We've been exploring what you need to know when you approach a book contract. Here are five more questions to ask…

11. Are there restrictions on the sale of the contract? Check to see if your publisher has the right to sell the entire deal to another house. This doesn't happen often, but it can happen, especially with smaller houses, and you need to be aware of the possibility. It would mean you go through the entire process of negotiating a deal with one house, then suddenly you find yourself working with another house. I once had a sleaze-ball publisher sign a well-known personality to a book, then immediately start shopping the contract… In other words, he never had any intention of publishing the book; he just wanted to sign a lowball deal and flip it to a bigger house. (This is something he admitted to me, but denied to the author. Mr. Sleazeball is now an agent, by the way.)

12. If it all goes south, who pays for the lawyers? Remember that a contract is put in place to clarify two things: what will happen if everything goes well, and what will happen if everything goes to hell. A good contract covers both scenarios. In case of the latter, check to see who covers the cost of the lawyers. True story: A short while back I was sent a contract that called for the publisher to pick the lawyer, but the author to pay for it. Um… we suggested a minor wording change to keep the author from getting hosed.  

13. Does your contract clarify what constitutes "out of print"? It should be simple: When the publisher is no longer selling your book, it's out of print. Don't get caught up in windy explanations of why publishing-on-demand titles constitute a book for sale. (Years ago, I worked on a deal where a publisher claimed a popular author's book was still "in print" because they still were offering an audio version to libraries, so they still controlled rights.) Get a clear definition that includes having regular books commercially available. This has gotten much more complicated since ebooks became popular, so you're going to have to figure out if a digital book qualifies. Most publishers will say it does… so WHEN do you have a chance to actually get those rights reverted? Possibly never. So read your contract carefully. 

14. Does your contract have an option clause? There are various forms of options — everything from "you promise us your next book" to "we'd like you to give us a first look at your next one." Options aren't necessarily evil (they can reveal a commitment on the part of the publisher to an author's career), but you should know the risks and rewards of a proposed option clause. (True Item: In days of yore, one publisher used to insert an option clause that promised two books for every one you published… so an author could never actually get out from under the contract. For every book he wrote, he owed two additional titles. Ugh. That's no longer the case at that house, by the way.)

15. Is this a perfect contract? The answer, for those who aren't sure, is "nope." In a perfect world, you'd get a perfect contract. But, in case you haven't been paying attention to the war in Afghanistan and the Republican primaries, we don't live in a perfect world. So while you'll sometimes hear people make declarations about all contracts (things like "You should NEVER sign a multi-book deal!" and "I MUST have approval of my cover!" and "I would NEVER allow them to cross collateralize my contract!"), be aware that a contract is a negotiated settlement. You ask for some things, you give up other things. That's the nature of the business. Every good agent understands that. And it's why you might be best served having somebody negotiate on your behalf. Nobody gets everything they want, so learn to compromise and you'll find yourself more at peace with the process.  If you approach a book contract as a sort of partnership between author and publisher, rather than as a battle to be won, you'll be happier with the results. I'll talk more about how to negotiate a contract next week. 

Okay, so you've got a book contract, and you're wondering what you don't know. Here are a few more questions to ask…

6. When will the book be published? In most book contracts there is a window that explains your book will be made available for sale within two years. I recently saw a contract that had a five-year window on it, and another contract that didn't limit the publishing time at all. The danger (and it's happened to others) is that you'll turn in a book the publisher keeps forever but never actually publishes. Generally you want wording where the publisher makes a legal promise to produce your print book in an 18-to-24 month window, your ebook faster. 

7. When are advances paid? Make sure you know when you're getting paid. Traditionally an author received half the advance on signing and the other half on completion. Many of the New York houses now pay one-third on signing, one-third on delivery, and one-third on publication. Random House has this author-unfriendly clause that calls for one quarter of the advance to be paid a year after the book releases (so it's not really an "advance," it's more like a "delay"). And HarperCollins pays a portion of the advance after the author has filled out a marketing questionnaire — their way of making sure they get their information. I recently saw a contract that called for the advance to be broken into eighths (signing, completion of a questionnaire, after an interview with marketing, completion of the manuscript, completion of typesetting… um…the next full moon, etc.)

8. When are royalties paid? Many publishing houses pay twice per year. Some of the larger houses pay quarterly. I still see some contracts that call for royalty payments to authors once per year… and no, that publisher won't be offering to pay you interest on that money they've been holding for you. And your ebook publisher might pay you monthly. Find out when you're getting paid, and if it's less than twice per year, request they send you your money more frequently. 

