Making Brass from Books: More chips than caviare

Last month in a draughty Essex town hall I spoke to 60 writers, some published, some just starting their manuscripts and others waiting for their agent to get back to them. Part of the Essex Book Festival, the talk was called "The Business of Writing", and as I looked out at the eager faces in the audience one piece of advice crossed my mind. It was a warning repeated to me by publishers, agents and established authors with mantra-like regularity: "If you sell your first novel, whatever you get for it, don't give up the day job."

It is unlikely that even five years ago there would have been the same level of pessimism, but in the past three years writers have felt the full impact of the end of the Net Book Agreement (NBA), which had protected them from the effects of retailers' use of price to win market share.

Back in 1996 the fears surrounding the death of the NBA concentrated on deep discounting of books by the supermarkets and the belief that, if retail practices more usually associated with beans were used to promote books, their cultural value would be undermined. Exposure to 40 million Tesco and Asda customers a week comes at a very high price: trade discounts of up to 65 per cent off the cover price and bungs upwards of £40,000 to pay for merchandising on top of beefed-up marketing and publicity. The traditional chains and burgeoning internet booksellers have also upped their demands. As a result, publishers have been forced to protect their profits by reducing costs throughout their businesses. At first this meant redundancies, consolidation and cutting production costs. But such have been the rapacious demands of retailers that publishers have been forced to save money on the riskiest part of their business: books. That's why authors are feeling the pinch.

Midlist authors who had sold in steady but unspectacular numbers felt the impact first. Their sales were undermined by the decline in library budgets. Once sales to these institutions fell away, they became far less attractive to large publishing houses, the economics of which make small books that sell in the few hundreds unsustainable.

Large publishers scythed through their lists. Between 2002 and 2004 HarperCollins cut its lists by 20 per cent, and MD Amanda Ridout announced a further 20 per cent cut over the following three years. Time Warner's list halved from 600 titles in 1999 to 380 in 2005. Penguin, Random House and Pan Macmillan also wielded the knife. It is an irrevocable change reflecting the need to concentrate more resources on fewer titles that (in the eyes of powerful retail buyers) are capable of delivering instant chart success.

"The market has shrunk dramatically," says agent Luigi Bonomi. "Advances are either very big or very small with nothing in the middle." Orion paid £800,000 for Diane Setterfield's The Thirteenth Tale; but according to the Society of Authors, the harsh truth is that the average advance rarely climbs above £12,000 for a two-book deal, and authors' annual incomes are under pressure - the average author earns less than £7,000 a year.

Andrew Lownie spells out in stark terms the impact on his clients. "In 2003 I sold 27 books in the UK with an average advance of £52,592. Last year the total was 27 titles again, but the average dropped to £31,070." In terms of first books and repeat contracts, Lownie quotes some bleak figures, which reflect those told me by more circumspect agents.

"Eleven books last year were first books, a further 16 sales were to authors who had just joined the agency and only 11 new contracts were for existing authors," he explains. "This compares to six first books, five books by new authors and 16 new contracts for existing authors in 2003 and four first books, 10 books by authors new to the agency and 13 contracts for current authors in 2004. I leave you to deduce what trends you can from these figures," he adds wryly.

Lownie's comments reflect the topsy-turvy nature of the UK market in 2006. Where once it was a given that when an author had a foot in the door they could sustain a full-time career through their income from backlist sales, now they face a struggle if their sales fail to live up to expectations, or if their next book fails to sell at least 25 per cent more than the previous one. In this brave new world, debut authors are having an easier time - although claims that it is easy for an unknown to be published are exaggerated. Agents complain they sell fewer fresh faces now than before, although the handful sold earn far higher advances.

The blame for this neophile culture lies with Nielsen BookScan, which provides publishers with actual sales data and a mechanism for measuring whether previous advances "earned out". Penguin Group MD Helen Fraser says lower advances reflect a necessary realism. "With everybody you're offered, the first thing you do as a publisher is check BookScan to see what their last book sold. Now an author paid a lot of money for a three-book contract five years ago is faced with publishers being able to look objectively at their sales. If they haven't performed to expectation the publisher can say we paid £200,000, but your books only sold enough to pay back £80,000, so that is what we are willing to pay for your next advance."

