Publishing Industry Myth (half-truth) #1

[Daithi]

Myth (half-truth) #1: Most authors don't even earn back their advance.

This isn't exactly a myth, but it is a half-truth. The implication when the publishing industry, or one of the fanboys, make this claim is that the publishing industry is either losing money on that underperforming author, or that the authors making their advances are carrying the underperforming authors that failed to make back their advances. None of that is true!

Let's look at an example to see how things really work.

Publisher A offers a $50,000 advance and 8% royalties.
Publisher B offers a $25,000 advance and 10% royalties.

If the cover price is $28 then the author receives
__$2.24 from publisher A per book so he must sell 22,322 to earn his advance.
__$2.80 from publisher B per book so he must sell 17,858 to earn his advance.

Let's say the author sells 20,000 books. Does that mean publisher A lost money?

Absoulutely not. In fact, if his offer of a $50,000 advance allowed him to sign the author, then publisher A made money. It was publisher B who lost the author and didn't make money. In publisher A's case, he would have received $14 per book (50% of cover is an industry average) so he would have made $230,000 ($14 x 20,000 - $50,000). Another way of looking at it is that 20,000 books with a cover price of $28 were sold for a total of $560,000, and the author received $50,000 or 8.9%. While it is true that the author didn't earn back his advance, it is patently false that the publisher lost money on this book. In fact, publisher A would have made MORE money than publisher B, as they both would have sold 20,000 books but publisher B had to give the author 10% while publisher A only had to give the author 8.9%. Since top authors can get 12% (or more) we can assume the publisher isn't losing money at a 12% royalty. That means publisher A could give an author a $50,000 advance at 8% royalties and if the author only sold 14,880 copies the publisher would still be profitable, even though the author only earned back less than $35,000 of his advance.

Publishers can, and do, make money on authors that don't earn back their advances. It is true that blockbuster authors generate the lions share of a publishers revenue, and that is where publisher focus efforts, but this in no way invalidates the profits generated by midlist authors.

So when the publishing industry says, "Most authors don't even earn back their advance." Well, it is true, but the implication that the publisher is losing money, or that only a few authors are earning their advances and are carrying the other authors, is complete BS.

[Dulin's Books]

what was the cost of producing the 20,000 hardcover books?

[Daithi]

How much it costs the publisher to produce the books is immaterial to whether or not an author earns back their advance. Pick whatever figure you like.

[Greg Anos]

Originally Posted by Daithi

How much it costs the publisher to produce the books is immaterial to whether or not an author earns back their advance. Pick whatever figure you like.

$500,000......

[guyanonymous]

Well, of course, once you take into account salaries and dividends!

[Dulin's Books]

Originally Posted by Daithi

Another way of looking at it is that 20,000 books with a cover price of $28 were sold for a total of $560,000, and the author received $50,000 or 8.9%. While it is true that the author didn't earn back his advance, it is patently false that the publisher lost money on this book.

So you think that the publisher makes the full value of the list price per book? and you also think that if 20,000 copies are sold they only printed 20,000 copies int he first place?

The publisher will only make $14 per book at most. Plus if they sold 20,000 copies they probably printed 40,000 or more. You can't say the cost of delivering the book to the store shelf is irrelevant to whether the author earned the advance- the advance ois part of those costs.


If the book in your scenario made $560,000 in retail sales but it cost $560,001 to put that book on the shelves than it lost money and it didn't earn back the authors advance.

[guyanonymous]

By printing 40000, they're unnecessarily increasing costs. Talk about a broken model.

[Dulin's Books]

that is a number i made up for example- most books don't sell out their entire print run immediately. and they may get a discount per book by printing a larger quantities. I imagine decided how large an initial print run will be is a significant task.

[drplokta]

Originally Posted by guyanonymous

By printing 40000, they're unnecessarily increasing costs. Talk about a broken model.

No, they're necessarily increasing costs. You can't sell books that you can't get into bookstores, and you can't get non-returnible books into bookstores.

[guyanonymous]

Again...talk about a broken model.

[Greg Anos]

Guys, please read this thread (and links). Real writer, real book and real royalty statements..


https://www.mobileread.com/forums/showthread.php?t=72513

[Kali Yuga]

Hrm, RSE may have beat me to it. Anyway....

