May 28, 2014
In Which I Invent Numbers
Last night I read Hugh Howey’s take on the whole Amazon vs Hachette thing. I don’t know why. I knew it would make me mad, and it did. Howey is, by all accounts, a super nice guy who is always available for emerging writers to pick his brain. He supports the community and tries his damnedest to make sure creators are not getting screwed. So I had to think that, rather than trying to shill for The Man, he must just be incredibly stupid and ignorant. I was up half the night seething bitterly about how many customers I would face tomorrow who felt entitled to have temper tantrums at the cash register because we/publishers are unfairly getting rich off their backs, and why can’t we all just discount books like that great Saviour of the People, Amazon???
Except Howey isn’t stupid and he knows how publishing works. So what was up with his backward-ass approach to explaining how publishers arrive at their prices?
Then it hit me. Howey is thinking like a self publisher. He thinks Hachette is a self publisher.
When you self publish, the money you spend up front to produce the book is a gamble. It’s the cost of having a dream fulfilled, or of getting your foot in the door. It’s a “long term investment”, betting on the day, five books down the road, when you really start to take off. Nine times out of ten, you never see that money again.
A publisher does not gamble any more than it has to. It looks at its costs – editors, designers, publicists, customer service reps, distributors, warehouses, printers, lawyers, mistakes, everything – and works out exactly how many books they need to sell at what cost in order to make it back. Some years a book hits big, and in those years, somebody makes bank. But most of the time, they pay their employees and produce books.
Howey’s assertion that Hachette “get[s] the full wholesale price of $8.99,” only makes sense if you think Hachette is a guy, like Howey. When a self-publisher sells a book, they use that money to pay back the loan they made to themselves during that book’s production – a cost that Howey seems to be counting after profits, the same way one might buy groceries or pay the hydro bill. Publishers do this the other way around. The wholesale cost of the book pays for the cost to produce the book. You only look at profits after everyone has been paid.
If a self-publisher never makes their money back, they may decline to self-publish again. If they were publishers, this would be called “going out of business”. Hachette isn’t super-keen to do this.
But let’s back up a bit. Let’s talk about Hachette’s “crazy” ebook prices, now that we understand that they are not gambling the same way a self-publisher might.
What does it cost to make a book? What % is the author really getting?
Here’s a simplified break down of the cost to self publish. Back-of-the-napkin stuff.
Book cover – $150 – $200 (this is cheap. CHEAP. You can do it for less, and we will be able to tell.)
Editing services – $400 (this is also cheap, but this is what I will charge you for an 80,000 word novel)
ISBN/expanded distribution – $99 (this is to get an ISBN you can use outside of Amazon)
Copyright registration – $85 (your work is automatically copyrighted, but many people choose to register for ease of legal protection. Many.)
Layout & Design – $150
Kirkus Review (this is a handy stand in for “publicity costs”)- $425
A website – $600
TOTAL – ~ $1900
This was done on the cheap. You could do it even cheaper, true, but you will pay instead with your time, sanity, and quality of product. So, your mileage may vary, but this is a handy number.
The million dollar question is, how many copies will you sell? Truly, nobody knows. Here are some things I do know:
90% of books registered with BookNet Canada only sell one copy. One. Copy.
Tobias Buckell dissected some Smashwords data last year that shows the vast, vast majority of titles sell fewer than 100 copies.
The best-selling anthology I have ever contributed to has sold 141 copies.
Award-winning YA author Arthur Slade reports selling an average of 635 books per title over a whole year, but this is 4780 copies of one best-seller and an average of 175 books for each other title.
But, that said, I know a lot of first-time self published authors of romance & teen books that come off Wattpad with “fan bases” of 5k+ followers. They expect to sell 500 copies in the first few months, and they do that or better. So if you have an established author presence and a book with a known audience, 500 is a good number to shoot for.
Let’s say you’ll sell 500 copies because I am being very generous.
You price your ebook at $5.99 because that’s what Hugh Howey did. You sold 500 copies. That’s nearly $3000.
Amazon takes 30% ($900)
The IRS takes 30% ($630)
You made $1470. Congrats!
Wait, sorry. I mean you are still short $430.
What about Hachette? How does this break down for them? Let’s look at one subsidiary, Orbit books.
I don’t know how many employees Orbit has, but let’s say you only need the ones that cover the same services the self-publisher paid out for themselves – even though they also need laywers, customer service reps, account managers and so on. Orbit publishes roughly 60 books a year, so we will assume a book gets 1/60th of their services (though in reality, things aren’t this fair – still, short hand). Salaries extrapolated from the bottom end of Indeed.com’s salary estimator.
Cover designer – $48,000/60 = $800
Editor – $47,000/60 = $784
ISBN = $5.75 (you can buy them in blocks for much less than they sell individually)
Copyright registration – $85
Layout & Design/Typography – $58,000/60 = $967
Publicity – $44,000/60 = $734
Printing – $3.90/book x 500 copies = $1950
Author Advance – $5000
Website – $0 (the publisher probably won’t do this for you!)
TOTAL – $10,325
Well, we printed 500 print copies. Let’s say we will sell these in addition to 500 ebooks, because I’m going to pretend I don’t know full well that plenty of big-5 titles only sell 150 copies, period. Let’s say Orbit has high hopes for you, and you will sell 1000 books.
If Orbit sold them for Howey’s $5.99, they’d have $5,990. Amazon would take 30% = $1790. I can’t guess at Orbit’s tax rate, but let’s be generous and say it’s 30% too. $1260. The distributor, by the way, wants 10% on the 500 print books you sold through them. That’s $300. Well, so far Orbit has lost almost $7000 on this book.
If MSRP was $8.99? $8990, and Amazon’s already paid. Well, we’re closer. They’ve only lost $4000. Incidentally, if they don’t pay the author an advance and just give them “25%” as Howey suggests, the author “only” gets $2250, but Orbit has only lost maybe $400. Another few months and they might break even.
Hachette’s barely eking by at $8.99 MSRP, and the author is $2250 ahead instead of $430 behind.
Everybody thinks they will do better. You can make this look better for Amazon & the author by selling more units. In scenario one, you will break even after you’ve sold another roughly 150 books. You’ll make the same as you might have in the Hachette scenario 760 books after that – so in order to make the same money on 1000 traditionally published books at $8.99 MSRP ($14.99 on Amazon), you’ll have to sell 1400 self published ones at $5.99. Maybe you think you will make those sales. I feel that this is… optimistic of you, but that’s your business. It is your dream to gamble on. You might, after all, make it big, like Hugh Howey.
But it would be business insanity for a mainstream publisher to operate as if they are guaranteed 1400, or even 500, sales of every book they publish. They know very well they have to balance the misses with the hits. They have been doing this for decades, after all.
And, of course, there’s the pesky issue of the salaries listed there. It costs more for a publisher to make a book because it employs people – real humans making middle-class salaries. We should not begrudge those people their jobs. Hell, most of them are probably the same creators Howey defends. The $2200 you might make self-publishing a book is not going to pay your bills, not unless you can write a novel every three weeks. Even being a freelance designer or editor isn’t going to pay your bills – not unless you are extraordinarily successful – or you put your prices up. I don’t edit six 80,000-novels per month, let me tell you.
No, it’s publishing that supports the entire creative industry. That’s where book lovers find jobs. Is that worth a buck per book to you? Is it to me.