Tag Archive - Traditional Publishing

Goodbye to Traditional Publishing?

by Steve Laube

Recently Ann Voss Peterson wrote of her decision to never sign another contract with Harlequin. One major statistic from the article is that she sold 170,000 copies of a book but earned only $20,000.

Multiple clients sent me Peterson’s “Harlequin Fail” article and wanted my opinion. My first thought is that this was the typical “a publisher is ripping me off” fodder. But that would be a simplistic and knee-jerk reaction and unfair to both Peterson and Harlequin.

Yes, Harlequin pays a modest royalty that is less than some publishers. Since when is that news? That has always been their business model because it is the only way to create and maintain an aggressive Direct-to-Consumer and Trade publishing program. Their publishing machine is huge and they are a “for profit” company. For Profit. If they are unprofitable, they go away.

If an author is uncomfortable with the terms, then don’t sign the contract (which is Peterson’s decision going forward). I urge each of you to be careful not to sign a contract and then complain about it later. Unless you were completely hoodwinked you agreed to those terms and should abide by them.

Understand that I am not being critical of this lady’s decision. It is her choice to do so.

But my issue is not with the money (although it is important) it is a larger question. She says she has sold 170,000 books but not made that much money. For the record Peterson has signed with Thomas Mercer which is one of the publishing divisions of Amazon.com…a traditional publisher of sorts, so she may still reach a 100,000 plus audience. So is it all about the money and not about number of readers? If Peterson had chosen to go Indie (solo) and published using the e-book option (like the Kindle Direct Program) and sold 10,000 copies she would make the same amount of money. BUT she would have 160,000 fewer readers! One Hundred and Sixty Thousand.

Consider the stadium where the Arizona Cardinals (NFL) plays seats 63,000. So, in essence this author’s choice could mean walking away from three stadium sized audiences for her stories.

In Peterson’s case it does not appear to be a dollars vs. readers issue because she has signed with another publisher. But for many who are frustrated with their publishing experience it is a good question to ask.

Reaching 170,000 readers is a rare place in this busy industry. And don’t forget that the success of those numbers made her an attractive acquisition for Amazon.com . That is not the case for most writers whose midlist numbers can be depressing. (Read CBA fiction author Eric Wilson who laid out his income while publishing with traditional publishers over a ten year period and has chosen to go a different route with his new books.)

If you wish to wave goodbye to traditional publisher and go Indie (independent) I believe the first question to ask is whether or not you want to start a small business. Just like an entrepreneur.  Those authors who are entrepreneurs are ideally suited for the self-publishing route. The understand the energy it takes and pitfalls ahead.

The second question is whether they can sell enough copies to make it all worthwhile. And are also are willing to take responsibility if a book fails.

But not all artists are entrepreneurs. I know of many authors who have gone this route. One sold 1,000 copies of their e-book in a year. Another is averaging about $1,000 in revenue each month…but had to self-publish ten books to reach that threshold. Another has sold about 2,500 e-copies in a few months but the numbers are slowing considerably. Each of these writers can get much more guaranteed income from going the traditional route. Their indie effort is nice income (in this business any income is nice) but it is not a replacement.

P.S. In my opinion it is wrong to compare Amazon’s traditional publishing divisions (like Thomas Mercer) with other publishers. Amazon is so incredibly large and diversified that they could lose money on publishing for five years and still be profitable elsewhere. For a company like Harlequin they are solely vested in publishing (not Zappos shoes, or used books, or electronics). Thus their cost structure is different. Amazon has brilliantly used their economic model and created one that takes advantage of their infrastructure without having to build from scratch.

Is that a defense of traditional publishing? It could be seen that way. But it is more a reminder not to compare oranges with apples. They are not identical.

Your Turn

What is your take on this issue?

Is there a question on this topic you would like to have answered in a future blog?

Writers Learn the Waiting Game

by Steve Laube

Ours is a process industry. Good publishing takes time. Unfortunately time is another word for “waiting.” No one really likes to wait for anything. Our instant society (everything from Twitter to a drive-thru burger) is training us to want things to happen faster. Awhile ago I wrote about how long it takes to get published which gave an honest appraisal of the time involved. Below are some of the things for which a writer must learn to wait.

Waiting for the Agent

We try our best to reply to submissions within 6-8 weeks and are relatively good about that. But if your project passes the first review stage and we are now reviewing your entire manuscript remember that reading a full manuscript is much more demanding than reading a few short proposals.

If you are already represented all I can say is that agents do their best to be responsive to your questions and phone calls. Crisis Management is part of our job description. But one of the first things a First Responder must do is triage. Some issues are more critical than others which can create consternation if yours is next in line instead of first.

Waiting for a Publisher

After working hard to get your proposal just right we send it out to a select list of publishers. Then we sit back and wait. It can take 3-6 months to hear an answer from a publisher. The longest our agency waited was 22 months before we received a contract offer. No kidding. Just shy of two years. [Both I and my client had already moved on, thinking the project was dead.] But that is truly the exception. I believe that if we don’t receive some sort of answer within four months it is probably not going to connect.

Waiting for Your Contract

Once terms are agreed it can take quite a while to get the actual contract issued by some publishers. Many can take as long as two months to generate the paperwork. We once had to change the date of the contract because it had taken so long to create the paperwork that the due date for the manuscript was earlier than the actual date on the contract! This delay can be excruciating. Ask your agent what is typical for the specific publisher you are working with. Some are quick some are slooooow.

Waiting for Your Editor

You met your deadline. And then you wait.

Months.

And you begin wondering if anyone is reading the manuscript at all!

This is actually quite typical. The publisher needs to have the manuscript in hand to know that it actually has been written. But don’t think the editor is sitting at their inbox, on the due date, with rapt anticipation of receiving your contracted manuscript. They manage their time in order to keep things in the queue and moving along. It can very frustrating to wait. The key here is to be in communication with your editor. It is okay to ask! Or talk to your agent to see if they know if there is anything going on that is preventing that editor from working on your book.

