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

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demystifying publishing

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

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.

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"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?"

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.

I'm having trouble making sense of this. Bookscan records cash-register sales, not the number of copies distributed. I.e., Bookscan sales are all copies that aren't going to be returned.

Right - but no one tracks the print runs, except the publisher. The only thing that sticks with the author is register sales. \

What you've just laid out is so much like the software publication business that it's scary.

Yes, I have a book out. However, the business model is completely different at Lulu. No, I don't pay for artwork, I do it myself.

I worked as a Product Manager, the software business equivalent of an editor. Yes, product life-cycle P&L can be a bitch.

but no one tracks the print runs, except the publisher. The only thing that sticks with the author is register sales.

No. If I'm considering buying a novel from Calvin Aargh (winner of the Huge and Nobbly awards, but not previously published by Tor), and I can see that Bookscan reports 16,000 sales on his last paperback, it's trivially easy for me to find out whether that was 16,000 copies out of 22,000 distributed (very nice!) or out of 50,000 gross (oh dear).

For one thing, it's entirely possible I can pick up the phone and call his editor at his last house. Or someone else who works at his last house and has access to their figures. Or someone else who works for some other house or imprint or distributed line that shares the same sales organization as his last house and thus has access to their figures.

Then there's talking with the buyers for the major chains, who will certainly remember if Mr. Aargh's sell-through for them was good or terrible. And we haven't even gotten into the the world of agents, people who work for agents, former editorial assistants, etc etc...

It's a small industry. The idea that "the only thing that sticks with the author is register sales" is flatly false. Now, of course, it's another question whether an author is responsible for a former publisher overdistributing them relative to demand. There are all kinds of reasons to take on an author whose former books had lousy sell-throughs. But the idea that a disastrous sell-through can be hidden because Bookscan only tracks point-of-sale? No.

The fact is, if publishers were in fact as hardnosed as we imply we are when we talk about this stuff, only a fraction as many books would ever get published.

Excellent article even though I had to google Dominar Rygel the 16th. dammit.

This is all incredibly interesting. One question I have is what sort of books end up at Overstock.com or Bookcloseouts.com or those discount bookstores where they have the 'remaindered' mark a lot of the time. And how do those books get there? Is buying from those places hurting publishers or authors?

YES. Buying any books remaindered or used hurts authors and their publishers. Do people (including people in the publishing industry) do it anyway? Of course!

I should talk about remaindering, you're absolutely right. I'll do that in the hardcover/mass market post.

Haha, you are soooo lucky that I am not chiding people for putting Farscape spoilers in my comments anymore!

you're welcome!

You have no idea how tempting it is while reading slush to write "GIVE IT UP, YOUR WRITING STINKS" on the form rejection and send the whole parcel back.

E-publishers don't offer an advance -- rather, authors receive ~40% of the "cover price" of every sold "book". I would be very surprised if traditional print publishing (as opposed to print on demand publishing, which I believe works the same as e-press publishing) ever decided to go this route.

Aw, don't be afraid of math. This is easy -- this is algebra. Just plug in the numbers and go!!

The basic facts are complicated enough!

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

"Trade" is actually a distribution term -- the only question is if it is "trade cloth" (abbreviated as TC, also known as "hardcover") or "trade paper" (abbrev. TP or tpb.) Most trade paper original numbers, as far as I'm aware, look like the numbers for hardcovers -- sometimes slightly higher, since the price point is lower and we estimate that more people will shell out $14 instead of $24 -- or slightly lower, since libraries decide not to take as many.

The simple answer to your remainders question is YES, it's totally a wash for royalties. They're considered a loss, and our "profit" on them doesn't actually exist. I'll do a post about remainders with more details eventually.

Aww. You are welcome!

Anyone you work with in publishing should take the time to explain this stuff to you. If you have an agent, your agent should do it; if you don't, your editor should. That said, you have to ask -- no one is going to offer this information to you!

People wonder that?

Haha, not me, man. I bet you make at least twice the salary that I do.

As an aspiring editor, you should give up now and go do something else. *g*

That's what we tell all our interns anyway -- don't work in publishing. If you can, do something else. If you can't... well, you'll be in good company.

You're welcome.

Hahahahahaha. Awesome. Always happy to help the procrastinators!

You're welcome!

YA publishing works the same. I am unfortunately not familiar with the intimate details of the sell throughs and such, but, as I said in the post itself, this is just one example of what can happen to one book. This is average -- though, perhaps, slightly cynical.

I don't know anything about graphic novel publishing, despite that we're doing one or two in our trade list. That is a steep steep steep discount, though. Whoa.

Thanks!

I am impressed with the clarity of this explanation, and gobsmacked by the concept of

pnh typing "OMG! SQUEE!"

The universe is indeed a strange and wonderful place.

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

How paperbacks came to be sold like magazines

Mass Market Returns

Re: Returns - always bad?

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Re: How paperbacks came to be sold like magazines