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When is 10 more than 50?

Originally posted by ianrandalstrock at When is 10 more than 50?
A writer friend of mine recently told me about a deal he's signed with a small publisher, a contract his agent called very author-friendly. The publisher will be paying him 50% of their income on the book. His comment preyed on my mind for a while, because I pay my authors 10% of cover price. Am I really doing my authors such a disservice? Or is the industry passing me by?

At first glance, that 50% sounds wonderful, especially in a publishing world where the big traditional publishers offer royalty rates ranging from 5% to 15%.

But the more I thought about it, I decided to put some actual numbers into the equation, to see how they could be so author friendly, or why I don't appear to be doing as well by my authors.

First, the caveats: Gray Rabbit Publications/Fantastic Books publishes its books via print-on-demand technology, nearly all of them as trade paperbacks. Our cost per book is higher than a traditional publisher printing 10,000 copies up front on offset presses. On the other hand, we don't have to pay to produce 10,000 books before we've sold any, so it's kind of a wash. Second, GRP/FB is a very small company, still almost a start-up, and I'm doing my best to keep initial costs low. For that reason, and to give others a greater chance to participate in the company's successes, I pay royalties to as many people as possible, rather than up-front fixed payments.

So, some numbers:

There's a complex equation to get the actual cost of the physical book, but for the sake of this experiment, a 300-page book costs just about $6.00 to print and bind.

When I publish a book, I have to pay the retailer (Amazon.com, BarnesandNoble.com) 30% of the cover price to sell the book. (For physical bookstores, see the end of this article.)

My contract gives the author 10% of the cover price.

I pay my editors 10% of the cover price of the books they edit.

If there's an artist involved (as opposed to using stock art), I offer 2% of the cover price.

If I price that 300-page book at $15.00, it works out like this:
$15.00 - retail price
- $6.00 - cost of physical book
- $4.50 - retailer
- $1.50 - author
- $0.30 - artist
- $1.50 - editor
- - - - - - - - - - - -
$1.20 - company income from the book.

So re-run the numbers taking out the author's 10%, and replacing it with 50% of the net:
$15.00 - retail price
- $6.00 - cost of physical book
- $4.50 - retailer
- $0.30 - artist
- $1.50 - editor
- - - - - - - - - - -
$2.70 - net. Split 50/50 author and publisher, and author gets $1.35 for the book sale.

In other words, splitting the net 50/50 with the author, and telling him I'm paying him 50% royalties, means the author gets 9% of the cover price. My 10% royalty puts more money in the author's pocket for each copy sold, and less in mine.

I'm not going to go into all that my company has to do with it's $1.20 from that book—it's business stuff, which you've probably heard before—but rest assured that that $1.20 does not wind up in my pocket; very little of it actually does.

So I feel a lot better about paying 10% royalties, knowing that it only sounds worse when you don't calculate the numbers.

As for physical bookstores: to get my books into physical bookstores, in addition to the 30% the retailer requires for selling the book, another company is introduced into the equation: the distributor. The distributor demands 25% of the cover price as their cut. Remember that the retailer, author, artist, and editor add up to 52% of the cover price. On this 300-page book, adding in a distributor means the physical cost of the book and my company's income from the sale now have to be shoe-horned into 23% of the cover price. If I raised the cover price to $26.10, the $6.00 print cost would be just 23% of the cover price, leaving no money at all for the company. And that's not even adding in the costs of returns, which those physical bookstores require.


Crossposted from http://fayanora.dreamwidth.org

Comments

( 1 comment — Leave a comment )
d4b
Oct. 14th, 2011 03:16 am (UTC)
And he doesn't even touch marketing costs, which in a perfect world would take up a significant chunk of the pie.
( 1 comment — Leave a comment )

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