Waiting for Your Marketing and Publicity to Kick In

The new author is so excited about their new book that they want to start chatting about it the day after they turn in the manuscript. A great athlete or sports team wants to peak at the right time, never too early. The same with book promotion. If you begin tweeting and Facebooking (is that a verb now?) without inventory to back it up, the window of sales opportunity closes.

“But e-books solves that issue because they can be ready today!” you shout. Remember that a lot of people still buy books in stores, online, and off your back table at an event. The physical book is still alive and well and must be available if your publicity and marketing is to be effective.

Recently we had a client contacted by “People” magazine for an interview. Unfortunately their book won’t be out for another year. The story is timeless and we asked if they would be willing to wait for the interview and run it as part of a larger campaign. The risk is that they won’t do the story, but it would have been worse to tell the story and not have a book to back up the feature.

Waiting for Your Money

When I became an agent I didn’t know I’d become a Collections Agent…not just a Literary Agent. Getting paid can take time (i.e. waiting).

Waiting for the “on signing” advance — Normally the publisher can take a full 30 days before issuing the check.

Waiting for the “on acceptance of manuscript” advance — This can vary widely. Just because you turned it in doesn’t mean it is acceptable. One publisher we work with will not issue a “acceptance” check until the book has gone through every stage of the editorial process and has been sent to production for typesetting. This can take months.

Waiting for the advance to earn out and new royalty earnings to arrive — Yes, some books do not earn out their advances. (Read the post about “The Myth of the Unearned Advance.”) But many do earn out and the money eventually starts coming, even if in tiny pieces. This can take a couple years.

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At each stage the writer chaffs at the process. This is quite understandable. Recently I read an author’s angry screed (on their blog) criticizing their publisher for the excruciating process of getting their book out. The problem, as I see it, is that the author’s expectations were not in line with reality. Much of a writer’s angst can be avoided by understanding the process and modifying their expectations to match.

Therefore my encouragement for you is to learn the waiting game. Some scientists even claim that it might be good for you (click here for the article). Truly it is to your benefit to accept the nature of this process and embrace the agony of waiting. Anticipating the result can be as fulfilling as holding the finished product.

 

A Matter of Taste

by Tamela Hancock Murray

I always enjoy reading comments on our blog posts. Recently a reader posted a provocative question:

In this time of great emotional upheaval, instability, and unrest, aren’t we ready for something more solid and inspiring than just different types of romance novels?

Those of you familiar with my career know that I am the author of many romance novels and stories — and Bible trivia books!

And while I represent a variety of authors in fiction and nonfiction, my list is weighted heavily to romantic stories. I do realize that not everyone has the same taste — nor should we. God has created each of as unique, and CBA offers a variety of books to accommodate all readers. Please see the twentieth entry in the comments section of my post, Study the Market, for my unscientific suggestions for those looking for limited or no romance in novels.

History Repeats Itself

As to whether readers are ready for heavier books during hard economic times, I would say that economic times themselves have little or no bearing on popular tastes. Because people always have been and always will be unique, in perpetuity you will find a segment looking to escape their problems and another segment looking to confront them in entertainment. Today’s tough economy is likened to the Great Depression. This decade brought us the complicated life and romances of Scarlett O’Hara  in the 1936 book release, Gone with the Wind, by Margaret Mitchell, which led to the 1939 movie starring a king of Hollywood, Clark Gable. This decade also brought us the 1939 release of a gritty and hardscrabble The Grapes of Wrath by John Steinbeck, followed by the 1940 film, when the country had not yet recovered and was on the brink of war.

The Good Ship Lollipop

In the meantime, my grandmother, whom I called Precious, was watching Shirley Temple  films, lighthearted and heartwarming stories that are still run on TV from time to time and can be bought in a variety of volumes on DVD.  Shirley was so popular that Precious owned, among other trivia, a water pitcher and drinking glass set bearing Shirley’s image. Escapism? Yes. Popular? Wildly. Oh, and my other grandmother watched her “stories” on TV from 12:30 to 4 PM every week day — diversions popular through prosperity, inflation, stagflation, detente, and other such worldly cares.

Variety in Entertainment

Because I don’t want this post to lapse into a burdensome tome overstating a point, suffice it to say, a study of entertainment history shows a consistent pattern of musicals and anti-war plus pro-war films in time of war and silliness alongside consciousness-raising books in times of unrest. Some authors want to address society’s problems — and we will always have problems, though immediate concerns will vary. Those blessed enough to find an outlet and an audience for the important points they want to make may well change society, or at least make people think. But those books and films are likely to attract a different audience than lighthearted stories. There is plenty of room for both.

The Importance of Romance

And please don’t discount romantic stories and genre romance as fluff in the Christian Market. Read one or more of these books and think about the stories. The ones I have written, read, and represent have an underlying spiritual thread and message. In fact, the spiritual arc is one of the proposal points I ask my novelists to include in their proposals. The difference here is, our  romance authors are writing the love story as the focus but intertwine spiritual truths. They are not looking to offer a sermon, then the romance. Those who dismiss romance novels and romantic stories should reconsider. God is great, and He can and does use romantic stories to change lives. My authors have the fan letters to prove it.

Your turn:

What is your favorite romance or romantic story you have read in the Christian market? What books do you recommend in other categories?

 

 

 

Perspective on the Sale of Thomas Nelson Publishers

by Steve Laube

In light of yesterday’s announcement of the sale of Thomas Nelson Publishers to HarperCollins I thought I’d present a few thoughts.

Without question this is the biggest news story in the Christian publishing industry this year, if not the last few years. Most of us have been caught flat-footed. Partly because Thomas Nelson is such a large company. And partly because they were just purchased by an investment group last year. The other surprise is the buyer. HarperCollins has owned Zondervan since 1988 which is a direct competitor to Nelson. They publish some of the same authors. (And by the way, HarperCollins is owned by NewsCorp…whose owner is Rupert Murdoch.)

