Some people were shocked a few years back by Lynn Viehl’s very revealing and incredibly generous post about how she only earned $24,517.36 after taxes and commission on her mass market NY Times Bestseller TWILIGHT FALL. In the post she also estimated the publisher’s gross at $450,000 and guessed the net profit to be something around $250,000.
This raised some eyebrows. How could publishers make so much and the author earn so little?
Well, my math is a little different. According to Amazon the list price of TWILIGHT FALL is $7.99. Discounts to booksellers vary and that’s not information others are always privy to, but since this is a rough sketch let’s just say they’re 50% across the board. For the purposes of this post that means that for every net copy sold (i.e. actually sold to consumers) the publisher receives around $4.00 and the bookseller receives $4.00.
Unit costs (i.e. producing the actual book) also varies anywhere from $0.75 to $3.00 depending on the format, quantity of the print run, etc. Since this is mass market let’s say that unit cost including shipping and warehousing is around $1.50 per book. Again, just a very very rough guess.
So we’re down to $2.50 per copy for the publisher. Lynn says net sales so far are 61,663, so according to the napkin the publisher is around $154,157.50
Lynn says she received a $50,000 advance, so the publisher stands at (approximately) $104,157.50 on the title.
Pretty good! This is a bestseller after all.
But you have to deduct all marketing costs (ads, sending out copies for review, bound galleys/ARCs if any, co-op), other production costs (cover, seasonal catalog, etc.), and overhead (salaries, health insurance, rent, etc.) before you get to the profit.
How much does all the rest of that cost? I don’t know, I’m not a publisher. But it all adds up to a pretty good chunk. And let’s not forget that historically most books don’t earn a profit and those have to be paid for as well.
At the end of the day, on all books that turn out profitable the publisher is going to earn more of the profit than the author barring a revenue share type of model where the author isn’t paid up front. After all, they put up the advance and the production costs, and the risk on any given book is exclusively theirs. While of course a book not selling can hurt an author’s career, they don’t have to pay back the advance or the amount the publisher lost.
But publishers aren’t exactly raking it in either.
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Art: The Moneylender and his Wife (detail) by Quinten Massijs
Ink says
Lol, Mira. You do make me laugh.
But, seriously, you're gonna take an industry that has been low profit since it's very inception centuries ago and suddenly, wham!, make it extra profitable? More money for writers and stories and publishers? When every single person who has ever passed through the industry has failed to make that most drastic and profitable change work? I give you kudos for courage and optimism!
If I was a publisher I'd totally let you run it. It would be fun, at least!
Anonymous says
I agree that, hypothetically, if an unknown author sold enough units to maintain a <10,000 sales rank on amazon for a sustained period, like for a year, that that person would be making real money at that point and would aattract the attention of the major players.
It can't be easy to do, though, or everyone would be doing it. There's no free rides.
Jess Anastasi says
Which just goes to show if you're writing to get rich, you're definitely in the wrong business.
It's also why some writers I know chose to write category. Category romances don't pay anywhere near as much as a bestseller, but they are shorter so if you can manage to write 3 or 4 in a year you might actually make a half decent wage. Of course, writing 3 or 4 books in a year, no matter how short they are, isn't exactly a cake walk.
Anonymous says
Yep me too Mira.
Mira The Sweet with her sweetspot titles.
If you think you can build it,I'll lend you a hammer and a saw.
In the meantime, it is a
sweet dream.
Anonymous says
One thing I would like to add to the discussion… you need to take Lynn's original post with a HUGE grain of salt. When you get a $50,000.00 advance from a publisher you do not get to keep less than half of that. The highest income tax bracket in the USA is only 33%. The minimum the author would keep from a $50,000.00 advance is $33,500.00 which isn't a bad living.
And if your SOLE income from that year was the $50,000.00, you wouldn't fall into the 33% tax bracket. You would fall closer to 20%.
Lynn claims the missing $8982.64 is 'expenses', yet she fails to disclose what those expenses are. What could they be? What 'expenses' does an author really have? Paper? Ink? Postage? There is no way your expenses add up to $9000.00.
If Lynn took some of her book money and (wisely) went to a seminar or convention she might try to claim those as expenses on her tax return, but they aren't REAL expenses and they were not 'required' for her to write the book.
