Category: publishing

I’ve been thinking a lot about Amazon lately.

Specifically, I’ve been thinking about them since the end of July, when I did my end-of-financial year tally of ebook sales. I have two sale/publication channels – Amazon Kindle Direct Publishing (KDP), who fairly obviously handle Amazon (and nothing else), and Smashwords, who convert manuscripts into a variety of formats and act as a distributor to 14 other outlets, from Barnes and Noble and the Kobo store to libraries and subscription services like Oyster and Scribd.

Saying which channel is ‘better’ is difficult. While you might think that its breadth made Smashwords the much more valuable channel, especially as their royalty terms are also better, I sell more ebooks through Amazon – although I actually make less money in the process, because Amazon’s royalty terms aren’t as good. Since starting this whole ebook racket caper program in 2010, I’ve sold 182 ebooks and and made $317.25 from Smashwords, and sold 219 ebooks and made $253.38 from Amazon.

(If you find those numbers pathetically/depressingly low, imagine how I feel.)

That spread of numbers is uneven, just to make things more complicated. Smashwords was a lot more financially viable a few years ago, then fell off sharply in 2012 and 2013, to the point where I sold just one ebook through them in the 13-14 year and made only 82 cents from it. Meanwhile, Amazon sales have stayed reasonably consistent, especially for The Obituarist, which has been about twice as successful on Amazon as on all other channels/sites combined.

From my POV, the clearest reading of this is that Smashwords was a strong platform at the start, but its value has significantly dropped as the Kindle (both device and tablet-app) has cemented its stranglehold on the ebook reader market. It still has its uses – I have seven short stories on there that I can’t put on the Kindle Store because they’re free – but it looks to be on the down-cycle while Amazon stays firm.

Which has made me start thinking about the potential benefits of going Amazon-exclusive, both with my stubby little backlist and with The Obituarist II (I’m behind schedule but it’s coming along, I swear to god). Sticking an ebook in the KDP Select program means it’s exclusive to Amazon for 90 days (more if you renew) and can’t be sold on other platforms or in other formats. In exchange you get to make the book free for five days, which brings in no money but can greatly increase its visibility on charts and for browsing, and possibly take advantage of other discounts that still generate some royalties. The book also goes into the Kindle Lending Library and Kindle Unlimited programs; when readers access the book for free and read a certain amount of it, you get a share of funds from a monthly pool that Amazon maintains. How big a share? That depends on Amazon’s arcane accounting, but various accounts have it somewhere between sweet-fuck-all and maybe-two-bucks-per-read. Which is still more than I’m getting right now, frankly.

So yeah, KDP exclusivity has been on my mind. There are definite drawbacks, particularly the worry of cutting out my Nook/Kobo/iBooks audience – but then again, if that audience is smaller (and shrinking), perhaps that’s outweighed by the possibility of stronger Kindle sales, higher Amazon visibility and a share of the lending fund. Assuming that fund is actually going to pay anything worth a damn, and Kindle Unlimited isn’t going to be the failure some observers are predicting.

Should I try to expand my reading community? Should I focus on cementing the income from the one I have? How can I make enough money to pay my rent? These are questions that any indie ebook creator really needs to consider at some point.

But then, on Saturday night, the Failboat sailed right up the Amazon and beached itself.

 That’s when the ‘Amazon Books Team’ sent me and every other KDP-using self-publisher a long email that… I mean… it’s hard to describe it without getting embarrassed on their behalf, you know? It’s like they tried to send someone private dickpics but accidentally CC’d their entire mailing list. And had a really ugly dick to boot.

But basically, they begged me to email the CEO of Hatchette and abuse him for not discounting his ebooks more. And gave me his email address and some possible talking

Seriously. I mean it. You can read the whole facepalm-inducing thing right here if you don’t believe me.

Someone got paid to write that pile of wank. Someone got paid to organise sending it to every email address they had. And then they had to go home and make eye contact with their loved ones. Poor bastards.

