E-Books

Author Accounting 101

by Steve Laube

Roll of money

You are a published author. You must be rich!

You are an agent. I know you are rich.

If it only were true.

A couple weeks ago we peered at the bottom line for the brick & mortar bookstore, now let’s attempt to do the same for the author. Please remember this exercise is generic, your mileage may vary. As before we will use some round numbers so we can all follow the math.

Let’s start with that $10 retail price book we dealt with before. The publisher sells the book for $6.00 to a store. That creates a “net price” for the publisher. Be aware that some contracts pay the author a royalty based on the retail price and some on the net price.

The net price is $6.00. They author’s contract pays them 15% of the net price. That would mean when this book was sold to the bookstore the author’s account was credited for 90 cents.

This particular author was paid an advance of $9,000 to write the book. That money is like an advance on your allowance when you were a kid. You must pay back the advance before you earn more money. So if each book sold earned the author 90 cents then how many copies must sell before the $9,000 is “earned out?” The answer is 10,000 copies. On the 10,001th copy the author earns an additional 90 cents.

But because the royalty is based on a net price the royalty paid will depend on each sale. Some books will be sold at $6.00, some for $5.00, some for $3.00. It all depends on the situation. (For example the books you see on the spin racks in the grocery store are sold to “rack jobbers” at a very high discount to enable them to pay each person in their distribution chain. The author gets less money but sells more copies.)

If the royalty rate were based on the retail price (say a 7.5% of retail rate for paperback, which is a standard number among the “Big Six” [soon to be Five]), then the author would receive 75 cents per book no matter what the publisher sold the book for.

Out of that $9,000 advance mentioned above must come the author’s expenses. Research materials, conference fees, travel expenses, etc. All are deductible at tax time (April 15th is next week folks!) And those are just the business expenses. If you are a normal person you have housing, car, food, clothing, etc. to pay for as well. But unless that advance is a lot higher it’s going to tough to pay your mortgage with the advance money you have received.

When I teach this at conferences I usually stop here and ask, “Is this making sense?” “Are you following the math?” Most will answer yes, but the room is deathly quiet because I’m talking about money.

I also ask the room “Can you make a living as a writer?”
D.Q.Y.D.J. is the correct answer.

Don’t Quit Your Day Job.

That sounds grumpy and negative, but it is a reality. Most authors do not start their career with a million dollar advance and a legion of fans. They build it slowly but surely over time. In the beginning they struggle mightily to make ends meet and to justify the time and energy. Just like anyone starting a small business.

I heard one highly successful author say during a keynote address that her hourly wage for her early books worked out to less than 50 cents an hour. Now, of course, she writes full time and speaks full time. But in the beginning it was a struggle.

The writing profession is a marathon not a sprint.

Why is your percentage so small? Read this article for the short answer.

A number of writers are turning to the new opportunities by self-publishing via e-books and see the potential for greater income. There is no debate from me as to the potential for success. A number of writers find this as the solution to their money problems. But just like every small business venture there are successes and failures. Your mileage may vary…. There is no single solution for every writer. One writer I know has a very steady income from ebooks, but still works part-time at a day job to make ends meet. This writer would be considered successful by any standard, but still has to supplement their income. The writer has grown the writing side of their world to the point that they must now decide whether to make the jump to full-time in the hopes that revenue will increase because they will have the time to devote all energy to writing.

And if you are interest in Publishing Economics 101 see this post from October 2011.

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When Editorial Errors Matter

by Steve Laube

Writers make mistakes. It happens. Often an editor’s job is to be the safety net and catch those tidbits that find their way into an early draft of a manuscript for any number of reasons.

The simplicity of “cut & paste” has created more opportunity for error than ever before. I’ve seen half sentences left in their original place because the writer failed to cut and paste accurately. Many books evolve over time with additional research or new thoughts. Errors can creep in this way. I’ve seen an author actually contradict himself between chapters. There are too many details to keep straight so the writer overlooks the inconsequential trusting the editor to fix things. I remember talking to a Bethany House editor who revealed that an author accidently brought a character back to life, forgetting that the character had died earlier in the story.

None of the above examples ever found their way into the final edition of the book and the public never knew the error was made. An editor caught it and fixed it. That is why errors found in a finished and published book are so jarring.

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Book Industry Trends

by Steve Laube

Publishing is partly an exercise in guessing what might be the next surprise bestseller. Some of it is an educated guess based on certain trends we see in the industry and in society at large. Any exercise in naming these trends bears the risk of expressing the obvious or being out of date the moment they are stated. So bear with me as I tinker with some of the things that are either influencing trends or are trends within themselves.

