I’ve always thought it unfair that the big name books, celebrity books in particular, get paid advances that are so high that even the publisher doesn’t expect them to earn out. In effect, books that surprise the publisher by selling well subsidize the books that everyone assumes will sell well.
But Mike Shatzkin points out that it’s even worse than that:
Because books that publishers and agents know will be big in advance tend to have advances calculated to be too high to earn out, a publisher can figure that all the sales margin on those titles creates a margin contribution to the publisher; the royalty is, in effect, already paid. But that’s not true further down the list, particularly on backlist, where each incremental sale can trigger an incremental royalty payment.
In other words, publishers are motivated to focus their marketing dollars on books that aren’t earning out, at the expense of those that are.