9. If you're doing a novel, who owns the subsidiary rights? Publishers are in the business of licensing and selling rights, so they'll ask for the dramatic rights to your story. But check something out — Has this publisher ever sold dramatic rights? Do they actively pursue movie and TV deals? If not, you might be wasting your time granting them to the house. Nothing frustrates an author more than having rights that could be generating income tied up with a house doing nothing. 

10. If you're doing a nonfiction book, what's your buy-back discount? The publisher's boilerplate contract will call for you to receive about ten copies of your printed book, and allow you to purchase your own book at about a 40% discount. But if you speak to large groups, you'll want to negotiate for a better deal. You don't want to be in competition with your publisher, but if you regularly have a captive audience listening to you speak, selling books is a sure money-maker for you, and your publisher isn't losing money on the deal, so ask for more copies and a better buy-back rate. 

What questions are you asking when negotiating a contract? 

Every once in a while, I'll set a contract in front of an author, and he or she will say, "Just tell me where to sign." I have to explain that they need to know what they're signing. The fact is, every clause in a contract can be deemed important, if you consider it's a legal document that will govern everything about your book for as long as it's in print. So let me offer several questions an author ought to think about…

1. What's the grant of rights? Your contract should ask you to grant specific rights to the publisher. Not "everything, always, in all circumstances." And rights not specifically granted to the publisher are to be retained by the author. Keep in mind that you (as the author) own the work — you're granting a license to a publisher for them to produce and sell copies of your work. So understand what you're granting them. 

2. Is the wording clear? Know what you're signing. Understand the due date, the word count, the rights being granted. Some publishers have exceptionally easy-to-read contracts (Baker, Harlequin, and Harvest House are three that come to mind). Others can have contracts that read as though they were invented by lawyers for whom English is not their first language. If you don't understand what you're signing, ask questions. And let me offer a word of advice: If you have an agent, he or she ought to be able to explain what you're signing. If you don't have an agent, you can get help from a contract evaluation service, which will charge you a couple hundred bucks to review your contract and suggest changes. [You can also have a contracts or intellectual property rights attorney review the contract, but DON'T have him or her negotiate it for you. The moment they pick up that phone, the clock is ticking...and the longer they can keep the clock ticking, the more you're going to pay.] You can also find some books at Barnes & Noble that will help you understand your contract. 

3. Is there added work? Sometimes a book contract will also ask you to create something else — study questions, additional material for an enhanced books, etc. Read the contract carefully to see if you're on the hook for an index, a bibliography, or a map to the star's homes.

4. What is acceptable? Make sure your contract offers you the chance to revise an unacceptable manuscript in order to make it acceptable. That's usually pretty simply — the editor tells you what they want, and you, as the author, have adequate time to fix the book. Some larger houses wait until the book is completely edited and proofed before they consider it "acceptable." And some smaller houses have been know to withhold "acceptance" until, um… well, until they have the cash in hand to pay for it.

5. Who owns the copyright? A contract should state that the book's copyright will be in the author's name, not the publishers. 

We'll look at some more questions you should ask when signing a contract — feel free to drop in your questions and comments in the "comments" section!

Rachel Hauck is an award-winning, best-selling author, and a client of MacGregor Literary. She’s an Ohio State grad and a Buckeye football fan. Her next release, The Wedding Dress, is a Romantic Times Top Pick. For more information about a private session of book therapy, go to http://www.mybooktherapy.com/.

Hey everyone, Rachel Hauck here. It’s an honor to be guest posting on the MacGregor Literary blog.

 A few weeks ago I asked Chip if I could post a live book therapy on his blog as a teaching tool. After sending him numerous threatening emails, and vowing to expose his affection for a stuffed Oregon Duck pillow, he caved. (Oops, sorry Chip, the secret is out.)

 So, what’s this about therapy? Glad you asked. My Book Therapy is a craft service founded by the lovely and gracious Susan May Warren designed to train writers on story crafting, world building, and word painting, as well as develop an online community.

As the resident therapist, I’ve done dozens upon dozens of critiques and reviews of beginning and even published novelists.  And I found there are some very common struggles with those first five pages.

 For example, I might read for pages without so much of a hint at what the protagonist wants or what the story is going to be about. Often, the first glimpse of the starring character is negative and off-putting.

Since MacGregor Literary does so much to help writers, a critique of a piece can be informative and helpful, especially for those of us who are visual.

