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Thursday, July 11, 2013

Traditional, Indie, Profit-Sharing, and Vanity Publishing

The war is on between traditional and indie publishing. Or so I've heard. I've also seen the vitriol, on both sides of the fence. Human nature, I suppose. You've chosen your path and once selected, seek to justify that choice. Sometimes the reasons make sense. Sometimes they appear to be grasping at straws. Often, an over reaction to the other side. So, what is the real story? What are the options to consider for an author and how does one evaluate them?

First, let's define some terms as I'm using them here so that we are on the same page.

Traditional publishing: The publishing companies and their imprints who distribute widely to bookstores as well as online outlets. There are other players who use a version of the traditional publishing model, from small presses to fairly big ones. I'm not suggesting that these companies are not a version of the traditional publishing model. However, without an established distribution network into bookstores, a publisher is not going to have much more impact than an indie publisher short of some heavy marketing investment, and so straddles the two areas.

Indie publishing: A self-publisher. An individual or small group of individuals who manage and oversee the publication of their own book(s). Though some do everything themselves, most will not. Many hire out help in cover art and design, interior design, editing, and distribution.

Which is right for a specific author and/or book depends on the situation in regards to the following factors.

Traditional Publisher

With a traditional publisher, the author leases to the publisher a set of rights for a guaranteed return, known as an "advance." This is a bit of a misnomer in that an advance typically means the receiver will pay it back in full, if not through future earnings, then out of the receiver's pocket. A true advance is a form of a loan. The "advance" from a publisher, however, isn't paid back no matter how little money the book earns.

So while the publishing world makes it out to be a loan of sorts, it isn't. Rather, it is a payment to the author for the rights to use his book. The author will not get any further payments unless the book earns out the advance, but the author has no obligation to return any unearned money. Therefore, it is not an advance or a loan. It is the payment for leasing rights from the author.

By obtaining rights to publish the book, the traditional publisher invests in the publishing of the book and takes the financial risk instead of the author. Yet both benefit if the book exceeds costs and makes a profit. Because the author does not have to pay back the advance if the book flops, they take minimal financial risk. The publisher takes the hit instead.

Likewise, the less of an advance an author gets, the more financial risk the author is taking on the back end, especially if the rights granted become too expansive. With a traditional publisher, you are negotiating how much rights you will grant them for a specified payment amount. The more rights you sell them for less money, the less of a risk the publisher takes financially, and the more the author assumes.

Indie Publisher

As an indie publisher, you should retain all the rights to your book and benefit from those rewards. Likewise, you also retain all the risk of failure. An indie publisher not only invests time and expense writing a book, but getting it edited, artwork, cover and interior design, marketing, etc. Therefore they take all the financial risks. That is, they invest in the publishing of the book in hopes of a return on that investment, but they may lose that investment if the book tanks.

The investment comes in two forms: time and money. A traditionally published author invests time and some money writing and preparing the manuscript, and sending it out in hopes of a sale to a publisher. It is expected that the advance will pay them back for their time and expenses.

For an indie publisher, the ratio of time to money invested will depend on their abilities and cash flow. If the indie publisher doesn't possess the skill to create cover art or design a cover, he will either learn how or hire someone to do it for him. He will possibly trade edits with other authors, which takes time, or hire an editor, which requires cash.

Many indie authors, if they can do most of the work themselves or very cheaply, have a low cash overhead to publish a book. It is possible now days to publish a paperback and ebook for a cash outlay less than $50.00. If you can earn around $3.00 profit on each book sold, on the average, you'd only need to sell 17 books to earn back that cash.

However, time cost is just as important. If we estimate you write 2000 words an hour, a 70,000 word novel would take around 35 hours of actual writing time. Double that, at least, to account for editing: 70 hours. Assuming you have the following down pat, creating/finding cover art: 5 hours. Designing the cover: 3 hours. Designing the print book interior: 3 hours. Creating the ebooks: 1 hour. Proofing the final products and uploading to various sites: 2 hours. Total time invested: 84 hours.

If we "pay" ourselves at least $15.00/hour, then our time costs comes to $1260.00. Add that $50.00 money cost on, and you end up needing $1310.00 to totally recoup your cost on the project. If any of those activities take longer, the cost goes up. At $3.00 profit per book, you'd need to sell 437 books to cost out and make a profit. If it never gets to that level, you lose money and/or your time invested in the project.

