How are Book Offers Made?

This week, I made an offer to an author to publish her book. She asked for two weeks to consider it. I asked her to get back to me by the end of business on Monday, which would have given her three business days, plus the weekend, to consider it. Because I was unwilling to give her two weeks, I don’t know that I’ll get to publish this book, and I think it’s worth discussing here the actual process that publishers go through in deciding to offer on a book and how you might respond to such an offer.

Do You Even Know What You Are Talking About?

For starters, as a publisher, I do acquire the rights to publish works directly from authors. Many publishers do not. There are a couple of reasons for this: Publishers use literary agents as filters. If a manuscript can get representation from a respected literary agent, chances are that there’s something worth reading there. Maybe not something the publisher will want to acquire, but not total drek, either. But Endpapers Press, which is a part of Author Coach, is a small press. We don’t pay what big houses pay, so getting submissions from agents can be a challenge.

The second reason is that publishing is full of jargon that most people may never have heard. When my wife and I watched Younger together, a TV show set in the publishing world, I laughed when they talked about a magazine publishing a chapter of the work before publication, instead of saying the magazine had bought first serial. They did this because, while the entire publishing world knows that first serial rights are the right to publish a part of the work before publication, the rest of the world does not.

When a publisher buys a book directly from an author who has never been published before, it becomes the job of the publisher to educate the author. This can take time and patience.

If the author has an agent, educating the author becomes the agent’s job. And since the agent is representing the author, authors tend to listen to their agents, whereas they might question what the publisher is saying and feel the need to research it. And the truth is, there’s a lot of incorrect information out there.

I once attended a panel at San Diego Comic-Con about publishing. No one on the panel worked at a publishing house, nor was there an agent on the panel. The number of incorrect statements being tossed around made my head spin. I had to leave, lest I stand up and shout out, “None of you know what you’re are talking about!”

The Submission

In a traditional publishing process, a book comes into an editor from an agent or perhaps directly from the author. The editor may reject the work based solely on the cover email. For example, if the genre is not one in which the editor generally acquires, or if the subject matter is simply wrong for the house. If the editor chooses to consider it further, they may start to read it or ask their assistant to be the first reader.

Let’s assume the editor reads it and loves the manuscript. What next? The editor may go to another editor in house and ask them to read it. If the editors often agree on things, this can be a good way to create some support for the book before bringing it up at an editorial meeting.

Generally, at the editorial meeting, if the editor-in-chief or publisher thinks the book sounds interesting, they will ask if anyone else wants to read it. Hopefully, you get some volunteers. In houses where assistants attend the editorial meeting, this can be a real opportunity for them to step up and participate. Everyone’s opinion counts when it comes to being a reader. You like or you don’t.

So let’s say three editors volunteer to read the book, and the next week each comes back and sings its praises. What happens next?

Calculating the Advance

At some publishing houses, editors may be asked to run a P&L—profit-and-loss estimate—on the book, using different prices, page lengths, and royalty rates to determine what an appropriate advance might be. The editor will be given sales estimates, also, to see what happens if the publisher buys the book, typesets it so it’s 384 pages, sells it at $27.00, and ships 15,000 copies with a 50% sell-through, i.e., 50% of the copies shipped aren’t returned. An editor can do this by hand, but today publishers have elaborate systems that can include many more variables such as type of paper and the cost of that, set-up fees at the printer, etc., to determine much more accurately what the appropriate advance might be.

Of course, much of what the publisher is doing is guesswork. Print runs are driven by orders. If a publisher has orders for 10,000 copies, it will print enough to fill those orders and perhaps extra in case of early reorders. But if the orders are for 10,000 copies, it certainly won’t print 50,000 copies. And no one knows the orders until the salespeople start selling the book to accounts.

Publishers have certainly guessed wrong, overpaying massively for books that didn’t sell. But plenty of best-selling books were acquired for very reasonable sums of money and far, far exceeded the expectations of the publisher.

