The U.S. Department of Justice antitrust case to block the merger between Penguin Random House and Simon & Schuster has generated global conversation about how the publishing industry operates. Key to the case is the concern about a monopsony, whereby the publishers’ large combined market share would result in reduced competition, and therefore a reduction in the size of advances offered to authors.

The impacts of the trial will be widespread and the ASA will be reporting on the decision and its implications once it is handed down later this year. In the interim, in this article we explore the purpose of book advances, our survey results on the Australian market for advances, and the questions to ask when negotiating with your publisher.

An advance is a sum of money paid against future royalties. It is not a separate additional payment to an author, it is advancing monies to help sustain authors while they write their book. Authors are then not paid royalties until the amount payable has exceeded the advance already paid (the advance is “earned out”) and royalties begin to flow. 

While the  premise of an advance is to fund an author’s living costs while writing their book, in reality, that premise is rarely borne out, as advances have fallen over the last two decades and are now mostly very low in Australia. (Of course, there are exceptions at the top end of the market.) 

Advances are also unlikely to sustain you while writing, because they are typically paid in instalments, and you may receive the bulk of the total sum only after you’ve delivered your manuscript. For example, you may receive:

• • One third upon signing the publishing contract 

• • One third upon acceptance of the manuscript 

• • One third upon publication of your book

The ASA’s observation is that, in very broad terms, small publishers are often paying no advances at all, medium publishers tend to pay modest advances, and large publishers pay modest to very substantial advances. The size of your advance tends to correspond with your publisher’s estimation of the commercial success of your book. 

According to the ASA’s 2021 survey, 58% of respondents indicated they received no advance for their work. 80.6% of respondents received advances under $5,000. Only 13% of respondents reported receiving an advance over $10,000; a marginal decrease from 14.6% in 2020.

Our survey also found that 60% earned out their advance, meaning that while publishers judged sales well more times than not, almost 40% of respondents indicated their advance was not earned out. This indicates the high-risk nature of publishing, which has been examined in detail in the US trial.

You don’t have to pay your advance back if you don’t earn it out but your publisher may be reluctant to sign you again, perceiving your previous book as disappointing – unless they understand there were good reasons why the advance was not earned out. In this way, advances are a double-edged sword; a large advance represents money in the bank but if you fail to earn out, you may be perceived as too high of a risk for your next book. 

If you have an agent, they will negotiate for the best advance possible. If you represent yourself, then we encourage you to negotiate for the best advance you can  – there is room to negotiate! – but would also advise you not to be distracted from negotiating for better royalties, which are important in determining your long-term commercial return. In the end, the advance is only an early payment of royalties earned.

Given the range of advances on offer, it is impossible to offer any norms for what a reasonable book advance may be in Australia. One formula to be used as a guide is to ask for an advance of one half of the royalties you would earn on the initial print run or:

[10% x RRP less GST x half the number of books to be printed in the initial print run]

For example:

Royalty = 10%

RRP = $24.95

RRP less GST = $22.68

Total initial print run = 5,000 copies

10% x $22.68 x 2,500 = $5,670 advance

To help you get thinking about negotiations for your advance we’ve prepared a list of questions to ask yourself:

• • What sort of publisher are you negotiating with – small, medium, large? Is there a big budget for the book?  

• • What advance was I paid last time? Were my sales strong? Can I therefore push for a greater advance this time round? (Remember that publishers have access to books sales data and can check the sales levels of your previous titles even if you didn’t publish with them. Don’t be tempted to exaggerate your sales.)

• • What is my bargaining power? Am I an ‘unknown’ to the publisher, or an author with proven success? 

• • Can I show that I have followers on social media or a large network who are likely to buy my book? This is particularly relevant for nonfiction, YA and graphic novels. 

• • What is the recommended retail price of the book? What is the initial print run?  

• • What are the consequences (if any) of not earning out the advance?

If you’d like more information about book advances, you can use our free members-only Advice service. Alternatively, if you’d like a full commercial and legal review of your publishing contract seek advice from our legal service Authors Legal.