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Actually Elfwreck, the numbers aren't right. you can't use $3.75 for hard costs in one place and not the other. See attached.
Let's take some big book the publisher is doing with a celebrity. She's created a $25 hardcover book, and the publisher has paid her a $100,000 advance.
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So take the $12.50 the publisher received for the book and subtract author royalties ($2.50), hard costs ($3.75) and overhead ($2). Conservatively, the publisher is left with $4.25 per book after paying all the bills. In essence, the publisher is making more money per book than the author is making. (And no, there's nothing wrong with that.)
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let's say the publisher printed fifty thousand copies and sold half of them. They received $312,500 from bookstores ($12.50 x 25,000 copies sold). They credit the author her royalty of $84,375 ($2.50 x 5000; $3.125 x 5000; $3.75 x 15,000). The author hasn't earned out — she's still in the red $15,625. The publisher is left with $228,125. Out of that they pay $150,000 on printing ($3 x 50,000) (should be $187,500 $3.75 x 50,000) and $50,000 in overhead. So the publisher is left with a profit of $28,125 (loss of $9375). Even if they write off the rest of advance, they're sitting on $12,500 (loss of $25,000 ($15,625 + 9375)). Maybe they remainder the rest of the books for a dollar each , so they just got in another $25,000 (and royalties aren't paid on remaindered books), so now the publisher has $37,500 (breakeven $0). Did you follow that? The book did NOT earn out, but the publisher still made money broke even.
I know I'm a math geek, but I want the argument to be right. The breakeven point is 50% of sales in this example....
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