As you may be gathering, I don’t have much respect for Amazon as a result of this. Their ongoing battle with Hatchette is messy and unprofessional, but until this point it’s been a fight between two corporations doing corporate things – shitty things for any Hatchette-published authors caught up in it, absolutely, but not super-relevant to those of us outside it. (Even if some authors wanted the rest of us to pick one side or another.) Trying to co-opt uninvolved writers, uninvolved clients and customers – as Chuck Wendig put it, ‘asking the serfs to pick up sharpened shovels and become knights for the realm’ – just opens up a whole new world of desperation, sleaze and fail. (Especially since some self-pub authors are taking the bait and sending the Hatchette CEO grumpy emails, to which he’s responding far more politely than those schmucks deserve.)

Fortunately, most people are shaking their damn heads about all this. And the books themselves are calling for a time out. So the fail boat may yet be pulled off the rocks before Amazon drowns.

—

In any event, the upshot for all this from my point of view is that I spent weeks considering the KDP Select option, trying to weigh up the pros and cons, and composing the first half of this post to get my thoughts in order. Then this turd-in-the-bedsheets email arrived in my inbox and made me think that the last thing I wanted was to ally myself more tightly with jerks who willingly misrepresent George Orwell while asking me to be an unpaid author for their standover business.

So. You know. Take the time to think things through, kids. That’s the moral of the story.

—

In other news, our landlord had kicked us out and we have four weeks to find a new place and move in.

Hooray! Excitement! Panic!

So my priorities for the rest of the month are finding houses, looking at houses, applying for houses, applying for different houses and eventually packing everything and putting it in a different house.

Given this, blog updates are likely to be sporadic. As is progress on the two books on my to-write list. Will see how I go.

I want to talk tonight about what I liked about a book I didn’t like.

…okay, that intro could have been clearer.

Last month I decided to check out some books published by Angry Robot Books, which are putting more and more SF/F/H books out these days. I didn’t really care what I read; my main interest was seeing what the standard of editing and typesetting were in their books. Which is normal, right? Plenty of you just grab books at random from library shelves because you want to check on the level of skill and care taken in their production, right?

Right.

Anyway, I looked at Angry Robot’s Wikipedia page and grabbed the first novel by the second author listed (after Dan Abnett, as I’d already tried and quickly cast aside his Triumff.) This was Guy Adams’ The World House, and frankly it’s not very good. It has a decent premise (there’s a surreal and spooky house inside a box and shit’s going down) that’s let down by pedestrian writing and clichéd characters and dialogue. (As for the typesetting and editing, there were a few glaring errors but on the whole it was acceptable.)

But I don’t want to get into that; others may get more out of the book than I did, and anyway I don’t want to use this blog to talk about negative things. Instead I want to talk about what was terrific about The World House, and that is its cover, which is fucking boss.

Let’s start with the front image:

Really strong sense of design here that makes the most of a stark black-and-white palette for maximum contrast. Bang – title. Bang – spooky house. Bang – author name. Lots of hard lines and blocks with occasional curves to break things up. And then you’ve got that single spot of red in the window that pulls in your eye and tells you that something important is up in that room. Add in the intro sentence at the top and the whole point and premise of the book is spelled out to immediately grab your interest. Personally I wouldn’t have bothered with the moth and the pull quote from Kilworth, but then again I’m not a professional designer and they’re more likely to be write about this than I am.

So that’s a really strong front cover that stands out in a shop or in a set of Amazon listings, and that’s a hugely important thing. For a lot of publishers that would be enough. But Angry Robot really went the extra mile with an amazing back cover:

(Sorry about the drop in quality; I had to scan it myself because no-one bothers showing the back cover of books online.)

Let’s look at each part in turn:

