Wednesday, February 23, 2011

Time Is Money

Here's a concept that is tough to wrap your head around, but it needs to be addressed.


First, it's important to understand that in traditional publishing (which my friend Barry Eisler calls "Legacy Publishing"), time moves slowly.

When your agent sells you novel, it can take several months to get the contract.

Once you sign the contract, it can be months before you're paid.

Once you turn in the manuscript, it can be months, or even over a year, before your book is published.

The large, inefficient, unwieldy industry that is legacy publishing is painfully slow.

Because it takes so long, there is often a date set for publication. Some call this the sale date, or the release date. For bigger books, all bookstores hold off selling the title until this date arrives, so all retailers have an equal chance to sell it.

Prior to the release date, there's a lot of pre-launch promo that happens. Advertising, pre-orders, interviews, reviews--all of this hype is to build a buzz for the release, so everyone buys it. The more people that buy it during its first week of release, the bigger the book's chances at getting on a bestseller list.

This model usually results in big sales right away, then a trickle down until the sales reach a steady level, or eventually fall to nothing and the book goes out of print. This can take months, or even years, to happen. But it's always the same: start selling strong, then eventually sell very few, as the book is no longer regularly stocked on the bookstore shelves (or if it is stocked, it isn't in the quantities it once was.)

But release dates don't apply to ebooks. There is no reason to delay a release. What took two years for a legacy publisher can be done in two weeks by self-pubbing. Holding off on publishing the book is like letting money slip through your fingers.

It can take up to 18 months after the release date in order to get an accurate count on how well a book sells. That's because publishers often hold back reserves against returns. Since books are returnable for full price, they don't count copies shipped as copies sold, so they don't pay the author for a certain percentage of titles shipped.

You would think that publishers would pay the author on monies received from the retailer, but that would make too much sense, which means legacy publishing doesn't do that.

So the time you finish the book, until the time you get your first accurate royalty statement (and hopefully a royalty check to go with it), is usually around 3 years.

In them meantime, the only money you received for that book is the advance money. And since only 1 out of 5 books actually earns out the advance, that money may be the only money you ever see.

Now let's compare that to self-publishing.

When you write a book you plan on publishing yourself, you don't get an advance. That's a minus, especially if you'd like a large chunk of money upfront.

But that large chunck of money shouldn't be thought of as a payout. It should be thought of as a loan. More specifically, a balloon loan, which costs you more and more money as the years pass.

Self-pubbing doesn't give you money up front. But you make money sooner. And you ultimately make more money.

Scenario #1 - Legacy Publishing

1. Write a book - Takes as long as it takes.
2. Find an agent - Takes weeks to years. (it took me 8 years to land an agent)
3. Find a publisher - Takes weeks to months. (it took me 6 months to sell Afraid)
4. Get the contract - Takes weeks to months (I've heard 3 months from handshake to contract)
5. Get the advance money - Takes weeks to months (usually around 6 weeks)
6. Book is published - Takes 6 to 18 months after contract is signed (Whiskey Sour took 19 months). During this time all of the work is done on the book, editing, proofing, cover design, typesetting, printing, promotion, etc.
7. Get your first accurate royalty statement on how well the book sold (18 months after pub date)

Scenario #2 - Self Publishing
1. Write a book - Takes as long as it takes.
2. Edit, proofread, format, design cover, upload. - Takes one or two weeks.
3. Book is published - Two weeks or less after the book was written.
4. Get your first accurate sales figures - The next day, and every day after that.
5. Get paid - Two months after publication, and once a month after that.

Now, since time=money, which the the better scenario for the writer?

Technically, you get paid faster with self-publishing, though normally the check isn't as big as an advance will be. (I say "normally) because we earned over $5k the first month Draculas was released, and $5k is still the average advance for a debut author.)

Crazy as it sounds, every day your book isn't being sold, is a day lost that you could have been earning money.

The legacy publishing scenario--sell a bunch on the release, then trickle down to nothing--doesn't apply to ebooks. Ebooks often follow a bell curve. Sell a few at first, gain momentum and sell a lot, then gradually decrease in sales until they sell steadily.

In some ebook cases, it is more like a many-humped snake, with sales rising and falling for no discernible reason. I've had ebooks sell really well, then drop a bit for a month, then sell even more the month after that. Instead of the standard bell, the graph looks more like a snake going up a staircase--a wavy line on a gradual overall incline.

That's because ebooks NEVER stop selling. They aren't dependent on coop or shelf space. They don't get remaindered or stripped and returned.

