Friday, 10 October 2008

Who Makes The Money When A Book Is Sold?

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.


Brian Clegg said...

'It's clear from this analysis that publishers make less money on each book sold than their writers do' -

I'm not sure this is strictly true. The publisher, on that analysis, is making £3.70 per book, as against 80p made by the author. Some of this they offset against expenses - but then the author has expenses too, which don't appear in this breakdown.

Jane Smith said...

Brian, you're right, of course: what was I thinking?

I shall edit my post. Thank you for pointing out my foolishness, and for being so very kind about it, too.

Annie Wicking said...

Very interesting posting.

But I was about to say what about the writers... Glad to see you got there before me, Brian.

Thank you,


DOT said...

My expenses so far:

Two HB pencils 2x20p = 40p
Five notepads 5x£1.20 =£5.80
3,000 cups of FairTrade coffee @ 20p per cup = £600
Bitter dregs of despair, free with the coffee.

Expenditure £606.20

Jane Smith said...

Dot, you forgot about the many fivers you've sent my way to get me to say nice things about you. They add up, you know.

Meanwhile, to remind you all: when you do read things here that strike you as wrong I do hope you'll shout about them. I hate making mistakes and am grateful for the opportunity to correct them.

Anonymous said...

Re the paltry amount authors make. I have this argument over and again with writers and non-writers alike. Yes, the author royalties can be quite low and sometimes it seems that the bigger the publisher, the lower the royalties (I had a contract that quoted 3% from a ‘big publisher’, and now have a much nicer 15% from an independent press). However, in considering how much you might make, it is worth taking into account how many books are likely to be sold. You may only get a small amount per book, but royalties of 3% on a book that is placed in supermarkets and high volume chain bookshops will bring you a larger royalties cheque than 40% (or whatever the self-publishers quote) on a book that is only sold to your friends and the occasional internet random person. If an author is self-publishing then they are the publisher and all of those overheads, distribution costs, discounts etc. have to be absorbed by the author.

PS hello Jane. Nice blog!