Yesterday I read a blog comment in which a writer insisted that she preferred to self-publish her work, as commercial presses paid such low royalties; this morning I overheard someone complaining that it was no wonder that writers are so rich, as books were so expensive. Leaving aside the value of books and the wisdom of self-publishing for a moment, let's consider exactly where the money goes from the sale of a commercially-published book.
According to Tim Hely Hutchinson, writing in The Author in September 1998, the money is split like this. Figures in brackets give real amounts due on a book with a cover price of £10.00.
Manufacturing Costs: 15% (£1.50)
Royalties: 8% (£0.80)
Distribution/Marketing: 8% (£0.80)
Publisher’s Overheads: 9% (£0.90)
Trade Discount: 55% (£5.50)
Publisher’s Net Profit: 5% (£0.50)
Wholesalers buy the books from the publishers at around 55% discount, and then sell the books on to bookshops for around 35% discount. Remember though that not all of that is profit: wholesalers and bookshops have high overheads to cover, like rent, heat, staff, cleaning and advertising. Then there are the discounts that bookshops offer: all of those three-for-two offers also have to be paid for here. It's estimated that once the bookshop has covered all of these various costs, their profit per book sold drops to below 5% of the cover price.
It's not quite clear from this analysis quite who makes the most money out of every deal. But what is clear is that if you do it right, publishing is a very expensive business indeed.