Blogger: Rachelle Gardner
Today I want to explain some publishing terms that sometimes get confused: sell-in, sell-through and earn-out (and I’m reluctantly throwing in returns at the last minute.)
SELL IN: This is the number of copies ordered by retailers (or any other entity) prior to publication of the book. Sometimes this number is called the “lay down” and you’ll hear publishing types say things like, “What was the lay down?” The number tells you how many copies are available to consumers on the day the book first goes on sale. The sell-in figure helps to determine the initial print run.
Of course, the publishing industry has this lovely little tradition called returns* so the sell-in could be just the beginning of your skyrocketing sales figures… or it could be an optimistic early indicator of your book’s success, only to be annihilated by reality, otherwise known as:
SELL THROUGH: Also known as “net sales,” this is the number of books consumers actually purchase. The number is calculated and recalculated over the life of the book, and always takes into account the returns to-date. Sometimes you’ll hear people say things like, “The sell-in was terrific but the sell-through was disappointing.”
So to simplify:
Sell-in refers to the number of books placed in bookstores.
Sell-through refers to the number of books consumers carry out of bookstores.
EARN OUT: This refers to whether or not your book sold enough copies for you to earn back the advance you were paid by the publisher. To use this term in a sentence (verb form): “Did your book earn out?” Or to use it as a noun: “What’s the earn-out on that book?”
Keep in mind that the earn-out does not determine the publisher’s profitability on your book.
*And what’s the deal with returns anyway?
Basically the deal is that “returns” are one of the most lamented aspects of the publishing industry, blamed for everything from making it difficult to have a profitable business to climate change to the popularity of Donald Trump. (Okay, maybe not those last two.)
Bookstores can return unsold books to the publisher and get full credit on their account. This is why your sell-in is one thing, and your sell-through is something else entirely. If your book is doing well, the bookstore will sell out and order more. If your book isn’t selling, the bookstore can package it up and send it back.
The tighter a bookstore’s finances are, the quicker they’ll send back a book. Some bookstores will only give a book a month on the shelf to show some significant sales (however they define significant) and if it doesn’t measure up, back it goes. In tough times, bookstores occasionally return books for credit rather than paying their bills with actual money, setting into motion a devastating financial spiral for many publishers (who actually need cash to run their business, not a warehouse full of unsold books).
Of course, one of the unsung advantages of e-books? No returns.
Any questions about these very exciting publishing terms?
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* Sellin’ – that’s what ah’m fixin’ ta do
* Sell threw – hopin’ someone’ll bah the stuff thet got remaindered
* Earn out – weird way of sayin’ Earnhart, but ol’ number 3’s drahvin a stocker fer God
* Returns – ah alwiz plan on returnin’ here, cause that’s whar I gits mah ritin’ smarts.
Andrew!!!! Bahahaha! Yourn kin folk must hale from my neck o’ the woods.
*Rachelle, Very enlightening, thank you. Industry speak is confusing and so I guess the salutation, “Many happy returns” is not something you want to hear.
It’s in honour of my late mother-in-law, Jean Schmeisser, a wonderful Southern Belle who would have needed just a word or two to lay low the whole Philistine army. She embodied grace, strength, and rapier wit. I loved her, and still do.
Love your response, Andrew! Made me smile!
Thanks, Jeanne!
Totally made me laugh, Andrew!
Thanks, Rachelle!
It’s always good to know publishing terms. On be thing I hadn’t considered was what you said about the publisher’s profitability not being tied to whether or not an author earns out their advance. Will you explain this a little more? 🙂
Hi, Jeanne! I can speak to that to some extent from a published author’s point of view.
When you get a publishing contract, it will stipulate terms for the purchase of your book. One of those terms is the advance, which the publisher very carefully calculates based on the perceived marketability of your book (unless it goes to auction, in which case that’s a whole other animal). The other important contract terms that your agent will negotiate for you are the royalty rates for each format of your book (hardcover, paperback, ebook, etc.).
