book prices -- where's the money going?

[BadBatsuMaru]

I was just wondering about how the book publishing industry works.

For example, Harrington's book has a $29.95 list price. You can walk into Barnes & Noble and buy it for $20.96. Now I know B&N probably isn't selling books at a loss, so that really makes me wonder how much of a chunk they get. How much is 2+2 actually getting off the sale? How much of it goes back to Dan? I'm assuming the book is pretty much Dan's material but Bill Robertie edited it all together, so how much do you think Bill gets?

I'm not looking for specific numbers, I was just wondering in general how it breaks down. When a book sells for $30, is $15 going to the retailer, $10 to the publisher and $5 to the authors? So what, Dan puts a ton of work into a $30 book and he's lucky to get $3 a copy while the retailer is getting 50%? Not that I'd be surprised, as record stores will charge $18 for a CD and about $1 goes back to the artist.

Are there a lot of other weird factors at play? I know strange things go on with magazine publishing and retailers can get deals where they can return all the magazines that don't sell and the publisher has to take them back.

[BarronVangorToth]

I don't know the 2+2 specifics, but I'll bet that Dan gets far less than you're thinking.

Printing a book, laying it out, advertising, shipping -- this all costs a lot.

A $30 book probably is sold by 2+2 for around $15 (half price) and then the various distributors / stores make the rest.

Of that $15 that 2+2 gets, a bulk of the money goes into the book's production. A certain percentage goes to the author for royalties. Whatever is left is profit.

Your analogy with bands with their CD's is pretty much what happens in the book industry as well -- but you are forgetting that there is a TON of money spent in things that you don't realize that the publisher needs to make that money to pay for.

PLUS, retailers need to make a lot of money per item or else they can't stay in business. Book stores, gaming stores, hobby shops, etc etc, are used to getting things for half off. Yes, they "make" $15 on the book (if they sell for full price) but they have to pay rent, insurance, staff, etc etc.

Likewise, the publisher has a ton of costs that have to be accounted for. All of this is the reason why people always believe that the people who write the material that get published -- I get this all the time with my WWE card game -- get more money than they do, especially when the companies advertise things like "25 Million in Sales!" and suddenly someone thinks that the guy who makes the product got the lionshare of those millions.

Production costs. A ton. And many people need to make something along the way.

Barron Vangor Toth
www.BarronVangorToth.com

[benfranklin]

[ QUOTE ]


For example, Harrington's book has a $29.95 list price. You can walk into Barnes & Noble and buy it for $20.96. Now I know B&N probably isn't selling books at a loss, so that really makes me wonder how much of a chunk they get. How much is 2+2 actually getting off the sale? How much of it goes back to Dan? I'm assuming the book is pretty much Dan's material but Bill Robertie edited it all together, so how much do you think Bill gets?

[/ QUOTE ]

Everything is subject to negotiation, but in general, it works like this. The publisher prints the book and pays royalties to the author, usually a percentage of sales. That percentage varies, and it may be based on the cover price or on the wholesale price that the publisher gets for the book. The old standard for a hardbound was 10-15% of the cover price and maybe 7-10% for a paperback, but many publishers are going to some percent of the wholesale price because of increased discounting. (Mason has stated here that 2+2 pays royalties that are above the industry average.) With 2 authors, they make their own deal on sharing the royalties.

The publishers sells the book to a distributor or directly to the retailer, depending on various factors. Ususally, a big publisher will sell directly to Amazon, B&N, etc., and smaller book stores have to buy from a distributor. The publisher will sell the book for about 50% of the cover price. The distributor will sell it for about 60%.

[ QUOTE ]
So what, Dan puts a ton of work into a $30 book and he's lucky to get $3 a copy while the retailer is getting 50%?

[/ QUOTE ]

You don't get rich writing books, unless your name is Stephan King or Tom Clancy. Considering what he could have made playing poker instead of writing, the book probably cost Dan money.

Depending on the royalty arrangement, the authors might be getting $4 a book. But if B&N did buy the book for half of the cover price and sells it for $20.96, they only gross $6 on it, and have to pay a lot of overhead. A small book store would buy it from a distributor for 60% of the cover price, about $18, and sell it at cover price, for a gross of $12. That has to cover a lot of overhead, and they are working on very small volume.

[ QUOTE ]
Are there a lot of other weird factors at play? I know strange things go on with magazine publishing and retailers can get deals where they can return all the magazines that don't sell and the publisher has to take them back.

[/ QUOTE ]

In generaly, all books are fully returnable. Book stores can return books to the distributor for full credit, and the distributor can return them to the publisher. And the publisher holds back a reserve on author royalties to adjust for returns.

[playersare]

the retail margins in the book retail industry are a little bit higher than the CD business. generally speaking, a wholesale discount for a book is 50% off the list price (eg. $7.50 cost for a $14.95 book), while for the CD of the same list price, a store is paying closer to $10.00 (about 30% margin). I couldn't say exactly why the money gets split up one way or another, though I could theorize that CD's are generally easier to sell, they're smaller-sized and stored uniformly. also the production cost of a CD may be higher with recording, mastering, music videos etc...the main expense for a book is pretty much the advance to the author for writing it.

CD's, books, magazines, DVD's - basically all the sh*t Amazon does well with - these categories of products are all generally returnable if unsold. for the music biz, the record label or distributor will keep 25% of back end royalties in "reserve" for any overstocks and defects that find their way back to the warehouse (though if a product continues to sell well, then the reserves can slowly be released down the line).

[Ed Miller]

You don't get rich writing books, unless your name is Stephan King or Tom Clancy. Considering what he could have made playing poker instead of writing, the book probably cost Dan money.

While you clearly know your stuff WRT the publishing industry, I just wanted to make it clear that Dan is certainly making money from having written the book, opportunity cost notwithstanding.

2+2 pays very generous royalties, and HoH is going to sell a lot of copies. Mason can afford to be generous royalty-wise because he knows that every book he publishes is top-notch, and that the high quality promotes long-term success. In other words, he's not going to have to eat any losers because he won't publish a loser.