with a publisher". 

Advances are carefully decided on by publishers, who create a profit and loss statement for “each book they wish to acquire, which sets out the outgoings, such as manufacturing costs and the income from estimated sales,” Emma says. These figures enable the publisher to calculate the level of advance they can offer. 

It’s for that reason that advances can vary significantly in size. While well-established authors might sign a six-figure advance, for the majority of debut authors the value is going to be much lower. On each book a publisher is taking a financial risk: paying not just the value of the advance but investing a significant amount of time, money and expertise in getting the book ready for publication and into the hands of readers. The advance is a careful calculation made by the publishers which reflects this risk in light of the book’s estimated sales. 

The advance is usually paid to the author in instalments, which tend to be on signing the contract, after submitting the final manuscript, and then on publication. 

The difference between advances and royalties

In addition to the advance, authors are also paid through royalties. “A royalty is an amount of money paid to an author from the sale of each book,” explains Emma. “This will usually be a percentage of the sale price.”

The relationship between the advance and royalties is quite important. “The advance will be offset against future royalty payments once the book is on sale,” Emma says. This means that an author won’t start earning royalties until the initial sales of a book are equal to the size of their advance. An industry term for this is ‘earning out’ your advance.

Royalties come in many types and levels. Emma explains: “There are different royalties paid on different formats (such as hardback, paperback, ebooks) and royalties also differ upon whether the sales take place in the UK or are sold to other countries for export. Royalties reflect the share that the author should receive taking into account the production costs of a book and all other costs ancillary to getting the book published.”

The types of royalties an author gets from a publisher also depends on the types of rights they sell to that publisher. Catherine Cho, literary agent at Madeleine Milburn Literary, TV & Film Agency, adds: “As an author, you automatically hold the copyright in your book. As an agent, our job is to ‘exploit’ as much of those rights for an author as possible.

“This means making sure that translation rights, book to film rights, etc. – that these are all being used.

“Most authors without agents end up having to sign over all their rights to a publisher (so a contract that includes world territories in all languages and in all editions and including film).

"An agent is going to want to limit these contracts as much as possible, this protects the author and makes sure that they are the ones benefitting from their rights.”

Authors will get royalty statements once or twice a year, and payment is made then too. A publisher’s royalties department will get the author’s bank details and arrange for payment to be made directly into their account.

While it’s good to be aware of what’s in your contract, if you have an agent you don’t have to suddenly become a contractual and financial expert. Catherine says: “Agents are the ones who examine contracts and negotiate contract terms.

“As an author, you should be able to trust your agent to make sure you have the best terms possible.”

Illustration: Mike Ellis for Penguin

Sign up to the Penguin Newsletter

For the latest books, recommendations, author interviews and more