The Blockbuster Mentality

If it was your money you would likely “bet” on those book ideas that you know are going to sell a ton of copies. And only those who already have a track record are assured of a ready-made buying audience. In addition, for the non-fiction writer in particular, there is a demand for the author of have a visible or quantifiable platform from which they can launch their book ideas. Much ink has been spilled on defining platform and how to build one, and for good reason.

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When the Outlook is Bleak

by Steve Laube

In the constant ebb and flow of this industry we have authors celebrating and authors in tears. Ask any agent and you will hear the same. For every author excited about their new contract there is another experiencing bitter disappointment.

And I wish I could fix it.

To hear the anguish is difficult, but to be the one who delivers the bad news is heart-wrenching. Why is it that they seem to come in bunches? So what do you do when you run into the inevitable disappointments the writing experience throws at you?

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Ebook-Originals, the Next Step in Traditional Publishing Strategy

Guest Post by Sue Brower

Our guest today is Sue Brower. She is Executive Editor at Zondervan in charge of fiction and thinks she has the best job in the world…she gets paid to read all day!  Zondervan is currently looking for completed manuscripts to fill the Zondervan First fiction eBook platform.  The ideal stories will primarily have romance-driven plots and vivid, realistic characters.  We are also looking for proposals in the Contemporary, Historical, Suspense, and Romance categories for our print program.  Sue lives in Grand Rapids, Michigan with her husband Todd, dogs Pepper and Ollie, and cat, Shep.

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Lately, I’ve been thinking about how much the book market has changed in just a few short years.  Some bad, but mostly good because of all the new opportunities for innovation and creativity in publishing. Traditional publishing (print books sold through retail stores) is holding its own, but now there are so many more vehicles for authors to get published: print, epub-only, self-pub, etc.

A diehard fiction fan, I swore I would never give up my printed books and I didn’t believe that there would come a day when I wouldn’t be able to spend hours in a bookstore just browsing.  I love the way books smell; I love the way they feel.  Then the company I work for, Zondervan, gave me an IPad so that I could get comfortable with the format and so I could experience books electronically.  For a while everything I read was on my IPad; current books, as well as manuscripts I was considering for publication.  I thought it was so cool…for at first.  Then, a book was being released by my favorite author and I just had to have it in hardcover.  It wasn’t enough to have it loaded in perpetuity on my IPad, I wanted to be able to hold the story in my hands.  I enjoyed it more, become involved in the fantasy just as the writer intended.

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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 typical “the 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.

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News You Can Use – Nov. 15, 2011

The End of Borders and The Future of Bookselling – BusinessWeek article shows why Borders failed and why it doesn’t mean the demise of bookstores. Every writer should read this.

Another Change in How We Read Books? – Cloud-based book rentals…is it the future?

You Don’t Have to Accept Rejection – Copyblogger makes the case for the Indie route

Does Your Web Site Use Flash? – If so, then it is time to change. It is no longer supported by Adobe.

Random House of Canada to Try New Book Tour Model – Selling tickets that include the price of the book. Thus the book is “free.”

Jeff Bezos of Amazon, Owns the Web – A fascinating article from Wired magazine

Kindle’s Cost More to Make than What Amazon Charges – Obviously a “loss leader” that gets readers buying tons from Amazon.

A Fascinating infographic. Enjoy! (Click through to the original blog post to see the infographic.)

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The Greatest Thing Since Sliced Bread?

Guest Post by Teddi Deppner

Today debuts our first guest post. 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.

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All About E

This was the year of the E word. “E-Books.” The topic replaced the other “e” word…the Economy…as the number one topic among authors, editors, publishers and agents. And the news media reported every nuance with breathless excitement. The iPad, the iPhone4,  the Droid, the avalanche of tablets, the Kindle, the Nook, and a deluge of e-reading devices, all commanded our time and attention.

But the story is not over. In fact 2011 promises to continue this conversation as our industry writhes in chronic pain from its various twists and turns.

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E-Book Buyers Buy More Books

New research by the Book Industry Study Group (BISG) has made some interesting discoveries.

E-book consumers say they are buying more books overall, but fewer in print, and are decreasing their total dollars spent More than 40% of e-book readers have reduced the number and dollars spent on hardcovers and paperbacks. Retailers are becoming more important than publishers as a source of information about e-books. General fiction and mysteries are the fastest-growing e-book genres. More respondents received e-readers as gifts than bought them for themselves.
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