The Business of Publishing

I've been reading a lot lately about the publishing business. I found a couple of blog posts by writer Lynn Viehl about a novel of hers that recently hit the New York Times bestseller list. The first blog post, titled "The Reality of a Times Bestseller," is an interesting read, and she includes with it a link to her first royalty statement. (Technically, this is a statement detailing how many copies were sold [and the dollar cost for those], how many were returned [and the dollar cost for those]. She received a $50,000 advance on this mass market paperback (which sells for $7.99, and she earns a standard 8-10% royalty once the book earns back the advance she was paid). The statement shows sales of $40,484, with $13,512.69 withheld for 21,140 books printed that had not yet been distributed, plus $750 for book club rights sold, for a net of $27,721.31. (NOTE: "Returns" are books reported to the publisher as unsold. In many bookstores, you will often find books at the front of the store that are severely discounted. These are known in the business as "remainders." "Remainders" are books reported to the publisher as "returns." I don't believe that authors earn royalties on "remainders" that are sold. "Remainders" are a cash cow for bookstores.)

What does this mean? Well, it means that at this point Viehl's book had not yet earned back the advance paid to her. At the time of that statement, 17 Feb 2009, her novel needed to earn another $22,278.69 ($50,000 - $27,721.31 = $22,278.69) before she would start receiving any additional royalties off the sale of her books.

Viehl went beyond this, however, to blog again in this post, "More on the Reality of a Times Bestseller," about her second royalty statement. This statement again shows copies sold [and dollar cost], copies returned [and dollar cost], and it shows that the books withheld in the previous statement had been released for distribution.

Monies received for US sales were $3794.94, while monies refunded for US returns were $6594.64, for a net US loss of -$2799.70 ($3794.94 - $6594.64 = -$2799.70 — more were returned than sold).

Export sales (Canada, Export, book club) were $773.27 ($81.97 + $462.64 + $228.66) and Export returns were $237.31 ($197.99 + $38.84 + $0.48), for a net Export earnings of $535.96. This gave a "Total Royalty Earnings," actually a loss, of -$2263.74 (-$2799.70 + $535.96 = -$2263.74).

It shows that 21,140 books were released, for an earnings of $13,512.69, and from this was subtracted the total US and Export returns $8814.57 (13,790 books @ a royalty of $0.6392/book) for a reserve adjustment of $4698.12.

Subtracting the loss on royalty earnings gave a total earnings of $2434.38.

Adding the earnings from the previous statement ($27,721.31) to the earnings from the second statement ($2434.38) means that in one year the publisher has earned back $30,155.69 of the $50,000 they paid to Viehl. At this point, they're still $19,844.31 shy of earning back the advance she was paid against her royalties.

It's important to understand that Viehl never has to pay back any money that the publisher loses on the sale of this book. Even if another copy of this particular book never sells, Viehl will have earned the $19,844.31 that the publisher lost.

I stated earlier that her royalty for a mass market paperback is 8-10%. There is a schedule that publishers follow in determining when the royalty payment goes from 8% to 10%. Generally speaking, the royalty on the first 100,000 copies sold of a mass market paperback is 8%, and then 10% if the book sells more than 100,000 copies.

Knowing the royalties alone tells you how many copies of her book have to sell before she can start earning money on top of that $50,000 she was paid. Her book sells for $7.99. Her royalty is 8%, so $7.99 x 8% = $0.6392 per book. Divide the advance by the royalty per book: $50,000 ÷ $0.6392 = 78,222.7 books must sell before she'll earn another penny.

She has thus far earned back $30,155.69 of her $50,000 advance, which means that $30,155.69 ÷ $0.6392 = 47,177.2 copies have sold thus far. Therefore, there another 78,222.7 - 47,177.2 = 31,045.5 copies must sell.

To verify the math: 31,045.5 x $0.6392 = $19844.28. And I said earlier that they were still $19,844.31 shy of earning back the advance she was paid. I'm off by only 3¢. If I'd carried it out to four digits beyond the decimal point, my calculations would've been closer.

Keep in mind, too, that Viehl's agent received a 15% commission ($50,000 x 15% = $7500), leaving her with $42,500, before taxes (she'll have to pay self-employment taxes, too; if, as an employee, you pay, say, $200 per paycheck in Social Security taxes, your employer also pays $200 in Social Security taxes; so, if you're self-employed, you pay the employee's half and the employer's half, for a total of $400). In Viehl's case, as with all those who are self-employed, she'll have to pay her taxes quarterly. The self-employed have to pay for their own health insurance, too.

What's interesting about this is that Viehl had a New York Times bestseller, and one year later the book still has not earned back its advance. More significant is that this book was in the top 20 on the bestseller list.

Doesn't sound like it's very easy to make a living solely as writer, does it? Well, it is and it isn't. It all depends on how you handle your business, and that's where many fail. Most writers don't understand that they're in business and they don't treat their writing career as a business. That's a sure formula for failure.

For a view that shows how to treat it like it's a business, especially one that discusses how it is possible to for a writer to actually make a living writing nothing but fiction, check out "Killing the Sacred Cows of Publishing: Can't Make Money in Fiction," by author Dean Wesley Smith. I've been reading (and commenting) on the entire series that he's written on these Sacred Cows, and it's damned good stuff, too. Enlightening.

FOOTNOTE: Regarding the blogposts written by Lynn Viehl, I've read every word of both posts, as well as every comment that was published. There's a good bit of myth-spreading contained therein, if you compare what's said in those posts with what Smith says in his Sacred Cows series. The most important thing for a writer, something that Smith emphasizes, is to understand copyright law and how to use it to his advantage. Smith uses the idea of a "magic bakery" to make his points, and it's a valid metaphor. Author/literary agent Donald Maass makes the same point in his book, The Career Novelist, but his metaphor is of a "bookstore."

As an additional note, I'll also be blogging a little more about the business, sharing things I've learned elsewhere, such as where libraries fit into the picture of the publishing business.

I hope you enjoy all the reading assignments I've given you. LOL

0 comment(s):

Post a Comment