Fantasy Publisher League: Ups and Downs in the Third Year

[As we continue our “Does Literary Fiction Suffer from Dysfunctional Pricing?” discussion, Mary is taking us through our third year with a hypothetical publishing company].

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Although the general tone of yesterday’s post might have indicated that a 10% year was a disappointment, I assure you that Simon Collins & Random Day’s board of directors were pleased. We were just coming down from our high of Season One’s 30% profit. But, a profit is a profit and we shouldn’t sound unhappy about operating in the black. Now it’s time to dig into season three.

Get ready for some big news, books fans. We’ve got two seasons under our belt and have learned a few things about the publishing industry. SC&RD has been doing well and word has spread about our profitable publishing program. As is often the case, though, our shareholders have been clamoring for higher returns. In response, our acquisitions editors have spent the preseason scouting for talent and signed a few big names for our next frontlist catalog.

Making a Killing at Thrilling

SC&RD scored a huge hit when we found debut author Lindsay Patterson Grisham. Being an unknown, we picked up her first novel for a song and it turned into a runaway bestseller. The story follows a washed up Triple-A shortstop as he is lured into a web of deception and danger when his brilliant and beautiful scientist wife is left at death’s door after a horrifying attack. Marketing helped knock this one into the lights by giving away giant foam fingers promoting the book. We knew it would be big when we saw every agent and bookseller wearing them while wandering through the aisles at Books Exposed America. The stats:

  • $25,000 advance
  • 1,000,000 units printed
  • 95% of inventory sold
  • $7,621,106.67 net profit

Another smash happened after we lured an MVP away from Harper Schuster House. Rumor had it that F. Clive Follett-Cornwell was unhappy about the author photo they used on his blockbusting Interlude for a Murderous Symphony (Repairman Alex Plum Series #72). Apparently, his eyebrows weren’t furrowed enough, so we offered him a huge advance and a celebrity photo shoot. Oh, happy day:

  • $500,000 advance
  • 750,000 units printed
  • 90% of inventory sold
  • $4,268468.33 net profit

Losing Literary Fiction

Although our thrillers did exceptionally well this season, literary fiction fell short of expectations. It all started when a bidding war broke out for Jonathan Frazier Ford. The acquisitions editor convinced our entire office of his literary prize potential, so we placed a huge bet on him. Turns out, his horse didn’t run as his novel received mediocre press and negative stars from nearly every amateur reviewer on Amazoo. Not all hope is lost, though. Marketing is working on a plan to repurpose unsold inventory as doorstops to use as a tie-in for the next Lindsay Patterson Grisham novel about a Manhattan doorman on a killing rampage. The sad truth:

  • $500,000 advance
  • 386,400 units printed
  • 25% of inventory sold
  • $1,605,159.02 net loss

More bad news, books fans. SC&RD thought our list would gain some respect from the literati by signing seasoned author Alice Upjohn Oates. She put the literary into fiction nearly 30 years ago when she wrote We Were the Thirteen Suns, but we should have known something was up when she didn’t blink at the modest advance we offered. Some of us scratched our heads when she delivered a manuscript consisting of the word “dog” 25,000 times, followed by 25,000 repeats of “god”, and ending with “Thus, the sun set.” The acquisitions editor was convinced her experimental novel would find an audience, but it turned into a fiasco when we were sued for copyright infringement by some blogger in Terre Haute. Eh:

  • $50,000 advance
  • 41,400 units printed
  • 15% of inventory sold
  • $214,915.00 net loss

A Tale of Two Product Lines
Since our thrillers and literary fiction had the most impact on the bottom line, we set up today’s big spreadsheet to compare them. Besides the above winners and losers, the rest of our frontlist experienced a typical year. Some were very profitable, some were very unprofitable, while the rest broke close to even or lost money. Without further adieu…

Click here to view SC&RD’s financials for season three

Hmmm. A few significant numbers bear repeating:

Thriller (all titles): $13,049,880.34 net profit (33% profit margin)
Literary Fiction (all titles): $725,665.36 net loss (-10% profit margin)
Both Product Lines: $12,324,214.98 net profit (26% profit margin)

In the end, SC&RD still managed to make money despite so many red numbers.

Although we are running a fantasy publisher, don’t forget that our financials have been based on real industry averages. When a book sells well, the sky’s the limit because there isn’t a ceiling on profits. But when a book is a dud, losses end at the initial investment. In the meantime, we can take our earnings from bestsellers and invest them in chasing the next big hit. Lather. Rinse. Repeat. One winner can help carry the company through the next season, but a whole lineup of losers will bury it.

Moving on

It’s the bottom of the ninth, books fans, and the last out looms. I’d like to thank Levi for the soapbox and the entire LitKicks audience for playing along. For my part, I had a lot of fun building Simon Collins & Random Day, and I hope everyone found this exercise to be both amusing and educational. Steeeeeeerike three!

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And LitKicks says thanks right back to Mary for a very entertaining and educational three-day adventure. For those of you who’d like to keep enjoying her wit and wisdom, check regularly.

Whither our book pricing discussion? We’ll break for the weekend and gather next Monday to begin the “closing statements”. We’re definitely near the end. — Levi Asher

12 Responses

  1. What ifWhat if the publisher
    What if

    What if the publisher printed copies on demand? Or what if the publisher just used print on demand for the more speculative literary fiction? Wouldn’t that keep the cost down and posibly bring a small profit? If the advance is small, a modest number of books sell, but only those books that sell are printed, wouldn’t this change the way of looking at non-blockbuster books?

  2. Great series, and an
    Great series, and an explanation

    Thanks for a *great* rundown of publishing financials. I learned a few things!

