Thursday, July 10, 2014

Advances and Patronage

What is an advance?
An advance is an “advance payment of royalties.” Hence the name, advance.
To many people, the advance means the check the writer gets when a publisher accepts the author’s book for publication.
When a publisher accepts a manuscript for publishing, the publisher makes an estimate of how many copies that book might sell in a given period of time. Based on that estimate, they figure out what the royalties would be and give the author a check for a portion of those royalties. That is what an advance is: prepayment of some of the royalties.
If a book is estimated to sell perhaps 50,000 copies over its first year in print, then the publisher would cut the author a check for their estimated royalties for those 50,000 copies. So, if the book sells for $8 and the author gets 2.5% of the cover price as a royalty for each book sold, then the advance check would be for $10,000.

($8╳$50,000)╳.025 = $10,000

The author would not start receiving actual royalty payments until the 50,001st book sold, because the author had already been paid for the first 50,000.
The advance is essentially a gamble by the publisher that the book will sell that many copies.
If the book turns out to be a big hit, one day the author saunters out to the mailbox to discover a royalty check waiting to be cashed. And possibly a new contract offer for the next book (or books) at better terms for the author from the publisher.
If the book does not catch on with an audience, and doesn’t sell the 50,000 expected copies, then the publisher just lost money on the deal and the author won’t be seeing any royalty checks anytime soon. Unless the book catches on and sales start to surge over the next couple of years, it is probably unlikely that the publisher will want to renew the publishing contract with that author.
So why bother with an advance?
Because if that author is the next Stephen King/Danielle Steel/J.K. Rowling, the publisher wants that author cranking out the next big hit. One, hot bestseller could rake in millions of dollars in profits. And often a hot book can lead to TV or movie deals that could be worth hundreds of millions of dollars. The publisher wants that writer at the keyboard working on the next bestseller, not flipping burgers for 13 hours a day in part time jobs trying to make ends meet which could delay the next book by years.
The advance can be an excellent investment on the part of a publisher.
Self-published writers, however, don’t have the advantage of an advance as a resource.
A self-published writer cannot get a business loan because they have no tangible assets to be used as collateral, and the Small Business Administration in the US government does not support writers as a business. So there is no place for a self-published writer to turn to for financial assistance to tide things over until the book really starts to catch on.
Many writers have turned to Kickstarter to try and raise operating capital. Kickstarter is a great idea, but I have found it to be fairly overrun by commercial entities that don’t need the money they raise via Kickstarter. Kickstarter has been very successful at raising money for small startups. So successful, in fact, that it is easy for the little fish in desperate need of help to be lost in the noise.
For the record, I should note here that I am one of those little fish. My campaign got off to a really strong start, but then it all just sputtered out too quickly and my proposal never got off the ground. C’est la vie.
I did try selling the first six chapters of Nobody as a novella. It was both a success and a failure. It succeeded because it sold like crazy and people really liked it. But at the price I offered it, 99¢, it didn’t raise enough money for me to cover all my expenses; I was unable to move forward on the project to bring Nobody to print as a full novel, which I consider crucial to the overall success of the series. (Sixty-five percent of books sold are print books, ebooks make up only thirty-five percent of the market. So Nobody is missing 65% of potential sales by being ebook only.)
I can say with all experience, being an independent writer can be difficult financially when getting started.
What can be done for independent writers to replace the advance?
The answer—in my opinion—is to turn back the calendar and bring back patronage. But do it with a modern twist.
Shakespeare, da Vinci, Mozart, and many others, were all supported by patronage. A wealthy individual, usually a high ranking nobleman, would pay the artist a base salary. The artist would be technically in the patron’s employ, and produce pieces of work for the patron as artist worked on other pieces of work. Having an artist brought prestige to the patron and thus the greater potential for the accumulation of status, wealth, and power.
Today's civilization was brought about by the Renaissance in Europe.  The Renaissance itself was powered by patronage, which supported the artists and thinkers who set the foundations for modern civilization, applied science and technology. I’m not belittling all the contributions that the multitude of societies in human history have brought to the human experience, but today’s civilization was strongly shaped by the rise of Europe out of the dark ages. (For those who would like to argue that point, by all means pull out your smart phone and send me an email about it.) Without the support of patrons, many of the thinkers who brought about the Renaissance would never have been allowed their “idle play” to pursue their ideas and thoughts. They would have been stuck working whatever menial tasks they were assigned.
The only way today a writer is going to get financial assistance is through an arts grant. As most art grants are for visual arts, there are meager pickings for writers. The competition is so fierce for what crumbs might be available, it is unlikely that many writers will get the assistance they need to get started.
Hence, my idea to bring back patronage in the form of an investment. That is to say, it isn’t money going just one way. The patron is making an investment in the work of the writer and therefore should be compensated in some manner.
First the downside: like any investment, this could go south and take the patron’s money with it. The biggest issue being that no one can really predict how well any given book will do in the markets. Hence my emphasis on patronage of the arts. The patron must recognize this is altruistic support of the arts and is making an investment on the growth of society. The investment-side of things comes about because I just cannot bring myself to take money from someone without the benefactor having some benefit of payback.
Naturally, you want to hit the potential benefactor over the head with starry-eyed predictions: imagine what would happen if a TV or movie producer became interested in the story? (e.g. Game of Thrones)
The investor buys in $X for a share of earned proceeds for a set period of time.
For me, $50K gets the investor a 25% share of proceeds for 2015, 2016, and 2017.
The benefit: Book 1 is already out. Book 2 will be released in September. Book 3 will be out in early 2015, Book 4 in 2016, and Book 5 in 2017. Book 6 might also be released in 2017. Each book magnifies the sales of the other.
The risk: there is no guarantee of payback. As mentioned above, it’s hard to tell why one book does better than another. All I can say is my future depends on the next year—that’s a helluva motivation for me to make things work.
Another issue is people prefer to buy multiple books in a story. As Book 1 is the only book out so far, sales have already petered out. I do expect the release of Book 2 should generate a strong surge in sales, but I believe it will be when Book 3 is released that the series really takes off. So the bulk of earnings won’t appear until 2016 and 2017.
Why $50,000? Because that is what I need to get caught up financially and to cover my costs for the next year. I need to hire an artist for cover work, pay for business filings and accounting, as well as paying for editing services. Also, the cost of printing the books. Sure I can go Print On Demand (POD), but I determined there is a lot more profit going directly to a book manufacturer and printing the books in small runs, by about 200%.
Why 25%? Because I figure I’ve made a $200,000 investment on this project in hours worked (using my last annual salary as a metric). So, $50K being 25% of that, the number seems correct to me.
Why just the three years? Because I figure that is how much time it will take for book sales to earn enough money to repay the investor $50K plus 20% for a total of $60K, even if the project only sells the minimum number of books I am projecting (10K copies per year). Also, I don’t like being in debt. I’d rather be able to do what I can to return the patron’s investment than have anything hanging over my head. I do not engage myself in lifetime deals. Even if I can only pay back $30K , at least I was able to return the bulk of the initial investment. I could possibly swayed to go with four years.
What’s the upside? I’m confident that readers will enjoy Aggadeh Chronicles. Based on how other, successful self-published authors have done, there is the potential that Aggadeh Chronicles could sell as much as 100,000 copies per book each year as the series matures. That could potentially earn the patron a payback of over $1 million. A $1M payback for a $50K investment over three years wouldn’t be too shabby.
If I do turn out to be that successful, I fully intend on creating a foundation to do just what I described above: to create a financial vehicle by which new, independent authors can receive true financial support while they are getting started. Pay it forward.
Would it really be that easy? Just put in an application for support and a five-figure check appears in the mail a few days later?
No. Of course not.
For me to support a writer in this way, the rules would be:

  1. The author has to have one book already self-published, on the market for at least six months, with X copies sold for that period.
  2. The author must hire a Certified Public Accountant to set up an incorporated business entity for their book selling and assist them with setting up the various business channels. The CPA will perform regular audits quarterly during the contract period. (This will greatly benefit the author in their career as a writer.)
  3. The book must pass an editorial review by a panel of readers and experts in the given genre of the book.
  4. There will be no required payback, however the author agrees that a 25% share of proceeds earned from their works will be paid to me as a share of their business for X number of years. The period to be determined by me as how long I figure it will take to make a profit.
After X years have gone by, the last payment is made and the author is able to collect the full earnings of their work and I have made a tidy profit (hopefully). 
Many of the independent writers with a more activist bent are calling on the publishing industry to change. My take is rather than try to change an already entrenched industry, why not simply move forward with a new business model for a new industry? The entrenched businesses will have to adapt as the industry changes.
Perhaps this could be a future for publishing? Self-published writers selling interest in their writing business to raise capital to get their writing careers off the ground. In addition to publishers and agents, we introduce the patron into the mix.
Instead of a 25% limited-duration stake, perhaps the patron might want a more longterm arrangement for 2.5%. Imagine collecting 2.5% from fifty successful, self-published authors over thirty years. One self-published author sold over four million books last year alone. Imagine what she could produce over thirty years in back list and new book sales. (For those who are calculator-challenged, that’s almost $33.5M to the investor, over $1M per year.)
The key thing to keep in mind, is investing in an author is not a quick-return investment. It takes time for book sales to grow. Yes, I am looking for help at this point, and if your interested in helping me, you can send me an email here.