Tuesday, January 28, 2014

DO THE MATH: Choosing a Publishing Deal

This post is Not about Megan Erickson's soon to release novel DO THE MATH. It is a post about why authors need to Do The Math when considering publishing deals. Far too many authors are unaware of the fact that the Publishing Model has changed significantly. Advances are not what they used to be, unless you're a Best Selling author or have a huge platform; and that even the top 5 publishing houses now have e-imprints that offer no advance at all. 

Many authors get hung up on the traditional publishing mode and can't accept the fact that a contract may be a great deal even if the advance isn't what they expected. Unfortunately it sounds to me like no one is doing the math. Sarah Negovetich, of Corvisiero Literary Agency, just posted a wonderful post about Authors needing to learn math. I loved her post so much that I've 'borrowed part of it'. To see her full post and her other musings click on her name.

Sarah Negovetich Wrote:
"In publishing, you can't take anything for granted. There are no guarantees or absolutes. So, it's no wonder that the idea of an advance is the jewel in the corner of every writer's eye. If you haven't dreamed of announcing a six-figure advance on Publisher's Marketplace then you're lying. Who wouldn't want cash money in the bank that's yours to keep no matter what crazy winds blow in the book world?

But if you've been paying attention, you know that the big advance is not all that common anymore, especially in the growing segment of small to mid-sized independent presses. Of course, the trade off is usually a higher royalty rate. The question then becomes, which one is the better deal? And this, my right-brained creative friends, is why all writers still need to know math.

It's important to understand your earning potential when considering contracts. Before you ask your agent to push for a bigger advance, you should know what you're really asking for. You might be surprised to know that taking a smaller advance in exchange for a higher royalty rate is usually going to be the better way to go.



And just in case you don't believe me, I've done the math for you.

Let's take a look at two different options. In option A the publisher is offering a $1000 advance and 7% in royalties. In option B the publisher is offering only a $500 advance but is willing to give a 10% royalty rate. For this example we are assuming a $10 cover price because that makes all the numbers nice and neat.


You can see that because of the difference in royalty rates, it will take much longer to earn out the advance in offer A, 1429 books versus only 500 in option B. If we assume the author can sell 5K books with their first print run, the total royalty earnings for option B are $1500 more than option A. That number will only continue to increase as additional books are sold. 


Offer A
Offer B

Assume $10 cover price
Royalty Calculation
7%*$10.00
10%*$10.00
Royalty per book sold
   $0.70
                $1.00
# of books to earn out
1429
500
# of books to reach 5K
3571
4500
Revenue post earn out
  $2,500.00
 $4,500.00
Total revenue for 5K
 $3,500.00
 $5,000.00




Now, let's say the author can't sell 5K books. Would it be worth it to take the higher advance if the author was only able to earn out?



Offer A
Offer B

Assume $10 cover price
Royalty Calculation
7%*$10.00
10%*$10.00
Royalty per book sold
 $0.70
 $1.00
# of books to earn out
1429
500
# of books to reach 1429
0
929
Revenue post earn out
 $          -  
 $929.00
Total revenue for 1429
 $1,000.00
 $1,429.00


The answer: No. Even if the author is only able to sell enough books to earn out the advance, they still would have made more revenue with the higher royalty.

Now, obviously, there are a lot of factors that go into this. The cover price, the difference in the royalty rates, and the difference in the advance. However, in most cases, the higher royalty is the way to go."


After reading Sarah's post you're either saying 'I knew that', in which case kudos to you! Or you are surprised to actually see how the numbers work out. But some of you may be wondering if this makes sense at all if you don't get an advance, or if the numbers are larger... 



To that I say Do the Math! and see what works out. If you want to play around with some figures Sarah created a "handy dandy Contract Revenue Calculator for you to plug it all in. Just enter the royalty rate, advance, cover price and anticipated book sales. The worksheet will automatically calculate the number of books you need to sell to earn out and the total anticipated revenue.

I realize math isn't the most fun subject for a lot of people, but as an author, you are also a business owner whether you go with a traditional publishing house or go it alone. You need to know what you are worth, how much you should be making and when a bird in the hand is not actually better than the two in the bush." (Sarah Nego Writes)


And since I couldn't have said it better myself, I'll leave you with that! 

Happy Computing! 
~Marisa