 What does it mean to “have a hint of the lie?” Or “hint at the story question?” A live therapy will help us all understand better.

 Sound interesting? Yes? No? Maybe? Who’s got courage? Here’s your chance to appear on THE MacGregor Literary blog with your fine work of fiction!

 Contest Details

Simply leave a comment stating why you deserve—or need!—therapy for your manuscript.

Since most of you are regular readers of this blog, you know how snippy, snarky, and funny win the day. Here’s your chance to shine. Leave a funny, bizarre, hilarious, or ridiculous comment before midnight on February 29th. Be sure to leave your contact info.

The winner, to be picked by Chip, will have one week to submit a scene of no more than 1,000 words, plus a log line, or a hook, to yours truly.

I’ll do my therapy magic on it. The winner can choose to have his or her name included or to remain anonymous. The resulting critique will then be posted on the MacGregor Literary blog.

The idea is that we can all learn from a live critique. I learn with every book therapy. One of the main things I’ve learned is the very common struggles of new writers to make those first five pages pop.

Come on, join the fun! 

Amanda Luedeke is a literary agent with MacGregor Literary. She posts about growing your author platform every Thursday. You can follow her on Twitter @amandaluedeke or join her Facebook group to stay current with her wheelings and dealings as an agent.

When I first met Chip, I’d occasionally run a book idea by him just to see if anything sparked his interest. I remember at one point, I came up with this GREAT idea for a book all about making your wedding your own. It was about ditching tradition and going for something that reflected your uniqueness as a couple. But when I pitched this future bestseller to Chip, he kind of glazed over. He gave me a few pointers, patted me on the back and sent me on my way. And I couldn’t figure out why.

But now, years later, I know exactly what he was thinking: I’m not a wedding expert. People don’t ask me for wedding advice and I certainly don’t have an all-things-weddings blog. Heck, I’m not even a wedding planner. I’m a “no one” in the wedding biz, so who in the world would ever pick up my book and listen to what I have to say?

Most nonfiction writers are like I was a few years ago. They think that just because they have this great idea or a fabulous success story, people will want to listen. But think about it…

When we have money troubles, we look to Suze Orman or Dave Ramsey.

When we have health troubles, we look to Jillian Michaels or Dr. Oz.

When we have political confusion, we look to … Jon Stewart.

We will always pick the expert over the nobody. So how do you cross that divide? How do you become an expert?

Become a speaker, my friend. Become a speaker.

Speaking has gotten a bad rap lately because there’s not really any money in it anymore. Plus, it’s expensive. There’s all that travel, meals in restaurants and time spent away from the home or job or both. But if you’re smart about it, speaking can be a great boost for anyone looking to become an expert.