Those royalty rates kick in at the first sale of your first book once it’s released. That means for every book sold, you’re getting 10% of the cover price (or 7.5% or whatever your contract says for that format). That 10% that you earn for each sale goes back into the publisher’s pocket until the accrued dollar amount from the 10% of each book sale equals the advance they paid you. After that magic “earn-out” point, you’ll receive a check for 10% of each book sale going forward as your royalties (usually calculated and paid to you once every six months–for the Big 5 pubs at least, smaller presses are often different).
Meanwhile, the other 90% of each book sale, starting from day 1, goes to the publisher to cover operating cost and contribute to profit margin. So once the printing costs, editorial costs, marketing costs, etc. are met, the rest of the 90% is pure profit for the publisher, even if they’re still paying 10% of each book sale to you to earn out your advance.
Hope that makes sense!
Well, you just saved me a boatload of time, Mary Elizabeth. Thank you!
Thanks, Mary Elizabeth! That makes sense. 🙂
Thank you for this post, Rachelle. I would love to see more like it. And what happens if an author’s book doesn’t make enough to cover the advance? As an author, is it prudent to set aside any advance until certain that those funds are covered? Publishers can claw those funds back, right? NLBH
Hello, there! Published author here chiming in to answer your question. The only time I’ve ever heard of a publisher asking for their advance back is if the manuscript was never delivered (and even then, it’s pretty rare). An advance is a payment to the author for the right to publish their property in whichever territories the contract stipulates. If you deliver your manuscript to the publisher, they pay you (usually in installments) and they then have no right to that advance money, because you delivered on your contractual obligations. In other words, generally speaking, the answer is No, a publisher cannot rescind their advance due to poor sales. That advance is yours to keep no matter what!
Actually, I just thought of a time when you might potentially pay back an advance. If a publisher gives you an advance for a manuscript and then cancels the contract (this doesn’t happen often, but it does occasionally happen), all the rights for publishing the book revert to you again. Then your agent can sell your book to a different publisher. IF the same book you received an advance for sells to a different publisher (who then gives you another advance for the same book), the initial pub who canceled the contract may have some grounds for asking you to pay back the advance they gave you. I’m not sure about all the legal intricacies of that, but a good agent (like Rachelle!!) could help you navigate that.
Thanks for the response, Mary Elizabeth. As publishing bends and sways as a result of the industry changes, I’m trying to remain aware.
NLB, publishers would LOVE to have a clause in their contracts specifying that the author has to pay back the advance in the event of poor sales. All I can say is, not on our watch!
Thanks for the response, Rachelle. I’m just trying to keep the piles all neat and tidy. : )
“EARN OUT: This refers to whether or not your book sold enough copies for you to earn back the advance you were paid by the publisher.”
What happens if you don’t earn back the advance? Do you pay it back? Do authors hold on to the money, just in case? I assume the advance is money given to live on … for maybe those authors who do well enough to make a living off their writing?
What about authors who need to use the advance for research to finish their MS? I too have wondered if it would be “safer” to bank that advance until you “earn out.” How horrible to have your book not only tank, but then to owe money on it. Ack. I need more coffee with an extra shot of cream.
Hi, Lara! No need to worry about banking your advance in case of your book tanking. You should never need to pay it back to the publisher unless you don’t deliver the manuscript. If you fulfill your end of the contract, then you’ve done your part and that advance money is rightfully yours. 🙂
Everything depends on your individual contract, of course, but in general, the advance is yours to keep. Unless you happen to violate your contract terms, in which case, yes, they can demand you pay it back.
Hi, Shelli! I answered your question in a reply to NLB Horton above, if you’re interested. Generally speaking, the answer is No, a publisher can’t take back the advance they pay the author as long as the author delivers on his/her contractual obligation of providing the finished manuscript.
Oh, wow … that is surprising. But good to know. They are definitely taking a risk on the writer by offering an advance. That’s interesting … and makes me appreciate them even more.
If authors had to pay back unearned advances as a rule, then a high percentage of authors would be paying back advances. Luckily, that’s not the case. Everything depends on your individual contract, of course, but in general, the advance is yours to keep. Unless you happen to violate your contract terms, in which case, yes, they can demand you pay it back.