Originally Posted by Daithi

Myth (half-truth) #1: Most authors don't even earn back their advance.

This isn't exactly a myth, but it is a half-truth. The implication when the publishing industry, or one of the fanboys, make this claim is that the publishing industry is either losing money on that underperforming author, or that the authors making their advances are carrying the underperforming authors that failed to make back their advances. None of that is true!

If you were basing your claim on actual numbers, you might qualify as a myth-buster. However...

Lynn Viehl (thank you to whoever linked her blog page to MR ), who has published several sci-fi books, posted her royalty statement and an analysis thereof online. She got a $50k advance, 8% royalties on paperback, sold around 65k copies. She earned $40k in royalties, $13k of which was held in case of returns.

Or to put it bluntly: she sold 65,000 books and hasn't earned her advance yet.

If she had a 16% royalty rate instead of 8%, she'd still need to sell around 40,000 copies to officially cover the $50k advance; assuming a 30% reserve against returns, she'd have to sell 65k hardcovers before getting an actual royalty check.

There is a separate issue of, "are writers selling enough to cover the publisher's expenditure of the advance." But the advance is not the only cost -- so it does not make sense to isolate just that cost and, on that basis, pass judgment on how much profit the system makes. I.e. when you ask "did the publisher make money on that book?" you must include all the costs of the book in that analysis. That's also going to have a complex answer, as the publishers have all kinds of overhead costs that are spread out over dozens of titles (e.g. office space, taxes, staff, legal).

It's pretty well understood that publishing has razor-thin margins. As informative as Ms Viehl's blog post is, it's only a part of the story.

[rhadin]

Originally Posted by Dulin's Books

that is a number i made up for example- most books don't sell out their entire print run immediately. and they may get a discount per book by printing a larger quantities. I imagine decided how large an initial print run will be is a significant task.

I can tell you from experience that it is one of the most time-consuming and difficult tasks for a publisher. True if the author has a track record the guessing is easier, but for new authors, determining the appropriate print run is a nightmare. (I used to run a publishing company and know from experience how difficult it is to accurately predict the initial print run.)

One other thing that is rarely mentioned. It is not unusual for the makor distributors like Ingram and the book chains (including Amazon) to refuse to stock a book unless a minimum print run is done, regardless of whether you think it appropriate for a new author. We had to decide whether it was worth the risk of no exposure by not having the major distributors handle our books or the chains carry them by doing a low print run.

[Greg Anos]

Originally Posted by Kali Yuga

Hrm, RSE may have beat me to it. Anyway....



If you were basing your claim on actual numbers, you might qualify as a myth-buster. However...

Lynn Viehl (thank you to whoever linked her blog page to MR ), who has published several sci-fi books, posted her royalty statement and an analysis thereof online. She got a $50k advance, 8% royalties on paperback, sold around 65k copies. She earned $40k in royalties, $13k of which was held in case of returns.

Or to put it bluntly: she sold 65,000 books and hasn't earned her advance yet.

If she had a 16% royalty rate instead of 8%, she'd still need to sell around 40,000 copies to officially cover the $50k advance; assuming a 30% reserve against returns, she'd have to sell 65k hardcovers before getting an actual royalty check.

There is a separate issue of, "are writers selling enough to cover the publisher's expenditure of the advance." But the advance is not the only cost -- so it does not make sense to isolate just that cost and, on that basis, pass judgment on how much profit the system makes. I.e. when you ask "did the publisher make money on that book?" you must include all the costs of the book in that analysis. That's also going to have a complex answer, as the publishers have all kinds of overhead costs that are spread out over dozens of titles (e.g. office space, taxes, staff, legal).

It's pretty well understood that publishing has razor-thin margins. As informative as Ms Viehl's blog post is, it's only a part of the story.

Yes, but.....

If she's make 8% royalty, then the publisher is making 92% (minus the lump sum advance to the author). If this is such a razor-thin business, why aren't the companies located in Podunk, USA, where office space is 10th the cost of Manhattan/LA, and salaries/cost of living is lower? It's not like they have to have the authors come into the office every day....

[Greg Anos]

By the way, even in the dark days of the 1920's (huge oil glut), the Oil Business paid 1/8 royalties to the land owners (that's 12.5%) + a per acre bonus (non-refundable) just for the privilege of drilling for oil.

Publishers can't make it on 92% percent......