About Me

A blog wherein a literary agent will sometimes discuss his business, sometimes discuss the movies he sees, the tennis he watches, or the world around him. In which he will often wish he could say more, but will be obliged by business necessity and basic politeness and simple civility to hold his tongue. Rankings are done on a scale of one to five Slithy Toads, where a 0 is a complete waste of time, a 2 is a completely innocuous way to spend your time, and a 4 is intended as a geas compelling you to make the time.

Tuesday, March 25, 2014

Apocalty Now

Yesterday I told you what royalty statements looked like at the start of my career in the mid-to-late 1980s.

As we progressed through the 1990s, publishers slowly started to provide "better" royalty statements.  As with the Random House portal, which has been around for two years now, I am always surprised when publishers make it easier for authors and agents to find information, though maybe I shouldn't always be because even publishers can sometimes recognize the cost of keeping secrets.  Unlike, let's say, the NSA

That said, the additional information is often provided in a "watch what you wish for, you might get it" kind of a way.  It's sometimes so hard to find the information and so difficult to interpret it that the improvements are less significant than I would wish.

Before continuing, this post's reminder that in major trade publishing that most of the books publishers send to bookstores can be returned to the publisher for full credit.  Hence, the publisher is entitled to take a reserve against returns to guard against paying royalties for books that are later returned. 

Furthermore, your profitability to the publisher is dependent in some ways upon the efficiency of your sale, i.e., how many print copies the publisher has to send out into the world in order to sell one copy.  This is a little less the case today than twenty years ago because of ebooks, but it is still important,  If it costs $2 to print a $25 hardcover, and if the publisher gets $12 of that $25, it is harder to make money if the publisher has to print three copies in order to sell one,  $6 of the $12 is already out the door to the printer, $2.50 or $3.75 to your royalty, and there could be $2 or $3 left from each copy sold for the publisher to pay for your cover, the copy-editor, the editor, etc.  If the publisher sells four of every five copies, then the printer gets $10 of every $48, your royalty is $10 or $15, and the publisher can have over twice as much money left per copy sold to pay overhead and direct expenses.

Because of this, it is very important if you want to judge how big an advance you should get from your publisher to know your "sell-thru" percentage,  Higher sell-thru equals more money for the publisher equals more money to pay you.

I am simplifying a little bit.  The publisher can make decisions that can artificially inflate or deflate your efficiency.  As an example, for Brandon Sanderson's debut YA novels in 2013, The Rithmatist and Steelheart, both Tor and Delacorte decided to invest in shipping more books into channels like Costco, Walmart and Target that generally have higher return rates.  However, each publisher still had expectations on what the size of the investment would look like after the final numbers came in, relative to their profit expectations and their overall marketing budgets for each book.

Since these things are important, I think any decent royalty statement today should clearly tell you how many copies were shipped, how many copies were returned, and what the reserve against returns is.

Penguin started to provide that information only as we got into the mid 2000s; even for Dead Until Dark which the Berkley Publishing Group published in 2001, the earliest royalty statement was the old-fashioned (your number) Berkley royalty statement.  I feel they provide the gold standard for royalty reporting.  Each print format or ISBN gets one or two clean concise pages that give the current information for copies shipped and sold, for the reserve against returns at the start and finish, and at the bottom, summarize that information cumulatively for prior, current and ending totals.  If you want to figure out your sell-thru percentage for the life of your book, you need to pull only that one most recent piece of paper.

Pretty much every other publisher falls short of this in one way or another.

Scholastic is surprisingly awful for a big US publisher in the 2010s, and their statements are relics of a last age, with the reserve against returns still hidden, and no information given on copies shipped and returned.

St. Martin's is slightly better, but only slightly.  They provide cumulative total copies sold by channel, while Scholastic provides only a grand total, which is a little better.  As an example, if you are a Canadian author, you might want to know how much of your business is coming from Canada, and St. Martin's is a little better for this.  And St. Martin's does give the reserve against returns, albeit only in dollars and not in units, which is something I will discuss in more detail in a later post that deals exclusively with reserves.

