Understanding advances and royalties is essential for authors navigating publishing contracts in Australia. These financial arrangements significantly impact an author’s earnings and control over their work.
This guide, written by experienced publishing lawyers, provides a detailed overview of advances, royalties, and key considerations for negotiating fair terms in publishing contracts.
Whether you are a first-time author or an experienced writer, this article will help you make informed decisions when entering into publishing agreements.
Key Takeaways
- Advances are upfront payments made to authors, often disbursed in instalments.
- Royalties are payments based on book sales, typically calculated as a percentage of the Recommended Retail Price (RRP) or net receipts.
- Authors should negotiate terms such as royalty bases, high discount royalties, and subsidiary rights.
- Reversion and audit clauses are critical for maintaining control and ensuring transparency.
- Authors should consider engaging a lawyer for a publishing agreement review.
What Are Advances in Publishing Contracts?
An advance is a pre-publication payment made by a publisher to an author, serving as an advance against future royalties. This payment supports the author financially during the writing process.
How Are Advances Structured?
In Australia, advances are generally modest and often disbursed in three instalments:
- One-third upon signing the publishing contract
- One-third upon acceptance of the manuscript
- One-third upon publication of the book
Trends in Advances
According to a 2021 survey by the Australian Society of Authors (ASA):
- 58% of authors received no advance
- 80.6% of advances were under $5,000
- Only 13% of authors received advances exceeding $10,000
The size of an advance reflects the publisher’s estimation of the book’s commercial potential.
Understanding Royalties in Publishing Contracts
Royalties are payments made to authors based on book sales. They are calculated as a percentage of either the RRP or net receipts
Standard Royalty Rates in Australia
Print Books: Typically 10% of the RRP. For example, if a book’s RRP is $24.95, the author earns approximately $2.50 per copy sold.
E-books: Generally 25% of net receipts. For instance, if an e-book is sold for $14.99, the author earns about $3.75 per copy
Earning Out the Advance
Royalties are only paid once the advance has been “earned out.” This means the author’s share of royalties must equal the amount of the advance before additional royalties are paid. If the book does not sell enough copies to earn out the advance, the author is not typically required to repay the unearned portion.
Key Considerations When Negotiating Publishing Contracts
Advance Calculation
A common formula for calculating an advance is to request an amount equal to half the royalties expected from the initial print run. For example:
- Book price: $24.95
- Royalty rate: 10%
- Initial print run: 5,000 copies
- Total royalties: $12,475
- Reasonable advance: Approximately $6,237.50
Royalty Base
Ensure clarity on whether royalties are calculated based on the RRP or net receipts, as this significantly impacts earnings.
High Discount Royalties
Be cautious of clauses that reduce royalties when books are sold at high discounts. Standard practice is to reduce royalties by half or one-third when discounts exceed 55%.
Additional Clauses to Negotiate
Subsidiary Rights
Subsidiary rights include translation, audio, and film rights. Authors should negotiate a higher percentage share of income from these rights.
Reversion Clauses
Reversion clauses allow rights to revert to the author if the publisher is no longer actively selling the book. For example, rights may revert if sales fall below a certain threshold over a specified period.
Audit Clauses
Audit clauses enable authors to verify royalty payments by auditing the publisher’s accounts. This ensures transparency and accuracy in financial reporting.
Frequently Asked Questions
What happens if my book doesn’t sell enough to earn out the advance?
If your book does not sell enough copies to earn out the advance, you are not typically required to repay the unearned portion.
How can I calculate a reasonable advance?
A common approach is to request an advance equal to half the royalties expected from the initial print run.
What is the standard royalty rate for e-books in Australia?
The standard royalty rate for e-books in Australia is generally 25% of net receipts.
Why are reversion clauses important?
Reversion clauses ensure that rights revert to the author if the publisher is no longer actively selling the book, allowing the author to regain control over their work.
Can I audit my publisher’s accounts?
Yes, including an audit clause in your contract allows you to verify royalty payments and ensure financial transparency.
This guide provides a comprehensive overview of advances and royalties in Australian publishing contracts. For further assistance with publishing agreements or other legal matters, contact our experienced team today.
