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

We separate out our "manufacturing costs" from our PP&B costs. We do print about twice as many covers as we estimate that we're going to need, and sometimes we need even more than that and have to go back to press.

I'm sure the numbers look high to you, but they are real numbers that really exist. The way big NY publishing works, as I am sure you know, is really different from the way small press works.

And we don't outsource to India.

Thank you for writing this. It was not actually far from what I would have expected, but I'm glad to have read it all the same.

First, THANK YOU for shedding a little light on the problems you face. As an unpublished author, these are the problems I face, too. And, now that I know more about them, it helps me understand the why (or, perhaps more importantly, why not.)

I have a question, though.

What if I offered my $5,000 advance back to the publisher as an investment in marketing?

Obviously, I believe in my book. Why not let me put my money where my mouth is? Even if I don't break even with whatever royalties I earn, my goal is to build an audience and warrant a second and third book. That's where the money is going to be made anyway, eventually.

It seems unfair that it should still be so hard to get published by a major house when I'm willing to share the financial risk. Even beyond the advance, why not open a door for authors who are willing to fund some of the other expenses in return for your brand and expertise?

Jeff

Forgive me-- I assumed you meant Sarah.

We'll leave alone why I thought that title was entirely appropriate....

lol~!

So the author got a royalty of 8%...is that common? Seems somewhat low, since I know at least one author (relative) who gets ~18% royalties. Though the royalties probably vary based on the genre.

[Exeunt omnes, pursued by World War II.]

...will you be my internet boyfriend? I will pay royalties to

tnh.

It's why I went web-comic with my novel. Why try to break into an inudstry that's hurting when I can lead in a new one.

'Tisn't math 'tis arithmetic

I'm not getting into *that* flamewar, thank you. :-)

It is common NY big house publishing that on a mass original, the author receives 6% to 150,000 copies sold and 8% thereafter. It is just now becoming common NY big house publishing that on a mass market original, the author receives 8% to 100,000 copies sold, and 10% thereafter.

Bestselling authors receive a larger royalty.

Small press authors may or may not receive more. E-pubbed authors will often get up to 40% or 60% of the cover price -- less overhead = more profit.

Authors "willing to share the financial risk" are not actually sharing the financial risk. It only seems that way. The advance is actually shorthand for "advance against royalties" -- the publishing company still bears 100% of the financial burden.

Thanks for writing that up. I can now point people at this...

I've heard this analysis of the costs of publishing a book any number of times...I used to run CAN-CON, an SF convention that David Hartwell used to frequent, and it always fascinated me how all of this anaylsis defines how a book can affect the career of a writer. It is scary how so much of the success of a writer depends on good estimating by publisher. A bad job of estimating will stall or ruin the career of a new writer, which is a shame. But it is an important piece of information for writers to know about, and plan their careers with.

ttyl
Farrell J. McGovern

...Co-Founder of CAN-CON, The Conference on Canadian Content in Speculative Arts and Literature.

Not only estimating, but any part of the human factor! What always scares me is how much luck everything takes.

Great article, I wish I could have this to hand out to people who want to join my writer's group. They have all written the great american novel and know that it will make them tons of money. Gah.

Ya, the old story about the Thomas Covenant books (apocryphal or not), after being shopped to 19 different publishers, being bought by the same publisher they were initially shown to is a good example of the "human factor". Luck...well, that's always a factor in any business. The "Fickle Finger of Fate" is an invisible weathervane in all human endeavors.

ttyl

Small press pay little or no advance. (I don't mean POD or vanity or self-pub) With a small press it's author + publisher against the world, with the author standing out front as the world advances on them. Downside: if you want to be loved and cuddled by your publisher this is not good. Upside: you have more say in your future.
Like you, I was more interested in the getting published side than the getting paid lots up front side. However, you DO have to look at the distribution your chosen publisher has in place.
I'm published by a small press in Australia, but that small press has a distribution arrangement with Penguin, whose reps treat my book as one of their own outside my home state.
The publicist at FACP has been great with getting me exposure in the media, but I've also done my own bit by lining up a few reviews and cover blurbs. It feels like a collaborative effort, and that's how I like it.
Almost twenty years in small business (wholesale and retail) had me nodding my head at everything alg was saying. Books are products like any other - regard them as such and the whole crazy system suddenly makes sense.

Fascinating. Thank you.

B

Totally different market for the trade paperbacks, then?