You can write books (and sell them) without spending $9000.00 a year on travel.
So, the idea that she got paid 'minimum wage' for her novel is a bit of a falicy and I suspect that most people would be able to manage just fine with that kind of an advance.
After taxes, health insurance and gas most people whose income is in the $50k range probably bring home less than $24k.
She is making it sound like she isn't making a good living, when the truth lies somewhere on the other side of that line.
Terry says
I need to buy more lottery tickets.
Blues Greene says
There are some fascinating parallels between what happened in the music business to what's happening in publishing now. While I too am not inthralled with the prospect of losing books as they now exist, I know when a revolution is taking place. I see tremendous opportunity for talented writers, especially those with something to say, to reach people that want to hear what they have to say. The number crunching, the profit margin, the gate keeping that exists in the publishing industry needs to be threatened. Nothing lasts forever.
Mira says
Ink
Yes. I would.
I'm ready.
Hand me the keys.
Of course, I'm not good at business, but I don't think that's required. I'll get Nathan to help me with the business stuff.
I'll bring the vision and the courage. And the action.
Well, Nathan could bring that too, or you for that matter, but I'm the one with the key.
Hmmmm, I just thought that maybe I'm talking too much on this thread.
Well, maybe just one or two more. Hope that's okay with Nathan….
Okay, here are some things I'd do.
a. Market, market, market, market
b. Then I'd market some more
c. Put some muscle behind the 'get caught reading' campaign.
d. Hire you, Nathan and Marilyn to help me, and some other people from this blog, too.
e. Move out of New York
f. Stop advances immediately. Offer shared risk. Why invest in authors who don't sell?
g. Develop an e-book branch. Start the transition now.
h. Stop the incestous referral system immediately. Search the slushpile for darn good writing. That's all I care about. The writing. Don't care if the author is hard to work with. Don't care if they've taken a bath in ten years. The writing. That's where it's at.
i. Compensate my writers higher than the industry standard to keep them loyal, and stop the move to self-publishing. Make them feel like part of the family, instead of step-children in the cellar. Nurture them.
j. Develop a company blog and build brand and consumer loyalty.
k. Market some more.
l. Nurture my writers some more.
m. Speed up production. Book to shelf, 6 months.
n. Set up a compensation system for agents who bring me books that sell. Make them want to bring books to me first.
o. As an experiment, I'd hire writers on a full-time basis to just sit and write. Give them salaries, benefits, and a share of the profits.
p. Market research.
q. More market research.
r. Then do some more market research.
s. Gather the best minds in the industry for a summit on how to save the industry. Don't let any of my competitors attend that summit.
t. Stop the interns going through the slush pile. My best minds go through the slush pile.
u. Stop the query system. Waste of time.
I don't work in publishing. I bet if I actually worked in publishing, I might have made it to z.
Thanks for the forum, Nathan. I don't want to abuse it, I'll stop soon.
Karen Schwabach says
Kinda makes you wonder why publishers publish.
But, now, I've seen the building in Manhattan where my publisher keeps house. Those Manhattan buildings don't come cheap. They must be doing all right somewhere along the line.
Nathan Bransford says
(more napkin math)
$50,000 advance, per your numbers means approx $16,500 in taxes. Agency commission is $7,500. That leaves you at $26,000, which is basically what she was saying.
And that's before those expenses I mentioned.
Anonymous says
" $8982.64 is 'expenses', yet she fails to disclose what those expenses are. What could they be? What 'expenses' does an author really have? Paper? Ink? Postage?"
I concur with anon 2:20. Lynn's doing pretty well for an author. I think her point, though, was that many people assume that if you hit the NYT list that yu're going to be rich, which she is trying to show isn't the case. But she is making a living. Agree that with any job, AFTER you take out taxes and expenses like a commuute (which she doesn't have), the end results aren't pretty for most people.
For the expenses, I guess 9K could be computer equipment, Internat bill, printer ink, office supplies, maybe some travel for 'research' purposes?
