13/02/06

The business of books: #776

GOB reminds us of a December posting (I think the first of his I read) discussing the economics of publishing.

It’s a comment correspondence with an ‘anonymised’ author called ‘Jeremy’, and they discuss the earnings of authors against publishers, with some pretty interesting numbers attached.

Jeremy presented a lengthy example of the sales of a hypothetical novelist, one Geoffrey Gloom, and the royalties resulting. He went on to suggest that, from total sales income (customers’ money handed over the counter) of £108,000, the publisher would end up with a net profit of £24,000. The author, by contrast, might get £11,000, less agent’s commission, less expenses.

Actually, Jeremy’s figures (if I understand them correctly) are not quite correct in terms of their own arithmetic, because he forgot to deduct the author’s royalty from the publisher’s profit, so the £24,000 becomes £13,000. But, having noted that point, let us summarise Jeremy’s estimates, as seen from the publisher’s perspective, and consider how the £108,000 which is handed over the counter actually gets distributed. In rounded percentage terms, the figures work out as follows:

Booksellers’ share: 54%
Manufacturing costs: 15%
Overheads: 4%
Distribution and marketing: 5%
Royalties: 10%
Publisher’s profit: 12%

Jeremy counters,

But I think what I was really saying in my previous post was that most publishers and agents live a lot better than I do – or at least have a lot more money – and achieve this trick largely by sleight of hand.

It seems to have litttle to do with real economics. Publishers pay millions each year to a handful of authors and buttons to the rest. It makes no sense. there is no m arketplace logic to it. But the trick works and it benefits those it was always intended to beneift: publishers themselves, the better known agents and an approved list of top authors.

Do read both in full.

GOB update (today)
Original post with comments (December)
Archive piece on advances (GOB)

Of course, the counter-argument here is that it is not publishers who make the real money, but retailers. Publishers have to spread the risk of buying in books, by paying an equal amount of high advances for the ’slot’ books that will *surely* be a success, and significantly lower ones for the books they love, or want to take a punt on, but do not have the ‘platform’ visibility that Jeremy is talking about.

Irrespective of the nastiness of the high street, supermarkets, retailers and Amazon fighting over market share, a lot - even though less than in recent years, still a sginificant percentage - of book sales are under terms of full, 90-day returns. In other words, if a retailer doesn’t sell any, then they send them back to the publisher, who invariably can’t sell them on to anyone else because they are damaged, or mixed in with a bunch of other ‘returns’ and the cost of sorting them too high. Before I go off on one about the logic of that wastefullness, it’s clear that if a book takes off then it is the retailer who wins. They can return them all, or demand new ones effectively overnight, whilst it is the publisher who takes on the risk in the first palce of acquiring the books, and then if it takes off - the risk of how many to reprint.

Quoting Caroline Proud, in a very interesting but strangely offline recent Bookseller article (’Predict sales and print accurately’, Feb 3 2006) acting sales director at Profile Books, says, ‘The worst thing for a small publisher is to overprint - it’s a huge risk and the profit goes very quickly…’

Naturally a retailer doesn’t have that risk on fast-moving stock.

Posted by Peter Collingridge in Publishing.