The Myth about Offset Printing…

We use two criteria for determining whether we will offer a publication contract for a manuscript. The first is the quality of the manuscript: is it a well written manuscript that will entertain our readers or contains information that should be shared? For a publisher this must always be the first criteria. The second is whether we can produce the book at a profit. This should not come as a big surprise to anyone; publishing is a business, and businesses that are not profitable tend to go out of business.

In my last blog on word count, I show that using print-on-demand (POD) to publish a 450 page book (which costs $6.75 per copy to print using POD) will probably not be profitable for a genre where the average paperback book price is $15. The obvious question at this point is why not use offset printing? Most people will tell you that printing costs tend to be twice as much using POD and that most publishers use offset printing so that books can be sold in bookstores. But is offset printing really the best way to print books? Consider the following facts:

• An offset print run of 1,500 copies for a 450 page book costs $5,160, or $3.44 per book (about half the price of POD printing). One would need to print 5,000 copies using offset printing to get the price down to $2.05 per book.
• The average book in the US sells 500 copies (Publisher’s Weekly, July 17, 2006) and only 1 in 10 books are successful.
• The discount given to bookstores is 40% of list. Net sales (the amount of money the publisher receives) is 60% of list

Assuming that the book in question has a list price of $15 (which seems to be the average for mystery & thriller paperbacks), your net sales per book are $9.00. Thus, if you sell the average number of books (500) your net sales are $4,500, or $660 less than the cost of the offset print run. If you also use a distributor (most charge up to 15% of list in addition to the retailer discount), your net can be as much as as $1,785 less than the cost of printing. Most important, if you only sell 500 books your actual printing cost per book sold (total cost of the offset print run divided by number of books sold) is $10.32 per book, which is $3.57 more per book than using POD. Thus, the possibility exists that you will actually pay more per book sold using offset printing than you would have using POD if the book does not sell well.

If you include author royalties, editing and cover design (estimated at 25% of net in my last blog), you would need to sell 765 copies of this book (or 51% of the books printed) to break even if you do an offset print run of 1,500 copies. Is it possible to sell this many books? Of course it is – people wouldn’t get into publishing if it wasn’t. But the point of this article is that, given the low success rate for books, you are just as likely to lose the investment you’ve made on that offset print run.

Someone recently asked me what the break even for our short story collections was. For Damn Faeries, our break even was 91 copies sold using POD. This includes in the fixed costs the one-time payments made to the authors for use of the stories. My break even for Damn Faeries would have been 369 copies, or over 4 times the number of books sold, using an offset print run of 1,500 copies. Quite frankly, the reason we feel comfortable doing short story collections (which are never big sellers) is that we are able to minimize the risk associated with printing costs and returns using POD.

As a publisher, the choice is yours. You can assume the additional risk associated with offset print runs and make more money per book (assuming you reach break even) or you can make less profit per book but also assume less risk using POD. Caveat Emptor.

A Word on Word Count…

I received a query three months ago that will be the topic of my next three blogs. This is not because it was a bad query. In fact, we requested the manuscript and in my opinion the novel has great potential. It’s not because the author was unprofessional, which we unfortunately see far too often. It’s because the query serves as an example of three different topics that I want to talk about. The first topic is word count.

The proposed novel was an action thriller where the bad guys come up with an ingenious way to attack the US. The good guys respond by coming up with an even more ingenious way to thwart them. The plot was very clever, and while there were many ‘dead spots’ overall there was plenty of conflict and suspense. So why did I send a rejection letter? Simple. The original manuscript was 150,000 words.

In my letter to the author I pointed out that our upper limit for considering a manuscript is somewhere around 100,000 words and that I would be more than willing to review the manuscript again after the author took my comments about the length and a few other issues into consideration. I must admit I was actually excited when I saw we had received an updated submission. Unfortunately, the revised manuscript was 135,000 words. It arrived with a very nice letter from the author saying that this was as much as she could cut without doing damage to the story. As much as I like the manuscript I’m just not seeing how we can move ahead with publication.

Go to any blog which gives advice to authors and you will see the same thing: while it varies a bit by genre, the optimum word count for a novel is around 80,000 words with an upper limit of 100,000 words. “Query Shark” Janet Reid recently responded to a query that 200,000 words was “twice as long as you want something like this.” So why is word count so important, especially for a debut novel?

As the number of words goes up so does the cost associated with publishing a manuscript. For a debut novel where the author has no track record, the cost associated with publishing the manuscript and the popularity of the genre are really the only information a publisher has to go on (other than the quality of the work) when making a decision concerning publication.

