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

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?

Re: Returns - always bad?

[(Anonymous)]

I'm not Anna, but this is what I think given what she said.

Why would a pub print only 10K if they think there's demand for more? The more they print, the cheaper per unit cost becomes:

[(fixed cost + variable cost) / (# of units printed)] = per unit cost

Since fixed cost is the same, and the variable will change depending on the number of copies printed, and since the per unit cost of printing will be much less if you print more, a publisher is most likely to print as many copies as it thinks it can sell.

So the fact that Aeryn sold 8,400 copies means (in my non-publishing expert's opinion):

1. The publisher printed a lot and she only sold 8,400 copies -- crappy sell-through

OR

2. The publisher couldn't print many copies because nobody really wanted to order her books that much (meaning B&N, Borders, Walden, and other retail outlets) and consequently she sold badly

Either way, poor Aeryn's screwed.

Anna -- please provide more enlightenment on this because I may have been completely wrong!

Re: Returns - always bad?

[pnh.livejournal.com]

When her next publisher is looking at buying her books, don’t they only have access to sales (though Bookscan) not the print run?

Well, no. Because not only do we have access to Bookscan, we also have access to buyers for major chains and big wholesalers who remember all too well the extent to which the previous publisher pushed too many copies onto them.

It seems like authors (or agents, at least) should push for bigger print runs, hoping that the extra copies will result in better merchandising

Ah yes, the old "Push them into over-distributing it, then they'll have no choice but to spend lots of money marketing it" argument. There are many reasons this doesn't actually work, but the biggest is that "marketing" and "merchandising" dollars spent after an act of gross overdistribution are a lot less effective than you might think.

and get sales in the bank (bookscan) and let the publisher worry about the returns.

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.

Re: Returns - always bad?

[(Anonymous)]

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. \

Re: Returns - always bad?

[pnh.livejournal.com]

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.