Back in 2002 when I was still with Bethany House Publishers we were sold to Baker Books. So I’ve seen some of the inside of a publishing sale. There will be some obvious echoes to our experience, but Zondervan and Nelson are very different from Bethany House and Baker.

Ten Random Thoughts

Some random thoughts for authors who are worried or wondering about the sale:

1.  The sale has not been completed . It still has to pass Federal regulatory stuff. Anything can happen before the end of the year.

2. This will put both the New International Version Bible (NIV) and the New King James Bible (NKJV) under the same ownership.

3. Everyone at both Zondervan and Nelson is saying “business as usual” and they are being completely truthful. But when management begins trying to merge the two entities under one roof they will find redundancies that must be reorganized. Those are usually in infrastructure, i.e. accounting, information technology, production, design, warehousing (Zondervan’s warehouse was already being closed). Other areas where we see changes are in sales. Which sales reps will cover which stores in overlapping territories? Marketing and publicity could see some shifts. The last place usually affected is editorial. But don’t see this as a blueprint, merely an observation.

4. HarperCollins has enabled Zondervan to operate independently other than typical corporate profit pressures and they have done so with some great success (like the Purpose Driven Life phenomenon). There is no reason to think that management methodology will change.

5. The biggest future question for literary agents comes in the proposal stage. Currently we have had times when Zondervan and Nelson were vying for the same property. If they are under one roof it remains to be seen whether that practice will continue. For example Baker Books, Bethany House, and Revell do not bid against each other because they are under one “roof” as part of the Baker Publishing Group.

6. What does this mean for the existing Zondervan or Thomas Nelson author? One, there will likely be little change for now.  Current projects will move forward as before. Nothing will come to a standstill because that would mean revenue would stop. Two, if you have an old contract with Thomas Nelson for a book they still have under their care I would dig it out and read the “Assignment” clause. Find out if your book can be “assigned” to HarperCollins without your permission. That is likely the case, but be sure. Ask your agent if you are unclear. Three, our understanding is that acquisitions will continue as before. (But see number five above.) If you are an author with Westbow (the self-publishing arm of Thomas Nelson) I doubt if anything will change. HarperCollins has a company called Authonomy that helps give self-published authors a forum for discovery.

7. In a christianbook.com search I counted 2,900 Zondervan books and 3,300 Nelson books. (Only books, not Bibles.) That is astounding. (Tyndale House has 1,400 titles listed.) It truly will make this the largest Christian publishing company in the world.

8. Should authors be worried? No. The corporate landscape is always changing. Does this mean fewer publishing slots will be available? Possibly. Time will tell. Fortunately there are some pretty smart people in charge and they all have a vested interest in not breaking what isn’t broken.

9. Will they change the name of one of the companies after the purchase goes through? I doubt it. At least not in the foreseeable future. Both company names are iconic and have a rich tradition of quality and strength.

10. Is HarperCollins done? Or are they going to buy up other Christian publishers too? I had to chuckle when I heard that question….as if I would know or could predict. :-) My two cents says that they will have their hands full with this integration process. I could be wrong, but if it were me, I’d make sure this went very smoothly first before acquiring other companies.

Do you have any questions or thoughts on this? I’m happy to try to answer them in the comment section below.

Update 11/07/2011:

News Corp. is paying $200 million for Thomas Nelson, the parent company of HarperCollins disclosed in its quarterly filing on Friday November 4th. In 2006, InterMedia paid $473 million for the publisher which had sales of $253 million at the time.

 

The Greatest Thing Since Sliced Bread?

Guest Post by Teddi Deppner

We are really pleased to have Teddi Deppner be our guest today. I first met Teddi at the Mt. Hermon Writers Conference while she sat through my Major Morning Track, listening patiently to 8 1/2 hours of lecture over four days. She has recently been asking some penetrating questions about technology and the publishing industry so I invited her to create a post and express those thoughts for your discussion.

Teddi Deppner has published hundreds of websites over the last 15+ years in her work as a professional web designer, marketer and consultant. Recently, she has launched on a quest to map out simple, effective strategies to share with creative people using the Internet and social media for their business. Find her latest projects at www.TeddiDeppner.com.

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Thanks to Steve for the opportunity to share some thoughts with his audience. This post, intended primarily to open a lively discussion, was sparked by an article by Craig Mod about “Post-Artifact Book Publishing”.

Craig’s essay presents the idea that books have traditionally been artifacts: the concrete, physical products of an author. He diagrams the process and participants in the creation, publishing and distribution of this artifact and how things are changing now that books have become more than static artifacts.

The part that fascinates me is his observation that the digital age of publishing isn’t really about taking “the book” (a frozen collection of specific words and images) and simply copying it into some readable digital format. Instead, we now face the opportunity to take our idea and shape it into an unlimited number of formats: printed book, web page or online community, e-books of varying flavors, interactive and/or animated digital presentation, video, and yes – much, much more.

So many choices these days! Are you tempted to ignore them until the dust settles? Don’t think those choices apply to your “book”?

Think again.

What’s a Book, Anyway?

Craig Mod’s article is worth reading in detail, and every time I read it the implications multiply. A provocative and key concept I keep returning to:

To think about the future of the book is to think about the future of all content.

Books weren’t static because that’s the best way for a person to express an idea to the world but because it was the only way we had available to record an idea and spread it beyond our immediate circle of friends.

The printing press transformed the world in very short order. I believe we’re living at the dawn of a similar transformation. The Internet may not be the best thing since sliced bread, but I would argue it’s the best thing since the printing press!

Today we have available a new means of spreading ideas — and it doesn’t require a static, physical form. The Internet is with us everywhere, as Netbooks, iPads, mobile phones and e-readers like the Kindle are in more and more hands. Five years ago did you imagine you’d be checking your email while waiting at the gas pump? Did you have any idea you would take 20 books on vacation with you and use up less room in your bag than for a single paperback novel?

