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Jordygirl
06-01-2007, 05:38 AM
Quick question: I've heard it said that the majority of novels published by reputable publishing companies never earn back the author's advance and actually lose money for the company. Is this true? And if so, isn't the publishing industry facing impending doom?

veinglory
06-01-2007, 05:40 AM
Not earning back the advance generally means the author got a percent or two more royalty on each book than they were meant to, not that the book was a net loss. Publishers that don't make a profit don't last long ;)

benbradley
06-01-2007, 06:08 AM
Yes, I've heard this also, from the used book trade in reference to identifying first editions and such, that most novels don't go into a second printing.

But publishers still make money. This is a trick of mathematics.

Publishers can lose money on most books, yet make money overall. The books they make a profit on make more than enough profit to offset the losses on books that don't sell out their first print run.

I'll pull some figures out of the air, since I have no real knowledge of the publishing industry (so someone is likely to tell me this is totally wrong...) For every five books they publish and lose between $1,000 and $10,000, they have a best-seller from which they make $100,000. They lose money on five out of six books, but they still make a profit overall.

Jordygirl
06-01-2007, 06:12 AM
For every five books they publish and lose between $1,000 and $10,000, they have a best-seller from which they make $100,000. They lose money on five out of six books, but they still make a profit overall.

If these figures are correct, than only one sixth of the books currently out should even be published, right?
Basically even if you GET published you're likely to not have more than one book because it's more than likely your first book will LOSE money.

Storyteller5
06-01-2007, 09:01 AM
You also have to consider as well that publishers also have books that are bestsellers which balances it off. :)

Maprilynne
06-01-2007, 09:08 AM
"Losing money" is so relative.

Anne Lyle
06-01-2007, 09:38 AM
If these figures are correct, than only one sixth of the books currently out should even be published, right?


No - it's just that publishers can't predict what the market will be buying by the time the books come out, so it's always going to be a gamble. It can easily happen that it's the hyped book with the six-figure advance that bombs whilst the modest four-figure debut comes out of nowhere to make the publishers their real money (e.g. the first Harry Potter, which earned JKR an advance of around 2500* quid, or approx $5000). If they only published one-sixth the number of books, they really would go bust.

Publishing isn't like fashion. Whereas you can design clothes and advertise them to hell so that people want to buy them, readers just don't respond to that kind of pressure. Sure, there's always some who are bewitched by the sympathetic magic of bestsellerdom (as Ursula Le Guin might have put it), but most books sell initially by word-of-mouth (whether on- or off-line), helped by a few well-chosen in-store promotions.

* Estimates vary between 1500 and "less than 10,000" - take your pick!

Stijn Hommes
06-01-2007, 01:24 PM
Of course they are losing money. That's what happens if you print far too many copies and end up shipping, storing and destroying the leftovers. It would help if they stepped away from that business model.

Puma
06-01-2007, 02:34 PM
Hi Jordy - Somewhere here in AW there's a thread with information on how many books (percentage) sell over X number of copies (100 is my mind but that seems too low). It was really shocking. Puma

Anne Lyle
06-01-2007, 03:59 PM
Of course they are losing money. That's what happens if you print far too many copies and end up shipping, storing and destroying the leftovers. It would help if they stepped away from that business model.

Of course it used to be that it was much cheaper to print a large number of each book and then trash the ones that didn't sell, rather than do small print runs and have to reprint the ones that did sell (most of the cost of a small run on a conventional printing press is set-up, not paper and binding). Now that POD has arrived, of course, that's no longer the case.

On the other hand, since the majority of fiction is still bought through book shops, publishers have no choice but to print at least enough to have a presence in all the shops (plus a few for Amazon's warehouses), even if they decide to go POD with subsequent copies. So there'll still be returns on books that don't sell as well as hoped. I just don't see any way round this unless online buying becomes much more pervasive. Maybe in a generation's time, but not in the next few years, certainly.

larocca
06-01-2007, 06:11 PM
I know MY novels lose money!

Jamesaritchie
06-01-2007, 10:05 PM
Quick question: I've heard it said that the majority of novels published by reputable publishing companies never earn back the author's advance and actually lose money for the company. Is this true? And if so, isn't the publishing industry facing impending doom?


