Editor Reveals How Books Make Money
Via Copyfight, I found an entry about how trade publishers justify buying or not buying a title. It seems much of the decision is based upon profit-loss analysis.
A P&L is done a couple of different times. The first time is when we are estimating what we think we will spend on a book versus what we think we will make. If we buy the book, P&Ls are done throughout the book’s life.
In order to buy a book at Tor, we have to fill out a P&L to make sure that the book will be profitable. I am going to give you a basic rundown of the things that we include in our P&L. Every company includes this stuff in their P&L.
We are going to do two fake P&Ls. These are totally made up, but the numbers are real. For the sake of argument, we are going to make a P&L for a mass market original, and we are going to make a P&L for a book that goes from hardcover into mass market. For the sake of argument, the mass market P&L will be a negative P&L, while the hc/mm P&L will be a positive/neutral one.
This should help authors understand publishing economics, hopefully with an eye toward negotiating better contracts.
Anna Louise’s Journal. P&Ls and How Books Make (Or Don’t) Money. April 20, 2006.
Denise Little. The Profit Motive. Science Fiction Writers of America. 2001.
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