A New Set of Questions

As an author, as a business person, as an artist, I’m asking myself some new questions:

    • What is the heart of my idea?
    • Is it best expressed in a static form, or is it rather at its heart a conversation that should begin somewhere and then dynamically grow and evolve?
    • Who is looking for an idea just like this one and how do I reach them?

I’m exploring new “best ways” to convey a story:

    • What length works best? Does my audience want serial episodes or large chunks of completed story arcs at a time?
    • How many illustrations should I include and what should they look like? Pure text novel or completely graphic novel?
    • Should I attach music or record an audio version?
    • Should I offer multiple versions of this story, rated for content along the same lines as movies?

These things are fun to think about, but the most urgent missing piece for me as a creative person making a living producing this content is the business model.

    • How do I turn what’s in my head into cash in my pocket?
    • What is the payment model? What is the distribution model?
    • Who do I need to partner with to make it happen?
    • How many different successful partnerships can I create with collaborators? (writer + filmmaker, writer + artist, writer + writer, and stick some editors in there all over the place because we need QUALITY, people!)

Making Sandwiches That Sell

Okay, so we’ve got all this sliced bread. Now what do we do with it?

Many authors are offering free content as bait to gather their target audience into position and sell them paid content. Sometimes it works, sometimes it doesn’t. Will this model last? Is it sustainable?

And who decides what content is worth paying for? Where do the curators (see Steve’s post on curation) fit in? I can imagine a day when I pay a publisher not for printing a book but instead for a list of vetted, quality content providers directly matched to my preferences.

Although even the average “Joe Reader” is aware that things are changing, he’s ignorant of the full implications. He just goes along, doing what he’s always done, right? His assumptions and prejudice and habits based on a lifetime of traditional consumption of books and movies and music are still mostly intact.

Or are they?

As big entertainment companies change how other forms of content are delivered and paid for (music, TV episodes and movies), what is already changing in the minds of our target consumer? How have your content buying habits changed in the past five years?

What Do You Think?

I’d love to hear your thoughts! At the risk of mixing the metaphor, let’s say this post itself is a slice of freshly baked bread. Help me butter it. Throw on some jam. Go ahead and toast it, if that’s your thing.

Post a comment sharing how you read your books, check your news, get new ideas. Tell me what you’re willing to pay for and what you’d rather enjoy for free. I’d especially like your ideas on the most exciting content you’ve purchased recently and what kinds you wish were available but can’t find anywhere.

 

 

Many Happy(?) Returns!

by Steve Laube

Every first-time author is confronted by the reality of “Reserves Against Returns” as part of publishing economics. It is usually a shock and elicits a phone call to their agent crying “What happened to my money?”

Did you realize that book publishing is the only “hard goods” industry where the product sold by the supplier to a vendor can be returned? This does not happen with electronics, clothing, shoes, handbags, cars, tires…you name it. If it is a durable good the vendor who buys it, owns it (which is why there are Outlet Malls – to sell the remaining inventory). Except for books. Somewhere along the line the publishers agreed to allow stores to return unsold inventory for credit. In one sense, publishers are selling their books on consignment. Bargain books are actually resold by the publisher (after getting returns or to reduce overprinted inventory) to a new specialty bargain bookseller or division of a chain (which buys the bargain books non-returnable).

Consequently book contracts have a clause allowing the publisher to establish “a reasonable reserve against returns.” By “reserve” they mean a pool of money withheld from the author…holding that money in “reserve.” The intention of the clause is to protect the publisher against paying the author for books that have been shipped and billed to a store but may eventually be returned to the publisher.

Imagine if Walmart purchased 10,000 copies of your book. Everyone celebrates. If you are earning $1.00 in royalty (on average) for every book sold, that means you will receive $10,000 from your publisher at some point. Hooray! Steak dinners for every one!

But wait.

What if Walmart doesn’t sell all the copies they purchased and returned 5,000 of them?

And what if your publisher had already paid you for all 10,000 sold copies? That means your publisher overpaid you by $5,000. Do you have to give that money back? You really don’t want their collections agent (his name is Guido) to come to your door to get their money back.

Thus the publisher will make an estimate on every royalty statement and withhold a “reasonable reserve against returns.” It seems that some publishers abuse the word “reasonable.” One author I know had 70% of their revenue withheld for a complete royalty cycle because their publisher had made a big sale to a big box chain. But is that really abuse?

The Big Box retailers are notorious for returning over half of what they purchase.

I don’t begrudge a publisher for holding a reserve. I’d rather they not demand the money back later!

There was situation, many years ago, where an author’s book sold 8,000 copies to a single big-box retailer as part of the initial launch. Six months later, the author developed a new proposal and the editor was going to present it to the committee because the author had already sold 12,000 units (including the 8k to the big-box retailer). The day before the committee meeting the big-box retailer returned the books. All of them. All 8,000. The warehouse said it looked like the cases were untouched, in other words they never made it into the stores. Thus the author’s total sales went from 12k to 4k in one day. The editor walked into that committee meeting and was ambushed by the sales manager with this news. The publisher declined to contract a new deal. Author had to switch publishers.

The author was crushed, the publisher stunned, and everyone lost. So before we get all huffy with publishers and their accounting practices we have to realize that history tends to dictate accounting policy.

However, there is a practice regarding reserve against returns that is quite frustrating. There are some publishers that roll the reserve over every cycle….forever. No matter how old the book, if it is still in print, they hold back a reserve. And the new reserve they choose is suspiciously consistent to the amount the book had sold in the previous royalty accounting period. In other words the author never seems to get a respite because the reserve keeps rolling forward. This is just plain nasty.

If a publisher is savvy (and most are) they put that “reserve” in an interest bearing account. And they can sit on that float for six months earning interest on what is technically the author’s money. And if the returns do not use up the reserve the difference is credited back to the author. Let’s use the above example:

Books sells $10,000 worth of earnings in July-December.
Publisher creates a reserve of $5,000 in January in case there are returns after Christmas, so they only send the author $5,000.
In Jan-June there are $3,000 worth of returns sent back which is charged against that reserve.
So the publisher gives the author the $2,000 balance in their next check.
But the publisher, in essence, made some additional interest income on that $2,000 because that reserve sat in a bank for six months. Smart business!

