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

[ashnistrike.livejournal.com]

That's what I've been wondering. Is it actually in the author's long-term interest to try and get a smaller advance the first time, increasing the odds of earning out?

[alg.livejournal.com]

I would say yes.

Some editors would say no.

Some agents would say yes.

Some agents would say no.

This is the kind of question that is very situational.

For example, when Tor started its paranormal program, we gave small advances, even to our biggest names. However, by doing so, we created a pool of "extra" money that we could work with -- sure, it was money that didn't exist yet, but we talked a good game and walked a good game, and used that money to launch the books.

However, at houses that are not Tor, it is very likely that the smaller the advance is, the less work anyone will do on it, and the less effort anyone in a department that isn't editorial will put into it.

See? Situational. This is where a smart, savvy agent can come in handy.

[tnh.livejournal.com]

Even a very modest advance won't help if your book didn't sell for beans.

There'll still be production costs, distribution costs, and that basic marketing and promotion that real publishers do for all their books no matter how small. There'll also be Contribution to Overhead, which is your book's fractional share of the cost of running the publishing house. If your book doesn't earn enough to cover those, you're still in the red no matter how tiny your advance.

Some years back, so long ago that alg (http://alg.livejournal.com/) was a cute little cartoon-watching moppet, there was grumbling about the very low advances being paid by one of the big trade houses.

As the authors and agents pointed out, if said publishing house honestly thought the book was only going to sell enough copies to earn out one of these pitiful advances, there was no way the book was going to cover its basic costs, and so they ought not be publishing it. But since they were publishing it, they obviously believed it would sell quite a few more copies than that -- and consequently they should have been offering higher advances.

Share the risk?

[(Anonymous)]

As an author who is more interested in getting published than getting a publisher to pay me money, I'd be willing to share the risk with the publisher: don't pay me any advance at all, but give me a bigger share of each sale. If it bombs, the publisher is not out any advance money, although clearly, they are still out the production and distribution costs. If it flies, we both make money. If it bombs and later I become famous, well, we still both make money.

I'm sure this is not an original thought, and I'm also likewise sure there are a lot of authors would would view this idea with horror. Which leads to the question: does any publisher do anything like this? Would they consider it?

Re: Share the risk?

[alg.livejournal.com]

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.

Re: Share the risk?

[halspacejock.livejournal.com]

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.

Re: Share the risk?

[(Anonymous)]

I believe R.A. Salvatore (Fantasy writer of some fame) works with a publisher that does much as you say. I seem to remember something akin to this in an interview. I believe his book, THE HIGHWAYMAN, was the first offering from that publisher.

wf

Re: Share the risk?

[tnh.livejournal.com]

No!

I earnestly beg you not to do business with any publisher that offers you such a deal. While in theory they might be honest, in practice I've never seen nor heard of one that was. Proposals to share the risks are reliably a sign that you're dealing with a scammer.

Think of the worst books you've seen commercially published. Their publishers paid all costs. If a book were worse than that, do you imagine anyone would read it?

You can't share the risk. Your advance is only a fraction of the total cost. If the publisher has a real marketing, promotion, distribution, and publicity operation going, a genuine share of the risk would cost more than most people can imagine paying.