Royalties Aren’t Free: A Hard Look at Publishing Math

by Cindie Geddes. 

Yes, writing is an art. It’s a passion, a dream, a calling. But it’s also a business. And for most of the last 50 years, it’s been a dysfunctional one.

Until recently, writers had few options when it came to bringing their books to the readers. They could 1. Self-publish, which meant huge upfront printing costs, storing cases of books in their garages or basements, and hand-selling from the trunks of their cars and/or going bookstore to bookstore in hopes of getting individual stores to carry a few books here and there or 2: Publish with traditional publishers, which meant royalty deals in which the publisher would front the costs of production, marketing (if there was any), and distribution in exchange for the bulk of the book’s earnings (some writers would also get an “advance” on the deal – a loan against future royalties).

Somewhere along the line, writers began to think of traditional contracts as meaning the publisher did work for the writer “for free” or even paid the writer for the work. I’m not sure how that shift took place, but it’s a piece of marketing genius on the part of the industry. Or jaw-dropping self-delusion on the part of writers. Or maybe a bit of both.

Publishers don’t do anything for free.

Publishing companies are businesses, beholden to their shareholders, with a responsibility to increase profits. Writing is a business too, of course, but most of us are taught from a young age that there is something distasteful about treating the arts as a business. Any coincidence we’re also taught that artists starve?

The traditional model for selling a book was that an author would receive an advance (though not always). That money was actually a loan meant to tide the writer over while he/she finished the work in progress (though seldom, if ever, was it enough to actually do so). If the writer didn’t turn in the book or the book was not to the publishers liking, the advance was to be paid back. If the writer did turn in the book and it was found acceptable, the loan would count against royalties. So once the book made the company the amount of royalties equal to the advance, only then would the author start receiving royalties.

Royalties are a percentage of each sale, as designated in the contract, usually ranging from 15-20%. Hopefully, they were negotiated for in the contract, but many writers are afraid to negotiate out of fear of losing the deal. (Read more about negotiating here at Kris Rusch’s blog: http://kriswrites.com/2012/09/05/the-business-rusch-a-good-offense/. In fact, do yourself a favor and read her whole series on publishing.) In an industry where the only other option was to self-publish, in a world where self-publishing meant huge cost and equally huge stigma, the fear was a legitimate one. So while the writer might get 15% of the sale of an individual book, the publisher would get 85%. That 85% would cover all production costs (editing, cover design, ebook design, print design, marketing), as well as distribution.

Then we get into agents, and writers are looking at another 20%. Books sell. The publisher takes their 80-85%, then sends the remaining 15-20% not to the writer but to the writer’s agent. The agent takes his or her 20% and then sends the rest on to the writer. The writer best trust that agent — an agent who has no certification requirements, no education requirements, no requirements of any kind. Your neighbor, my sister, that guy on the corner with the misspelled cardboard sign – they can all be agents tomorrow. They all have the legal requirements to set up shop as a literary agent and take 20% of the writer’s money before sending checks onto their clients – the same requirements publishers require when they declare “no unagented material” in their submission guidelines. Dean Wesley Smith has some good advice on agents.  (and a lot more. Do yourself a favor and read his blogs on publishing too.)

Of course, agents only get what writers give them.

Publishers only get what writers give them.

And for around 50 years that worked really well for them because there really wasn’t any other game in town.

But that’s all changed over just the last three years. And it’s still changing. Every month something new happens. A new player enters the arena, a new service pops up, a new technology comes online. Publishing is becoming easier. Distribution is widening. Marketing reach is deepening.

Traditional publishers are getting nervous. Agents are panicking.

And frightened people do stupid things.

So we’re seeing rights grabs, sneaky clauses in contracts, misleading claims, legal manipulations, and outright lies.

We’re seeing writers turning against writers, redefining of terms, confusion on what to call what we’re doing (Am I indie publishing? Is this a small press? Am I some sort of a hybrid?)

EBook Money Grabs?

Here’s a quote I read on a traditional publisher’s imprint site that made my blood boil: “The digital list will benefit from [publisher’s name redacted because I just don’t want to get into it] editorial, marketing, publicity and sales platforms. And getting all these services at no cost to the author is the benefit of publishing with [big publisher].”

Really? No cost to the author? So they won’t be taking any royalties then? Because I guarantee that taking 80-85% of every single sale of every single book that I ever sell sure the heck is a cost to me, as a writer, since that IS my business, we are talking about.