If you look at many of the indies in the current Top 100 Kindle Bestsellers, most took months to get on that list. If they'd been legacy published, they would have been returned before they found their audience.

So, if you have an agent shopping a manuscript around, every day your book isn't for sale is a day you're not getting paid.

But Joe, you may ask, what about multiple book deals? Even if you never earn out your advance, won't you make more money annually because you keep signing contracts with a legacy publisher?

Let's look at the numbers. Imagine you signed a two book deal for $500k, and then signed another two book deal for $500k right afterward. Let's assume each $250k is paid out over a three year period.

A two book deal for $500k, minus agent commission, is $71k per book per year for three years.

This means you're getting $71k per book per year. So how quickly does this accrue?

Year 1: $71K
Year 2: $142K (because you also got paid for book 2 that you turned in)
Year 3: $213K (3rd year for book 1, 2nd year for book 2, 1st year for book 3)
Year 4: $213K (3rd year for book 2, 2nd year for book 3, 1st year for book 4)
Year 5: $213K (same as above)
Year 6: $213K (same as above)

and so on as long as you keep getting contracts.

Now let's look at self pubbing.

Year 1: $53K (based on 1600 sales a month at $3.99--a conservative estimate compared to some of my novels, which sell 2000-4000 a month)
Year 2: $106K (book 1 still earning, plus now book 2)
Year 3: $159K (books 1, 2, 3 all earning)
Year 4: $212K (books 1, 2, 3, 4 all earning)
Year 5: $265K (books 1, 2, 3, 4, 5 all earning)
Year 6: $318K (all 6 books earning)

and so on, each year adding $53K.

So in six years, you made $1,065,000 through a traditional publisher.

On your own, you made $1,113,000 by self pubbing.

And each year after 6, you keep accruing.

I'll make $500,000 this year, with six novels, a collaborative novel, and a bunch of short stories, novellas, and collections.

You may make a bit more with a traditional deal the first few years, but then it becomes a very bad deal compared to self-pubbing. Akin to buying life insurance where you keep paying more per month for a diminishing final payoff.

And these numbers don't take into account how quickly you get paid.

Book launches are no longer necessary in self-publishing. In fact, every day the book isn't released, is a day it isn't earning money. And those days can add up, when compared to a legacy publishing schedule.

Let's say you already have an agent, and a completed manuscript.

If it takes six months to sell, you could have earned $26,000 on your own during that time.

If she finds a publisher, you could have made another $9000 in the time it takes to sign the contract and get the advance check.

By the time the book comes out (let's say 12 months later), you could have made another $52,000.

Does that big advance still look as attractive?

On a single book, with a $250k deal, you'd have made $212,500 from the day you finished writing it until you got your first accurate royalty statement, which is 40 months later (could be longer.)

In that same 40 months, you could have made $176,000 on your own. But the money keeps coming in, month after month, year after year.

Assuming you earn out your advance and sell 1600 ebooks a month at $5.99 through legacy pubbing (which is 25% royalties minus Amazon and agent fees, which equals 14.9%) you'll earn $16,700 a year after that.

With self pubbing, you'll continue to earn $53k a year.

See what I mean about a balloon loan or a bad life insurance policy?

At ten years, even if you earn out your advance of $212k you'll wind up earning around $328,000.

In ten years, self-pubbing, that book would have earned $530,000.

Now I'm being VERY broad with the numbers here. They don't include print sales (though I'm now making $100 a day on my self pubbed print books) because it assumea that within five years, print will be a subsidiary right.

It also assumes a $5.99 ebook will sell as many copies as a $3.99 ebook, which it won't. The $3.99 will sell many more.

And it assumes you'll earn out your $212k advance, when likely you won't.

It also assumes you'll sell well. You might not sell well self-pubbing. You might not sell well legacy pubbing, either.

But at least with self-pubbing you have forever to find that audience. An ebook selling poorly for a year is still earning some money. A book looking for an agent or an editor isn't making any money at all. And even if it does find a publisher, by the time it is published, you could have already made a nice bit of money.

And let's face it: very few authors get $250k advances.

Time=money. You can start making money as soon as your book is finished. Or you can spend months to years looking for an agent, selling the book, getting it published, hoping for a big advance, hoping it does well enough to earn out that advance. And even then, if the book earned out a big advance, you'll then be locked into a contract that pays you 14.9% instead of 70%.

That's a bad deal.

Instead of waiting around, crossing your fingers, to ultimately get screwed, self-pubbing is a much faster, and more lucrative, way to go.