On Earning Out

A wise man recently was asking me about that old canard of how his first novel would be doing nicely if it earned back it's advance. It took me more time than I thought to explain to wise man why this is not correct. 

Let me try here in the best way I can think of. 

Imagine that there are two books that are in every way identical. Each has a $7500 advance. The publisher spends the exact same amount of money on each, ships the exact same number of copies, absolutely everything the same. The book is a $7.99 mass market paperback and sells the exact same 15,000 copies. 

Only difference is that one author has a 6% royalty in his contract, the other author has an 8% royalty. Both rates are common.

Now do the math. 

7.99x15000x.06=$7200 and the book has an unearned advance of $300. 

 7.99x15000x.08=$9600 and the publisher writes out a royalty check above the advance for $2100. 

If you believe that your book becomes profitable only when you get royalty checks you are forced to believe that the publisher of these two otherwise identical books has a profit on the book that cost more total money net of author royalties and a loss on the book that cost less. 

Since that is obviously not correct, safely ignore anyone who attempts to say that the bottom line on a book is the earn-out status of the advance.