So, assuming the P&L turns out some advance numbers that make sense, the editor will be authorized to make an offer of a certain advance or authorized to offer up to a certain number. If the editor chooses to go in low and try to get the book for less, that’s a valid strategy. It can leave the agent or author feeling like a winner if they talk the editor into offering more, while the editor knows they are still in safe territory.

Now let me pause and tell you that there are certainly editors at a certain level who do not go through this process. They may be executive editors or they may have their own imprints and as such have the authority to offer on books up to a certain level without anyone else authorizing them to do so.

The Offer

So the editor makes an offer. That offer may be on the phone or by email. Either way, there are generally not a lot of details. Usually it’s advance, payout, territory, splits, royalties, word length, and proposed delivery date. Any agent can make an informed decision on an offer based on this. Some may ask some additional questions, such as is the publisher offering any best-seller bonuses? An agent might ask if the editor would consider making this offer a “floor,” so that the agent can run an auction. But, generally speaking, this is about it. Everything else can be hammered out in the contract negotiation.

So how does this go down?

In an email, it might be as simple as this:

Dear [Agent]:

Thanks for sending along [TITLE] by [Author]. We really like the book and I’m excited to be able to make you the following offer:

Advance: $10,000, payable ½ & ½

This means half on signing of the contract and half on delivery and acceptance of the manuscript; some publishers want to pay on a different schedule, limiting their cash flow.

Territory: World [this means world rights, all languages] with splits of 80/20 UK and 75/25 translation

This means the publisher will acquire the rights to publish in all languages and if it licenses UK or translation rights to British or foreign publishers, the author will receive either the 80% or 75% of any advance and royalties, which will be applied to their US advance until that advance earns out.

Royalties: Standard hardcover; 7½% straight trade paperback; 8%-150M; 10%TA.

Every agent knows what this means, but every author does not. All of these are based on retail list price, even though that is never mentioned. “Standard hardcover” is 10% of the retail list price to 5,000 copies sold; 12½% to 10,000 copies sold; and 15% thereafter. The trade-paperback rate is a flat rate with no escalators. Some publishers start at 6% and escalate to 7½% at 20,000 copies sold. The mass-market rate is 8% until 150,000 (yes, that’s right) copies sold, and 10% thereafter.

E-Book 25% of net; Audio 10% of net.

These rates are based on net and a smart editor makes that clear, so as not to mislead the agent or author. If a book is $25.00 and sold at a 50% discount, the hardcover royalty is $2.50, or 10% of the MSRP. If the E-Book is $14.99 and sold at a 30% “commission” under an Agency Model, the publisher’s net is $10.29 and the author’s royalty is 25% of that, or $2.62. Since most E-Books are sold by Amazon and under an Agency Model, the publisher receives 70% of the sale price, which is set by the publisher and not Amazon. Smaller publishers cannot get an Agency Model and are likely “selling” E-Books to Amazon at a 55% discount, meaning they net 45%. Small publishers using Kindle Direct Publishing get 70% on E-Books, but the price can be changed, even without their permission. It may be worth asking if the publisher sells under an Agency Model, but 25% of net is nearly written in stone at most houses.

Word length, i.e., how long the final manuscript will be.

Ever change the font and margins of your English paper to make it longer or shorter? Authors can do the same thing. Back in the age of typewriters, almost everyone used a Courier mono-spaced font and an average of 250 words per page was typical. Now, the type and spacing are easily manipulated, so word length is more important than ever. But what is a “word?” Is the word length what Microsoft Word says it is? Not for old-school publishers. I use five characters including spaces as a “word,” but you can get far more complicated and publishers do when they are working on P&Ls: they do cast-offs: https://www.bookmobile.com/art-book-printing/how-many-pages-will-your-book-have/ Most publishers’ contracts do not specify how they calculate word length, which may or may not be to the author’s advantage.

Due date, i.e., the date that the complete, revised manuscript will be delivered to the publisher.