Now all you accountants out there, please don’t criticize this example. I know there are new sales and new reserves and all sort of other nuances and the interest rates are currently pathetic (and therefore little incentive), but I’m trying to make a different point.

Therefore let me use real numbers for you. I won’t tell you who the publisher is, or what the book is, or how many copies were sold to generate the numbers. You won’t be able to guess, so please don’t try. These numbers are taken from an author’s last two actual royalty statements to show you what I’m illustrating. I can tell you that the author’s book was published more than three years ago… And publisher is still withholding returns each cycle.

Statement A (first six months)
Royalty earnings from Sales – $941
Reserves withheld in previous cycle credited back to Author – $940
Reserves withheld this cycle – $626

Total Earnings this cycle – $1,255  ($941+$940-$626)

Statement B (second six months)
Royalty earnings from Sales – $825
Reserves withheld in previous cycle credited back to Author  - $626
Reserves withheld this cycle – $688

Total Earnings this cycle – $763

The publisher has kept about $600 of the author’s money in their “reserve” pocket in case there is a return, for a full year. But if this were multiplied across every title in this publisher’s warehouse think of the amount of that reserve. If they have 5,000 titles in their warehouse and they are only floating a reserve average of $400 per title, they are earning interest on two million dollars. (At 2% that is $40,000 in earned interest.)

Again, I do not begrudge the publisher of the necessity of withholding a reserve. But when it starts to appear to be a form of clever accounting I get a little testy.

My preference would be to have a clause in the contract under the Reserve Against Returns section to read:

Publisher has the right to reserve for anticipated future returns. Reserves are never established to avoid paying royalties, but to eliminate the situation where royalties might be paid out on sales that are ultimately reversed. Such reserves will be used only when the publisher is aware that inventories exist in the marketplace that are not selling through and will likely be returned. Reserves are not limited to a certain percentage of sales, but in all cases must be defensible by the publisher.

Agents can dream too, can’t they?

By they way? Lest you think I’m ignoring the E-elephant in the room? Ebooks technically do not have returns since there is no physical inventory on a shelf to handle. Consequently there should never be a reserve against returns on e-books. But I’m still trying to track down the oddity of a recent royalty statement where the author had negative 3,000 e-books sold. How can you unsell 3,000 e-books? Yes, you can return an e-book bought by mistake on Amazon. I’ve done it to see if it is possible. It is. But all that does is counter the sale made the day before. So to have thousands of returns boggles the mind. Even the accountants are flummoxed. Maybe I’ll tell you the rest of that story when the mystery is solved.

For a brilliant discussion about other implications of returns take a look at this post by Mike Shatzkin and Michael Cader.

 

 

 

 

 

 

 

 

The Myth of the Unearned Advance

by Steve Laube

A common myth permeating the industry is that a book is not profitable if the author’s advance does not earn out. I would like to attempt to dispel this myth.

First let’s define the term “Advance.” When a book contract is created between a publisher and an author, the author is usually paid an advance. This is like getting an advance against your allowance when you were a kid. It isn’t an amount that is in addition to any future earnings from the sale of the book. Instead, like that allowance, it is money paid in advance against all future royalties, and it must therefore be covered by royalty revenue (i.e. earned out) before any new royalty earnings are paid.

The advance is usually determined by a series of assumptions that the publisher makes with regard to the projected performance of each title. The publisher hopes/plans that the book will earn enough royalty revenue to cover the advance within the first year of sales.

A NY Times essay a couple years ago casually claimed “the fact that 7 out of 10 titles do not earn back their advance.” Of course they did not cite a source for that “fact.” But I have seen it quoted so often is must be true! (and it isn’t.) The implication then is that a book isn’t profitable if it doesn’t earn out its advance. The publisher overpaid and has lost money. The author is the happy camper who is counting their cash gleefully celebrating the failure of their publisher to project sales correctly.

Let me try to explain why that isn’t always true. And to do so means we have to do math together. This may be a little complicated, but realize that these calculations are critical and each publisher runs these kind of scenarios on your books. To dismiss this conversation and claim you “don’t do math” is to ignore the lifeblood of your profession.

Realize that this is a generic model. Each and every number below fluctuates from title to title. That is the weakness of the exercise, but bear with me.

Assumptions:

Advance paid to author: $10,000
Retail price: $13.00 (paperback)
Net price: $6.50 (this is what the publisher receives when they sell the book – to dealers, big box retailers, distributors, etc. )
Copies sold: 10,000

Scenario one: Author earns 14% of net for each book sold. ($6.50 net x 14% royalty x 10,000 sold)
Thus, after selling 10,000 copies the author has earned $9,100.
Leaving $900 of the advance unearned.

Scenario two: Author earns 16% of net for each book sold ($6.50 net x 16% royalty x 10,000 sold)
Thus, after selling 10,000 copies the author has earned $10,400.
The publisher writes a royalty check to the author for $400. The amount above the original advance.

The myth says that scenario one equates a failed and unprofitable book , while scenario two is a profitable book.
But wait! Let’s do some more math.

New Assumptions. (remember these are all estimates based solely on this scenario.)

BOTH scenarios have the publisher making the same amount of revenue. ($6.50 net x 10,000 sold.) Both scenarios generated $65,000 in net revenue for the publisher.

To determine profitability we have to subtract costs.

Fixed costs

Editorial expense: $8,000 (includes all stages of the editorial process)
Design (typesetting/cover): $4,000
Printing and warehousing:  $15,000 (the approximate cost of printing 12,000 copies)
Marketing and PR: $10,000 (an average of $1 per book)
Administrative costs: $13,000 (20% of the net revenue)
Advance paid to author: $10,000
TOTAL COSTS: $60,000

Profit for the Publisher: $5,000 (or 7.7% of revenue before tax)
or the $65,000 in revenue minus the $60,000 of total costs.