It is a disingenuous comment, because the new realism is weighted against established writers, though Fraser maintains publishers remain willing to pay more for authors' break-out books. While no one would deny publishers have a right to adjust their advances to reflect sales, there is an uneasy silence when they are asked about cutting advances for established writers.

The accuracy of BookScan has created a scenario in which established authors are judged by their past, whatever the nature of their new book, and debut authors, who by their very nature have no sales record, are judged by their potential. Consequently, they are more likely to hit the jackpot when their book is auctioned. A book by an author unsullied by "failure", who looks likely to wow Waterstone's or Tesco, inspires a reckless confidence in publishers and a bidding war breaks out, especially if it looks likely to hit the target with the hugely influential Richard & Judy Book Club, which can lift sales by 100,000 copies in a week. This is why over the past year record advances have been paid for a string of debuts of which only a handful can hope to earn back, while established authors have been forced to accept less or be dropped.

But the simple fact is that in their desperation to find obvious hits, publishers are over-estimating the sales potential of too many first books and TV tie-ins, and setting authors up for early disappointment that marks them as failures because they did not earn back.

It is a cruel fate, because failure to earn back is not necessarily a sign of poor sales, as Antonia Hodgson, publishing director at Time Warner, points out. "It is all too easy to take the big money, but what if the book doesn't earn out? An author might sell 80,000 to 90,000 copies of their debut, which is a very healthy sales figure, but because they received such a massive advance, it is seen as a failure because it didn't earn out."

Of course, publishers are not solely responsible for inflated advances: agents carry a large part of the blame for auctioning books for more than they could possibly hope to earn back. Am I alone in detecting a level of cynicism - or even pessimism - in agents whose reputation seems to rest on selling debuts for high advances that will never earn back? Such a policy implies they feel it is best to make as much money as possible up front because the odds for their author lasting beyond a handful of titles are not good.

An author who fails to match expectations will be judged by retailers, press and rival publishers as a disappointment and may carry the stigma of failing to deliver when their next work comes on the market. Far better to take less money from a publisher who shows real vision for your career as a writer and offers ideas on how to build you as a brand rather than a one- or two-hit wonder.

Not earning out is a blow to an author's confidence, says Hodgson. "If you start off with a £200,000 advance and then drop to £100,000 for the next book, even though it is a lot of money, it seems like a failure," she explains. It is a danger the author Elizabeth Buchan understands only too well. "When I wrote Consider the Lily I was wooed by a publisher and it looked like I was going to be earning quite a lot of money," she recalls ruefully. "But the books didn't do at all well." Buchan was lucky. She swapped agent and moved to Penguin, which was undaunted by her track record. Their fresh input helped turn Revenge of the Middle-Aged Woman into her break-out book and launched her not only into the charts but into the international market.

Researching this piece, I had some bizarre conversations when I asked editors if advances were lower. "No, absolutely not," said one after another. "But are you demanding more rights?" With a shrug they answered, "Well, yes, of course. But we aren't paying less."

Advances are indeed being cut, observes the agent Clare Alexander, president of the Association of Authors. "Certain publishers are trying to bring advances down but they are not necessarily doing it by offering less, but by asking for more when they acquire rights in a book."

This is a serious blow for authors' potential income. Whereas an agent previously could expect to sell UK and Commonwealth rights to a British publisher for, say, £30,000 and then make a profit by selling US and Canadian rights and bundles of foreign, film and audio rights separately, that £30,000 will cover world rights thus seriously reducing their income. Sometimes more money is on the table, but it rarely matches the amount lost from ancillary sales.

Suddenly the figures written up in newspaper reports appear less dramatic, especially when measured against the time it takes to write and publish a book. Advances have long been structured in a way that, when analysed, makes the amounts reported far less spectacular than at first appears, and certainly makes writing as a career far less lucrative than film or music. Usually they are based on a two-book deal, and the full amount is paid over the time taken to deliver both books. An author will receive a third on signature, a third on delivery of manuscript and the balance on publication, or when the second book is delivered, if the first book failed to earn back the advance. When the headline-grabbing £100,000 deal is broken down to £35,000 paid over three years from pitch to publication, comparisons with lottery wins are inappropriate.

Elizabeth Buchan points out that advances include an agent's fee of 15 per cent, up to 40 per cent in tax and other costs. In other words, of a £100,000 advance less than half can reach the author.

