Big numbers part 2: My Dinner With Batman

So last week we looked at the cost breakdowns and predictions for a secondary school textbook, using a real costing for a real textbook published by my real day job.

But textbooks are something of an outlier in publishing, with specific and potentially expensive requirements such as image permissions and complex text design and layout. A standard novel doesn’t have those same requirements, and some of the costs it has will be lower. So we can’t just extrapolate from textbook costs to say that a novel will cost x dollars; we need a different set of numbers.

Which, yet again, I have.

But first, a few quick caveats and qualifiers.

1 – I forgot to mention it last week, but part of the business of publishing is that you rarely sell directly to the reader/audience; you sell to a bookseller or distributor for a percentage of the cover price, who then sells it to their customers. The bookseller gets about a 33% discount, so the publisher’s revenue is roughly 67% of the price. That’s factored into the final figure I quoted, but not stated in the working to get there. Sorry. Oh, and you have to calculate for GST somehow.

2 – Just to repeat last week’s disclaimer, these are real numbers but they aren’t universal numbers. I’m certain that other companies in other areas of publishing would have different costs and maybe a very different balance between those costs. I’m not trying to say this is how it always is, just this is how it is for some operations. I hope this real data is educational, but that’s all it’s meant to be.

3 – The aim of this exercise isn’t to prove that ebooks should be more expensive, although I can see how the preamble to the last post may have given that impression. All I want to do is get people on the same page and share some information about what goes into making a book, whether physical or electronic. I don’t have an agenda; I just want to show off how clever I am spread some knowledge.

So anyway, tonight I’d like to calculate and project the cost of producing a novel. Now, we don’t publish novels where I work, so I can’t give perfectly accurate numbers this time. I did, however, publish a number of anthologies in the last couple of years, which combined short fiction with writing/comprehension exercises. Those books had much more ‘traditional’ editing/typesetting/design costs, so we can use those details to extrapolate a composite book that has largely accurate ideas of costs.

What should we call this imaginary novel? Well, in keeping with the usual themes and motifs of this blog, I’d like a semi-literary, semi-genre work that’s heavy on metatext. How about… an 204-page novel about a meeting with a fictional character and the subsequent discussions about purpose, heroism and intellectual property rights.

I call it My Dinner With Batman.

This is why you need a cover designer

Development costs

Editing – Last time was about $40 a page; this time we’ll drop down to $30 a page, for a total of $6120 (you quote based on total page count, even if some are blank). That’s pretty reasonable, given that the standard fee of a freelance editor is $50 an hour. The editor will be copyediting to fix grammar and sentence construction, but also doing a substantive edit to make the writing and the story better.

Proofreading – A dollar a page is probably fine, for a total of $200 (we’ll round this one down to a convenient sum).

Typesetting$2496. That’s about $12.24 a page, which is much lower than the $33/page cost we had for Cooking with Graeme. Typesetting is much simpler for a novel than a textbook, but it still requires attention, care and a couple of passes through page proofs to fix mistakes.

Text design$800. Yep, that’s exactly the same as it is for the textbook. Part of that is because it’s a basic cost that designers don’t vary much, and part of it is that novels require text design too – font choices, layout styles, design elements that make it more than just plain text. Anything that sees print is going to need more than just a dude plugging it into Word and exporting to PDF or InDesign, and $800 is a small price to pay for My Dinner With Batman to be not just professional-looking but simply readable.

Cover design$850. A bit cheaper than the textbook, mostly because it’s simpler, but not much cheaper. And this is just for designing the concept  and layout of the cover; it doesn’t cover the cost of artwork. That comes under…

Illustrations$650, which is for the cover. We’re assuming no internal illustrations for the book, which isn’t going to be the case all the time; lots of Very Serious Novels still have the odd illo inside to break up sections. But not this one.

Permissions – Nothing this time round, because this is a 100% original work that involves no photos, text extracts or agreements that allow us to use Warner Brothers’ trademarked characters. Which means we’re gonna get sued, but hey, so it goes.

Software development, image scans, some other stuff – look, let’s not worry about any of that, okay?

