The Economics of Publishing a Book – Part I

Many writers think of two numbers when their book gets traditionally published: their advance and the royalty statement numbers. But there are so many other factors that go into how you end up at those two crucial bank balance enhancing numbers.

The Profit and Loss Statement

Before an editor makes an offer, they have to run what is called a profit and loss statement. Publishing is a business, like any other, and part of the risk of their business model is that they front the costs of publishing a book without the opportunity to see a return on investment for a significant period of time. Still with me? So, in order to decide whether or not to publish your book, they need to project what the sales will be (profit) and compare that with the costs of getting your book out into the big, wide world (loss – marketing, paper, distribution, production, etc.).

How do you project sales?

How do editors estimate how many books you’re going to sell? Pick a number out of thin air? Not quite. They have to find a comparable title (comp title) to yours and look at the sales of that title. Book A is a vampire novel geared at teens (for instance), so Book B, which is also a teen vampire novel, can be expected to make similar sales to Book A. Is that always going to be the case? No, but it’s the best way a publishing house has to predict it.

Now, you don’t want to go crazy. I might like to think that my book is like Sophie Kinsella’s Can You Keep A Secret but that doesn’t mean that I should estimate my projected sales at her sales rate. She has author brand. She had multiple titles to her name before her book came out. I’m a debut author… with minimal brand equity, at the moment. Be realistic.

Is it bad if I don’t have a five-figure advance?

Depends. For a debut author, five figures is certainly ambitious. Above all, what an author wants is an advance that they can earn out. The “advance” part of an advance means that until your share of the books make ‘x’ dollars, you don’t start getting royalties.

Say I’m traditionally published (whipee!) and my book costs $15. Say I’m lucky enough to get $2 off the list price for every copy sold. If my advance is $2,000, I have to sell 1,000 copies of my book before I earn a penny more in royalties.

And if I don’t surpass 1,000 copies? Well then, the publisher is unlikely to want to publish book 2, because I wasn’t a great return on investment.

At the end of the day, unless you aim to be a one-hit wonder, think of the long game. Yes, you might be taking smaller advances now, but if you continually earn out your advance and surpass expectations, you’re more likely to be an author that is continually traditionally published.

Next week we will look at the Economics of Publishing Part II – what the margins are like for books, how much of a percentage your publisher is really making and why it feels tighter in the publishing world these days.

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One Response to The Economics of Publishing a Book – Part I

  1. lorellepage August 31, 2014 at 9:44 pm #

    I heard this the other day from an author and was surprised! I always thought royalties were on top of your ‘contract offer’. Not that I’m interested in making money of course…. Hmm why are we always so afraid to admit that we would like to make a career out of writing? I would love to be paid to write! Argh I found it hard to find a comparative book – with same style and same age group…that should really reduce my chances of being picked up :S

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