What they mean, of course, is no upfront costs. I know they are trying to distinguish themselves from companies exactly like ours. But saying No Costs is so misleading as to be … well, bad.

So, let’s break down some numbers here so we can really see the costs they are talking about. Since we’re looking at ebooks only (this is a digital imprint); that makes it a little easier. And since they are targeting new authors, who usually get no publicity on their books, we will assume no marketing. Publicity? Most contracts I’ve seen over the last few years require the writer to do their own publicity, so that doesn’t change either. (However, I’m sure they do a minimum amount of publicity such as promoting new titles on their website, maybe on social networks, etc. Let’s assume they do that for free. So do we.) So that leaves us with editing, cover design, ebook formatting, and distribution. Now to the math:

For Lucky Bat Books, let’s assume a 300-page manuscript that takes 20 hours to edit (that’s an average for me). That would be $1100. Cover design = $275. Ebook formatting and placement with Smashwords, Amazon, Barnes&Noble, Kobo = $220 for a grand total of $1595. Let’s assume we sell it for $10 (I’m going to round up to make the math easier.)

For that same manuscript, you pay nothing upfront with your traditional publisher. Sounds like a good deal right now. You’re up nearly $1,595!

Now, your traditional publisher puts it up on those same retail sites (though they will skip Smashwords and go straight to iTunes and Sony. You can go straight to iTunes too, though it’s complicated. You can’t currently go to Sony on your own).

Let’s assume you got no advance (since the above example mentions no advance). And let’s assume you only sell 1,000 copies. Your average royalty from the retail sites is 65%. So for every sale, the retailer keeps around $3.50. With Lucky Bat, the net of $6.50 goes directly to you — that’s directly, not via Lucky Bat, but direct, never passing through our hands in any way whatsoever. With your traditional publisher, that $6.50 goes to them and then it a percentage gets distributed to your agent and from there a percentage on to you, etc.

So, with your 1,000 books sold, which earned $10,000, you made $6,500 on your $1,595 investment with Lucky Bat Books. for a profit of $4,905. And you will continue to make that $6.50 on every book that sells FOREVER.

For your traditional publisher, I am going to make assumptions to make the math easier. First, we will assume you don’t have an agent – because, frankly, I don’t think you need one. Send your manuscript yourself. So let’s assume you make $2 on every book (which you very likely won’t because your contract will never be written like that, but maybe you got a better contract and got 30% or 40%, but this seems like a good average). For your 1,000 books, you will make $2,000 if you got a 20% contract ($3,000 for a 30% contract, $4,000 for a 40% contract, etc). Your publisher will make $8,000 ($7,000 for 30%, $6,000 for 40%, etc). How’s that $1,595 investment looking now?

That’s just 2012. Maybe you get mentioned on a popular blog and you sell 2,000 in 2013. With Lucky Bat, that’s $13,000 in your pocket. How much for Lucky Bat? $0.

With your traditional publisher, you make $4,000. With your Indie publisher, you make $16,000.

Now let’s look 10 years down the line to the year 2022. You’ve written another few books and your latest book happens to be the new Harry Potter and is selling millions of copies and that little book you wrote in 2012 has turned into a best seller too, along with every other book you’ve ever written. You’re so happy! Your little book that sold 1,000 copies in 2012 has sold a million copies in 2022.

In our Lucky Bat Books scenario, on that million copies in 2022, Lucky Bat Books makes $0. You make $6,500,000. For the life of that book, you will continue to keep all the money from every sale of your book. Forever. Direct to you.

In our traditional publishing scenario, on that same million copies in 2022, your publisher makes $8,000,000. You make $2,000,000. Forever. For the life of that book, you will make 20% and your publisher will make 80%. That goes direct to them and will be distributed to you (and you get to trust that they will send you what you are owed or have to pay for an audit and court costs).

Business Choices

Lucky Bat Books has a completely different business model from traditional publishers because we come from a completely different view of what publishers do. We simply see the value of books coming from storytellers. What we do is more akin to housepainters and cabinet-makers. You can hire someone to come paint your house or rebuild your kitchen cabinets. They may do a great job, even drastically improve the value of your home; that doesn’t mean you give them part of your equity. So why do we, as writers rush, to give publishers part of ours?

When you look at “costs” of publishing, you MUST consider royalties in the equation — because I guarantee you, publishers are looking at them as simply deductions against their profits.