An Author's Account of How Authors Get Paid

Taylor Stevens, who wrote The Informationist, and who I have quoted in the past, has given a detailed account of how she gets paid for the sales of her books and how she can monitor whether the publisher and literary agent have been honest in their accounting.  I found it to be fascinating.  Here it is.

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I recently received the following question: Q: I find your “business of writing” emails fascinating. So many published writers start blogs about writing techniques, but being a former businesswoman, I am intrigued by your angle. I have questions about how the accounting works between publisher, agent and author: Do the checks that a writer receives come from his/her agent? Or the publisher? Or someone else? In other words, does the publisher pay the agent, who then takes his/her cut, and then forwards on the rest? If that is the case, does the writer have any proof that the agent is completely honest? Does the writer know exactly how much the publisher pays the agents? I'm sure most agents are above board, but if there is no oversight, this could become mighty suspicious. A: Excellent questions! Publishing is definitely mired in murky accounting—there seems to have been a perpetual outcry over this since writers began scribbling on cave walls. Generally speaking, though, the murkiness lies with the publishers themselves. Outside of an external audit (and authors do have the right to call for one if they feel they are being cheated, but that is a double-edged sword, opens a whole other can of worms, burns bridges, and many more metaphors for might-not-always-be-the-best-idea) both agents and authors have to take it on faith that the publisher is accurately accounting for number of books sold. This is even more pronounced when it comes to eBooks and digital audio. From what I’ve heard among the industry professionals, it’s the general feeling that publishers do notdeliberately cheat when it comes to reporting book sales, but there are tremendous time lags (again with eBooks this is especially pronounced) and yes, there are mistakes. The good agents are experienced in sussing out the inconsistencies, and I know that every royalty statement I receive is combed over for anomalies at the agency. Once the money actually leaves the publisher’s hands, it’s a whole lot easier to keep track of. Do the checks that a writer receives come from his/her agent, the publisher or someone else?This depends on what is stipulated in the book contract, and this may be predetermined by the author’s contract with the agency. [Side note: Not all agencies require the authors to sign contracts—at least mine doesn’t—my agent simply let me know what their terms were—which were quite honorable by industry standards—and that was that.] The two basic ways that the money division can be done is for the publisher to send the agent’s portion to the agent and the author’s to the author according to the percentages spelled out in the book contract, or they can send it all to the agent and let the agent take care of what happens next. My contracts call for it to all go to the agency, which then cuts me a check for the total minus commission. From a business perspective (if I were an agent) that’s what I’d want to see done, as it allows the agent to stay on top of everything. I am fortunate because my agency is very fast in their turn-around time and usually has a check to me within days of having received payment from the publisher. I don’t think it always works like that, though it should. Does the writer have any proof that the agent is completely honest and does the writer know exactly how much the publisher pays the agents? Yes, and yes—at least as it pertains to dealing with the big five—I don’t have any experience in dealing with a smaller press, but I assume it must work similarly. The author gets paid in two ways: a) When a milestone in the contract has been reached (contract, delivery/acceptance, publication, etc.), at which point the author already knows the total amount s/he will be receiving so there’s no question there. And b) Royalties after a book has earned out. In the case of royalties, these payments are always accompanied by a statement that breaks down exactly how many books were sold and for what price and at what percentage to the author, what foreign rights at what percentage, etc. etc. One of my recent royalty statements for INFORMATIONIST totaled 9 pages of this type of detail. The statements can take a little while to decipher, but considering the level (depth?) they go into, they are actually very straightforward, and the one thing that is very clear from the very first page is how much money the check is for. So basically, the author always knows how much money has gone to the agent. Even if there is no money involved (the book hasn’t earned out) these royalty statements still account for all of the print runs and sales, so you can keep track of where you stand.