Anonymous says
Also remember that the 50k advance isn't paid out all at once. It's doled out in thirds, right? Or at least halfs. On signing, on aceptance of edits, and on publicaiton, or just on signing and on publicaiton. So it's not like wow, here's 50 grand! However, that's just the print rights. She could still sell foreign rights, audio book, ebook, film, video game, whatever else…
Susan Quinn says
Wait, what?
I have to pay taxes on my agent's commission, and they have to pay taxes on it too?
That stinks.
Anonymous says
Don't forget office furniture. You know she's not slaving away on some ratty alley chair.
Marilyn Peake says
Nathan,
I’m loving this discussion. It’s fascinating. An operating budget of 137 million Euros seems pretty good, especially considering executive earnings. When the head of Bertelsmann, Reinhard Mohn, died in May of this year, he was personally worth $2.5 billion. In the third quarter of 2009, Bertelsmann AG has already managed to increase its operating budget by 14% to 284 million euros. When a company has billions of dollars to work with, they can buy and sell and reorganize until they make a profit. When larger corporations say earnings are down, it may mean temporary bad news for stock prices. It doesn’t necessarily mean the company’s anywhere near financial failure. I think the tendency of most people is to misinterpret announcements that "earnings are down" as if the company’s in real trouble and then to support all cost-cutting measures.
Anonymous says
Don't forget "product placement" rights.
I can have my protag drinking a Dr. Depper instead of a Coke, or {gasp} a generic "soda" for the right price.
My herione could be waching CNN instead of MSNBC, for the right price.
do agents negotiate those deals?
Terry says
Mira – I want to work for you.
Marsha – It's the Alfa Romeo for me and, hey, there's always Vegas. As for Juan, use your feminine charms.
Anonymous says
Nothing's changed much. Writers write books and publishers try to get people to buy 'em, and the author tries to get poele to buy 'em too. Internet, yea, yea. Same ole same ole.
write 'em, sell'em, repeat.
captacha: nutrap
Mira says
Oh. Can I add one last thing?
I'd do whatever google is doing. 3,000 resumes a day. I want the best minds and the best writers in the industry wishing they were on my payroll.
Anonymous says
Mira,
I want money, too! can I have some?
Mira says
Terry,
You're hired.
Anonymous says
The economics of publishing are thin margins and an excruciatingly slow product-to-market timeline. Peripherally, the business model is under threat from a chaanging retail landscape and increased competition for disposable income (i.e. video games, music and videos on the go, Web 2.0).
If a writer can make it to franchise level, they'll be set. But for the rest, it's a tough slog up a dirty bog.
Nathan Bransford says
susan-
In retrospect I probably shouldn't be weighing in on tax matters since I'm not an accountant. Get a good one if you're making money writing!
Anonymous says
An author reports royalties/advances from a 1099/Scedule C income form. The publisher sure ain't paying payroll taxes, thus a 1099 for income greater than $600 per author. Scedule C is a profit/loss statement of income. Agent fees are a loss or expense deduction from gross income. Taxes are assessed on net income. And an author is typically self-employed paying employer's share of Social Security, FICA, and Medicare taxes, which is about 7%.
Veihl reports 42 novels to her credit. How many of them are earning backlist royalties is a question, but novelist and other writing related activities probably put her in the $50,000 gross income area and therefore, with self-employment, payroll taxes in the neighborhood of 32%.
clindsay says
Nathan –
Those numbers look about right. You haven't taken into account returns, however, which bring everyone's net down even more.
Returns usually runs about 30-40% of any given title. This is money the publisher needs to give BACK to the retailer/wholesaler. I think that most people don't realize that paperbacks, even if the retailer only returns the covers.
So yeah, the publisher isn't raking in a whole lot of dough, either.
Marsha Sigman says
All this math is making my head swim and I'm an accountant by day! This is killing my creativity.
Don't do this for the money…it will only lead to disappointment.
Anon 12:54 and 12:57, we have firm plans to toss back a few.
Terry: My husband won't let me…I have to wait a few years until he is too senile to notice.
Nathan Bransford says
Thanks, anon@2:59 and Colleen.
Chris Bates says
You hit the nail on the head, Bransford.
'[The publisher] put up the advance and the production costs, and the risk on any given book is exclusively theirs…'
The person that takes the financial risk should always have a better ROI. Apparently publishing is still a business, although probably not a great one!