Are you with me so far?

Now watch this.

Scenario one – (with the unearned advance still on the books) has a profit of $5,000 for the publisher.

Scenario two – (pays the author $400 for earnings beyond the advance) has a profit of $4,600 for the publisher.

In this comparison it is the book that didn’t earn out the advance that actually makes more money for the publisher!

Why? Because scenario one pays a lower royalty per book sold. The advance itself has NOTHING to do with it. The advance is a fixed cost that is covered by the revenue generated by the publisher.

_____

Pause and reflect on that for a moment.

_____

The advance is a cost of acquisition. If that cost of acquisition in the above scenario were $50,000 of course neither scenario would have been profitable because sales would not have been enough to cover all the costs. And it is likely, if there was a $50,000 advance, the publisher would have spent more on marketing and PR.

So this is not an argument for bigger advances. Instead it is an attempt to show, albeit using controlled statistics, that an unearned advance does not necessarily equate the failure of a book!

So when is a book profitable if there is a bigger advance?

Let me do one more set of numbers to illustrate:

Assumptions:

Advance paid to author: $75,000
Retail price: $13.00 (paperback)
Net price: $6.50
Copies sold: 45,000
TOTAL REVENUE ($6.50 net x 45,000 sold.) = $292,500.

Fixed costs

Editorial expense: $8,000
Design (typesetting/cover): $4,000
Printing and warehousing:  $55,000 (the approximate cost of printing 50,000 copies)
Marketing and PR: $75,000
Administrative costs: $58,500 (20% of the net revenue)
Advance paid to author: $75,000
TOTAL COSTS: $275,500

Profit for the Publisher: $17,000 (or 5.8% of revenue before tax)

If you are an experienced person from the publishing side of the table it is obvious that this is a very generic scenario that has only an echo of reality. For example, the net revenue for a publisher is usually less than the 50% of retail that I used above. That is because distributors and specialty vendors (like the book racks you see in the airport) command a much higher discount off the retail. Thus the true picture is highly complex. And we don’t even touch on ebooks or ebook sales or royalties here. This exercise is merely to show a business model where the advance is a fixed cost. Not a cost that has to be earned out for the book to be profitable.

In the above case, a book with a $75,000 advance makes money after only 45,000 copies are sold.

So what do you think? Is the math realistic? Does it make sense? What are the implications (either to the publisher or the author)?

 

 

 

 

 

 

 

A Defense of Traditional Publishing: Part Five

INFRASTRUCTURE

The more I write on this series the more “boring” it seems to become. Why? Because I’m not revealing anything particularly new or uncovering the secret to getting published. However, the goal has been to talk about things that the traditional can do quite well. And this series ultimately is a journey through the innards of the publishing business.

Today we discuss infrastructure. I’m talking about the yawn-worthy topics of accounting, licensing, legal protection, and metadata.

A publisher must account for all revenue with the IRS and pay both corporate and state taxes. If you self-publish you have to handle this all on your own, and technically, if you travel to another state and sell your books in that state you should be paying the sales taxes in that state. The large publisher handles all of this for you and navigates the tax issues across state boundaries.

But beyond the simple tracking of money, another accounting function is price verification, sales validation, and sales report standardization. (An argument could be made that some of this is really more the responsibility of the sales department.) The publisher must make sure that every one of their titles is priced correctly at all their retail outlets, both brick-and-mortar and web stores. Then they have to have a way to validate that sales have actually been made and revenue has been received. And last they must have systems in place that standardize the information flow so that reports and audits can be handled without confusion or misunderstanding. If you are publishing on your own it can be a bit tough to get customer service at XYZ big chain to take your call and fix the info about your book, or to even get paid. I know of a situation where an independent author was doing rather well with their book until a major chain decided to “slow pay” and the author did not have the money to support the continued printing and distribution of their project. Without clout they were unable to fight successfully. (Sounds like an argument for ebooks, but that is another subject entirely!)

Anything related to foreign rights licensing can be incredibly complex. For example, if a book is licensed in English and is sold in Canada, but the license does not include Australia or South Africa, there has to be someone watching to make sure the territory boundaries are honored. We have a missionary friend in France who is frustrated by the inability to purchase certain English titles in France on his Kindle because the publisher only has North American English rights…and the European English rights have not yet been secured. I suspect we often forget that publishing is a global concern. Recently we received a royalty report at our agency for a client’s book that had been translated and sold in Korea. That Korean edition has sold nearly as many copies as the U.S. edition, and in less time. Amazing.

Some authors are very concerned with piracy and copyright violations. Sometimes this is very appropriate. I did have one person state that piracy is not the problem for most authors, instead the problem is obscurity. And yet you don’t want your book stolen and sold somewhere else. An author friend of mine discovered her entire Bible Study (published by a major publisher) online…verbatim…with another person’s name on it as author.  Would you want that to happen with your book?

I attended a presentation last year on “Digital Initiatives” made by very smart people from Hachette. They discussed their use of “Attributor Monitors” to scour the Internet for illegal versions of their book titles. I was shocked to hear that they discover and send out 1,500 take-down notices to illegal sites, every month (saying, in essence, take the illegal book down from your site, or else). Fifteen hundred! They get better than 99% compliance with the request, worldwide. (It is understandable that they would have that level of trouble since Hachette publishes the Twilight franchise.) I suspect that when a company like Hachette contacts the illegal site with their powerful legal team, the offending site owner is willing to comply. But if you tried to do it on your own, you would be ignored.

They also work very hard to protect their digital properties from theft by using a form of Digital Rights Management (DRM). And since there are multiple platforms for ebooks this can be somewhat complex. (Mobi for the Kindle; e-pub for the Nook and iBookstore; and PDF are just a few examples.) One recent complaint from a Kindle user showed how this worked. The Kindle user was highlighting and clipping numerous quotes from their ebook, but was informed that they had exceeded the limit for clipping. This was a DRM limit set by the publisher to prevent a reader from copying and pasting the entire book and possibly distributing the contents via the Internet. Of course someone could just re-type the entire book and have the same result, but the publisher was at least attempting to make it harder to “steal.” Obviously, in this particular case, the publisher had set the clipping threshold too low and offended a user.