No, they aren't facing impending doom. It's always been this way.

Here's the thing. It's true that roughly three out of four published novels either lose a bit of money, or make so little it doesn't matter. Those that do lose money seldom lose much, and those that do make money seldom make much. Even the fourth novel that does make money seldom makes a great deal. No large publisher could stay in business for long by depending on these books to generate their profit.

Most large publishers do make their real profit from bestselling books, perennial or otherwise. How much? You can usually count on the publisher making as much as, or more than, the writer. So when you hear that Dan Brown has made $40,000,000 from The da Vinci Code, you can assume the publisher has, as well. And when you hear that Stephen King or Nora Roberts earns $60,000,000 per year, you can safely assume the publishers are also making a mint.

See the point? Say you publish 1,001 novels in a given year, and 1,000 of these novels lose $5,000 each. You just lost $5,000,000. But the last novel is The da Vinci Code, and it makes $40,000,000. Now you're $35,000,000 ahead, even though you have a thousand novels losing money, and only one making money.

No publisher will ever publish 1,000 novels that all lose money, of course, but I think this illustrates the point, which is that one blockbuster makes up for a lot.

Where publishers can lose a chunk of money is when they gamble on a book, give it a six or seven figure advance, and then it flops miserably. This happens fairly often.

At ordinary levels, however, a book does not necessarily have to earn back all the advance to make a small profit, but books that do not earn out are not looked on with favor.

Jamesaritchie
06-01-2007, 10:10 PM
Of course they are losing money. That's what happens if you print far too many copies and end up shipping, storing and destroying the leftovers. It would help if they stepped away from that business model.


No, not really. This is still far and away the best and most profitable business model. Nothing else, including POD, even comes close. POD is NOT a good business model for selling large numbers of books.

Really, printing too many copies, shipping, and storing are not a problem unless the publisher does something stupid. Most book do not have far too many copies printed, this is largely a myth. Publishers are usually pretty darned good at judging how many copies to print.

And shipping and storing are both handled nicely.

The current business model, in fact, generates a better percentage of profit than any other model out there.

Books seldom lose much money, and even when they do it has nothing at all to do with the business model. The current business model, in fact, is why few books lose enough money to matter.

Doug Johnson
06-01-2007, 10:13 PM
This is why it can be hard to get a third or fourth novel published. If you don't show growing sales, that you're building an audience, then the publisher starts to think that you'll never make money for them.

But publishers do want to build an audience for their authors. Grisham's first novel didn't make any money, but he's done OK since then. So has his publisher.

Anne Lyle
06-01-2007, 10:45 PM
From what I heard a while back (don't know if it's true) the problem for midlist authors is a combination of overcautious (or automated) bookstore stocking policy and reader laziness.

Say the store orders 10 copies of your first book. They sell 9, so next time they think, well, we'll order only 9. Eight copies of Book 2 sell, but one copy gets dog-eared so no-one wants it to buy (maybe the readers look for it elsewhere, or just forget about it). When Book 3 comes out, the store orders 8 copies, but only 7 get bought, and so it goes on.

That's a simplification, of course, but with so many titles on offer and instant gratification ingrained in our culture, customers will tend to buy the books they see right there on the shelves rather than ask for a "missing" one.

tjwriter
06-01-2007, 11:05 PM
From what I heard a while back (don't know if it's true) the problem for midlist authors is a combination of overcautious (or automated) bookstore stocking policy and reader laziness.

You are referring to the Dreaded Death Spiral (http://www.absolutewrite.com/forums/showthread.php?t=6710&page=90) - see post #2227

Doug Johnson
06-01-2007, 11:24 PM
But if you sell out quickly, they'll order more.

Jamesaritchie
06-01-2007, 11:34 PM
From what I heard a while back (don't know if it's true) the problem for midlist authors is a combination of overcautious (or automated) bookstore stocking policy and reader laziness.

Say the store orders 10 copies of your first book. They sell 9, so next time they think, well, we'll order only 9. Eight copies of Book 2 sell, but one copy gets dog-eared so no-one wants it to buy (maybe the readers look for it elsewhere, or just forget about it). When Book 3 comes out, the store orders 8 copies, but only 7 get bought, and so it goes on.