10 Steps to Growing a Public Speaking Platform:

1. Figure out what venues work for your audience. People gather all the time and for every reason on the face of the earth. Don’t believe me? Pick up your city’s latest “What’s Happening”-type publication (almost all have them) and take a look. There are events at colleges, high schools, churches, VFWs, libraries, country clubs, and more. Everyone from doctors to academics to parents to students to nonprofit volunteers will be amassing at some point in the not-to-distant-future. But an expert in PTSD isn’t going to hit it off with the First Baptist Youth Group as well as they would the VFW. So think about who your audience is and where they go to congregate.
2. Make a list of all possible venues, gatherings and groups in a 100-mile radius. For new speakers covering their own travel expenses, 100 miles is doable. You can be there and back in a morning or afternoon. There’s no overnight expense and if you’re really watching the budget, you could even pack a lunch.
3. Put together a few talks. Your talks shouldn’t be autobiographies on your life or ways through which you can tout your opinions and stand on your soapboxes. Your talks should provide answers, information, insight or advice to the listeners. They need takeaway value. As agents, we do this all the time when we visit conferences or try to get invited to new conferences. We have our go-to workshops all polished and ready to go…and if you’ve noticed, not a single conference offers a workshop on “How Amanda Luedeke Became an Agent.” Nope, workshops are full of helpful information. Your talks should be the same.
4. Perfect your pitch. You can’t call someone up and say “Hey, I was just wondering if you needed someone to talk about paying and planning for your kid’s college?” Yawn. You need to intrigue them…make them believe that you have a secret that they and their group need to know. Something like “I’ve helped numerous parents plan for their kids’ education with my talk ‘Get Henry to Harvard’, and I’d love the chance to share it with your parent group. It’ll include free consultations and a download of my step-by-step booklet. I’m not looking to make any money on this…just trying to get my name out there, so if you want a sample of my style, you can check out my video on YouTube…”
5. Start scheduling. This is the hardest part, because it’s a bunch of phone tag, calendar-checking and polite refusals. But stick with it and form friendships. You’ll find that groups will ask you to come back…they’ll even recommend you to their friends, social groups and more. But you have to be persistent and aggressive with following up and making the whole scheduling process as easy as you can on the event organizer.
6. Bring your own gear. The easiest way to uninvite yourself from ever speaking again, is to be high maintenance. Don’t demand that they have all this high-tech equipment ready. Don’t get angry when you get there and all they have is an overhead projector that they’re really proud of. And above all, don’t complain. Ask politely what type of equipment they have and fill in the gaps yourself. Come armed with a plan B and C, extra printouts, your powerpoint presentation on a flash drive, your own computer, and an idea of what you’re going to do should you end up with no technology at all.
7. Give listeners a place where they can get more. A website, a blog—someplace you provide frequently updated information, a way for them to contact you and the details of your future speaking engagements. This will come in handy when shopping your goods or when you’re trying to get audience members to remember you post-event.
8. Consider the power of webinars, Skype, Youtube, epublishing and other such media. Once you have things moving forward, you’ll find that you have a following. A real, growing group of people who know who you are, believe in what you do and share it with their friends. But you’ll soon find that there’s no way to get in front of this growing group when you’re just one person doing one venue in one town at a time. By offering online webinars, ebook downloads, weekly podcasts and the like, you can keep in touch with your audience…even when you only make it to their neck of the woods once a year or so.
9. Track your numbers. Keep a ledger of how many you have in attendance for each gathering, where you go (the more states you can add to your list, the more impressive it looks), website stats, ebook downloads and any other pertinent information that shows the size of your following and potential promotional reach.
10. Stick with it. Speaking builds off of itself, and when you take lengthy breaks it affects your momentum. DON’T STOP MOVING. Even when life gets busy, sneak in a talk here or there. Vacation can be a great time to build a following outside of your intial 100-mile radius. Don’t let that opportunity pass you by!

That’s all I have for now, although some seasoned and fledgling speakers alike probably have more to add. Sound off in the comments below!

UPDATE: check out SheilaGregoire's comment below…she has a free public speaking training website and advice/encouragement for those starting out.  

Clarice wrote to ask, "When is it appropriate to inquire on the status of a submission to an editor or agent? I sent something in to an agent four months ago, but have yet to hear."

Keep in mind that every agent has his or her own system. I try to get to submissions once a week, but sometimes I go three or four weeks between looking. And that's just for a quick look — if I like something, I have to read it through, and that means I could have it for a month or two before I can give the author a firm response. In my experience, most agents would like to have two or three months to consider a proposal before they render a "yes" or "no." During busy times (like Christmas, summer vacation, and stints at rehab), it may take longer. So if you sent a project to an agent four months ago, and she hasn't responded to you, it might be very appropriate just to drop a friendly note — something like, "Hello, I'm just checking back with you on that proposal I sent you a few months back. I was wondering if you've had a chance to look it over yet. I know you're busy, so thanks very much for giving it your consideration."

On a related note, Hank wrote to complain that an agent hadn't responded to his proposal in a year… but when I checked with Hank, he noted that he'd never met the agent, nor had he queried via email or letter. In other words, he had just sent in a proposal cold. And that leads me to ask,"Where is it written that an agent must respond to you just because you wrote to him or her?"

Answer: It isn't. An agent isn't obligated to respond to everyone who writes him or her. I've got a job to do, and time is money, so I really can't take the time to read every project somebody sends in cold. I don't feel that's a deriliction of my duty, either — I simply don't believe that I owe every writer a favor. With MacGregor Literary, I state very clearly on my company website that I'm not looking for unsolicited proposals. Still, people send them. I also state on my site that I don't have time to read every project coming in over the transom, and that I don't return unsolicited proposals, even if they come with a postage-paid envelope. It's just not my job to take responsibility for someone else's idea. Still, I have people I've never heard of write to complain that I didn't respond, or that I didn't return materials — as though their decision to mail me something puts a burden on me, merely because I work as a literary agent. Wrong. I generally represent people I know — maybe we met at a conference, or they were a referral from a current author… but it's a very rare thing for an agent to yank something out of a slushpile and offer an agency agreement. So make sure you have realistic expectations, Hank.

