Tips for Writers
Who is Making Money in Publishing?
By Jerry D. Simmons | November 10th, 2005 | 2 Comments » (Click to add yours!)
There are two groups that are making what would be considered really big money in publishing. The first is of course those very successful bestselling authors whose books on occasion are turned into the latest motion picture or television mini-series. The second group is the largest mass merchants and bookstore chains. Here is how it breaks down.
The biggest authors command more than a million dollars per book, some several million. Publishers rarely make money on these titles. Yes, they sell lots of copies but after paying more than a million for the rights, publishers seldom recoup their advance on the sale of the hardcover.
Here’s why–publishers sell books to their customers at an average of 48% off the cover price. For a book that retails for $25, the publisher bills that title to their customer for $13 and gets paid only after the book sells. Books are guaranteed, if that customer cannot sell that $25 hardcover, they return the book and the publisher credits back $13. Only after the customer sells the book does the publisher get paid and in most cases it is many months after the sale.
The publisher absorbs all costs related to advertising, promotion, publicity, author tours, production, art, editorial, marketing, warehousing, shipping, and the overhead of running a multi-million dollar division. All of those costs in addition to the advance for the rights come out of the publisher’s portion of that $13. The margins for operating their business are squeezed very thin and in most cases the publishers end up making pennies on the sale of a $25 hardcover.
The largest mass merchants and bookstore chains make money in two ways, on the sale of copies multiplied thousands of times and the rental of real estate. Every inch of a major bookstore chain and the book aisles of the mass merchants are considered real estate and are available for rent to promote titles for a specified period of time. Consider the size of the stores times the number of locations nationwide and you get an idea of the revenue stream this creates.
In addition to the rental of retail space, publishers often pay for advertising costs associated with promoting the book in-store. They pay placement allowances for displays on the floor, on the shelf, or on the tops of tables. They pay to promote titles when authors make appearances to sign books; they also pay for any print announcements the store may offer. It seems the lists keeps getting bigger because the money to retailers for these promotions, advertising, and placement are paid regardless of whether or not the book sells.
Writers who can consistently complete a book every six to nine months and maintain a consistent level of sales, can make a very nice living as an author. And who knows, you might be the next one to write the biggest bestseller of the year and end up with a million dollar paycheck!
Here are some of the most frequently asked questions about this subject, “If the publishers don’t make that much money off of those best selling authors that are given a million dollars and up for the rights then why do so in the first place?” The answers are billing and publicity. Publishers today are focused on generating as much billing, and creating as much publicity as possible.
Big name authors generate lots of billing and create publicity. It is easier to get the recongizable names on television and in print than any other author. This creates a buzz that publishers use as leverage to get the less than recognizable names on television and in print. Plus the media exposure sells older backlist titles.
Publishers need a complete list of titles, including big name authors that do not make money on the hardcover publication. However, they can earn a great deal of money on the paperback and subsequent sale of the older back listed titles. So they are willing to break even on the hardcover and recoup their investment on the paperback edition.
Another question, “I have been hearing stories about some of the recent new authors that have been given at least a million in advances and they have never been successfully published much less published at all in their lives. Am I missing something here?” The answer relates back to the need to generate billing and create publicity. A new unknown person who is suddenly handed a million dollars or more for a new book, had something in a manuscript that a publisher felt they could exploit and was also something they desperately needed.
With an investment of one million, they can create lots of billing and tons of publicity. The problem for the author is that if the book fails miserably, the chances are slim they will ever see another million dollar advance. Of course with a million in the bank, perhaps the new author is not interested in another big payday. My guess, based on years of working with hundreds of authors, is that the ego would take over and the need for another big advance would become increasingly important.
Big advances and loads of publicity do not guarantee sales. There are never any guarantees. The publisher of Patricia Cornwell has a pretty good idea how many copies of a new hardcover will be sold. The range hardly ever varies. So the advance per book is based on selling the same numbers. The publisher makes their money on the sale of all her older back listed books in the paperback editions sold alongside the new hardcover.
And of course do not forget, the retailer is making a nice piece of change on the sale of the hardcover, paperbacks, and space they are renting to promote the books.
Tags: Book Distribution, Book Marketing, Book Sales, Booksellers, writing
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