Miscellaneous and contingency$336. Hey, I don’t make these numbers up, I just report them.

So our total development costs for this first print run – remember, there are two – is $11 452. This is quite a bit cheaper than the book I’m using as my model, because it had a big permissions budget, but we’re primarily extrapolating this time around.

Manufacturing costs

Just two costs to worry about here for our initial print run, which is going to be 3000 copies.

Printing and binding – $3990. Now this is for a two-colour book that uses a second colour (e.g. the midnight blue of Batman’s cape) to give the pages more visual pop. A true black-and-white print run would be even cheaper, but this is still costing just over a dollar a book to print.

Freight – $415 to ship 3000 books from China to Australia. That’s even cheaper than it was for the textbook because the books have a smaller page size.

Total manufacturing costs – $4405.

Second print run

Let’s just extend this out for another run of 2000 copies, which will give us three year’s worth of books and projected sales.

Development costs – just $154 budgeted for contingencies.

Manufacturing costs$3320 for printing and $276 for shipping, for a total of $3596.

So let’s stick it all together for a total cost – to edit, develop and print 5000 books over two runs – of $19 607. Which straight away tells you that novels can be a lot cheaper to produce than textbooks.

Financial voodoo

We’ve printed 5000 books but we only plan to sell 4818; the rest go towards marketing, archiving, author copies and the like (mostly marketing). The author’s royalty is 12% and  the target gross margin is a minimum of 55% (same as usual). So how much do we charge for this book?

Well, the anthology I’m using as the basis for this sold for $29.95, which was enough to bring in a projected $89 203 in sales (meaning $10 704 in royalties, which doesn’t suck) and a margin of 58%. But that book cost about $7000 more to make than this one, so we’d expect a higher margin. And if we crunch the numbers for the same receipts, we in fact come to a final cost (including royalties) of $30 311, meaning the final margin is 66%.

Wow, that’s good. Too good, probably; as the publisher, I could easily bring that $29.95 price down and still make my 55% cutoff. A lower price means less profit and lower royalties for the author, but it also means the book is perhaps more likely to sell – and that the price is fairer to the customer. Which matters, believe it or not.

Lemme play with the numbers a bit and spit some totals at you, which I’m working out on the back of a piece of paper because I’m honestly not very good with spreadsheets. If we assume the same sales (4818, giving up 32% to the bookseller):

  • $27.95 retail – $83 303 in sales, $9996 in royalties, $ 53 700 in profits, 64% gross margin
  • $24.95 retail – $74 293 in sales, $8915 in royalties, $45 771 in profits, 62% gross margin
  • $22.95 retail – $68 271 in sales, $8192 in royalties, $40 472 in profits, 59% gross margin
  • $19.95 retail – $59 414 in sales, $7129 in royalties, $32 678 in profits, 55% gross margin

Okay, so $19.95 is as low as I can go for a 204-page book and still make it worthwhile to produce. To be honest, I’d probably for the $22.95 price point instead; it’s still a fair price, it means the author gets another thousand bucks in royalties for his hard, wildly illegal work, and the extra profits help pay a bigger chunk of my wage. I got bills, girlfriend.

In closing…

What do these numbers mean? Look, not as much as I might like. They’re pretty accurate (except when they’re just guesswork), but they’re predicated on a certain set of margins and expected costs and for a print run/sales target that some publishers would find wildly optimistic and some wouldn’t bother getting out of bed for.

But still, the numbers tell a story. A story that’s not just about Batman, but about what might go into making a printed novel you can find at your local bookseller, assuming it wasn’t Borders.

What about ebooks? What happens when there’s no physical product and very different design/typesetting needs and costs? Well, then we venture into the crazy world of Educated Guesswork. Come back next weekend to explore that world with me.

Bring a pith helmet. Things just plummet from the sky all the goddamn time in the Land of Educated Guesswork.

8 thoughts on “Big numbers part 2: My Dinner With Batman

  1. I admit, these sums are bigger than I would have expected.

    Here’s a question you may or may not be able to answer – how’s the author’s advance calculated on those price points you broke down? What sort of risk does the publisher take on the author advance?