St. Martin's is owned by a big publishing conglomerate Macmillan, and strangely other Macmillan imprints like Tor provide information on copies shipped and returned that the St. Martin's statements do not.  We are told this is because St. Martin's purchased the new royalty system earlier and got the budget version.  But same conglomerate, same warehouse, same computers tracking everything, and they haven't had a chance to upgrade?

Even the better statements from other Macmillan imprints have a tragic flaw.  They only provide a cumulative total for net copies sold, and not for copies shipped and copies returned.  Hence, if you want to know what your vitally important sell-thru is you still have to collect information from many pieces of paper dating back many years, and there is no positive change there as against the royalty statements I saw in 1988.

Other publishers are unable to present information on one page.

Simon & Schuster was one of the first publishers to provide more "informative" royalty statements, but the statements could take three or five pages to tell you that three or five copies had sold.  If you are wondering why I have a "watch what you wish for, you might get it" approach to these newer royalty statements, look no further.

Other publishers have layering problems.  i.e., like airline security they took their old systems and loaded new stuff on top of it.

Historically William Morrow and Avon had provided slightly better detail on their royalty statements, and when HarperCollins purchased Morrow/Avon, they just added more pages without looking at the overall quality of their reporting.  It's a mess, spread over many pages.  Perseus, which had been distributed by Harper, has a similar-looking statement that looks a little prettier but isn't any easier to use.

Random House made a big fuss when they switched from putting "your number" on a computer-fold oversize piece of paper to putting it on an 8.5x11 sheet of paper, but it was the same information or lack thereof only more manageably presented.  When they finally got around to providing information on copies shipped, copies returned, and reserves against returns, they kept that same 8.5x11 sheet of paper around as the first page of the new royalty statement.  To put it less politely, the first page of your Random House statement is the same utter bullshit that we got 25 years ago.  They do provide more information but you have to go hunting for it.  And they don't automatically provide information on copies shipped and returned for the life of your book.  They automatically provide a sheet with that information for books that have reserves activity, but if they stop holding a reserve on your hardcover after two or three years that page suddenly disappears.  They provide that information by price point, so if your mass market price changed from $6.99 to $7.99, you may now only get the page for the $7.99 copies.  If you ask them by ISBN and price point to provide the missing pages, they will provide them to you, but only if you ask.  Or, you can ask them to provide you with all the "Print Summary" pages every time.  Since e-books can be sold at many different prices, this may result in you receiving a 40-page royalty statement.  Every time.  You can choose to drown in information, you can choose not to have information, or you can choose to add a semi-annual e-mail request for select additional information while also being sure to archive sheets of paper from several years ago.  The one good thing in these statements:  Random House is on of the only publishers that will tell you how many copies they print and when they print them.  On the other hand, the calculation of actual royalties earned is on a different page than the detail of how many copies were shipped and returned.  At its best and simplest, you'll still have three pages of information (summary, royalty calculation, ship/return/reserve detail) vs. the one page from Penguin.

Penguin has one layering issue of its own.  Early in the e-book era each e-book format had its own ISBN, and their system was designed to generate a page for each ISBN.  Suddenly, we would have six pages of royalty reports for e-books.  For less popular formats, those pages might list a handful of copies if any.  The pages didn't have a place to tell you which ISBN was the Amazon one and which was the B&N one, so there were no benefits to having the information spread over multiple pages.    Over time, ISBNs have been consolidated, but they do not have a way to purge the inactive ISBNs from the ongoing reports.

Especially now that the ebook ISBNs are consolidated, I clearly prefer the Penguin reports to the Random House reports and am curious to see which will prevail as the combined companies merge operations.

So on the one hand, we've come a long way, and on the other hand not.  After two or three years the old statements were reasonably accurate for what they were, and you had just one page that anyone could understand.   Now, we generally have much better visibility on reserves against returns, but there are still serious problems across the industry in giving basic cumulative information on copies shipped and returned, and the royalty statements are differently annoying with each publisher in their layers, pages, complexity and presentation.

We shall continue this series with a discussion of our internal processing of these pieces of paper,  Suffice to say just sticking these pieces of paper in the file isn't going to be very helpful when we actually need to make use of the information that is hiding within these reports....






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