Let’s use the above query as an example. Go to Amazon and do a search for the bestselling trade paperbacks for “Mystery & Thrillers” and you’ll see most of them are priced at just below $15.00 (this excludes mass market paperbacks, which are always priced lower than trade paperbacks) . Books of this type are generally priced in this range because this seems to be what people are willing to pay. At 135,000 words, the best I would be able to do when typesetting the book is to get it down to about 450 pages, which means my printing costs at a minimum will be $6.75 per book. Knowing that the average retailer discount is 40% of list and that I pay 25% of net on average for author royalties, editing, and cover art I can compute the profit I can expect from each book sold:

List Price	$15.00
Retailer discount (40%)	-$6.00
Printing costs	-$6.75
Royalties, editing, and cover design	-$2.25
Profit	$0.00

In short, we would make no money from publishing this book. In fact, given the size of the manuscript, the additional editing costs might result in the book losing money for every copy sold. There are other issues regarding the readability of a manuscript of this length that are addressed in the blogs I mention above that I won’t rehash here. But the above example demonstrates why most publishers will likely pass on a debut manuscript of this length.

So what is an author to do? In my opinion you have three options. The first is to self-publish your work. It is important to note that you will have the same issues regarding profit margins that I outlined in the table above if you try to publish the book as a paperback. Thus, unless you have a large amount of money to invest in a large offset print run this would most likely limit you to publishing as an eBook. The second option is to reexamine the manuscript to determine if it really needs to be the length it currently is.

If after an honest examination of the manuscript you determine there is no way it can be shortened and you decide that self-publishing is not for you, then no matter how great the manuscript is, it is probably not a good candidate for a debut novel. Your third option is to put the manuscript aside for now and begin working on your next novel. I know this is hard advice for most authors to hear, but it really is the best advice. If your goal is to become a published author, sending queries for a manuscript that will be rejected by most publishers and agents based solely on the length without even being read is probably not the best strategy. Sending the same manuscript to a publisher that you already have a relationship with will most likely at least get it reviewed.

I know one comment that will be made is that I can significantly reduce my printing costs (and thus increase the profits) if I just went to moderately sized offset print runs. While this is true, it would also introduce a significant new risk that I will discuss in my next blog. Regardless, there is a reason most publishers have word count guidelines. Following them is the best way for a debut author to avoid a form rejection.

On Royalties…

The biggest argument for self-publishing made on the many blogs dedicated to the topic is that an author gets to keep all of the money. I have to admit this one point is hard to argue – other than to say that, as I point out in my last blog, you also get to do all of the work. The other point is that publisher’s royalties are somehow out of touch with the reality of a modern age.

This one point I would like to argue, with an example.

Divertir Publishing currently pays the following royalty rates to authors:

• 12.5% of net for the first 2,500 paperback copies.
• 15% for the next 2,500 paperback copies.
• 17.5% for every copy after the first 5,000 paperback copies.
• For e-books we pay 50% of net.

So how does an author fare with these rates? Let’s take our upcoming book “Hurricane” as an example. We are planning on pricing the book at $9.99 to keep it in line with other books in the genre. Assume the following:

• We are giving a 40% discount to retailers, so our net sales per book are $5.99 for print copies.
• Our fixed costs (press fees and ISBN) are $142 per book, and we pay 15% of net (or about $0.90 per book sold) for editing and cover art (we pay editors a percent of net sales just like authors). Our printing costs are $3.50 per book.

Let’s look at what % of the gross margin (net sales minus cost of goods sold) an author receives if we sell the average number of books (500) or if the book is a success (meaning we sell 5,000 copies)

Books Sold	500	5,000
Net Sales (60% of list)	$2,997	$29,970
Cost of Goods Sold (not including authors royalty)	$2,342	$22,142
Margin (Net – Costs)	$655	$7,828
Author Royalty	$374	$4,104
Royalty – % of Margin	57%	52%

 

Our royalty rates are set of so that an author will receive about 50% of the margin for each book. For e-books, we give 50% of net. We feel this is fair. What are we doing for our 50%? We provide the editing, typesetting, cover art, fulfillment, and marketing (more on this in a future blog).

The usual argument against self-publishing (or going with a new small press like Divertir) is that you’ll end up with low sales. But as discussed previously, going with a major publisher is no guarantee your book will be successful or that it will sell more than 500 copies. The usual argument for self publishing is that you keep all them money. While this is true, you also get to do all the work. The choice is yours. Caveat Emptor.

Do you really need a publisher?

My last blog talked about book sales with respect to Joe Konrath’s assertion that authors no longer need publishers and that most authors would be better off self-publishing. So the question of the day is “Do you really need a publisher?” The short answer is “no”. The more complete answer is “it depends”.

I’m glad I was able to clear that up for you.

