A Typical Trade Title’s P&L

I’m sure many of my frequent readers know these numbers by heart, but some of you are new around here. So, . . .

Let’s look at a typical non-fiction trade book. (Fiction makes less money, by the way, unless it “goes big.” And we all know that’s as rare as finding gold in the gravel.)

So, let’s say, for simplicity’s sake, that your hardback has a list price of $30. (Those greedy publishers!)

The bookstore buys that book for $18. Now, some of those books will be sold for less than $30, but not most. That means the bookstore has $12 (40% of list) to cover rent, salaries, utility bills, and so on and so forth. Given that they’re not selling all that many books on a given day, you can see why so many bookstores are going out of business.

The bookstore doesn’t buy from the publisher, all that often, though. They buy from a wholesaler. Why? Because there are 100,000 active publishers in the US alone. And they can’t afford to deal with even 1% of them as direct vendors.

The wholesaler takes 15% of the list price ($4.50) to cover their costs of operation. And that’s a very, very slim sum. Our net is now $13.50. Out of $30.

But wholesalers don’t deal with more than the top 1 or 2% of those 100,000 publishers. The rest need a distributor. That distributor takes roughly 15% of the list price in combined commissions and other fees. (Another $4.50 gone, leaving a princely $9.)

So, the publisher is getting $9. From that comes:

–Pre-publication preparation: (cover design, text design, structural editing, copyediting, proofreading, indexing, file preparation to meet e-book or printer standards, . . . ). This costs about $3,500 to 10,000 per title. And that tends to work out to $0.75 or $1 per copy for most mid-range books. (We’re netting $8.25, if you use the better number.)

–Printing: At a mid-range volume, that might be $3.25 per copy. (The net is now $5)

–Royalties. Non-fiction, hb, standard rates of 10% of list for the first 5,000 copies, 12.5% for the next 5,000 copies and 15% after 10,001. Let’s be conservative, and call it 10% of $30, or $3.00 per copy. (The net is now $2.)

–Marketing of 5% of revenue, or 0.05 * $9, or $0.45. The net is down to $1.55.

From that $1.55 (or 5.2% of the original $30) comes the salaries, utilities, rent and maybe, just maybe a few pennies of profit.

Now, there are other complications I didn’t treat. Sometimes bookstores buy directly from distributors or the larger publishers. That happens about 1/3 of the time, so you’d get back an average of 1/3 of the 15% that the wholesalers take. That raises your bottom line by another 5% of list, or $1.50.

BUT you also have to accept returns from anyone in the trade, in any condition, at any time. (Yeah, that’s not how the terms of trade on the invoices read, but it is what really happens.) Most of these books will have a 25 to 30% return rate. And that eats up your bottom line with books you printed but can’t sell. (It adds another $0..90 in cost, on a good day.) And then there are the copies you never quite manage to sell, and freight, and . . . .

In the end, a large publisher usually gets 2.5 or 3% of list through to the bottom line. A smaller one is lucky to break even.

And fiction? It’s worse!

You don’t go into this business for the money.

Last word: Publishing is addictive. If you haven’t get gotten hooked, do NOT start until you have consulted your accountant and therapist!

7 Responses to “A Typical Trade Title’s P&L”

  1. [...] Profit & Loss – If you’ve ever wondered why books cost as much as they do, you’ll want to check out this post on Marion Gropen’s Publishing for Profit blog. Marion takes the reader step-by-step through all the factors that make up a non-fiction book’s cost. It’s an eye-opening exercise if you’re not already familiar with the business side of publishing. [...]

  2. [...] post is a great example of laying out costs. Every single author and every single Publisher needs to be doing [...]

  3. [...] A Typical Trade Title’s PLThis is not for the faint-hearted. [...]

  4. [...] “If a book lists for $30, the publisher gets between $15 and $18, but it has to pay a wholesaler 15% ($4.50) and a distributor another 15%. Take the higher number and Hyperion, HarperCollins, Simon & Schuster, and the rest end up with $9. Pre-publication (cover design, text design, copyediting, etc.) run about a buck. Printing: $3.25. Author royalties, maybe $3 a book. Don’t forget salaries, rent and the like, which may cost a buck or two on each title. Then there are returns, with booksellers returning unsold merchandise to the publishers, who either remainder it for pennies on the dollar, or simply pulp it. In the end a publisher is fortunate to wring a few cents on a book. No wonder it’s a hits business, with John Grisham, Dan Brown, Stephenie Meyer, and J.K. Rowling carrying the rest of us. If a publisher gets one or two big books a year, it might report margins of 10%–if it’s lucky.” [from The Profitable Publisher] [...]

  5. I’ve got years of experience with writing anything from articles to reviews but this is really something…

  6. Dave says:

    Such a wonderful analysis! No idea how you wrote this report..it’d take me long hours. Well worth it though, I’d assume. Have you considered selling banners on your blog?

    • Thank you.

      I choose not to offer ads on this space, especially since most of the ads that would be placed there are for so-called self-publishing services or other companies that use language in their ads that I feel misleads their customers.

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