Orders Versus Sales & Hold On Returns

July 9, 2010

I'm reasonably certain that all published novelists know this already, but because it came up in my own life recently, I thought I would reiterate some basics about how book publishing works.

Orders: This means that when your book comes out officially, bookstores order your book and presumably stick it on a shelf somewhere.

Sales: Sales are not orders. Sales are when a person actually comes into a bookstore and lays down some money for the book and walks out of the store with it. Go you!

The reason I mention this is, I, like most authors, get asked a day or a week or a month or two after the publication of my novel, "Hey, how's your book doing?" Being older and presumably wiser, I now typically say, "Good, it's doing well." But because I tend to provide honest answers--I'll blame it on my upbringing, perhaps that time when my Dad yelled at me for lying to him about whether or not I had taken a banana (I had, I was holding it behind my back)--my most common response is, "I don't know."

I recently pressed my publisher to give me some numbers about The Fallen, and I assured them--and my agent--that I understood that early numbers don't reflect sales, they reflect orders, and as a result, are somewhat meaningless. On the other hand, as I told my agent when explaining why I was asking, "500 orders is one thing, 5,000 orders is another."

The numbers I did get were reassuring and about what I expected, if not quite what I hoped (because, you know, I hoped for millions of orders, dudes and dudettes, millions!)

And there was a nice low number they threw in as well, which reflected returns.

Returns: What bookstores do if the books they order don't sell and they want to free up shelf space for books that might sell. If you're a brand name and there are 100 copies of UNDER THE DOME sitting around in your store, the bookstore may very well keep most of them around for a while because, well, you're Stephen King and you'll probably sell most of them eventually, or at least until his next book comes out. If you're Mark Terry or FILL IN NAME OF RELATIVELY UNKNOWN AUTHOR HERE, the book either sells, you think it'll sell, or you give it maybe 6 weeks and send it back to the publisher for a credit/discount/refund.

Hold On Returns: When you get your royalty check, aside from subtracting the amount of money you owe for your advance (advance, for the uninitiated, is short for Advance Against Royalties, which means if they gave you $10,000--I wish--you have to make that much back in royalties before royalty payments start coming to you.) Anyway, as I was saying, on your royalty statement, your publisher may make a statement that goes something like this:

Units Sold ........ 100

Royalty/Unit..... $2.00

Royalty................ $200.00

Hold On Returns (10%)........ $20

And the check you actually get will be $180. (Or, if you have an agent, the check will probably be $153, or 15%. (And then, if you live in Michigan and pay your taxes quarterly like I do, you'll set aside $36.72 (24%) for federal taxes and $6.12 (4%) for state taxes, which leaves you with a grand total of $110.16. So think about that for one depressing moment. Assuming you've already earned back your advance, you may end up paying up to 53% of your royalties to other people!)

Now, in theory, you eventually get that 10% Hold on Returns back. Or not, because most authors have returns and bookstores typically have plenty of time to actually make those returns. And publishers may or may not take their own sweet time, depending on the individual publisher's accounting practices. After all, the money they got for the orders can sit in their accounts gathering interest at your expense under the guise of Hold on Returns. Also, 10% Hold On Returns is just one figure. It varies all over the place. One friend of mine claimed that on his first royalty statement there was a 90% Hold on Returns!!!!! (My agent thought he was mistaken, but he's a pretty sharp guy, so I'm not so sure).

Which is at least one reason why some writers think e-books are kind of cool. Via the Kindle self-publishing program, there are no returns or Hold on Returns, and you get your royalties deposited directly into your bank account on a monthly or quarterly basis immediately after publication, not sometime next year on the publisher's bi-yearly accounting schedule.

Anyway, I hope that information is useful.

Cheers,

Mark