A: It depends.
In the "old days" of publishing, let's say prior to 1990, there was a common publishing phrase that referred to unsolicited manuscripts as something that "came in over the transom." (A transom is literally a hinged window over a door. Think of the book return slot at a library.) In other words, a writer sent in his or her manuscript to a mail drop, which then ended up in one of several 4-foot high stacks in a junior editor's office, and which after six or seven months of collecting dust was either rejected with a form letter - or voila, it got discovered and published. One way many publishing companies handled projects over the transom was to hire college interns to sift through hundreds or thousands of manuscripts over summer break and separate the winners from the losers.
Many publishers were still leery of agents in the mid-90s. (Many still are.) Since acquisitions is the lifeblood of publishing, they preferred to take the initiative and go find someone with a marketing platform to promote their own work; if that person couldn't write, the publisher would help them write it with a ghost writer or collaborator. If an author didn't have a platform but had exceptional verifiable credentials - for example a professor at a university with a reputation for expertise in a particular discipline - the publisher would still take the initiative. Both of these and many other scenarios still happen all the time but even when the publisher is responsible for basic ideation, it is more common to work through an agent.
The worry for publishers back in the "old days" was that once an agent was involved, he or she would demand too much money up front as an advance and too much in royalty rates and thus damage the economies of publishing. (Okay, the publishers were right on this point for many deals.) But even with that concern, sometime in the mid and late 90s, agents went from being a luxury for big name authors who wanted to sell projects to one of the big publishing companies, to a near necessity for almost all writers interested in placing a project with almost any size publishing house.
Today, many publishers will no longer receive unsolicited manuscripts from authors. They prefer and require agent involvement. In a sense, the agent, for many publishing companies, has become a way to streamline the acquisitions process - and maybe even reduce head count. The hardcore, full time, certified agent - and yes, there are many former editors and other publishing staffers who moonlight at agenting - earns his or her commission (more often 15%, up from 10% even a decade ago), along with a trustworthy reputation that opens doors to a variety of acquisitions editors and publishers, by carefully screening authors and projects and vouching to the publisher that the author can deliver both great material and can help market it.
What does this mean for the aspiring author? It means that finding an agent who will represent your work can feel - and be - as hard as selling the project.
So, do you need an agent? The answer is YES, if ...
1. You don't have inside connections with one or more publishers who are already disposed to buying a project from you.
2. You haven't been approached by a publisher to write a project, which is a dream come true for anyone who has toiled with speculative work (you still might be better off with an agent if the deal seems fishy in some way).
3. You don't have a large established platform (connection to a well defined audience that is motivated to buy from you) whereby you can guarantee a certain number of sales. (Some publishers will make a deal with this kind of author if the author commits to buying X number of copies, which becomes part of the contract. Some authors, particularly if they speak to large audiences, will then determine that they'll make more money self-publishing.)
4. You want to be with a larger publisher (not necessarily the right option for every author or project) that will present your work to bookstores and other retailers. (I have a friend who has sold more than 1 million copies of his self-published book. He still feels disatisfaction because the books he did with big time publishers did not do well in the trade.)
5. You have a big idea and a big audience that loves you, but don't know the first thing about book publishing and aren't really fond of writing.
That list isn't close to being exhaustive and even if you can turn each point around and answer it conversely, you still may not need or want an agent. And acquiring the services of a well connected agent who really believes in your work is no guarantee that your work will be purchased by a publisher at all, much less at terms that feel reasonable to you. Plus, today there are many more professional quality self-publishing options available to the aspiring author. You can even go on the internet and typset and design a cover for your own book with a service like lulu.com.
So do you need an agent? Unless you have the ways and means to sell a self-published work or have incredible connections within the publishing community, the answer is probably yes. I'd wish you well in finding the right agent for you - but I'll save that for another post!
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