That's a simplification, of course, but with so many titles on offer and instant gratification ingrained in our culture, customers will tend to buy the books they see right there on the shelves rather than ask for a "missing" one.

There's some truth in this, and if there's a problem, it isn't with publishers, but with the power chain bookstores have acquired. But think about this. No publisher can have an infinite number of writers. If you want to bring in new writers, you need to let old writers go. The real problem with midlist writers is that it's very difficult to define what a midlist writer is. Publishers keep writers who are making money, keep writers who haven't yet had a chance to make money, and get rid of writers who aren't making enough money so they can bring in new writers who might.

If midlist writers, whatever a midlist writer is, were not dropped, new writers wouldn't stand much of a chance at being published.

tjwriter
06-01-2007, 11:35 PM
Another thread on the Death Spiral (http://www.absolutewrite.com/forums/showthread.php?t=48044&highlight=Death+Spiral)

The sad part is that the computer system only looks at the actual number of sales rather than the percentage of books sold by a particular author.

If it set a lower limit for percentage and continued to order the same number or more for authors who met that lower limit, it would benefit the authors more.

Soccer Mom
06-02-2007, 12:20 AM
:runs screaming from thread:

Jamesaritchie
06-02-2007, 03:39 AM
Another thread on the Death Spiral (http://www.absolutewrite.com/forums/showthread.php?t=48044&highlight=Death+Spiral)

The sad part is that the computer system only looks at the actual number of sales rather than the percentage of books sold by a particular author.

If it set a lower limit for percentage and continued to order the same number or more for authors who met that lower limit, it would benefit the authors more.

Unfortunately, chain bookstores don't seem concerned about writers, only about their own bottom line.

tjwriter
06-02-2007, 03:11 PM
Oh, I fully believe that a percentage method with a limit that requires a certain percentage sell through would fully benefit the bookstore. They'd be reordering authors who consistently sell at least X percentage of books stocked nationwide, or whatever that defining criteria would be.

Point is, if you consistently keep the authors that people buy on the shelves, while at the same time, helping the authors from a bad computer method, what's the harm? The only hard part would be changing some of the code that directs the computer system.

johnzakour
06-02-2007, 05:14 PM
From what I heard a while back (don't know if it's true) the problem for midlist authors is a combination of overcautious (or automated) bookstore stocking policy and reader laziness.

Say the store orders 10 copies of your first book. They sell 9, so next time they think, well, we'll order only 9. Eight copies of Book 2 sell, but one copy gets dog-eared so no-one wants it to buy (maybe the readers look for it elsewhere, or just forget about it). When Book 3 comes out, the store orders 8 copies, but only 7 get bought, and so it goes on.

That's a simplification, of course, but with so many titles on offer and instant gratification ingrained in our culture, customers will tend to buy the books they see right there on the shelves rather than ask for a "missing" one.

As a midlist author I'd say that is mostly true.

It's not a great system. Heck it's not close to a great system but it is a functional system and one that I don't see changing anytime in the near future.

So we live with it the best we can by finding new ways to promote our books.

We all can't be superstars though that doesn't keep us from trying. :)

As long as I keep selling books I'm happy.

Sandy J
06-02-2007, 05:20 PM
I wonder how romance novels fit into this scheme. I think my genre might be a different animal altogether.

Jamesaritchie
06-02-2007, 06:52 PM
Oh, I fully believe that a percentage method with a limit that requires a certain percentage sell through would fully benefit the bookstore. They'd be reordering authors who consistently sell at least X percentage of books stocked nationwide, or whatever that defining criteria would be.

Point is, if you consistently keep the authors that people buy on the shelves, while at the same time, helping the authors from a bad computer method, what's the harm? The only hard part would be changing some of the code that directs the computer system.

They do keep writers that people buy consistently. But it isn't this simple. How do you deal with new writers that haven't been proven yet? There simply isn't enough room for everyone, and just like with publishers, when something new comes in, something old has to go.

I think many believe bookstores have unlimited room, but they don't. New books, by new and old writers, arrive every few week.

A percentage method really isn't practical for a lot of reasons. Percentages can never take into account overall potential, can't take into account "sleeper" novels, first novels, and a host of other things.