Of course, those figures Lynn Viehl provided will drive many authors to self-publish. My advice to those authors – for all it's worth – beware. Do your sums and stay on the low end of expectation. Best to print 100 copies with a POD printer than to blow thousands of bucks on a vanity publishing house. Or better yet, throw out an ebook and see if any interest comes from it.
That said, if your book is brilliant it's highly likely that you will make more cash going with a traditional publisher than doing it yourself. Simply because success in publishing is not just about the book's content. There's a logistical nightmare hidden between the lines of every bestseller.
Josin L. McQuein says
Anon 2:44 —
Gotcha beat.
My MC drinks Dublin Dr. Pepper. ;-P Which any Dr.Pepper drinker (and good Texan) knows is the only real Dr. Pepper.
How's that for product placement?
Anonymous says
"3,000 resumes a day. I want the best minds…"
Um, obviously with that many applying per day, it's safe to say that most of them (perhaps not even any of them) are the best minds! It's just everybody.
I doubt most companies could even handle the work of filtering out the best qualified candidates from that many applicaitons, let alone do the work necessary to generate that much public enthusiasm.
Anonymous says
good ol 1099 C!
Anonymous says
Any year I need to file a 1099C is a good year for me!
Susan Quinn says
@Anon2:59 – That makes more sense! Thank you.
Author as Small Business Person is a good analogy in many ways.
Nathan – only in my dreams of the future am I making money as a writer! But we all have to start somewhere, right?
🙂
Mira says
Googled it. Ha.
2007, it was only 1300 resumes daily. If this article is accurate.
Sorry for the exaggeration. Those of us who live near Google talk about how hard it is to get a job there – unbelievable competition.
https://careersearch.contentquake.com/2007/07/29/1300-resumes%E2%80%A6-per-day/
Anyway, they are doing something right. When I get the keys to the publishing industry, I'd want to do that too.
Anonymous says
Yup, and if yo're self-emplyed, some states will demand that you file for a business license, which also costs $.
Terry says
Mira, Deal! I like the way you think.
Anonymous says
Don't quit your dayjob, kids!
Publishing is like a hobby that could pay some money, but probably won't pay enough to ever live on.
I'd like to see that stats on how many non-bestseller auhtors are making a living off selling books–your backlisters and midlisters. Can one be an okay-selling novelist these days and still make a living? or is it pretty much if you don't hit the big lists at least once you don't have a chance?
june says
It seems to me, you'd be better off writing because you want to give people a good read and if you can make some money doing it-cool, but unless you luck out like Stephanie Meyers and company, keep your day job and consider any money you get from writing your book a nice extra! You can't be too disappointed keeping that perspective!
Mira says
Terry, thanks. 🙂
Maybe we should all form a partnership. Start a new publishing company. Nathan can be our leader.
Okay, I'm off.
Happy Thanksgiving to everyone. Much to be thankful for. 🙂
Anonymous says
Maybe I'll switch to screenwriting.
Terry says
Marsha, Then maybe the Alfa is for you, too. Listen to this review:
The Alfa is now stronger, its cars more stylish; it's now a brand that offers a genuine alternative to rival (read German) European premium automobiles. Plus it has an extraordinary and beguilingly beautiful new flagship, the 8C Competizione. It's this car, with both Ferrari and Maserati blood flowing in its veins, that leads Alfa Romeo's charge back to America.
All that Latin blood pulsing through its veins. It could be better than Juan!
OK, so it may not leave you kicking and screaming. Well, with me at the wheel, you might be screaming:)
Mary says
“… I'm a bit concerned about the 50% the bookstores are making. Not sure why bookstores are making so much of the profit either.”
Mira,
You’re talking about takings, not profit. The overhead costs of running a retail operation are heavy. You might be surprised that retailers in some sectors, including those you might regularly shop, mark-up even higher. Making a bigger percentage on the products they sell than booksellers make from books.
Anonymous says
It's called revenue. Profit = revenue – expenses.
Anonymous says
My goal is the humble airport bookshop and supermarket checkout stand. that's where I wanna be.
Anonymous says
Nathan,
I think you did the same napkin math I did in my post. It isn't taxes on $50k, it is taxes on $42,500 after your 15% agent fee.