• Blurb: Short and simple, this fleshes out the promise of the front cover with the first line in red to immediately tell you what’s important – there’s a ‘they’, they’ve been around for a long time, and you can bet that they’re bad guys. The rest of the blurb tells you that weird shit is in this house, and bad stuff, and a prisoner and that all of that is important. I personally think there should be more in the blurb about the characters of the novel to make it clear that the narrative involves people doing things in this weird environment, but at the same time it needs to stay short so this is probably okay.
• FILE UNDER: This box in the top right tells us right away that the book is MODERN FANTASY and gives us a handy précis of plot points – ‘worlds within worlds/ a sinister prisoner/ dimensional mayhem/ break out!’ No spoilers being handed out, but if you want to know if the book has the kind of story elements you like, or you can’t spare an additional 20 seconds to read the blurb, that box tells you everything important about the book in 14 words.
• Pull quotes: I’m not terribly impressed by the opinions of Mark Chadbourn or Christopher Folwer, to be honest, and I don’t even know who Stephen Volk is. But I’m not the sole target audience, and it’s not like many readers drop a book just because they don’t like another author who liked it. For those who do like these authors, it’s a drawcard, and if you don’t know the authors, you still get the impression that people who probably know lots about MODERN FANTASY liked this book and think you will too. It’s win-win. Also, the use of red for the quotes and black for the attribution keeps the contrast flowing on the cover, quickly drawing your eye from the slugline at the top to the recommendations and then letting you drift back to the blurb proper.
• IF YOU LIKE THIS TRY: Now this is clever, because they start off by recommending three books that aren’t published by Angry Robot. None of them are new books, either – Simulacron-3 (1964), Otherland (1996) and Weaveworld (1987). By suggesting these, Angry Robot potentially help newer readers learn more about some of the history and significant texts of the genre/subgenre, which is a really cool thing and worth pursuing. They also aren’t diluting their own brand by pushing readers towards competing modern titles.
• OR ANOTHER ONE OF OURS: These, of course, are the modern titles Angry Robot want you to buy, and there’s nothing wrong with that. I think it’s smart to just show the covers with no additional info, because it stops the cover from getting too cluttered and because we can assume that if those books are shown then they’re probably in the same subgenre or ballpark as this one. I also think that it’s smart to use covers that are primarily black and/or red, so that they align with the design and colour palette of the rest of the cover.
• MORE?: Last, it’s important to have a URL on the back of the book, of course. It’s even more important to have a URL that still works and that doesn’t redirect you to a Harper Collin site that has nothing to do with this site or with Angry Robot, but I’m sure it worked when the book was printed and time marches on. It’s also good to have that note that the book is available as an ebook, because the only way someone will see the back cover is if they have the book in their hand in a shop or library; knowing that there’s a digital version may be enough to sway a Kindle owner to buy it that way if they’re not sold on the hardcopy.

Wow, this turned into another long post. Why am I incapable of using fewer than 1000 words to say I liked something?

Anyhoo, I don’t really want this post to foster discussion about either The World House or Angry Robot. I didn’t like this book, sure, but I’m looking forward to Chuck Wendig’s Blackbirds (which also has an amazing cover) and I’ve been hearing great and intriguing things about Adam Christopher’s Empire State (ditto) which are both from this publisher.

What I’d rather talk about is what you think of this cover design, front and back. What do you think works? What doesn’t? What would you do differently? What are some cover designs – especially back cover designs – that have grabbed your interest and packaged information in a really effective way?

And, most of all, what are some ways that ebook authors/publishers, who don’t have the luxury of a back cover, can format and deliver this kind of information without just dropping a bunch of text onto a title’s Kindle Store page that no-one will see because they don’t scroll down far enough?

(PS – if you’re Guy Adams and you stumble across this entry, sorry to be a douche about your book. Feel free to be a douche about one of mine in return.)

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.

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.

A few weeks ago I was cruising the Australian users thread on the Kindle forums, looking for opportunities to plug my ebooks insight into how Aussies are reading and buying ebooks. One of the recurring themes I noted from skimming that huge thread (with hundreds of new posts every day) was that physical books were too expensive, and that ebooks should be much, much cheaper – after all, the main costs involved in making a book are printing, shipping and storing, and there’s none of that with an ebook, so they should be a fraction of the cost.

I found that interesting because I’m in a position to know that it’s completely wrong.

See, when I’m not writing blog posts full of insight or playing video games in place of working on my novel/novella, I work as a commissioning editor for a major international educational publishing company that I prefer not to name. (It’s not a secret or anything, but I like to compartmentalise things.) I edit and publish textbooks, mostly maths textbooks, and as part of that process I help crunch the numbers that lets us work out how much a book will cost, how much to charge for it and whether it’s worth publishing in the first place. And that costing process paints a very different picture of how it all works.

