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

[alg]

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

Movie Biz and Why this isn't totally honest...

[(Anonymous)]

Well I should say it is totally honest. But the question is how does a company stay in business then? The answer is that it is the same model as movies. MOST movies/books do horrendous and lose money for the company. However... the ones that are profitable, are usually HUGE for the company... and off-set the loses.

10 projects lose the company $21,000 each for a total of $210,000. But they have one book that hits the NY Times best sellers list and makes them $500,000... that's $390,000 more and can off-set the cost of 10+ more projects. Plus that same book that hits the NY Times best sellers list, well it turns out that Ron Howard really likes it and wants to do a movie of it. He offers to buy the rights for $500,000. But oh wait... A smaller director wants to do it... and he wants it to be his firt big hit, so he offers $750,000. But Ron Howard can dish out more so he ups it to $1,000,000. You get the idea.

Books become profitable when they sell off the subsidiary rights, including movie, tv shows, paper back rights, foreign rights.

This right up makes it out to be that the only profits are people buying books.

Re: Movie Biz and Why this isn't totally honest...

[alg.livejournal.com]

You will notice that I say several times throughout both the comment threads and the post itself that this is one example, and should not be taken as the only example, nor as The Word Of The Gods Of Publishing.

The subsidiary rights for books are only profitable for the publisher when they are owned by the publisher, or when they affect the rights owned by the publisher.

Re: Movie Biz and Why this isn't totally honest...

[mariongropen.livejournal.com]

I have a favorite saying about publishing finance: "It depends." That applies to your comment.

I have never worked in mass market, so I can't comment very specifically on the numbers in the P&L above, but I certainly saw nothing to which I took exception. On the other hand, you are right that subsidiary rights can be a huge part of the profit picture.

It is also true that publishers often find ways to fine-tune their estimations so that books more or less breakeven, and the break-out books can do some heavy lifting (of the bottom line).

A last point, break out books can be a mixed blessing. One of the most popular courses I give at PMA-U is "Surviving Success." There's a reason for that: small publishers with stunningly big books often tool up to deal with the demands they generate, and then have trouble cleaning up after the party's over.

This business is no end of fun, but it is also pretty hard to make simple, general and accurate statements about it. Or so I find, your experience may be different.

Re: Movie Biz and Why this isn't totally honest...

[(Anonymous)]

You've touched on something that I've tried to determine for the music industry -- namely, what is the range of profitability for a project? As you said, blockbusters tend to compensate for busts, but how often do each occur, and what about the 'tweens? Show me an historical frequency chart and I'll show you the underpinnings of corporate financial strategy.