Cecelia wrote and said, "I've noticed more authors using the term bestseller or bestselling author in their materials. Is there a rule about this? Must an author make an established bestseller list in order to use that term?"

Absolutely, Ceclia. An author needs to have a book that hits a recognized bestseller list in order to claim he or she is a "bestselling" author. That would mean your book needs to land on a legitimate bestseller list like the New York Times list, the LA Times, the Denver Post, the Wall Street Journal, USA Today, Barnes & Noble's list, or the Amazon Top 100. (It's also fine to note that you had a book land in your regional paper — say the Portland Oregonian or the Cincinnati Enquirer, though those lists don't quite have the same cachet as the major lists.) Several outlets (Publishers Weekly, CBA, etc) release their own bestseller list every month, and a few track the various genres as well as offering an overall "top 50 titles" in terms of sales. So if an author claims to be a "bestseller" in her proposal, she needs to be able to back that up with evidence of hitting a list.

By the way, BookScan is the reporting vehicle for most bookstores. Many CBA and religious bookstores use a different tracking system, called Stats. These are supposed to track book sales by ISBN number, and create a reporting data base for publishers. But one of the reasons this can confuse authors is because some books can sell incredibly well and never have their sales reported. Books sold in Sam's Club and Costco, for example, are not reported to any bestseller tracking system — so you could sell 100,000 copies and never appear on a bestseller list. The recent success of The Shack is a good example — the book moved a couple hundred thousand copies through alternative sales channels before any reporting store picked it up and began noting sales, so it had sold a bazillion copies and never appeared on a bestseller list. Once it was trackable, it hit #1 in the religion category. It's reasonable to ask the question, "Would it have been fair for the author of The Shack to declare himself a bestselling author prior to making the list?" Maybe… but that's not the way the system works.

Barbara wrote and noted, "You have advised authors to spend some serious cash in order to create a dynamite website. Can you tell me how many zeroes serious cash has? And are there templates or places a prospective author could view in order to begin making plans?"

I think a good website can be a great marketing tool. We used to think of sites as akin to a highway billboard — something you drove by, read, and moved on. But now sites are incredibly useful tools — a way to stay on top of the industry, communicate with readers, and let people know about books and speaking events. They have also proven to be content-centered — so if you have a plumbing company, you don't just say "great rates and quality service" like you might in a yellow pages ad. With a website, you'll have suggestions for fixing common plumbing problems, a place to ask questions, introductions to the company, a way to schedule an appointment, maybe even a "history of plumbing." In other words, the site has become the repository for information. It's why we've quickly become a nation of readers again. And it's always changing. We just updated our corporate site and added Twitter and Facebook, and we're going to move this blog from Typepad to WordPress soon. 

If you're an author who speaks, wants to stay in touch with readers, and can devote time to it, your marketing people will probably encourage you to create a good website. And it will mean you can expect to spend somewhere in the $3000 to $5000 range. You can go cheaper, of course (some places offer a do-it-yourself site for $99), but you get what you pay for. And you can spend a heck of a lot more, too. If you're interested, check out my company site – www.MacGregorLiterary.com. I've got what I consider to be a dynamite website for a literary agency, and I get compliments on it all the time… but I can't take any of the credit. The guy who created it for me is Nick Francis at Project83 in Nashville. (A free plug, Nick.) There are thousands of experts you can talk to about establishing a strong site — there's no reason to have a crummy website any more. If you want to check out author sites, visit my "authors" page and start clicking. You'll find all sorts of authors with a variety of styles and choices to their sites.

As always, if you've got a question about books or writing or publishing, send it in and we'll try to answer it for you.

Brynn asked, "Does a publisher lose money if a book doesn't earn out?"

I get this question a lot, and to answer it I need to beg your forebearance… Let me answer this with hard numbers, so that I can make my case. It will take a couple minutes to run the numbers.

Remember, every business can lose money. Retail shops, service business, even publishers. I mean, if you own a shoe store, you order in shoes that don't sell, and you have to drastically reduce prices, you can lose money on each pair of shoes sold. Publishing is no different. The publishing house pays out advances, they pay an editor, hire a cover designer, buy ink and paper, then pay a printer, and cover overhead such as the light bill and the editor's long distance phone calls. A lot of expenses are involved in every book. I like and respect publishers, and as a longtime agent, I WANT them to make money and stay in business. So I'm just answering a question, not writing a polemic. 