I’d bet that 99.99% of first novels are sold as complete manuscripts. The odd exception may be a celebrity who has never written a novel and only has a “treatment” of what it could be and a chapter or two. And the publisher acquiring the rights to publish your book has no intention of publishing the draft they just read. There will be notes for a rewrite from your editor, there will be line editing performed by your editor, and there will be copyediting, done by a freelance or possibly in-house copy editor. The due date is the date by which you are expected to have completed the revisions based on your editor’s notes. Line editing and copyediting come after. The best way for me to explain “acceptance” is that this takes place when the editor feels you have successfully executed all of the requested revisions or that you can’t, and the editor will have to do more in line editing. Either way, you are done revising and rewriting and can be paid the amount due on delivery and acceptance. The rare publisher waits until after copyediting is complete and you have signed off on it.

The one exception is if the editor feels you did your best, but the book still needs a ton of work. In a sense, this is the fault of the editor, for buying a book that was so far from ready, but that won’t make you feel any better when they call up to reject your book and ask for the signing payment back. The odds of that happening are pretty slim. In over thirty years in publishing, I’ve seen one manuscript rejected and that was due to it being too long and the editor was unwilling to work with the author to cut it.

We’re very excited to be making this offer and look forward to working with the author. Please let me know of your acceptance of this offer and I’ll get a contract going.

Now, that’s a little ambitious, don’t you think? The editor expects the agent or author to accept the first offer? Unless the offer is so outstanding or the book has been turned down all around town, first offers usually result in counteroffers.

The Counteroffer and Other Shenanigans

Offers also result in agents anxiously calling anyone else who has the manuscript and letting them know they have an offer. In short, they begin “shopping” the offer, hoping for a better offer or to pit one publisher against another in a bidding war. If there is a ton of interest, the agent might set an auction date, giving the first offering editor the chance to set a “floor,” or minimum bid for the book. But that’s not usually the case. Usually there’s just a counteroffer.

But it’s this shopping of the offer that generally leads publishers to press agents and authors for an answer quickly. They want to know the deal is done and get to work on the next steps. Waiting more than a day or two for the agent to get back with acceptance or a counteroffer is almost a sure way to end up in a bidding war.

Or, for the agent, it can be risky if they can’t get a counteroffer. Imagine if an agent took a week to get back to me. I’m an editor working for a publisher. Agent comes back a week later to accept the offer or counter. I may simply say, “Listen, you took a week to shop my offer to other publishers and you got nowhere, so my offer stands as it. So take it or leave it.” In my experience, almost every agent or author will take it.

So, it makes sense for an agent or author to counteroffer early on. That might not stop them from shopping the offer to other publishers, but at least they are keeping the iron in the fire and not cooling on the side.

A counteroffer might be looking for more money, a smaller territory that allows the agent to retain UK and/or foreign rights to the book, thus ensuring 100% of the advance and royalties on such editions go to the author (after the agent’s commission, of course!). It might be looking to retain audio, though several major publishers now consider getting audio a dealbreaker. The word length might be negotiated or the due date. The payout might be negotiated. Some publishers insist that one-third be paid on publication of the work. If the book was bought without a manuscript, e.g., a writer-for-hire of a media tie-in novel, one payment may be on D&A of the outline of the work. The permutations can be quite varied, but if you can get ½ and ½, that’s probably the best you can get.

The Acceptance

So, after probably two or three days of offers and counteroffers—though often less—the editor and agent or author have agreed on these basic terms: advance, payout, territory, splits, royalties, word length and due date. So you are done, right? No, because there still isn’t a contract. At best you have a deal memo that is contingent on signing a contract. While publishing tradition is that you now have a deal, and the book will be withdrawn from submission elsewhere, this deal can still fall through based on the contract. This is, in my experience, very rare, and here’s why: most authors won’t risk losing the deal. As an agent, I have had only two authors ever refuse to accept a contract and both times it was because the publishers wouldn’t give the author approval over the copyedited manuscript, thus not ensuring the author they would have final approval over the text of their own work.

Now, I’ve written over 2,500 words here (2,800, if you count words old-school), and I could probably write another 20,000 or more on negotiating an actual contract, so I will end here.

Hopefully, this has given you, the first-time author, a better sense of what goes into receiving, negotiating, and accepting an offer on your novel.

Good luck!