The bottom line for an indie publisher is they retain all their rights, invest in the project, and retain all risks and rewards of that investment. The indie publisher may hire out people to do the various tasks, but they don't sell their rights to obtain a service. They pay a flat fee and hope to recover the cost with future sales.

The good news for indie publishers is the window to make that cost back is much bigger. Traditional publishers have a limited window since they depend on bookstore shelf space to move their books. If a book fails to sell well within three months, they are usually returned by the bookstores and the book hardly sells more. So they must recoup their cost in the first months, then it will likely go out of print unless it takes off.

As an indie publisher, however, your sales will not be on the scale of the traditional publisher, but they can sit on virtual shelves for years earning money. This allows an indie publisher to take five to ten years to earn out, if necessary. Once that initial set up cost are covered, it is pure profit save distribution costs, which are usually pulled from each sale.

Profit-Sharing Publisher

This is a hybrid between a traditional and indie publisher. There are some cautions with this model, but it can be a viable option for some authors. First, let's describe what it is.

A profit-sharing publisher is usually a smaller press. If they give any kind of advance, it is a small token one. Usually the author pays no money up front, but the publisher's cost in expenditures is expected to be paid back by future sales before the author sees any return beyond whatever advance he may have received.

This model is more like indie publishing, but rights are being sold to the publisher in return for services and help in the form of a limited partnership. The publisher takes on some financial risk in that if future sales don't cover cost to produce, they lose that money. The author is not obligated to reimburse the publisher for the loss.

Likewise, unlike a traditional publisher, the author also risk loss. If not in money, in time to create the book. Without an advance, the example of 70 hours to write and edit a book at $15.00/hour means the author's cost isn't covered until he earns $1050. If he received a $100.00 advance, he'd need another $950, or 317 books after the publisher sells enough to cover their costs.

The advantage for the author in this model is he is not required to front any money to pay for the services the publisher is providing. The authors this will appeal to are those who have decided not to go the traditional publisher route, don't have the desire or ability to manage self-publishing, and/or don't have the expendable cash flow to hire out what they cannot do.

For this model to work, the author needs to ensure the following areas are covered in the contract:

Limited rights are granted. The term of the contract should be time limited. No reversion of rights in an "out of print" clause. It should be for a set number of years in the range of 3 to 10. You want a definite cutoff point when the publisher is expected to regain their cost and make some profit, then rights revert back to the author.

No expected payment up front. The publisher's risk is the cost to publish. If the author is required to pay any of that up front, it is no longer profit sharing, but moving into a vanity press situation.

Set cost for publishing and marketing. The publisher should be able to give you a definite dollar figure. Avoid open-ended publisher costs. If your future profits are paying for their services, you have a right to know before you "buy" what you are paying. If it is open-ended, you could be in for some sticker shock.

With these limits in place, the profit-sharing publishing model is viable for authors who don't want to or can't self-publish due to finances, but the doors to traditional publishing are closed to them. Keep in mind, however, that the author is selling rights for services instead of money.

Vanity Publisher

The last model we'll look at is the vanity publisher. It is unfortunate that many traditional publishers have teamed up with vanity presses, usually Author Solutions and its multiple heads, and touted it as a "self-publishing" option. It is not. What's the difference, you ask?

Vanity publishing expects the author to lease them the rights to their book, often in a way that covers the life of the copyright, for free. The vanity press does not risk money on purchasing those rights in either an advance or the cost of publishing. Instead, unlike the profit-sharing model, the author is expected to pay for all cost of publishing up front, including often expensive packages for marketing and distribution.

In the vanity press model, the author gives away their rights, but retains all of the financial risks. They end up with the worst of both traditional and indie models. High cost and reduced rewards in terms of earning potential. It is not traditional publishing. It is certainly not indie publishing. Nor is it profit-sharing publishing. It is a rip off. The author gets no benefit from leasing their rights to the publisher. They might as well have purchased the services directly and retained their rights and profits.

If you encounter someone who wants you to pay for all services, including publishing, up front, but still expect you to give them your rights, but don't pay you any kind of decent advance—run from that contract. You'll be sorry if you put your signature on that paper.

Which option is right for you? Only you can decide. Hopefully the above has given you the business insight to make an informed decision rather than jumping at the first offer that moves your direction.

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