Earn out — sounds like paying off a credit card. Or not.
* I’m OK investing all of myself in my book. For me it’s not all about the money, but publishers are in business to turn a profit. It’s not wrong to think of my book in financial terms. It is different.
* Thank you, Rachelle, for the reality check.
Interesting, Shirlee. It IS kind of like paying off a credit card! The publisher is “advancing” you the money you expect to earn in royalties, similar to a credit card company “advancing” you some money to go on vacation. 🙂
These terms also serve the purpose of making new authors, like myself, feel intimidated! Just kidding … but not really.
Thank you for your post, Rachelle.
Thanks for once more explaining part of the industry to us, Rachelle. I do have a quantitative question (as you might expect). What would be a typical number of books that have to actually sell to readers for a fiction author to earn out an advance? I realize this could have a wide range, so what would the numbers be for a debut author?
Figure you’ll be earning $.80 to $1.20 per book sold (although it can vary). So, average it at a buck a book.
How many books at that royalty would you have to sell to earn back a $5,000 advance? A $15,000 advance? A $40,000 advance? Do the math. I’m waiting. 🙂
Average of 0.8 and 1.2 is 1.0. That makes number of books equal number of dollars. Easy peasy even for mathaphobics. Thanks for the numbers!
You’ve made me curious. When a publisher touts an author of theirs with tag lines like, “Over 2 million sold” … are they claiming 2 million copies have been “sold-THROUGH” … or are they getting their figures from the initial sales without taking returns into account?
That’s a very interesting question.
Stephanie, anybody can say whatever they want when they’re trying to promote something, as you know. First, we have no way of knowing if those figures are true. Second, they’re clearly CLAIMING those are sell-through numbers, i.e. 2 million people actually bought this book. But they’re probably actually counting sell-in. Or, they’re just playing fast and loose with numbers. Who knows.
I wondered about that. Thank you for confirming the fact that this really is a confusing business LOL. I’m thankful for Books and Such to navigate those confusing waters!
Beware promotions that laud an author’s, “Books in print.” They may very well be in print in a warehouse somewhere.
Rachelle,
Thanks for clarifying terminology. It is more helpful than you know!
Thank you for defining these terms, Rachelle. From the look of these comments/questions, you’re going to need to write a part 2. Good questions, everyone!
There are several bargain stores that will carry new, Christian fiction books. The books are usually 1/2 or 1/4 of the cover price. Are these the books that have been returned, unsold to the publisher from the bookstores? Is this where the publisher tries its best to make certain their warehouse full of books gets sold? A step further. Does the author and publisher actually make money on these bargain books?
Bargain books are usually “remainders” which neither the publisher nor the author makes any money on. I explained remainders on my blog: http://www.rachellegardner.com/what-are-remainders/
Thanks so much, Rachelle! Even as a published author, I’m still constantly learning new things. I’d never heard of the term “sell-in” before, and I only had the vaguest notion of what the term “sell-through” meant. Thanks so much for taking the time to blog about this stuff! I always find your posts immensely helpful and usually exactly what I need to hear at that particular moment in time–it’s like you’re in my head! 🙂
Thanks for explaining that Rachelle – also on the remainders, I wondered how that worked (so many business-bits in publishing). I’ve had some experience in books that I have illustrated, often splitting the advance and royalties with the author. When my books when out of print, I was offered a stack at a low price (which is why I have stacks in my studio) – but I didn’t know how it worked with remainders.
And hence the great name for that Stephen King band – the Rock Bottom Remainders.
Re: Stephen King – exactly! I always wonder how many people have heard of his band but have no idea what the name means. 🙂
I love reading your blogs. 🙂
Wow, Rachelle and everyone, great answers! Thanks for clearing the muddy waters of publishing terms.
Rachel, thank you for the info. It really says that an aspiring author better do a good job, make sure your work is more interesting than the competition. I have gone through a bad patch, stopped writing for a while, but your blogs are a help for me to get back in the groove.