I write for Syngress, technical books. They tend to be priced in the $30-50 range, list. I think printing runs are more often in the 8,000-12,000 range, costs per book are in the $15-20 range, returns actually are returned and restocked & resold. I take a pretty modest advance usually, if I take one at all. Being a hobby writer, I don't actually need an advance to pay the bills. I don't think I've ever lost money, as in had to pay back, on a book. Publisher keeps a reserve amount of royalties for returns until the book is retired.

And I mean "lost money" as in having to give some back. I'm not counting the fact that my time ends up being minimum wage sometimes. :)

Now, it's not just that my friends and I write killer books that always sell well. :) Is my publisher just structuring things so that I can't get into trouble? Just a totally different market for the tech books?

This was helpful to me, and I *work* in the publishing industry for a medium sized publisher. (of course, I only do IT, but whatevs)

>Note that every single bookselling outlet corporation must be offered the incremental coop. If we offer it to B&N, we also offer it to Your Mom's National Chain Bookstore. It has to do with monopoly laws, I think.

Uh...

Don't publishers sometimes agree contractually to give a distributor a price that is no higher than they give any other distributor (a so-called "Most Favoured Nation" clause)? Of course, I imagine that publishers wouldn't want to have a lot of distribution agreements with such clauses -- and certainly not all of them -- because even a handful would constitute price fixing, which is 100% the opposite of what antitrust law requires.

Of course I don't mean to suggest this is why your employer does it; I'm sure there plenty of other possible reasons. Fnord.

Maybe the "cooperative" nature of the advertising turns the tables somehow...

>Don't quote me on that.

Whoops... Too late. =)

Are you saying that Diamond operates at 3%-8% margin minus costs? That seems pretty slim. Surely I'm misunderstanding you?

Book publishers, like the music and movie publishers have always tried to convince everyone they lose money on every product and only run their business as a charity. It's simply not true. They would not keep doing it book after book, year after year if they did not make money.

The publishing houses have made their top people very rich off the work of others.

Ouch. As a book designer, yes, in NY, yes, more or less in trade publishing, though generally nonfiction trade publishing, I'm shocked, yes, shocked at $4500 for art.

The typesetting and design fees seem on the low end, basically assuming only a bit of keyboarding, minimal corrections, house cover/text design, etc.

But the art, oh, my, why not spend that kind of money on an honest to god designer and let them provide the art, etc.? You can buy a serious photo shoot or art from real artists for significantly less and, of course, if you hire a real designer the book will look better than your average TOR book. You can hire freaking _Pentagram_ for a $5000 a book fee.

No, it doesn't solve all problems or assure sales but you are going to get a much better looking book if you move your money around a bit differently and/or let the designer deal with the art.

And, given the percentage of the total production you are spending on art it's probably actually worth rethinking your P&Ls once in a while. What if we toss the art altogether and then spend an extra $1000 on developmental/copy editing, an extra $1000 on promotional swag, and an extra $2000 on design? You might move a few more books and, for god's sake, your books will look better and have a better chance in bookstores.

Not that I have anything against the very fine TOR cover artists, of course.

On the brokered publishers (Marvel, DC, Dark Horse and Image) Diamond never actually owns the title they distribute. In this sense they are actually a freight forwarder. The brokered deal outlines Diamond's margins but ensures that there's no competition. The brokered publishers are exclusive to Diamond.

Retailers earn a rolling discount based on the volume they order. The largest retailers earn a very high discount (again, around 55-57% off retail) and Diamond's margin is quite small. I'm not positive, but it should be around 6-8% for the highest volume retailers. But note that for most retailers Diamond's margin will be higher than this - the rolling discount varies from account to account depending on each retailer's volume. So probably closer to 10%-12%.

With the NON-brokered publishers (i.e.: everyone else) things become quite different. Diamond does purchase the titles outright from each publisher (and earns a discount of around 60%-65% off retail) but the discount retailers earn is lower. In some cases, only 40% off cover but usually no higher than 50%. Diamond's margins are then higher, but the lower discounts becomes a discentive for retailers when purchasing non-brokered titles (and if you want a reason why indy comics don't have a better sell-in to retailers, you just found a contributing cause).

It actually gets better for Diamond on re-orders (and worse for retailers). There's generally a 3% re-order penalty (and if you're from the book world with "just in time" ordering this seems particularly weird) on any re-order. So a retailer earning a 40% discount from a publisher who does well with a title actually receives a lower discount (37%) when they re-order that title.

So yeah, on the brokered publishers Diamond's margin is thin. On the non-brokered publishers, it's higher.

Von

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

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