    I think that the short answer to the question, ‘why high-priced hardcovers leading paperbacks,’ is this:

    1. Publishers could care less about literature. They are in business to make money.

    2. The present hardcover-then-paperback model makes more money than other models.

    Anything else is wishful thinking. (Wish it were different!)

  3. I think I know the answer to
    I think I know the answer to this one. After spending lots of money on advertising, the last thing anyone wants is for potential customers to show up at the bookstore, only to be told that the book must be ordered. Indeed, a big display, with posters and cardboard standups, and a big stack of books, like ripe tomatoes, ready for plucking – that’s what moves a lot of product. Am I right, experts?

    I know, because I use print-on-demand, and everyone keeps saying I need to do a book signing at Barnes & Noble, and that means I have to purchase, like, 100 of my own books. Even with the author’s discount, this is not so easy.

  4. I think you’re getting it,
    I think you’re getting it, Dan, but I would spin the results slightly differently.

    Traditional hardcover->paperback publishing may make more money than trade paper original if we agree that the same number of copies are sold in either case, but considering how few copies are sold of most hardcover literary fiction, it’s no stretch to imagine that we might sell significantly more in paperback.

    Also, as technology improves, the options are not as white/black (or, hardcover/paper) as they used to be. I definitely have hope that the major publishing companies will evolve how they publish literary fiction. Times are changing and the industry will have to change as well. The advent of electronic books alone is likely to force some changes. I remain hopeful that things will get better.

  5. Michael, funny you should
    Michael, funny you should ask, since Levi brought up these very questions as I showed him drafts of the spreadsheets.

    First of all, publishers are in the business of publishing rather than printing. Back in the day they used to run their own presses, but it’s cheaper to outsource to printers who are able to offer lower prices due to volume (like on buying paper, ink, creating plates, etc.).

    For example, let’s say SC&RD publishes 200 books each year. If they wanted to produce these books themselves, they’d need to invest in a printing press, paper, skilled employees, a manufacturing plant, etc. However, Joe’s Printing & Binding is in the business of just printing. This is all he does, so he has the resources to print 2,000,000 books each year. Thanks to volume, Joe’s costs would be around 10,000 times less than SC&RD’s in making those 200 books.

    POD technology is still fairly slow and expensive. I think I read that the $100,000 Expresso machine can make a single paperback book in 8 minutes with a PP&B of a $1. A printer with a high-speed press could probably make that same book in half the time for half the amount. For big publishers like SC&RD, POD isn’t yet at the point of providing them with any cost/time savings. Small presses with small print runs, on the other hand, are another story. However, raising the capital to buy a POD machine might be stretch since many of them operate with smaller margins than the typical 10%.

  6. Bill, although I think POD
    Bill, although I think POD isn’t viable yet for publishers, I see it as being a great resource for book retailers. Let’s say you walk into your local B&N and they don’t have a particular book on the shelves. With an on-site POD machine and a link to the publishers’ proofs, they could offer the option of printing it while you wait. No customer would ever walk away unhappy about not finding a book!

  7. Dan, regarding your first
    Dan, regarding your first point, it’s my feeling that this is where the actual dysfunction in publishing lies. (Rather than in pricing; no offense, Levi!) Although the corporate muckety mucks see books as a product, the editors do their jobs because they love literature. Making money and producing art might be a conflict of interest, but they do what they have to do in order to stay in business.

    Even though they may be churning out pulp fiction to keep the investors happy, the next Moby Dick could possibly slide across some lowly editor’s desk. Ironically, though, a truly great work of art has a life/selling span of forever. If you look at the long view, it has the potential to earn more money than any flash-in-the-pan mass market sensation.

  8. Hi, MaryDell — I haven’t
    Hi, MaryDell — I haven’t been directly involved in publishing for more years than I’m willing to say. Are there really editors left who love literature (other than at small independent presses)? I’d love to think so. I thought that that was all gone; Max Perkins replaced by Donald Trump.

    Why would the suits who run publishing conglomerates waste time and money on a ‘softie’ who loved books when he could invest in a corporate bean counter “editor” with an eye on the bottom line?

  9. the love of literatureI
    the love of literature

    I believe many people in the publishing business do love literature, and that’s why they got into it in the first place (not always, but a lot of the time). Somewhere along the line, it gets complicated.

    I see these kind of conflicts every day. The social worker, who wants to help people but gets buried under a mountain of case files, and must resort to an “assembly-line” approach. The doctor who works for an HMO that limits him to an average of 15 minutes per patient.

    Of course, Levi’s point, if I understand correctly, is that publishers could make MORE money if they would release paperbacks & hardbacks at the same time.

  10. That is exactly my point,
    That is exactly my point, Bill — thank you for stating it clearly.

    I agree that many people in the book business love literature. I am friends with enough of them to know this for sure. It’s also true, though, that you are never likely to find a more jaded and cynical group of book lovers than you will find working for the major corporate publishing companies.

  11. Dan, to be perfectly honest,
    Dan, to be perfectly honest, I never met anyone involved in publishing who didn’t love books in some way. Starting salaries for entry-level editors are pretty low. So when someone with a higher college degree signs on to slave over another person’s manuscript while taking home peanuts, they must be doing it for something other than the money.

    The corporate bean counter you mention does exist, usually in the form of the managing editor. The ME usually has ultimate control over what’s published and works closely with the publisher (the big boss) to guide the company’s list toward whatever the goal is (like how some publishers specialize in certain kinds of books). All of the little editors report up through chains to the ME, who also was once one of those little editors who love books.

  12. That’s great to know,
    That’s great to know, MaryDell. Thanks for your comments and your articles. And thanks to Levi for putting this together.

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Litkicks will turn 30 years old in the summer of 2024! We can’t believe it ourselves. We don’t run as many blog posts about books and writers as we used to, but founder Marc Eliot Stein aka Levi Asher is busy running two podcasts. Please check out our latest work!