Another legal protection issue is the fact that we have a litigious society. Lawsuits can be very expensive and lengthy to process. A famous example is the $136 million dollar defamation lawsuit brought against Harvest House and one of their books. The suit took six years to be resolved, with Harvest House and the authors being exonerated. (Read the complete report here.) I don’t know about you, but I’d prefer to have a strong legal team on my side than to have to go it alone.

Last in today’s line-up is Metadata management. This is the information filled out by the publisher for each book they publish. When you search for a book on Amazon.com there is a list of titles that pop up by other writers that would appeal to the viewer of this specific book. How does Amazon.com know this? It is an algorithm based on the information found beyond just the title author and price info and is found in the metadata. The Book Industry Study Group has provided a Metadata Best Practices guide in which they identify thirty-one key pieces of data that are necessary for every book.

Hanna Johnson, in her article “How to Sell More Books with Metadata” wrote, “It’s not just about ISBN numbers and titles anymore. Enhanced metadata can increase discoverability of books and provide marketing information to the entire publishing supply chain.” (If you want a simplified breakdown on this issue, read Carla King’s excellent article “A Self-Publisher’s Guide to Metadata for Books.”) But now Enhanced metadata is becoming more critical. That made me laugh the first time I heard that statement because most folks don’t even know “metadata” much less an “enhanced” version of it!

Let me ask you a question (those of you who have read all 1,000 words of this post). Was any of this “news” to you? Have you considered some of these complexities before? Or, in your opinion, does it even matter?

Part One: Introduction

Part Two: Curation

Part Three: Editorial

Part Four: Design

Part Five: Infrastructure

 

A Defense of Traditional Publishing: Part Four

DESIGN

Napoleon Bonaparte, is supposed to have said, “Un bon croquis vaut mieux qu’un long discours,” translated “A good sketch is better than a long speech.” That has morphed into the modern phrase “A picture is worth a thousand words,” which is a fundamental truth when talking of book design.

Another cliché states, “don’t judge a book by its cover,” but we do it all the time. We are a visual people and our eyes are drawn to images that capture our imagination. In my opinion, the title and the cover vie for preeminence as the most important part of the presentation of a book to a potential reader.

I wish every author could attend a cover discussion meeting at a major publishing house. In that meeting the art director displays all the cover samples created by a designer in a room full of people (editorial, sales, marketing, and management) and opens it up for discussion. There can be as many as twelve very different designs from which to choose. Often one cover immediately jumps to the front. But there are occasions where the typeface is good on one jacket but the colors are better on another. The art director takes copious notes and has the designer work through it again.

After a final “winner” is chosen the cover is supposed to be shown to the author and the agent (sometimes we get two or three “winners” from which to choose). Then that cover is made part of the sales conference presentation and those sales reps then start showing it to key dealers and buyers around the country. There are many times where the feedback from the key accounts causes the cover to be completely redesigned before it is shipped. This is why you will occasionally see a cover on Amazon.com for pre-order and then the actual jacket is different when released.

Design and packaging is one the major strengths of the traditional publishing process. Thousands of dollars are spent on getting top level designers (some are designed in-house and others are outsourced to the tune of $3,000 to $5,000). And the rigorous vetting of that design within the company and with key accounts is nearly irreplaceable.

At the hope of embarrassment, I believe that Paul Higdon, the Creative Director at Bethany House Publishers, is one of the finest cover design coordinators in the industry. The covers for Bethany House fiction have been industry leaders for a long time. If you want to see him at work, read this interview with Paul and see a cover design being created. It is worth the time to read.

Those who want to forego the traditional publishing route need to remember one thing, don’t let your own personal taste be the final vote. What you think is gorgeous may make another person heave. (A simple walk down the mall observing fashion choices is a case in point.) This is not the place to bargain hunt or be shallow with a comment like “I just don’t like the color pink.”

Even if the book is only going to be purchased online, the consumer will still be attracted by a great cover. But online the cover is the size of a postage stamp which creates an enormous design challenge.

In addition to the cover design, the entire package of the book is critical. Everything from back cover copy to author photo to the interior font to the trim size to the design of the spine to the type of paper on which the book is printed. Admittedly this is becoming homogenized by ebook technology where the reader chooses the font type and size…and the page size disappears. But for now over 80% of all books sold are bound and in physical form, not digital.

Ever wonder why some books are thick and others thin, but have the same page count? That is due to ppi (page per inch). Paper stock can come in a massive variety of weight and thickness and texture. If the spine of a book is designed to fit a width of 0.87 inches (based on standard ppi) but the production manager chooses a thicker paper, the spine art will not fit properly. You’ve probably seen examples of this sloppy work,  but it is rare to find among professional designers and publishers. They work very hard on those details. At Bethany House we once chose a very low ppi for a book so that it would feel very thick despite the fact it was barely over 200 pages long. Along with a hardcover package and a great slip cover jacket, the book “felt” like it was worth more money and the publisher was able to price it accordingly. It was a highly successful project and spawned four other similar titles.

When thinking of the issue of design and packaging, two watershed examples of came to mind. First was in 1989 with the release of The Beginner’s Bible by a little company called Questar Publishers. I was working in the bookstore at the time and still remember the gasp when I opened the box and picked up that book for the first time. I exclaimed, “We didn’t order enough of these!” Immediately went to the phone and ordered another 100 copies. The trim size, interior design, the artwork, the price point, everything worked. The packaging was absolutely perfect. It quickly became the bestselling children’s book in the Christian market and is considered a “classic” today. (Trivia moment: Questar Publishers later became Multnomah Publishers. But then somehow lost the publication rights to The Beginner’s Bible which is why it is now published by Zondervan. Multnomah was sold to Waterbrook in 2006.)