That said, the argument put forth that an unearned advance equals a loss for a publisher just isn't true. (Or at least not the whole truth.) All you have to do is look at some math…

Let's take some big book the publisher is doing with a celebrity. She's created a $25 hardcover book, and the publisher has paid her a $100,000 advance. The average discount a bookstore gets when ordering a book is roughly 50% — so they're paying the publisher $12.50 for that book. (In reality, it could be less, and there are a thousand factors determining that amount, but let's use a conservative 50% for the sake of clarity). From that amount, you have to subtract the author royalty on the first 5000 copies (the author will be paid $2.50 per book), the next 5000 copies ($3.125 per book), and thereafter ($3.75 per book). Of course, the publisher has to pay for the actual hard costs of the book (ink-paper-binding). That $25 book probably cost about $3 to produce. The more copies they printed, the cheaper each copy becomes. And there are plenty of things, such as cover features, that can boost the price of a book. But somewhere around $3 per book is about right. Some of the publishers state right in their contracts that anything sold at an 85% discount is considered "at cost," so they're assuming a hard cost of $3.75 for a $25 book. At several publishing houses, they have a standard "overhead" charge of about $2 per book, or $50,000 per title. So take the $12.50 the publisher received for the book and subtract author royalties ($2.50), hard costs ($3.75) and overhead ($2). Conservatively, the publisher is left with $4.25 per book after paying all the bills. In essence, the publisher is making more money per book than the author is making. (And no, there's nothing wrong with that.)

Still with me? Okay, since this is a big book, let's say the publisher printed fifty thousand copies and sold half of them. They received $312,500 from bookstores ($12.50 x 25,000 copies sold). They credit the author her royalty of $84,375 ($2.50 x 5000; $3.125 x 5000; $3.75 x 15,000). The author hasn't earned out — she's still in the red $15,625. The publisher is left with $228,125. Out of that they pay $150,000 on printing ($3 x 50,000) and $50,000 in overhead. So the publisher is left with a profit of $28,125. Even if they write off the rest of advance, they're sitting on $12,500. Maybe they remainder the rest of the books for a dollar each , so they just got in another $25,000 (and royalties aren't paid on remaindered books), so now the publisher has $37,500. Did you follow that? The book did NOT earn out, but the publisher still made money.

Oh, and they also sold the e-book, which didn't have any ink/paper/binding costs, or shipping, or warehousing. The royalty they pay on the e-book will be greater, but the lack of costs means the publisher actually makes MORE per book sold. If they sell foreign rights, they're keeping half that money as well. Over time, the overhead number shrinks considerably, so the per-book profit increases. And this model was created for a book with a relatively high advance — if we'd looked at a $25,000 advance, these costs would swing toward the publisher's side of the ledger. (Just to make sure you know I'm not pulling numbers out of a hat, I used to be an associate publisher with one of the Big Six in New York, and I had to fill out a P&L form for each book we acquired — so I know what the numbers look like.)

A couple years ago, a publisher paid huge money to the Clintons for a book. The advance was in the millions, and the book never came close to earning out. The publisher still made money — and admits having done so. Why? Because they sold a bunch of books. So don't accept the  myth that a book must earn out or the publisher is losing money — it's just not true. I have a good friend who works for a publishing house and has pointed out on my blog before that the publisher did indeed lose money — they lost the outstanding $15,625 in unearned advance. I think that's semantics. They didn't actually LOSE money on the book… what they did was MAKE LESS money. Does that make sense? 

Another publishing friend likes to point out to me that the author made $84,375, while the publisher only made $28,125. But that's a skewed way of viewing it… Because the publisher also made enough to pay all their bills and keep themselves in business. The $28,125 is purely profit — the money left over after everyone has been paid. A better way to view it is to say the author made $84K, and the publisher made $228k. And I'd be glad to compare the hourly rate of any writer, who sits in her chair for days on end, trying to crank out a good novel. Let's face it — the hourly pay for any writer sucks. 

Again, I'm not saying a publisher should lose money, or that I'm opposed to publishers making money — I'm not. I am ALL FOR publishers making a profit, so that they stay in business and keep buying books from our agency. And, in fairness, I should add that publishers DO lose money on some projects. If they paid a huge advance and the book tanked, they lost money. If they spent a fortune on full-page ads in USA Today and nobody bought copies, they lost money. But my point is simple: the majority of books do not earn out their advance, yet publishers stay in business… that alone should help you realize that "failing to earn out" does not equal "the publisher lost money." I hope that helps clear up the question.