The Faustian pact struck between certain retailers and publishers means that increasing numbers of authors are finding their earnings under threat, not least because increasingly royalties are calculated on trade price, not cover price, to reflect the level of discount offered retailers. That means if a supermarket discounts a £6.99 paperback to £3.99, the author will receive 7.5 per cent of £3.99 not £6.99 on sales through that outlet.

It also means even more copies need to be sold before a book earns out. "I know a historian who also writes novels, whose last book has still not earned back its £15,000 advance even though it has sold 40,000 copies, because his books are being sold at such a high discount," historian Antony Beevor fumes. "When you consider the amount of time it takes to write the book he would be better off working the till in Sainsbury's."

No one spoken to for this article could see the situation changing. But, as agent Heather Holden Brown points out, that may not be such a bad thing. "I think that the best books are often written within the pressures of daily life," she enthuses. "What is happening more is that creative writing courses are promulgating the idea that you have to be a professional writer, but that is not true and it is increasingly hard to be."

Writers unable to make a living off their books should not be discouraged, she says, warming to her subject. "I can think of endless examples of people who get up early and write before going to work. They are engaged in life and producing better work as a result. Just think of Trollope, it is what he did. And if that is what it can do for your writing, then I don't think you should ever give up the day job."

It is a piece of advice to encourage all writers faced with a market increasingly divided between the haves and the have-nots - and a reminder that writing should always be about more than money.

Earning pen-money: how to make ends meet

"A community policeman earns £32,000 a year, which looks pretty attractive to me," jokes writer Mark McCrum when asked about authors' earnings. More seriously, he adds: "The world does not owe us a living, but it is getting harder: freelance rates have not gone up for 10 years." McCrum supplements his income with ghostwriting - he ghosted Robbie Williams' Somebody Someday.

Ghostwriters receive either a flat fee - say £12,000 to write a minor celebrity's memoirs - or a percentage share of the advance and royalties, up to 50 per cent. Non-celebrity projects - those involving specialists, such as scientists or TV chefs - offer a mixture of a basic fee plus £200 a day for every day on the project.

Authors subsidise their writing with a portfolio of paid work that can include journalism, teaching and editing. A quick glimpse down the Society of Authors' list of recommended fees reveals why writers are keen to join the creative writing circuit. A lecturer should expect £250 for a full day and £150 for a single session, says the SoA, while a week teaching on a residential course can earn a writer £1,000. School visits, an important income stream for children's authors, earn £150 a day or £100 for half a day; a similar amount is paid for speakers at literary festivals.

The golden goose for most is a regular column in a national newspaper. One columnist earns £3,000 a week for her column, and, though she writes it, it is said "she needs some help". But don't get your hopes up: competition is fierce. Being a good writer doesn't matter: being a Z-list celebrity (like her) does. Unless you become a regular in the gossip columns you're unlikely to have the same pulling power.

That's the way the money goes...

ON A £20 HARDBACK

An average of £11 goes to the bookseller/retailer 55%

£2 goes to the author (the royalty for authors on hardcovers will rise to 15%; but as high discount clauses kick in it is safe to average the author royalty at 10%).

The cost of producing the book will be about £2 10%

The cost of distribution will be £1 5%

An average of 50p will be spent on promotion 2.5%

The remaining £3.50 pays the publisher's bills and wages ( 10%), plus stock and royalty write-offs, which average out at £1.50 7.5%

ON A £6.99 PAPERBACK

An average of £4 goes to the bookseller/retailer 57%

52p goes to the author (an average 7.5% once high discount clauses counteract the rising royalty scale to a 10% royalty or more)

The cost of production will be 50p 7%

The cost of distribution will be 70p 10%

The cost of promotion will be 35p 5%

The remaining 92p ( 13%) pays the publisher's bills and wages, although once again you have to take into account stock and royalty write-offs: basically, the retailer gets £4 of the total and the publisher divvies out the other £3 on such a book.

DANUTA KEAN is guest editor of Mslexia, the magazine for women who write. This is an edited extract from the cover story of the latest issue (April-June). Also featured in issue 29 are Carmen Callil, Bernardine Evaristo and Jill Dawson.

Mslexia is available in some good bookshops; or call 0191 261 6656 or visit the website: www.mslexia.co.uk