You don't pay taxes for your agent. 🙂
At $42k you aren't falling anywhere near the top 33% tax bracket.
That said, once you subract out taxes there is in the $25k – $30k range, but like I said above — that is the exact same amount of money that EVERYONE takes home who makes in the $40k range.
Lynn is making it sound like she isn't making a good living writing, when she probably is.
She might have a full time job on the side (she did say she only writes one book a year) and she has some money coming in from the first six books in her series and at some point she got an advance from the first book in the next series.
I respect and admire that she has the courage to post her financial information, but as I said you need to take it with a grain of salt since from the numbers she provied she is pretty successfull.
Anonymous says
The Economics of Authorship
Some quick and uglies;
An author paying an agent fees should file a 1099 for that so that it's a nontaxed business expense. The agent earned it, should pay the taxes. However, not a few authors are unaware of this allowed expense deduction. Perhaps Ms. Viehl has so far missed it?
A sole proprietorship category author has a few advantages and disadvantages over a Chapter S corporation category, and vice versa. One, incorporation costs on average $500, but is a fully deductible business expense. Chapter S's big advantage is distancing from liablity.
Then there's an LLC, which has its own advantages and disadvantages. LLCs one big advantage is liberal promotional expense allowance.
My choice is a sole proprietorship because of fewer reporting requirements. LLCs and Chapter S's require quarterly reports and esitmated tax deposits to federal and state agencies. Plus, a sole proprietorship has looser expense reporting restrictions, i.e., a laptop purchase can be entirely written off in the year it's bought, but might be required to amortize and depreciate in a Chapter S or LLC.
wendy says
I'm not surprised at these figures. When doing a writing course, I noticed that the tutor still needed to work full time as income from her writing career was so minimal although she had published, on average, two children's books per year. It seems writing is a labor of love. (As is art/illustration and music composition.)
Happy Thanksgiving, Nathan.
Nathan Bransford says
anon and others-
Yeah, thanks for the clarification on the tax thing, my brain got mixed up in that you have to report gross income but of course the commission is an expense and you pay on the net. Reason #278,081 I'm not an accountant (again: authors, get an accountant).
I still don't think Lynn's essential point was that she had it so rough, just that when you add it all up it's not as rosy as people think, even for bestsellers. People tend to think that published authors have it made in the shade, and I think the essential point that it's more complicated than that stands.
Pam says
Nathan,
I've really enjoyed the information you've provided as well as the discussions on your blog this last week. Yes, the times are changing, which is always an uncomfortable thing, but I'm hoping the changes will end up to be positive in ways none of us are anticipating. As you said, sites such as Amazon and B&N are taking a beating on eBooks right now. I think we can all assume that this loss leader status isn't permanent. Will the price of eBooks increase as the books in print decrease in availability? I don't know.
Take a look at the music industry and what's happened with downloads. CD sales decreased, and the price of concert tickets soared through the roof. Unfortunately, I don't think many authors will be able to compensate by charging exorbitant prices for readings.
Still, when I think about the fact that I have paid iTunes close to two grand to download each 99-cent song, I know that there's no way I would have ever gone out and purchased these 2,000 songs were it not for the availability, convenience, and let's face it, the fad of the iPod/mp3 movement. Maybe we'll see the same in publishing. In the future, people might buy an eReader whenever it becomes so-very-unfashionable not to have one. And as we know, we're a society of compulsive spenders. $9.99 for a book someone brings up in casual conversation? Oh, sure, let me whip out my handy-dandy e-reading device and purchase it right here on the spot.
Who knows, maybe people will actually start reading again, like in the old days. And maybe with the expenses of publishing cut to a minimum, authors (and agents!) will come out of this just fine.
Call me Pollyanna, but I do believe it will all work out… and not in ways we expect.
In the meantime, I just ordered my Nook today. I wish it was going to be here in time for Christmas, but I can wait until the first week in January.
Happy Thanksgiving to all!
Anonymous says
Oh, and the breakdown of 32% tax, roughly 20% federal taxes including worker income (13%), FICA, SS, and Med taxes (7%), 7% self-employment share, and average 5% state payroll taxes for the 41 U.S. states that assess taxes on payroll income.