The Economics of Publishing

March 4, 2010

Recently, the New York Times had a nice two-page article on the economics of book publishing and electronic book publishing. I’ve been thinking about writing on this topic myself, specifically about the money, as I suspect many people are curious about the financial aspects of the publishing business. However, I only have access to my numbers as a writer, so it was interesting to see the publisher side of things. I write computer books published as paperbacks, so my experience may differ from what the Times reported. That being said…

The first key number is that if the book lists for $30 (all numbers are in US dollars), then the publisher probably gets around $15. This is why Amazon and bookstores can mark the price down 20 or 40% and still make money on the sale.

Now the Times article suggests that the writer gets a 15% royalty on the $30. That may be the case for some, but, in working with two publishers (and having preliminary contract negotiations with another), a 14% royalty rate is the best I’ve personally seen. For many books the rate is actually 10 or 12%, and one contract I had started with royalties in the single digits, possibly escalating up to 10% or so as sales increased. As far as I can tell, the royalty rate a writer gets is based upon the expected and actual sales of the book and what the publisher thinks they can get you to agree to.

But, most importantly, the royalties are calculated on the price the publisher gets, not the list price (in my experience; I don’t want to question the accuracy of the Times article, but it’d really surprise me if any writer is getting paid royalties on the list price). So, if you do the math, a fortunate computer book writer can hope to get maybe $2.10 for each book sold (14% of $15). As for myself, I need to take out payroll taxes and cover business expenses, so at the end of the day, for each book sold, I’ll probably have $1 or thereabouts in my bank account that can be used to pay the mortgage and buy groceries. Yes, one dollar. (Not to belabor the point, but you may want to ponder that $1 the next time you go making demands of a writer or think they’re just doing X, Y, or Z to make money.) If I sell a copy of an eBook or a translation, I’ll get half that. This means that when a reader in India insisted that I put PHP, Apache, and MySQL on a CD, along with whatever other materials I may have (and I don’t have any that I’m keeping to myself, really), and ship that out to him in India, at my expense, that was after he had given me about 50 cents (or four-bits if you’re old-school). Kind of crazy, eh? Of course, I’m not trying to disparage readers, and people in all situations make unreasonable requests, I’m just saying that this is my experience as a computer book writer—but I’m a fairly successful writer—and this is pretty eye-opening for most readers.

Looking at the publisher again, the Times article puts their net, after the writer’s royalties, printing and shipping the book, marketing, and other book-specific expenses, at about $4 ($4.50-$5.50 for eBooks). And from that four to five dollars, the publisher has to pay employees, provide health care, have physical offices, etc., etc. So there’s not a ton of money being made by the publishers either, and that’s when a book sells. When a book doesn’t sell, it’s just a loss of money, because the publisher still paid the printing and shipping costs, plus they gave the writer an advance. My understanding is that about the top 20% of bestselling books helps cover the losses associated with the other 80% (and that most of these numbers are also appropriate to the music industry).

So there’s a little insight into the publishing business, from a money perspective (again, read the whole NY Times article if you want more and better details). As always, thanks for reading what I have to say!

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