So I thought it might be fun – and even better, useful – to pull up a set of costings for a fairly typical secondary textbook and go through them with you. They’re not universal numbers, of course, but they’re real numbers rather than something made up for an argument. And while these only apply to a textbook, which has specific needs and features other books don’t have, they can serve as the starting point from which to extrapolate further – which I figure we can do next weekend, since this is going to be a pretty long post. (Correction: it’s a really fucking long post.)

Before making this post, I checked with my boss that it was okay to draw on real data, and she was fine with that. Still, in the interest of protecting my source, the numbers are accurate but the names have been changed. So let’s pull apart the costings for Cooking With Graeme, a 212-page Home Economics text in which everyone’s favourite cat teaches 14-year-olds about the nutritional value of raw mince and his secret turkey ice-cream recipe.

Development costs

Before there is a book, there is a manuscript, written by a team of authors dreaming of fame, credibility and a decent royalty payment. Let’s say you have that. That’s not a book; that’s not even the idea of a book. That’s your raw material, and a lot has to be done before it can go to print.

Editing – $8672, which is roughly $40 per page. That’s a combination of copyediting (finding and fixing grammar and spelling errors), substantive editing (improving the text to make it more effective), fact checking, tweaking the layout, matching text to images and a bunch of other things, repeated through several iterations of layouts (or ‘proofs’) to get things right. It’s a skill that goes above and beyond simple proofreading – in fact, there’s a separate proofreading budget and that’s just $200, or about a dollar per page. Editing costs, but it’s utterly vital; even the best manuscript will have errors and problems, and even the best typesetter will make mistakes and misinterpret instructions.

Typesetting – $7072, which is about $33 per page, although it’s not just based on page count. Typesetters take the edited manuscript, all marked up with the editor’s instructions as to what goes where, and lay it out onto what will be the finished page that the reader reads. Again, it’s a technical skill, not just a matter of dumping everything into InDesign, that requires attention to fonts, kerning, page size, paragraph/page/section/chapter breaks, styles, flowing text around images and a bunch of other things. Textbooks are some of the most finicky and complicated books for layout (as are RPG sourcebooks, for much the same reasons).

Text design – $800. Not very much, but it still costs something for a designer to give your book its distinctive look – to choose fonts and colours, styles of headings and sections, page trim and visual elements and everything that makes the book more than plain black text. In fact, books that are plain black text still need some degree of text design.

Cover design – $1000. That’s front cover, back cover and spine; it’s choosing images, designing the title and subtitle(s), fitting the blurb and other information onto the back in a useful and appealing way, making sure the spine is exactly wide enough for the pages and so on and so forth.

Illustrations – $1000. Cartoons, complex diagrams, maps, artwork and anything else the typesetter can’t do themselves. $1000 might buy anything from five to 50 illustrations, depending on type.

Permissions – $2000 to purchase the right to print/reprint other people’s copyrighted material. For a textbook that usually means photographs, but it also covers text extracts from primary sources and other books. $2000 isn’t much, and means this book will primarily use general images from stock libraries and collections, rather than highly specific images that carry a high price tag.

Software development – $500. This goes towards any digital material, such as extra material on CD-ROM. Often this money doesn’t get used up, especially as publishers move towards putting that material onto a single proprietary website with a standardised interface, but you budget for it anyway. Anything more complicated probably gets costed as a separate product.

Miscellaneous and contingency – $391 on this specific book. Yeah, it’s a weird little number, usually a small percentage of the other costs, just there in case a freelancer goes mad and eats the manuscript and we have to pay to get her stomach pumped.

Other costs – none on this example, but other projects might require non-royalty-based author fees, manuscript development fees, indexing (which ain’t cheap) and a number of other costs. They all have to be costed beforehand.

Manufacturing costs

The above costs all go into getting the content into shape. You don’t have a book yet; you just have the extensively-developed plan for a book. To actually make a physical product, you have two (occasionally three) more costs.

Printing and binding – $7400. That’s enough to print, in this case, 2000 full-colour books. Printing more would bring the per-book price down – 3000, for instance, would only cost $700 more – but you work out the print-run based on sales projections and don’t print books you can’t sell just because the ones you can sell will be a little cheaper.

