So Why Is Profit Sharing So Rare?

In my previous post I made the argument that profit-sharing is a better way to pay authors than traditional arrangements. Is so, why is it so rare?

In fact, two famous experiments in profit-sharing were notable failures.  Harper Studio, launched by the legendary Bob Miller, lasted two years before shuttering its doors.  More recently, Perseus’ Vanguard imprint was closed. (Full disclosure: we are distributed by the excellent Perseus Distribution). Profit-sharing is occasionally offered by the major publishers, but it seems to be fairly rare. The focus is on advances against royalties.

So what makes profit-sharing so problematic?

First, it’s complicated and uncertain. Under traditional deals, the author can easily calculate his or her royalties for any level of sales (not 100% true, but close enough). Profit-sharing is more variable, and more complex. From an author point of view, if you don’t trust your publisher, there’s more to be nervous about. And from a publisher perspective, you will get asked about issues that are traditionally the publisher’s domain, from print runs to marketing spend. If you aren’t really committed to partnership with your authors, it won’t work very well.

Second, there is some risk that a publisher will have a lower standard on profit-sharing projects than on other projects, especially if there is no advance. This is, of course, disastrous, because it’s plenty easy to lose money publishing books, with or without an advance. At BenBella our bar is higher for profit-sharing projects than for traditional projects, which is as it should be.

Third, many authors, and many publishers, don’t really want a partnership. Authors may want to control every aspect of the publishing process, or they may want to go away and focus on their next book. Publishers may not want to share sensitive information, or may want the author to stay out of the decisions they are used to making. In these scenarios, profit-sharing will be a recipe for frustration and conflict.

Lastly, profit-sharing does transfer risk from publishers to authors. So some authors, and some agents, reject it on principle. If a publisher believes in a book, shouldn’t they the risk of publishing it? There is some truth in this, but there is also another side. If an author believes in his or her book, shouldn’t they have some skin in the game?

In practice, of course, we invest $50K to $100K+ in each title, even with profit-sharing and modest advances. So we do have a good amount of risk. And our authors often turn down larger (sometimes much larger) advances to come with us, so they have a good amount of risk.  In practice this is a great basis for partnership.

The bottom-line is that to make profit-sharing work you need more than a change in your royalty system. That’s easy. You also need to embody a partnership philosophy across your organization. That’s harder, and requires that you build this in from the ground up in your processes, your training and your values.

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