    (I realise this strays slightly from the topic at hand and wanders into “it depends on the contract” territory, but advancse have always seemed weird to me. I assume there must be some cold-hearted maths behind it somewhere.)

    1. There probably is a cold-hearted math to it, but to be honest I don’t really know it. My company has generally taken the even colder-hearted ‘no advances’ metric on board. And that’s probably increasingly common these days.

      I imagine that one would start by looking at the break-even point in the first year only, calculating what royalty that would generate and then offering a portion (maybe 10-20%?) of that amount.

      Let me see if I can do some research on this during the week and get back to you.

  2. I can perhaps add some weight to your argument! There’s a couple of calculations that your costings are missing.
    Something that most of the bigger publishers will factor in is prepress or quality assurance. This is basically preparation of the typeset pages for the various formats the content (the guts of your book) will be output in. The costs can be considerable, depending on the complexity of the design, and how many formats your content will be produced and available in. It can sometimes cost as much as the basic typesetting itself, and is absolutely essential for some types of projects, particularly those with digital components.
    By different formats, I mean the XML that might feed descriptions on bookseller websites, indexes and lists of contents, digital editions including ebooks – which need to render correctly in all of the common formats – and various print versions, to make sure that what your typesetter produced will render correctly in whatever machines you printer in China is printing it on.
    Its not just a matter of printing to PDF from inDesign and hoping for the best when it comes to professionally produced ebooks, and it definitely costs money, even if you don’t have printing costs.
    What many people don’t realise, is that the printed copy of most mass market paperbacks (your embarassing copies of Dan Brown’s works, for example) would be lucky to have cost 25c to physically print.
    I personally think that ebooks should be cheaper, but if you’re talking about making them cheaper based on cost to produce, you’re looking at saving of a buck or two. Woop-de-do!
    If you want to bring to bring “distribution” into it, think about the (massive) costs involved in developing platforms to sell and distribute ebooks. You’re mad if you don’t think the end user pays for that with mark-up on the product. Either that, or you’re one of those people who think that websites and software development cost nothing because computer nerds like coding for boxes of donuts.
    I also think that people forget that their Kindles are subsidised. You’re basically getting it for “free”, so you have to pay a premium on your ebooks.
    /end rant

    1. Hi Francesca,

      Thanks for bringing up those extra details! You’re right, they can add a lot to a project’s cost. I didn’t include them because, at least where I work, those are in-house costs and I’ve only been talking about external costs. And also because they won’t apply in all cases.

      …and, okay, because a different department looks after that and I don’t really understand how it all works.

      You’re also right on the way Amazon subsidises download costs for Kindle customers. Except that in many cases, it’s the author who takes on that cost. That’s why you only get a 35% royalty on an ebook that’s purchased outside the US/UK/EU nations with their own Amazon site; Amazon keeps a larger cut to pay for their delivery costs outside those regions.

      Which particularly sucks if, say, you’re an Australian author selling to a primarily Australian audience.

  3. Part 1 and 2 made for most intriguing reading. Thanks for taking the time to lay it all out.

    The figure that jumped out at me – because of the point at which I normally come into the publishing process – is that of a dollar a page for proofreading. Is that genuinely how you calculate it? That’s what I’ve been paid for proofing in the past, and I thought I was selling myself a long way short. If it’s industry standard tho….

    1. Hi Fiona,

      It’s the low end of the industry standard, and $2/page is probably more typical. The costs I quoted here are real, but I guess we got lucky on those projects.

  4. +lots from me… and for the insightful comments also.

    I look forward to Part 3 and the section on costs of print vs eBook distribution.

    1. That might be difficult to calculate, as Amazon, Apple and the like are unlikely to give us anything close to real data for development costs of platforms, websites and their ongoing costs.
      Having been involved recently the development of a similar distribution platform (at nowhere near the scale or expected market share) that ran into 7 figures, I can assure you that “old-skool” book distribution wouldn’t look super expensive by comparison.

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