I won’t make the usual arguments against self-publishing. I won’t comment on the relative quality of books published by “legacy publishers” versus books that are self-published. One needs look no further than Snooki’s recent book or the fact that Tinkerbell Hilton has a book (yes, Tinkerbell is the dog) to realize that the quality of books from “legacy publishers” can be pretty bad. I won’t comment on how poorly self-published books sell, because in my last blog I pointed out that the average book published by a “traditional publisher” only sells 500 copies. In fact, Joe Konrath and others have shown that a well-written self-published book can do extremely well. Instead, I want to quote Joe Konrath from another one of his blogs:

In order to reach the point where I understood the opportunities that ebooks presented, and was able to capitalize on that opportunity, I’d put in another 10,000 hours learning how the publishing industry worked.

That’s right. As much as I’m sure he would prefer to think of himself as an independent author, Mr. Konrath has become an independent publisher. He has taken the time to learn how publishing currently works, and to his credit has taken that information to come up with a strategy for how he feels publishing should work.

Publishing is a business, and if you self-publish then you should be prepared to treat it like a business – including learning all that you can about the business. So the answer to “Should I self-publish my manuscript” really is “it depends”. If you believe (as I do) that the way things are currently done in the publishing world are a throw back to the days of the typewriter and you have fresh ideas on how things should be done, then by all means you’re better off self-publishing. If you already know a lot about the publishing industry and wish to learn more, then you should take the plunge and self-publish. If you find the thought of one day being an independent publisher exciting, then go for it. There is no better time to get into publishing (unless you’re one of the large publishers), and there are plenty of people out there (including myself) who would be more than happy to assist you in getting started.

And for those of you who don’t one day wish to have the title “independent publisher”, the good news is that there are plenty of independent publishers already out there that would be happy to work with you.

Some Business Decisions…

I received a question last night about our decision to use digital printing (print-on-demand) and to not accept returns. Specifically, the person asking the question noted that “Stating that books will not be available in bookstores harkens to the limitations of self-publishing”. I had planned to blog about some of my business decisions anyway, so this seemed like as good a time as any.

First, some information about how books and other products are sold. For most products sold in retail outlets, stores purchase goods at a discount but must absorb the cost of any stock which ultimately is not sold. In general, returns are only allowed for damaged merchandise. This is how books used to be sold. During the depression, because publishers were not in a position to sell books they agreed to sell books on consignment to bookstores as a way to keep bookstores in business. This is the current model for selling books. In a sense, bookstores get the best of both worlds – they get a 40% discount off the list price for carrying an item with no risk because they can return any unsold books. In this model it’s the publisher who assumes all of the risk. In his book “Publishing for Profit” (discussed in this blog), Thomas Woll dedicates an entire chapter to the economics of accepting returns and points out that this is the single biggest risk (and challenge) currently facing publishers.

This risk for publishers has consequences. First, it is often difficult for small publishers to absorb large numbers of returns and many go out of business (for example, see this article). In fact, one major bookstore chain is being sued by an independent publisher for the practice of excessive returns (see this article for details).

The two biggest risks in publishing are cost of goods (printing) and returns. Printing too many books results in a publisher sitting on inventory they can not sell, preventing them from investing that money in other projects. One way to contain printing costs is by only printing books when they are ordered ( this is called print-on-demand). There is a misconception that books that are printed using digital POD technology are never returnable. In fact, the printing method has nothing to do with whether a book is returnable or not – whether a book is returnable, along with the discount given to bookstores, is decided by the publisher. We decided that our books would not be returnable because of the risk associated with returns.

By minimizing the risks associated with returns and printing costs, as a company we can take risks in other areas:

• We can publish short story and poetry collections, which do not have large sales volumes and thus are usually not produced by larger publishers.
• We can take the risk of publishing unknown authors.

The decision not to accept returns will result in our books not being carried in most “brick-and-mortar” bookstores. Thus, the question becomes how might a book fare which is sold through online channels only? Foner Books has published some sales figures for the major book retailers from 2009. In 2009, total sales by the major book retailers were $13.483 billion dollars. Amazon and BN.com accounted for $6.533 billion, or 48.5% of sales. More important, while Barnes and Noble’s and Borders sales decreased over the previous years (-5% and –15%, respectively), Amazon’s and BN.com’s sales increased over that time (+11% and +24%, respectively). This trend is predicted to continue, suggesting that over time “brick-and-mortar” bookstore sales will become less important for overall book sales.

Our books are currently available at several online bookstores in addition to Amazon and BN.com. But as many self-publishers find, merely having a book available is not sufficient for it to be successful. It is essential to get the word out that the book is available and to get people talking about it. We have a marketing strategy for doing this that we have begun to implement for our short story collections. I plan on discussing this strategy in a future blog. We also plan on making all of our offerings available as eBooks, which as a book market currently has the highest rate of growth.

A successful business is one that understands the risks associated with their business and that works to minimize those risks when possible. While we understand that not having our books sold in “brick-and-mortar” bookstores is also a risk, we feel it is one worth taking to minimize the bigger risks currently facing publishers.