The Big Misunderstanding about Money

We all know how a typical romance author lives. She rises in the morning to the smell of breakfast cooked by her housekeeper and brought to her on a silver tray by her butler. After donning her Givenchy dressing gown, she sits down to read the New York Times and dictate letters to her trusty personal assistant. She bathes in her jacuzzi, then dresses in her Donna Karan leisure wear to work an hour or two at her state-of-the-art computer. Then she jets off to New York to meet with her editor, after which she has a nice lunch at the Russian Tea Room.

Yeah, right. And if you believe that, I’ve got some swampland in Florida I’d like to sell you.

This scenario is so far removed from my own life that I had to go online to find out an expensive designer name for the opening of this article. I am sure there are romance writers out there who live like this, but only if they fit one of the following descriptions:

• Their husbands are brain surgeons.
• They inherited old money.
• They have incredible luck at the gambling tables.
• They’re Sandra Brown, Johanna Lindsey, Judith McNaught or one of the handful of authors who’ve made the New York Times Bestseller List so many times they no longer celebrate the occasion. I think there may be fifty or so of these romance authors out of fifteen-hundred-plus romance writers.

The rest of us earn anything from a pittance to a very nice living. And this is where I explain to you why that is.

Despite everything you’ve heard about advances, writers essentially make their money from royalties.  They do get advances, but those advances are against royalties. That means they don’t earn any royalties on the book until the publisher has recouped its advance. If the advance is really large or sales are really bad, they may earn only a few royalties or not even earn out their advance at all. But if they have wily agents and fabulous sales, they may get an advance bigger than any prospective royalties they will ever get on the book (Tom Clancy, for example). After all, it’s better for the publisher to keep an author like Tom Clancy generating millions of dollars even if he doesn’t earn back $60,000 of the multi-million-dollar advance it originally paid him.

And what is a royalty? A percentage of the retail price of every book sold.  

Note the importance of each word in this statement. First of all, it’s a percentage. For most paperback authors, that percentage is 4 to 8 percent (4 is what is offered at the very bottom rung). So for a $7 book, the author gets 28 to 56 cents.

Secondly, it’s the retail price, the one stamped on the book. The wholesale price is what a bookseller or distributor pays, often about 50 to 60 percent of the retail price.  

And finally, authors do not receive a percentage for every book printed, just for every book sold.  Since booksellers can return for credit any books they don’t sell, the number of books sold generally amounts to about half of the books printed (less if sales were bad; more if sales were good).

So an author’s earnings are figured from this formula:

Royalty percentage  x  number of books sold  x  price of book

Below is a chart that gives several possible royalty earnings of an average romance author (not a lead author) for a single book. I have to redo the series books part of the chart (the Silhouette/Harlequin books), but as soon as I do I will put it up.  

At present, this covers the majority of romance authors being published in single title. There are authors who make more (those fifty or so I mentioned, plus maybe two hundred lead title authors,), but it is a minority. The book prices are currently typical for this level, and the royalty rates represent the range still existing in the romance publishing world. This chart is meant to explain how people can make vastly different amounts of money for books of the same genre or sales. It should give you an impression of possible royalty earnings, not demonstrate exactly what an author can make for her books. Read it with caution. I hope it will enlighten.

To these earnings you can add other sales: foreign rights sales (advances range as widely for these as for the U.S. rights—they can be in the hundreds or they can be in the thousands), audio sales, in-house book club sales (generally accounted at 2.5 percent royalty for Harlequin/Silhouette), and out-of-house book club sales (Book-of-the-Month club, Doubleday, Rhapsody, etc., which offer advances plus royalties). This will probably add a couple of thousand to your earnings, unless you’re doing well, in which case it could add as much as several thousands to it. Of course, some people don’t get other earnings at all.

Royalty earnings + other sales = gross earnings. But gross earnings for a full-time author aren’t the same as for someone who works for a company. If you work for a company, it buys your supplies and it pays 7.5 percent of your social security tax. Anything related to the business is paid for (not work clothes and lunches, but paper, computer, etc.). An author who writes full-time has to pay all of her social security tax (15 percent total as opposed to a regularly employed person’s 7.5 percent), along with an agent’s commission, which ranges from 10 percent to 15 percent of the gross (most authors do need agents these days). She foots the bill for promotion (the author often pays out of her own pocket for those bookmarks and flyers and copies of galleys that you see), computers, supplies, research, etc. And she is responsible for her own health insurance, retirement fund, etc.

One more thing to consider is that an author has to cover her expenses while waiting for her royalties. And those take a long time to come, many times as long as two or three years after she sold the book. All the money doesn’t come in until a few years after the book has been published. I once had a friend tell me, “Yes, but the royalties come in forever, so the more books you have, the more little checks you're getting.” That is true—if your book is kept in print. Most midlist books are not. In fact, all of my Deborah Martina and Deborah Nicholas books are now out of print. So unless an author gets her rights back and resells the books (and reselling is only possible if she has established a fairly big name), the royalties do end eventually. That means that each book earns a finite amount.

Let me give you a concrete example of the earnings of a single title book. Rosalind Romancer has one of the top publishers and actually makes a living at her writing. She’s had four historical romances out. Her sales are fairly good. She has a good agent and has a track record, so her royalty rate is 8 percent. Her publisher prints 75,000 copies of To Live a Romance, 40,000 of which sell. Since she’s not at the bottom but still midlist, TLAR is priced at $5.99. She makes $19,168 in royalties on it (remember, this includes her advance).

She sells TLAR to Russia for $1,000 (her portion—the publisher has already gotten its percentage of the sale, too) and to France for $2,000 (her portion). She makes an audio sale with a new audio company for $750. That brings her earnings up to $22,918. Sounds pretty good, huh? Wait, I’m not done.

Now she must subtract 15 percent for her agent’s commission ($3,437.70) and 7.5 percent for self-employment tax ($1,718.85 more). That’s a total of $5,156.55 taken off that $22,918, which leaves her $17,761.45.

If you figure expenses for supplies, promo, etc., of anywhere from $1,500you pay generally, and that’s with no benefits. Is it any wonder that authors have to write two books a year to make a living? And remember that this is someone doing decently. There are plenty of authors out there making $5,000 a year or less after all is said and done.

Thankfully, writers love what they do. It’s what makes up for the low pay and the long hours (I spend most of my day at the computer, believe it or not, and am writing this on a Sunday). The thrill of watching a character emerge or having a problem plot suddenly fall into place or capturing a feeling in words can be more rewarding than any paycheck. If it’s not that way for you, I’d think long and hard about becoming a writer.

But if the money would just enhance your already overpowering need to create? Then by all means, join the rest of us lunatics! Just don’t assume you’ll get rich while enjoying your lunacy.

Author Royalty Earnings