Can you pay authors more and still make money?

Let’s face it. Publishing is not a high margin business. In earlier posts, I mentioned that on profit-sharing deals, authors can make 50-100% more than traditional royalties. How is that possible?

These royalties don’t come at the cost of our margins (very nice, thank you) or our staff (we generally peg our salaries against New York standards, even though most of our team are in Dallas), or our marketing (our authors tell me that we compare quite favorably against their experience with larger publishers).

I should start by pointing out that the majority of our deals are still traditional, an advance (generally $10K or less) against standard royalties (our standard is a little better than New York in a few details, but overall similar).

I generally reserve the  profit-sharing offers for deals that I and the author believe will clearly be big sellers (as opposed to surprise bestsellers, those delightful projects that pleasantly surprise us). While there’s a lot of uncertainty, you can make reasonable estimates about authors with a good track record or a celebrity angle.

We publish a set of “smaller” books that I fall in love with for one reason or another. We work these books as hard as the big books, but our expectations are more modest. On these books I don’t tend to offer profit-sharing, because if the book does modestly, profits can be zero! I don’t want to put our authors in this situation, particularly if the book is financially important to them (especially if the deal was zero advance against profit-share, as they often are).

Books that do well are profitable – very profitable. This reality is what keeps publishing going. I’ve heard it said that 80% of books lose money for their publishers. I have no idea if this is correct (it definitely isn’t the case for us).  Whether this statistic is true or not, it’s undeniable that vast majority of profits come from the very large books that earn out their advances and continue to sell well. Publishers live on these books.

But to get them publishers usually have to pay large advances. And sometimes – often even – they overpay. As a result unearned advances are a very significant cost for the large publishers. So the authors that earn out, that sell big, have to subsidize the authors that were over-payed.

Our unearned advances are essentially zero, so we we don’t have this unfair subsidization (at least not on our high-upside books). If our authors sell well, then they earn accordingly.

There are are a other minor factors, I believe. Our overhead is modest. We spend very little time in internal BS, and we have great people, so our team is quite productive. But the real answer is that we don’t have unearned advances and so we can afford to pay authors here who sell well extremely well.

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