From: eliz@ai.mit.edu (Elizabeth Willey)
Subject: Yes, you want to be a writer, but can you use interest tables?
Organization: MIT Artificial Intelligence Laboratory
	<1992Apr9.124913.25235@nocusuhs.nnmc.navy.mil> <1992Apr10.1841
	<GJH.92Apr14094822@ghiggins.hpl.hp.com>
Date: Tue, 14 Apr 1992 16:32:24 GMT

Graham Higgins inquires:
   
   > Chuq:
   > why sell a novel for a $5K advance when it could have been sold for $10 if
   > you knew how (and/or who) to ask for it? 

   Being a naif, I have yet to figure out the economics of advances. Given the
   fact that a book will earn $x for the people involved in manufacturing and
   selling the product and that an author gets a pre-negotiated slice of the
   revenue (not profit, *revenue*), what's the point of getting a larger part of
   it early? Is it a case of grabbing the money and running? If so, why? 

If you are entitled to a royalty of 6% of the cover price of every
copy of your book sold, and the publisher offers you an advance
against royalties of, let us say to make it simple, $5000 for your
book, you take it and run.  Why?

1.  This is *all the money* you are going to see until the book is
    published, and indeed

2.  the book may not be published for anywhere from a few months to a
    couple of years, reinforcing the fundamental financial principle that

3.  the value of $5000 you receive now is greater than the value of
    the same $5000 received in the future.  Inflation and
    interest work together to make this so.  You can take that $5000,
    pay your taxes on it, and stick it even in a humble CD or an IRA,
    and it will be worth more in the future.  If you're a little
    cleverer you put it in tax-free municipal bonds and *really* make
    out (as much as one could with $5000 less taxes etc.).

4.  By the time your book "earns out" its advance and pays more
    royalties, which can take another few months or years, you will
    have recouped your taxes, your agent's fee, and be looking at more
    than $5000, if you saved it in even the most conservative way.
    Therefore, you have actually earned *more than* that initial lump
    $5000 with that book.

    If you spent it on, say, a laptop, you have had the utility of the
    laptop for N years more than you would have done, had you waited for
    publication to be paid.

5.  Lastly, the quarterly royalty payments/statements you do get will
    be very slow and very small, a trickle of cash you can neither
    rely on nor invest sensibly all at once.

I could also discuss how much easier this makes the bookkeeping for
the publisher, as well as for you, but they made me take an oath never
to discuss the Higher Arcana of accounting with non-initiates, and I
know at least one of you hasn't been inducted to the Fourth Level.

   Could the publisher cough up an advance and then decide against publishing the
   book? Is that the problem? If so, my question is --- with what frequency does
   this occur?

That I don't know, although it does sometimes happen.  When it does,
the rights eventually revert to you and you sell them again.  In the
meantime, of course, your book isn't published.

   (As a wannabe beach-novel genre writer, I see publishers as an essential part
   of the chain, making the tales I tell available for people to buy and read. I
   envisage a long-term, open partnership with "my" publisher and would have
   thought that if the author gets a fixed proportion of revenue, whether that
   slice arrives earlier or later, doesn't change the total amount earned by the
   book. IMHO, brinksmanship over advances is only going to have deleterious
   effects on the relationship between author and publisher --- I intend to create
   the most positive relationship I can between myself and the people who turn my
   MSs into books.)

This is a lovely philosophy, to look on the publisher as a partner.
Know that the publisher looks on you as an easily-replaced part of his
business process.  You are fodder for his combine, the maximum benefit
to be extracted from you at the least cost.  Your publisher is in
business to make money, not to make literature; knowing this will
brace you for the day when your beloved editor jumps houses and leaves
your book stranded, for the day when your book is remaindered three
months after publication, and for the day when you sit down and
calculate that the advance and royalties paid you, in toto, about
sixteen cents an hour for writing the book in the first place.

Taking these financial realities into account, it is easier to
understand how "brinksmanship over advances" (which no one has brought
up here previously) can benefit the author.  The larger advance you
can pull up front, meaning no waiting for your earnings, the better
off you, the author, are in the long term.

Of course you can have a good relationship with your publisher.  A
good business relationship.  For nurturing, go to your mother.

Not a pretty sight, publishing.


"Liz Will"

Newsgroups: misc.writing