An “earn out” is a performance-based bonus that is often paid to authors upon the sale of their book. The earn out is usually a percentage of the book’s total sales, and is paid out over a period of time. For example, an author may receive 10% of the book’s total sales after the first year, 20% after the second year, and so on.
There are a few reasons why publishers may choose to pay an earn out. First, it aligns the author’s interests with those of the publisher. The author is motivated to sell as many copies of the book as possible, since they will earn more money from each sale. This incentive can help to ensure that the book is well-marketed and well-received by readers.
Second, an earn out can help to offset some of the risk for the publisher. If a book does not sell well, the publisher does not have to pay out a large bonus to the author. However, if a book is a bestseller, the publisher can share in the profits.
Lastly, an earn out can be used as a tool to negotiate lower upfront payments to authors. This can be beneficial for both parties, as it allows the publisher to invest less money upfront while still providing the author with the potential for a significant payout if the book is successful.
Whether or not an earn out is a good deal for an author depends on a number of factors. First, the author should make sure that they understand how the earn out will be calculated and paid out. Second, the author should consider the likely sales of the book and whether they are comfortable with the risks involved. Lastly, the author should compare the earn out to other offers from different publishers.
In general, an earn out can be a good way for an author to earn additional income from their book. However, it is important to understand the terms of the deal and to weigh the potential risks and rewards before agreeing to an earn out.