The other example was Jesus Freaks: Stories of Those Who Stood for Jesus by dc Talk and the Voice of the Martyrs. Originally published by Albury Press (in 1999) it went on to sell over one million copies. (click through the above link and take a tour via the “Look Inside” feature on Amazon.com) Never before had there been a paperback book with a combination of a die-cut hole in the cover, a complete inside fold-out cover flap, and deckled edges (click for a definition). Each page was designed and did not use a cookie-cutter look with black ink on white paper. It was both ground-breaking and breath-taking. And incredibly expensive to print. Of course much of its success was due to the incredible popularity of dc Talk as the #1 singing group in the industry, but the book itself had an enormous “cool factor” that made reading about martyrs something everyone wanted to do. (Trivia moment: Albury Press was sold, including the Jesus Freaks book, to Bethany House in January 2002. Thus I was able to be the project manager and editor of the sequel by dc Talk called Jesus Freaks II: Revolutionaries which came out in October of that year.)

In both of these examples it was the physical product that helped created the buzz about the book. Of course the content was great, but its packaging took its popularity to another level. This kind of innovation is happening all the time in the traditional publishing world. Some really smart people are pouring their creativity into each project to give a book its best opportunity to capture a consumer’s attention.

Below is a quick two minute time-lapse video of a book cover being designed. Enjoy!

Part One: Introduction

Part Two: Curation

Part Three: Editorial

Part Four: Design

Part Five: Infrastructure

 

 

A Defense of Traditional Publishing: Part Three

EDITORIAL

I need to clarify what I’m attempting to do with this series of posts. I am not digging deeper trenches and pouring the dirt over a head that is already buried in the sand. Some think I’m defending a dying industry and failing to see the changes around it. This series is merely an attempt to remind us what traditional publishers do well. Their critics are jettisoning all of traditional publishing as antiquated. But I posit that there is good to be found in the things that brought publishing to this place.

Today’s topic is Editorial – or more completely, “Content Development.”

Many critics say that the day of great editors is past. The legends are gone and instead we now have overworked editors who don’t have time to spend crafting and developing an author’s content into a masterpiece. They have become paper-pushers.

While editors are generally overworked…that is not anything new. It has been that way for a long time. While at Bethany House Publishers I managed the acquisition and editorial development of nearly fifty titles per year. But I did not work alone.

Editing is a multi-person process in the traditional publishing companies. First is the acquisitions editor who finds, defends, acquires, and negotiates the acquisition of a project (i.e. The Curator). Many times the actual content edit (also call the “line”  or “substantive” edit) is done by a different person. The content editor looks for accuracy, balance and fairness, cogency of argument, adequate treatment of the defined subject matters and issues, and also includes conformity to all aspects of the description of the work contained in the original book proposal. (That sentence is an adaptation from actual contract language defining an “Acceptable” manuscript.)

Next comes the copy editor who scours the manuscript looking for accuracy in grammar, citations, and factual content. Then it is sent to a proof reader who scours the work for fine-tuned details in punctuation and other tiny details.

These editors are amazing people. And despite the cutbacks in many major publishing houses there are still a number of truly incredible men and women who stay behind the scenes and pour their minds and hearts into the books they work on.

In the Christian industry I’ll highlight one man as an example (and he will likely be embarrassed by this!). David Kopp is an exceptional editor with Waterbrook Multnomah. He was the one who created the eight million copy bestseller The Prayer of Jabez out of a nearly unpublishable massive manuscript. He worked on the bestseller Do Hard Things by the Harris brothers. And recently he helped transform a book about missions into what is now called Radical (by David Platt) that has been on the NY Times bestseller list for 43 weeks (as of this writing).

This is the type of talented person that sits unknown in an office in a traditional publishing house… helping to create magic. I could rattle off a dozen or more names off the top of my head of similar people who make this happen every day. And that does not include the number of freelancers who are hired by publishers to take up the slack when they cannot meet the demands of the editing process in-house.

A critic might say, “But I can just hire these freelance people myself. Why do I need a traditional publisher?” That is a good point. But it misses a critical part of the process. It is illustrated by the question, “Who pays the invoice?”

Think about it for a moment. In a traditional publishing house the publisher is basically in charge. If there is a major dispute over editorial changes or input, the publisher has final say and contractual clout. Rarely is this used as a hammer, but the writer always knows it is there. In almost every case there are long discussions and a compromise is achieved.

But when the author hires the editor, who is the boss? The writer is the boss. The writer will usually defer to an editor’s comments. But what if your novel is going down a terrible path, a path to commercial destruction? I know of a case where an author was bent on writing a particular storyline and would not take anyone’s advice. His agent was unsuccessful. His writing friends and critique partners could not sway him from the path. If he were self-publishing he would have failed miserably. Instead an editor at a traditional publishing house recognized the talent and came alongside with valuable suggestions. The author, realizing that the editor had the goal of creating a great book, acceded to the advice. The book was saved, is now in print, and being sold in stores everywhere.

I also know of another case where a freelance editor took an author’s manuscript (to be self-published) and rearranged the non-fiction content from a topical presentation to a chronological presentation. (The book was the history of a specialized type of job in our court system.) The editor felt that a history should be told chronologically instead of topically. The author disagreed and made the editor put it all back the way it was in the first draft. Because the author was “paying the invoice” the author’s wishes prevailed. The book did not sell and was not adopted as a textbook, which was the goal of the author.

James Michener once said, “I’m not a good writer; I’ve been a masterful re-writer.” He has a fascinating book called James A. Michener’s Writer’s Handbook (1992). In this work are reproductions of the interaction between Michener and his editor. You can see the original text, the editorial suggestions, and the rewrite. A interesting exchange that is rarely seen.

As with the idea of “curation” I believe the editorial or content development process is a vital part of what a traditional publisher does for an author’s work.

Part One: Introduction

Part Two: Curation

Part Three: Editorial

Part Four: Design

Part Five: Infrastructure

 

 

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