There are lot of reasons why authors want to go with trade publishers. They don’t want to do the work. They want books on the shelves. Or they want the prestige. They think a trade publisher will do a better job in marketing. They want reviews in major print publications. Great expectations and wishful thinking… But how will you fare money-wise in the end?
Imagine you have two publishing offers:
One has a advance of $5,000 and 6,5% royalties against the advance, the other publishing contract presents $2,500 advance and 9% royalty you will earn out against the advance. Which offer do you take and why?
Money earned today is worth more than money earned next year…
You could take the money you earned today, put it in the bank, and have more money next year – also not in a savings account with these whimsical interest the banks are paying, you would need to invest it smarter. So, if you are thinking about the rights you are giving up to a publisher, consider their value for 35 years, and take into account the time-value of money. Luckily, economists have been doing this kind of calculation for years. It’s called a net present value calculation.
How much is Money Worth over Time?
Money today is worth a lot to you. Money earned in a couple of months is not worth nearly as much. If you’re carrying credit card debt at a 19% interest rate, money today is worth a lot more to you than it is to someone who has no debt at all.
Let’s Take the Example:
You are offered $2,500 advance for a book. What would it take for the net present value of your self-published earnings to come out to $2,500? Using for example 2% as an interest rate, a contract that offers you $2,500 is the equivalent of earning approx. $109 a year for 35 years, which is making you in the neighbourhood of $9.97 a month. That’s what $2,500 book advance means roughly. What kind of steady sales would you need to equal that advance over time? A $2,500 advance is an absolutely pitiful investment by a publisher. They will earn back their money in short time.
Bestselling Author C. Milan Calculated:
“What if you were offered $500,000 for a book? A huge advance. A self-published book that has the same net value is one that makes $19,750 a year, $1,645 a month – which means selling about 633 copies at $3.99 a month every month. Put another way:
A book at $3.99 that falls somewhere between Amazon rank 5,000 and 10,000 for 35 years is worth $500,000 today.
Whether your books are still performing well in 35 years will probably depend on whether you are still writing new books at this time, and what you’re doing to promote and push your books in Year 35.”
You also have to take into account that you can earn out your advance on your traditionally published books. If you’re offered an advance of $2,500 for a book, you will earn out your advance over the course of your publishing career unless your book was unprofessionally produced and priced. How long will it take you to earn out? How much will you earn per year after that?
Let’s assume you self-publish the book at $3.99. That you sell 2,000 copies of the book a year for the first five years (the lower price point combatting whatever marketing the publisher may or may not do for the book) and 500 copies a year for the next 30 years of comparison. And let’s suppose that you must spend $2,000 to get your book on the market.
The first year, you will make $3,200 – $5,200 income minus $2,000 in expenses. From year 2-5 you earn $5,200. Years 6-35 you make $1300. The net value of self publishing your book is in the vicinity of almost $50.000.
If you want to know what your rights are worth,
you should think of the value over time for 35 years.
Why go With a Trade Publisher?
Have at least some sense of what this is costing you. If you are offered an advance of $2,500, look at people from this particular publisher who are similarly situated, and ask what kind of marketing they are really getting. How much is it worth?
“Ebooks are Forever”. It might be true in the strictest sense of the word. Yet ownership rights in your ebook will terminate seventy years after your death – no matter if you self publish or work with a publisher. However, if you sign a traditional publishing contract, your publishing rights are not tied up forever if you are an American author. All U.S. authors have the statutory right to terminate a grant of rights 35 years after publication under 17 U.S.C. 203. Self-published authors and publishers can relaunch books at any time. Traditionally published authors sometimes get the opportunity to relaunch a book when their publisher reverts a book’s rights back to them.
Let your heirs know this too and mention it in your will or give your family copies of your contract, just in case! Thirty-five years is a long time, but it’s not forever.