Charles Petzold

Like many authors, I had to be briefly hospitalized upon learning that Sarah Palin was paid a $1.25 million advance for her memoir "Going Rogue." But what really puzzled me was the description in the press of this amount as a "retainer."

I've never heard the word "retainer" used in connection with book publishing. Apparently, this is the word Ms. Palin used on the financial disclosure statement rather than the more customary word "advance," and the New York Times suggests that the $1.25 million is only part of her advance!

Some people may not be familiar with advances (and other details about how an author is paid for writing a commercially published book) so here's an author-centric view of the deal:

A book contract is between a publisher and an author. Most contracts specify that an author will receive an amount of money called a "royalty" for every copy of a book that is sold. Many decades ago, royalties on hardcover books were simply 10% of the cover price of the book. (Norman Mailer once said "You buy an author's book, you buy the author a drink.") Then mass-market paperbacks came about; because these were intended to be high-volume low-cost items, the royalty on paperbacks was set at 5% of the cover price.

At some point, publishers stopped basing royalties on the cover price of the book, and switched to using "publisher's receipts" instead. This is the amount the publisher gets back when a book is sold, and it's generally about 50% of the cover price. In other words, a bookstore pays a publisher half the cover price for the book. This is why bookstores can discount books as much as 40% and not kill themselves — they're still recovering 10% of the cover price.

My experience is mostly with "trade paperbacks," which have soft covers but are the same size as hardcover books, but it is my experience that royalties for hardcover books are the same — usually in the region of 15% of publisher's receipts, which is equivalent to 7.5% of the cover price. For example, suppose a book has a cover price of $40. Of that, half is consumed in the distribution and retail chain, and the publisher gets $20. The author gets a royalty of 15% of that, or $3 per book.

This royalty of 15% is for the English-language edition sold in the United States (or sometimes all of North America). For copies of the English-language edition sold outside the U.S. (or North America), the royalty is typically less, like 5% or 10%. (Why this is so has never been adequately explained to me.) Translation rights are generally a flat amount that a foreign publisher pays to the original publisher, which the publisher splits with the author 50/50.

There may be a long gap between the time an author begins writing a book, and the time it is actually sold and generating royalties. To avoid the unpleasantness of an author starving to death before the book is completed, publishers have customarily paid an "advance" on the royalties.

The advance is generally not paid out at once. It's generally doled out in 3 or 4 installments -- for example, 1/3 when the contract is signed, 1/3 when half the manuscript is completed, and the final 1/3 when it's all done. (If the book is not completed, the author has to return the advance.)

Advances are tricky. It's the only money that the author is guaranteed to receive, so often the author wants the advance to be as high as possible. But publishers don't want to pay an advance that's not going to be matched by later sales. (Some very evil contracts call for the author to actually return part of the advance if the book doesn't sell enough copies. Such contracts should never be signed.) Often there's some ego involved. Sometimes a big advance is even used to generate publicity.

In more practical situations, the publisher uses a simple formula to determine the advance: Their marketting people estimate the number of copies the book will sell in its first year. Multiply that number by the cover price, then by 50%, then by the royalty. That's the advance — equal to the royalties the publisher expects to pay over the first year of sales.

Publishers sometimes claim they don't use this formula, but they do. When I was negotiating with Wiley to publish The Annotated Turing, they estimated that the book would sell 5,000 copies. Multiply that by the cover price ($29.99) and 50% and my 15% royalty, and the estimated advance is $11,250.

Perhaps because I had already successfully written several books and was moderately "famous" in the personal computer industry, Wiley graciously offered me an advance of $15,000, and made it clear that there would be no further negotiation.

(It does no good telling a publisher that you've been working on the book since 1999, and you've already spent countless unpaid hours on it, and you're likely to require another good six months of full-time work to get it completed. If publishers had to comply with minimum-wage laws, they'd all be in jail.)

So far, Wiley's estimate of sales of The Annotated Turing has been pretty much on target. The book was published in May 2008 and has so far sold 5,698 copies. It has not yet made back the advance, but sales seem to have leveled off at about 100 copies a month, so I'm optimistic. Sometime in 2010 I just might get a royalty check in the 3 figures.

So, what can we deduce about Ms. Palin's advance? The book will have a cover price of $28.99. If her royalty is 15% of half that, she gets about $2.175 per book. (It's quite possible her royalty is larger than 15%.) If the $1.25 million amount paid already is half of her total advance, then HarperCollins expects to sell over a million copies of the book. (Either that, or they're throwing a lot of money away for the "status" and "glory" of publishing Ms. Palin's memoir.) Also, Ms. Palin will probably be paying her ghostwriter out of the advance she receives from HarperCollins.

As usual, there's a big gulf between elites like Ms. Palin and those of us working in the trenches.

But I'm proud of The Annotated Turing. I know that The Annotated Turing, in its small way, has increased the accumulated knowledge of the world, and that the book is entirely free of demagoguery, creationism, and tips on shooting wildlife from helicopters.