P&Ls and how books make (or don't) money

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Profit & Loss/Profitability & Liability: How Books Make (or Don't Make!) Money

A basic outline of what happens when an editor buys a book and wants to publish it. This is very much a basic look at publishing and publishing finance, with some explanation of terms commonly used by the marketing and sales departments.

Comments

[lepapillon.livejournal.com]

Wow.... who knew I'd learn so much from LJ?

But this is the stuff I'm interested in so I'm glad you're posting about it. I never knew it was that complex or involved I guess. Kind of scary for both a publisher and a writer.

[endelarin.livejournal.com]

After my first novel was published many years ago (not Tor), I wrote polite letters to the editor trying to find out how many copies had sold. I never got an answer and eventually gave up trying. As you might guess, I had no agent. To this day, I don't know for certain how many copies sold or if it earned back its advance. I'm assuming not.

Thanks so much for helping demystify this whole process! Had I been less intimidated by the publishing end, I would have understood some of the reasons WHY they couldn't give me a number.

[laast.livejournal.com]

Wow, Anna! Math scares the crap out of me, so I am hiding under the blankets. I love learning about all of this stuff you are telling us about publishing, and thank you for taking the time to do it! Let's say someday I or a friend or someone I knew (no agent, no nothing) was offered a contract. How dumb would it be to take the first offer if the author was just so happy to have an offer? I feel like I would jump all over any offer @ all. I agree with lepapillon. Those numbers are scary. Really scary.

[oneminutemonkey.livejournal.com]

Wow. What a read. Thanks. Extremely fascinating and informative.
I knew a little of this already (2 years in a bookstore teaches you some strange stuff) but a lot is new to me.

It would be really fascinating to see the P&L treatment for anthologies, since they're a different kettle of fish from the average paperback.

Please don't stop enlightening us now.

[literaticat.livejournal.com]

Thanks! This is great info. Aspiring authors often ask me questions like this and, while I knew the basic facts, I never factored in coop or magazine jobbers, different discounts, &c.

There are so many trade PB originals coming out in the next year -- will their numbers look more like MM or HB?

Oh, and on a slightly related note, what happens when a book is remaindered? I know why a book gets remaindered; I mean, what happens then, does the pub call it a wash as far as royalties are concerned?

small advances

[(Anonymous)]

I'm an author with an independent publisher... I get a very low advance (usually $1-2000), but am offered a slightly higher royalty than bigger publishers. It means that i have very little to sustain me at the beginning of the process (so i have a day job), but start getting royalty cheques in the first six months. I personally much prefer this system, as getting an advance is a bit scary, because you're getting paid for something you haven't done yet! Getting paid in royalties instead makes me feel like I really earned it.

It also means that my publisher has more money at the beginning to spend on the design of my book, which makes more people pick it up and buy it...

[amy37.livejournal.com]

Man, I love you for doing this. If I'd had a blog when I was still editing, I don't know if I'd have had the patience or the motivation to do it, and I tell you, it's so helpful! Even to me! Explaining this stuff isn't easy, and you do it about a thousand times better than I've ever been able to do.

(Just ask my very confuzzled mother.)

[laast.livejournal.com]

ok, my other post didn't make much sense. small advances annon. answered more of what I wanted to ask. With all of the advance stuff, and the numbers you threw out there, it seems like there is a lot of shuffling. I guess this is where having an agent is a good idea so that they can explain what all of those numbers mean. I wonder if authors like a bigger advance or bigger royalties? I can't tell which would mean more. I never realized the advance was part of what the book is supposed to make after it hits the shelves. I love all of this info, Anna.

[plattcave.livejournal.com]

And people wonder why I'd rather work in advertising...

[thecityofdis.livejournal.com]

As an aspiring editor, this is ineffably informative (and sarcastic). Thank you.

[green-knight.livejournal.com]

Thanks for this fascinating insight into how a book can be a good enough read, but not attractive to a publisher.

