Book Startup Pitches Authors a Novel Deal: $0 Up Front, Bigger Profits

Author James Clear recently signed a deal with Authors Equity.
Author James Clear recently signed a deal with Authors Equity.

Summary

The approach contrasts traditional publishers, which pay author advances and don’t offer the opportunity to own a stake in the business.

James Clear’s first book, “Atomic Habits," was so successful it has been a New York Times bestseller for more than four years. This had him wondering if he could earn more on his next one.

“I’m not saying I wasn’t satisfied," Clear said. “But there are a lot of options out there."

Clear recently signed a deal with Authors Equity, a startup primarily financed by writers that promises authors the lion’s share of profits but won’t pay them any advance. Clear also invested in the venture, but declined to say how much.

The startup’s approach comes in contrast with the country’s largest traditional publishers, which pay author advances and don’t offer them the opportunity to own a stake in the business. It also runs counter to a trend seen in the streaming industry, where companies lure talent with ever-larger upfront payments at the expense of back-end royalties.

Authors Equity co-founder Madeline McIntosh, the former chief executive of Penguin Random House U.S., said the startup is adjusting to the changing dynamics of the book market, in which some writers have more power than publishers.

Authors are now instrumental in the successful promotion of their books, from television to TikTok, McIntosh said, which wasn’t the case in the traditional model, where writers essentially relied on their publishers for publicity.

U.S. book sales fell 2.6% last year to 767.3 million copies, according to Circana BookScan, whose numbers don’t include ebooks or audiobooks.

McIntosh said Authors Equity hasn’t set a limit on how many titles it will eventually release annually but expects it to be in the realm of 25—far fewer titles than traditional publishers. “It’s more important to focus on the individual author than getting big," she said.

Authors Equity will pay between 60% and 70% of each book’s profit to its authors, significantly higher than they would earn with traditional publishers, people familiar with the company’s royalty payout said.

McIntosh and co-founders Don Weisberg and Nina von Moltke have also invested in the business, as have self-help guru Tim Ferriss and crime writer Louise Penny. The size of their investments couldn’t be learned.

Weisberg is the former chief executive of Macmillan Publishers and von Moltke previously served as Penguin Random House’s president and director of strategic development.

Ferriss, the author of such bestselling titles as “The 4-Hour Body" and “The 4-Hour Workweek," said he had discussed profit-sharing with some of the country’s largest publishers but that their suggested offerings contained additional fees that made the contracts unappealing.

He said the Authors Equity contracts are more straightforward—and because the company will publish fewer titles, the amount of attention “to each author will be more concentrated."

Simon & Schuster, which was acquired by private-equity firm KKR last year, will ensure that the books published by Authors Equity are distributed to bookstores. McIntosh sits on the Simon & Schuster board.

“Atomic Habits," Clear’s debut book, was published in 2018 by Avery, an imprint of Penguin Random House. Clear said his decision to switch to Authors Equity didn’t reflect dissatisfaction with Avery but rather his interest in exploring his options.

What attracted him, said Clear, is that “you make more money per copy and you get better distribution than via self-publishing."

A spokeswoman for Penguin Random House declined to comment.

Several other former Penguin Random House veteran executives have also launched imprints in recent years. Molly Stern, a Penguin Random House staffer who left in 2018 shortly after publishing Michelle Obama’s hugely successful memoir “Becoming," launched an independent publishing company, Zando, in 2020.

Julie Grau and Cindy Spiegel, whose Penguin Random House-owned imprint Spiegel & Grau closed in 2019, launched their own independent publishing house, also named Spiegel & Grau in 2021.

Write to Jeffrey A. Trachtenberg at Jeffrey.Trachtenberg@wsj.com

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