The Economics of Publishing

I don’t think many authors have a clue about how rugged the economic terrain is for the average publishing house. Publishing is changing (again and again and again!), and with every change it seems that it’s even harder than ever for a publisher to make an honest buck (or even a dishonest buck, for that matter).

When a publishing house contracts with an author to publish their book, most authors look for some upfront money—an advance on royalties, which is usually the amount of royalties a publishing house expects to pay out in the first six months of publication. Smaller publishers, and even a lot of bigger publishers, are not so quick to give advances anymore—it’s just too risky, and too much of a cash flow issue.

Still, even if the the publishing house does not put out a royalty advance, they still have to put out a lot of money well ahead of getting any income from book sales. The whole company starts working on the book, so chalk up the salaries of the editors, typesetters/page designers, cover designers, marketers, and so on. This process can take a year or more, and remember the book hasn’t made the publishing house a single dime.

But finally, the book gets published, it is sent out to distributors and retailers, people buy the book, and the revenue gets back to the publisher—eventually. Distributors are notorious for delaying payment of sales for several months.

The publisher puts out all the money up front to edit, typeset, design, print and market a book, and then has to wait for months for the sales revenue to come in. And far too often, the sales are not enough, even after a year or two, to pay for the investment. So what do they do? Well, they bleed red ink! Thanks to print on demand, the initial investment for printing can be lower (you don’t have to print a large quantity all at once), but since the per-book printing cost is higher, their profit margin gets cut down. So print on demand helps you cut your losses if the book doesn’t sell, but it also cuts into your revenue if the book is successful.

And how often is a book financially successful? It used to be that about one-third of all books published lose money, about one-third break even, and about one-third make a profit—hopefully, enough of a profit to make up for the losses. Today, I suspect it’s more like 25% lose money, about 50% break even, and about 25% make a profit. One of the old jokes of publishing is that we should only publish the books that make money—then we’d really be successful!

The sad truth is, publishing houses usually expect all of their books to be profitable—which means these “experts” in the publishing industry are wrong about most of the books they publish! No one has a crystal ball to predict which ones are going to succeed and which will fail. There are innumerable stories out there about how this or that best-selling book was rejected by a lot of publishers, but the other side of the coin is that there are at least ten times as many stories about how a book that had everything going for it, that looked so promising, got published and lost a lot of money.

So next time you’re tempted to accuse publishers of being stingy, remember the economics of the industry, and shake your head in amazement that they manage to survive in this crazy business!

David Fesseden has degrees in journalism and theology, and over 30 years of experience in writing and editing. He has served in editorial management positions for Christian book publishers and was regional editor for the largest Protestant weekly newspaper in the country.

Dave has published seven books, written hundreds of newspaper and magazine articles, and edited numerous books. He is a frequent speaker at writers’ conferences. Two of his books, Writing the Christian Nonfiction Book: Concept to Contract and A Christian Writer’s Guide to the Book Proposal, are based on his experience in Christian publishing. The Case of the Exploding Speakeasy, Dave’s first novel, reflects his love for history and for the Sherlock Holmes stories of Arthur Conan-Doyle.

Dave and his wife, Jacque, live in south-central Pennsylvania and have two adult sons.

Websites/Blogs:

www.fromconcepttocontract.com
www.davefessenden.com
www.thebookstore.info