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

[(Anonymous)]

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

[vonandmoggy.livejournal.com]

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