Anne Lyle
06-02-2007, 08:12 PM
You are referring to the Dreaded Death Spiral (http://www.absolutewrite.com/forums/showthread.php?t=6710&page=90) - see post #2227

Ah, thanks - I thought it might have come up before, but not knowing its name made choosing search terms rather tricky. I decided that it would be quicker to ask...

Jordygirl
06-03-2007, 05:19 AM
Wow. I still don't get it, but maybe I understand a little more than I did when I posted this. How I understand it now:
Even if your book loses money, if it does relatively well (doesn't lose too much) and your publisher thinks you will grow an audience, your next book will most likely be picked up by them?
Hm. Interesting.
Of course I could still have it all wrong - feel free to correct me.

aruna
06-03-2007, 08:47 AM
I received large advances form my German publisher for my first two books six figures, in Deutsche Marks (now obsolete). Neither of the books came even near to earning out. They were published in paperback in 2001 and 2003. And yet, to my surprise, both of these books were reprinted in 2006 and 2007, with beautiful new covers. So I can only assume they are still selling. The funny thing is that these new editions are not yet available; they are not even on amazon, and I've never seen them in bookshops. I only know because the publisher sent me my free copies.

The new covers are MUCH nicer than the original covers, especially the second book; the original paperback cover was just a generic lotus on a shocking pink background - it looked really tacky. The new version looks really classy.

They also sold the first book to a vook club.
I canonly assume the books must be still selling, otherwise why go to this expense?

Here's the publisher's page with the new covers (the first one is unfortunately squashed flat, but it IS nice).:
http://www.randomhouse.de/book/editionsearchresult.jsp?pat=sharon+maas&imageField.x=855&imageField.y=67&select=nothing

You can see the old covers by clicking on the second link of the book's name by each book.

Oh yes, and the new editions are much cheaper than the originals.
I can't imagine what the logic is behind this development (though obviously, I like it!). I can't imagine that they are selling enough to earn back the advance, sowhy go to that trouble? shrugs.

Anthony Ravenscroft
06-03-2007, 07:39 PM
People who've never run a business are always so surprised at how shallow the profit margins actually are.

A typical grocerystore manager would personally club baby seals to have a stable 5% profit margin on sales.

For a restaurant owner, it'd be 3% -- think about that the next time you go to a fancy place & spend more than a hundred bucks.

I lost friends when I had a bookstore because I wouldn't give them "buddy discounts" off my books, typically bought at 60% of SRP. They couldn't grasp how that "big margin" was factored by low turn -- few small shops sell as much as a few dozen books a day -- & my rent-meter ticks every single second whether we're open or not.

PeeDee
06-03-2007, 09:56 PM
It sounds to me like a "statistic," and we know how much to trust those, don't we?

Considering the book industry has been "broken" and "facing impending doom" for nigh on a hundred years now, they keep on staggering forward somehow. I think they'll survive.

I think the answer to an "Is it true?" question like this is the invaluable answer "It depends," which means that some books don't, some books do just barely, and some books do wildly well. The reasons why Depend.

And yeah, Anthony's absolutely right about the shallow profit margins, of course. Running a business isn't a license to instantly print money. The trick is to make shallow profit margins consistently and repeatedly. That's how you make money. (Or at least, that's how you manage to pay your business's bills.)

Julie Worth
06-07-2007, 06:05 PM
Quick question: I've heard it said that the majority of novels published by reputable publishing companies never earn back the author's advance and actually lose money for the company. Is this true? And if so, isn't the publishing industry facing impending doom?


This short article (http://nymag.com/news/features/2007/profit/32906/) addresses the question, at least for Random House.

An interesting quote from their CEO: The most-profitable books are highly successful authors early in their career with a contract that doesn't reflect their success.

Julie Worth
06-07-2007, 06:06 PM
People who've never run a business are always so surprised at how shallow the profit margins actually are.

A typical grocerystore manager would personally club baby seals to have a stable 5% profit margin on sales.

For a restaurant owner, it'd be 3% -- think about that the next time you go to a fancy place & spend more than a hundred bucks.


The profit at Random House is running 10%--$230 million on sales of $2.3 billion.

jhtatroe
06-07-2007, 06:22 PM
That article was enlightening, Julie. "Best Ways to Make Money: Underpay writers." Lovely.