Can You Tell My Earnings From My Amazon Sales? Spoiler: Nope, Not at All

There was thread over at Metafilter this week talking about book sales and author earnings, including a link to a study that purported to chart author earnings, based on sales at Amazon. I have to admit I had a bit of a giggle over it. Not because it was attempting to guess author incomes, which is fine, but because the methodology for estimating those earnings came almost entirely from trying to estimate sales of the authors’ books on Amazon, and extrapolating income from there.

Here’s the thing: For non-self-published authors, the correlation between annual book sales and annual “earnings” as a writer can be fairly low. As in, sometimes there is no correlation at all.

Confusing? Think how we feel!

But let me explain.

So, I’m a writer who works primarily with a “Big Five” publisher (Tor Books, which is part of Macmillan). For each of my books, I’m given an advance, which in my case is paid in four separate installments — when I sign the contract, when I turn in the manuscript and it’s accepted, when the book is published in hardcover and when the book is published in paperback. This is fairly typical for most writers working with a “traditional” publisher.

Once the advance is disbursed, my publisher owes me nothing until and unless my book “earns out” — which is to say, the amount I nominally earn for the sale of each unit (usually between 10% and 15% of each hardcover, and 25% of the net for eBook) exceeds cumulatively the amount I was offered for the advance. Once that happens, my publisher owes me for each book sold, and that amount is then usually disbursed semiannually…

… usually. There could be other complicating factors, such as if the royalties of the books are “basketed” (meaning the contract was for two or more books, and the royalties are not disbursed until the advance amount for every book in the “basket” is earned out), or if some percentage of the royalties are held back as a “reserve against returns” (meaning that some books listed as sold/distributed are actually returned, so the publisher holds back royalties for a payment period to compensate).

Bear in mind that most publishers try to offer as an advance a sum of money they think the book will earn, either over the first year in hardcover, or across the entire sales run of the work. Which means that if the publisher has guessed correctly, it will never have to shell out royalties. Sometimes they guess poorly, which means either they paid too much for an advance or not enough; in the latter case, that’s when the royalty checks come (please note that even if a publisher pays “too much” and the advance isn’t earned out, it doesn’t mean the book wasn’t profitable for the publisher — their bottom line is not necessarily heavily correlated to the author’s advance — nor does the author have to pay it back).

So what does this all mean? Well, it means that for a non-self-pubbed author, often none of their annual earnings from a book are directly related to how many of those books sell in a year (or any other specified time frame). In fact, depending on how the advance is paid out, three-quarters or more (even all!) of the author’s earnings from a book are disbursed before the book has sold a single unit.

Like so:

Book is contracted: 40% of the advance (“signing installment”) goes to the author. Books sold to date: 0.

Book is turned in and accepted: 20% of the advance (“delivery and acceptance installment”) goes to the author. Books sold to date: 0

Book is published in hardcover: 20% of the advance (“hardcover installment”) goes to the author. Books sold to date: 0 (there may be pre-orders, but the sales don’t usually start being counted until this time).

Book is published in paperback: Final 20% of the advance goes to author. Books sold to date: Hopefully some! But even if the number is zero, the final installment gets paid out (if so few books are sold that the publisher foregoes the paperback release, there’s still usually the contractual obligation to pay out).

Note these advances can be paid out over more than one year — I once got a final installment for an advance roughly six years after I got the first installment (it was a complicated situation). Likewise, once the book starts selling, it can be years — if at all — before the author starts earning royalties, and even then, thanks to the reserve against returns, what the author gets in those semi-annual royalty checks is not 1:1 with sales for the period the check covers (note: this sometimes works to the benefit of the author). Also note: Those semi-annual checks? Often cover a period of time located in the previous fiscal or calendar year.

All of which is to say: For a “traditionally published” author, at almost no point do what an author’s yearly earnings for a book directly correspond to how the book is selling in that particular year.

(Is this bad? No, but it needs paying attention to. Authors tend to love advances because they’re not directly tied to sales — it’s money up front that doesn’t have to be immediately recouped and can help tide the author over during the writing and the wait for publication. But it also means, again, that it can be years — if at all — before money from royalties comes your way. Authors need to be aware of that.)

To move the discussion to me directly for a moment, if someone tried to guess my annual earnings based on my yearly unit sales on Amazon (or via Bookscan, or anywhere else for that matter), they would be likely be, well, wildly wrong. At any moment I have several books at various stages of advance disbursement — some contracted, some completed but not published, some published in hardcover and some published in paperback — a few all paid out in advances but not earned out, and several earned out and paying royalties.

Add to that audio sales (another set of advances and royalties) and foreign sales (yet another) and ancillary income like film/tv options (which are not tied to sales at all, but sales help get things optioned) and so on. Also note that not all my sales provide royalties at the same rate — a lot will depend on format and how many were previously sold (if they are in print or physical audio), unit price (if they are eBook or audio files), and on other various bits that are in contracts but not necessarily disclosed to the wide world. Oh, and don’t forget my short fiction and non-fiction!

Basically, my yearly earnings as an author are a delightful mess. I’m glad I have an accountant and an agent and a very smart life partner to help me stay on top of them. These earnings have almost nothing to do with unit sales in any calendar year, and more to the point, never have, even when I was a newbie book writer with a single book contract to my name. I signed my first book contract in 1999; since then I have yet to have a year when my earnings from being an author approach anything like a 1:1 parity with my book sales in that same year.

Does this matter? Well, it matters if you are, for example, trying to extrapolate what “traditionally published authors” make based on their annual sales, and are then comparing those “earnings” to the earnings of self-published authors. It’s ignoring that these are entirely different distribution systems which have implications for annual earnings. I don’t think one is particularly better than the other, but a direct comparison will give you poor results. Note also that’s true going the other way — applying “traditional publishing” income models to self-published authors will very likely tell you incorrect things about how they’re doing economically in any one year.

(And as a further note: Do likewise be aware of the caveats for anyone trying to extrapolate self-pub/indie annual author earnings from Amazon as well. It misses direct sales, which for authors who ply the convention circuits can be significant, and also may not fully incorporate how Amazon deals with payments in its subscription models, which are handled rather differently than actual sales, and which (unless it’s changed very recently) come from a pre-determined pot of payment rather than a straight percentage of sales. Hey, it’s complicated! Almost as complicated as the “traditional” model.)

Here’s one thing I suspect is true: It’s possible to make money (sometimes a lot of it) as a traditionally published author, or as an self-published/indie author — or as both, either in turn or simultaneously, since, as it happens, there’s no deep ideological chasm between the two, and generally speaking an author can do one or the other depending on their project needs, or their own (likewise, it’s possible to make almost no money either way, too. Alas). It’s not an either-or proposition.

But yes: Here is a grain of salt. Please apply it to anyone who tells you they know how much any author (traditional or self-pub/indie, but especially traditional) is earning in any year, based on Amazon sales, even if they’re limiting it to Amazon sales. They’re just guessing, and you have no idea how far off their guesses are. And neither, I strongly suspect, do they. Only the actual authors know, and most of the time, they’re not telling.