[trixalicious.livejournal.com]

Absolutely fascinating. I have two final research papers due in the next nine hours or so, but I promise you that I learned more by procrastinating and reading this entry than I did "researching" my paper topics (which is only partly because I haven't really started my research yet).

Seriously. Gold star!

[agamisu.livejournal.com]

'Kay. This is nice stuff. Also so depressing.

[lonp.livejournal.com]

This is fascinating stuff. Thanks for posting it. I was left wondering: What if any, significant differences arise on the YA side of the house?

For instance, often the books are shorter, so therefore probably cost less to print--is it enough less to affect marketing efforts/advances, etc.? I also suspect the distribution of buyers is skewed more heavily toward libraries and big chains than independents and general retailers. Do YA books tend to have a better sell-through, or the same?

Thanks again for such an educational post!

Returns - always bad?

[(Anonymous)]

This was great,

There's one area that's confusing to me regarding Aeryn’s career propects. 8,400 sales is bad, but only if you know that the publisher printed 25,400 copies. When her next publisher is looking at buying her books, don’t they only have access to sales (though Bookscan) not the print run? In other words, those 8,400 copies could be on a 10k print run, which would be great. How does the next publisher know that the book was unprofitable?

I ask because while it seems like returns can hurt the publisher, they shouldn't ruin an author's career, and cautioning away from pushing for larger print runs is problematic too, since print runs definitely affect the merchandising in the trade. If you don't print enough books, they can't put them in a display, etc.

It seems like authors (or agents, at least) should push for bigger print runs, hoping that the extra copies will result in better merchandising and get sales in the bank (bookscan) and let the publisher worry about the returns.

Or does that all just feed the vicious cycle?

[secco98.livejournal.com]

How much money does a book have to make to get an author a shot at another contract? Clearly, an author who (with the help of an editor...) costs a publisher $21,528.60 isn't going to get another contract. But what about a book that makes a small profit? Are publishers going to be happy that it made any profit at all, or will they take their chances that some other author can turn a bigger profit? I'm pretty sure the answer will be "That depends...", but I'm curious.

[vonandmoggy.livejournal.com]

Good, solid article. Having run a bookstore (www.perfectbooks.ca) here in Ottawa, Ontario for a number of years, it's always fascinating to see articles done from the publishing side of things. Most of it I knew (and I'm a BIG believer in P&L statements) but it's nice to see it posted regardless.

And now that I've left the bookstore to work on my graphic novel, it's all the more interesting (especially if I wind up self-publishing). The Direct Market (diamondcomics.com) operates on a non-returnable basis (all sales are final - yay! The discount you need to give is between 60%-65% off cover - boo!) so I'm trying to pay quite a bit of attention to the numbers side of things right now.

Good insights. Thanks!

Von

[heather-brewer.livejournal.com]

Fascinating stuff. Can't wait for part 2!

trade paperbacks

[(Anonymous)]

trade paperbacks are more popular than ever. After you do hardcover to mass market, please, please, please do an analysis if a trade paperback origina!

P & L

[(Anonymous)]

Thanks, I think. As an author I appreciate the insight. I'm trying to decide if I should be happy, sad or frustrated.
:0)
Alice Wootson
www.alicewootson.net

Wow, this is amazing.

[sandycou.livejournal.com]

Thank you for going into so much detail! All I can think, as an aspiring writer is, "Well, I guess I'm not going to quit my day job any time soon!" I'm also eagerly awaiting Part 2 for the "good news". Also, if I write a single title romance, I'm going to get myself an experienced agent who knows how to negotiate the contract for me!

[the-lady-m.livejournal.com]

SO this is why every book has to be a best seller.

*SIGH*

Well ok then - on to best seller dom I go.

Anna - have you got any ideas what a home based cover artist could do?

I just started playing around with covers for friends - and I guess now is as good a time as any to ask that question. SOme of them are pretty good. So wanted to know what was available - -if you have any concept. (If you want to see them on your spare time they are over at http://ladymwrites.blogspot.com ) Starting in March...

But I kinda would like to know if there is ever a chance in hell that I might be able to break into that industry.