Freight – $534 to bring 2000 books over from China to Australia. Not much, really, but that’s because they’re on a boat with a couple thousand tonnes of other stuff. Not every publisher prints in China, of course, but it’s the best option for publishers in this country creating full-colour material; printing locally would cost much, more more.

CD duplication and packaging – $1018. This book comes with a CD, which only has a PDF of the book. Those are pretty much history now as publishers move onto online models, but I’m including it for the sake of accuracy.

And that’s it. Developing the book before printing cost $21 635; creating 2000 physical books cost only $8952. Less than a third of the overall cost.

Setting the price

So you know you’re spending $30 587 to make 2000 books. Now how much do you charge for it? Well, 30 857 ÷ 2000 = 15.42 – so about $16, right?

Um, no. Not if you want to publish any more books in future.

There are two main considerations you take into account to set the price.

Royalty – oh yeah, that’s right, you have to pay the writer. Royalties are a percentage, so you have to calculate them off expected sales and after you set the price point of the book. In this case, we’re paying a 12% royalty (which is decent) on expected sales of 1841 copies of Cooking With Graeme (the other 159 are channelled into sales/marketing activities), and we can backtrack to estimate out how much that actually is once we set a price and work out expected sales.

Gross margin – this is the big one. It’s not enough to break even, and it’s not enough to make a profit – you have to make enough profit to make the whole activity worthwhile. You particularly have to make enough profit to pay the salaries (or part of the salaries) of the in-house staff who worked on it – the publisher and project editor who oversaw it, the production staff who coordinated the printing, the sales and marketing teams that get people to buy it and several others. And on top of that, you need to make enough profit to keep the business going to make more books that people want. Not every book will make a squillion bucks – it’s pretty much only the maths textbooks – but every book needs to provide a decent return on investment.

So you aim for a minimum gross margin – which, if you’re not familiar with the term (I wasn’t because money confuses me), is the percentage of sales income that is profit – of 55%, or maybe some other number, but that’s the usual we work with. Slightly more than half of your price needs to be profit. And to be honest, you’re better off aiming higher than that, because otherwise you should have just given up and made another book about trigonometry instead of adorable cats.

The bottom line

In the end, these considerations go into a blender (or more accurately a spreadsheet) and after some back-and-forth and rending of garments it spits out a price of $49.95 per book. Which, in turn, adds $5685 in royalties to the costs, which the spreadsheet somehow manages to take into account, so it costs $36 271 to make 2000 books, which we expect to bring in $56 847 in receipts.

If you have a calculator, you can work out that that’s only a 36% gross margin, which seems to belie everything I’ve just said. But the above figures apply to a single print run, while in actuality you usually plan and cost two print runs that cover 2-3 years worth of sales. Planning is everything, and the second print run is often the one that actually makes the money. That first printing has all the development costs beforehand; the second print run doesn’t have any (hopefully), just printing and shipping costs, which drive the gross margin for that run way down, and you clump them together to make that target of 55%.

See, I can handle maths. But this is accounting, and it makes my head bleed.

Anyway, our second print run of Cooking With Graeme is 3000 copies; we put aside $296 for development contingencies, just in case, then spend another $10 943 for printing and shipping the larger print run. Expected income is $92 573, and expected royalties are$9257; the book really starts to pay off for the author in that second year. Gross margin for the run is a whopping 78%, proving that books would be much more profitable if you didn’t have to spend time and effort making them readable.

So our total investment is $56 768, our income is $149 420, out actual profit is $92 653, and our gross margin is 62%. If Cooking With Graeme does as expected – and remember, these calculations are made before a single word is written, much less a single book is sold – then it’s been a worthwhile publishing project. We could have maybe dropped the price by $5 and still hit the 55% target, but that’s about it; no possibility of selling it for $20 and still staying in business.

Now what?

So that’s how a textbook gets created and how much it costs. In next week’s blog post, I continue acting like a lecturer at the world’s least-respected accounting college and talk about how we can extrapolate those number to understand how much regular ol’ novels cost to make and what costs still apply to ebooks.

Sounds exciting, no?