ADVANCED MAGIC BAKERY Chapter Eleven

Chapter Eleven… Talking Real World Business

Fiction writers create stories out of mixing elements of public domain into something original to them, The form is protected with copyright, and over time and the right business, also might be protected under trademark.  Both are intellectual property. In this book I have been calling these stories magic pies. And they really are magic in so many ways, and your magic bakery is magic in so many ways.

But for one short chapter, I want to talk real world business terms. Yes, I will keep it simple.

In the real world, the money that just appears in your cash register when your story is licensed to a reader is called “passive income.”

In fact, almost every dime you will ever make from a story or novel in any license is passive income. You wrote the story and put it in your store. That is mostly where your work stops on that story besides an occasional rebrand.

But… in the real world, each story, collection, novel has real value.

That value is figured a bunch of ways depending on why you needed it figured. Business valuation or estate planning are two of the main reasons. There are many others, and a ton of way of setting these valuations. Entire companies exist to do nothing but value IP.

And you can get values you desire from many of these companies if you know what to ask for and are willing to pay. Inflated for a business sale, deflated for a bankruptcy, really deflated for estate purposes. In other words saying this kind of valuation is an exact science just sends lawyers and IP professionals into fits of laughter.

Go ahead, you try to predict 70 years into the future past your death. At this moment in time my crystal ball is foggy for the next three years.

But IP is property under the law and it needs to have a valuation in the real world.

I inherited a house that was in such bad condition, it needed to be torn down. The house had no value I thought, but I still sold it for $40,000. IP valuation is not a judgement thing you can do, so don’t even try.

The value in business is figured on a bunch of factors, but mostly the life of the writer plus 70 years. If the story has made some money, the value goes up. If it is part of a brand, the value goes up. Part of a trademark, the value goes up.

This value will seem high per story or novel or collection title. But remember, projected income for 70 years past the author’s death, plus possible earnings, all devalued for that same 70 years. Rolling dice can get you some interesting results. (grin)

And your passive income on a story will never catch up to the value of the story because the more passive income you make from a story, the more valuable the story becomes.

Using two of my stories as examples…

“Story A” that is finished and published only in Smith’s Monthly has a value of $15,000. (Again, I have done a bunch of these valuation formulas and talked to others who do it for a living.) $15,000 is my base value for any one of my short stories.

“Story A” has a minor amount of passive income attached to it from sales of the issue, but not much.

“In the Shade of the Slowboat Man” short story started with a valuation of $15,000, but then it sold to F&SF, on the final Nebula ballot, made the Nebula anthology, got optioned numbers of times for television, was made into a radio play and so on. (Only a very tiny slice is gone from the magic pie for that story. Very, very tine.)

I have made in passive income from that story over thirty years over $25,000 and it is still earning. Now, the last time I tried two of the different methods of valuation on that story, the base value came out just over $60,000.

So as a story or novel makes more passive income through your magic bakery, the overall real-world value of your bakery just goes up and up.

IMPACT!!

The impact on this kind of valuation is two-fold. First, it helps writers realize their work has value and it is not attached to some stupid quality standard. Second, it helps writers with a lot of inventory and income coming in plan for their estates.

Magic Bakery Income comes from licensing your magic pies. Slices of them that come back to the pie as fresh as they day they were licensed.

You make all your money from that passive income of letting your copyright magically work for you.

Never give much thought past estate planning to the actual appraised value of your stories. Just focus on making your magic bakery the most welcoming place it can be.