Many hugs - thanks for the info.

Lady M

Something that would be helpful

[deep-bluze.livejournal.com]

You emphasize several things that help a book, or hurt it. Among these things were blurbs from known authors, reviews, etc. What would be helpful to some of us would be somewhat of a breakdown of what sort of impact these things have, and a ranking of importance?

For instance, your Crichton is an Idiot author had one pity blurb, and their one good review was in RT (which I know you pretty much only get if you have a paid ad). The other review, in Booklist, was awful.

In your figuring of the P&L how much weight do blurbs carry? Unfortunately, until you've already been granted money to print the galleys, you won't get the reviews, but once you HAVE the good reviews, on an average, how much do they change the outcome?

I ask this as an author with solis A+ reviews from Publisher's Weekly, but on HC books out from smaller publishers. Blurbs good in both cases (and more available from best-selling authors) but there has been no interest thus far from larger publishers for either taking these books to mass market, or in subsequent books (also with the same good blurbs).

That leads to another question. Being with the smaller / medium level publisher, who does very very low print runs, does the fact that the print run is very low, and sells through count for anything, or is it only taken into account that a low number were sold?

I'm looking for a formula, I guess, to assign importance to different factors, as opposed to other factors, with an eye toward plugging all of the useful information you provided into a workable "plan".

DNW

How paperbacks came to be sold like magazines

[pnh.livejournal.com]

"Another reason is that paperback books are sold like magazines. You might think this is stupid. It is not. This is pnh's cue to jump in with a comment explaining how this all works and why."

Very simply, there are two kinds of books: trade and mass-market. The distinction is not actually one of binding or trim size; it's one of distribution terms.

Unsold trade books are generally returned to the publisher's warehouse whole. Unsold mass-market books are usually stripped and their covers returned -- or, increasingly commonly, the books are pulped entire, followed by an affadavit attesting that this has happened.

Most trade books are hardcovers and "trade paperbacks"; most mass-market books are rack-sized paperbacks, but there are exceptions in all directions.

Cheap paperback books have existed for centuries. The modern American "paperback revolution", beginning in the 1940s, was driven not by the invention of inexpensive softcovers (which already existed) but the invention of the mass-market paperback distribution model. The sequence of events went roughly like this:

[1890 through 1941:]

WOULD-BE PAPERBACK PIONEERS: "Stock our 25-cent paperbacks, please!"

BOOKSTORES: "Nothing doing. Two or three of them take up the same shelf space we could use for a $2.95 hardcover. Begone with you!"

[Exeunt omnes, pursued by World War II.]

WOULD-BE PAPERBACK PIONEERS: "Hey, it's the postwar period! Here's an idea: forget the damn bookstores, let's sell our 25-cent paperbacks through the same system of jobbers and wholesalers that distributes magazines and newspapers to every newsstand, drugstore, bus station, and grocery store in America."

MAGAZINE JOBBERS AND WHOLESALERS: "Okay, Mac, but you gotta make 'em strippable, just like COLLIER'S and LOOK. Also, make your lists monthly. None of this carriage-trade 'season' stuff for us burly, down-to-earth practical men."

PAPERBACK PIONEERS: "No problem. Here, have a couple of dozen titles."

AMERICAN PUBLIC: "OMG! SQUEE!"

PAPERBACK PIONEERS: "Have a bunch more!"

AMERICAN PUBLIC: "SQUEE SQUEE SQUEE!"

BOOKSTORES: "Hey, wait! Can we stock these too after all?"

Mass Market Returns

[thedragonweaver.livejournal.com]

I used to work for a Borders, so I'll just comment that the whole idea of a MM paperback being "pulped" is a bit of a dream. What we actually did was strip the covers and throw the books in the dumpster (because there was no good paper recycling in our area.)

Mind you, this was the same dumpster being used by the restaurant next door, so the phrase "turned to goo" isn't too far off. But this is why paperbacks have that little notice about "if you purchased this book without a cover..." printed on the copyright page.