The New World of Publishing: Cash Flow

Okay, time to talk about that evil subject: Money. And more pointedly, money for fiction writers.

So many fiction writers these days banter around the saying that they can make more money indie publishing their work than selling it into the midlist in traditional publishing. And I’m not disagreeing with that, at least not for some. There are many factors to consider, including length of contracts, amount of advance, ability to do the work of indie publishing yourself. For some, indie publishing is right, for others not so good.

But so many of the discussions about indie publishing vs traditional publishing don’t take into account a very important, and sometimes critical aspect of money for a freelance fiction writer. And that’s timing of the cash flow. In other words: How Much? And When?

And trust me, this is complex and will seem odd to many, especially newer writers. But I will do my best to be clear and let you each decide on the path that is right for each of your books. And when you do decide on a path, you might understand the cash flow of that path.

Money: Traditional Publishing Style

I’m going to use a traditional midlist novel that will earn out around $20,000 total over its entire life. The book will start with a one book, $15,000 advance contract. I am also going to assume, as 95% of all mid-list writers, there is an agent in the mix and agent sells the book. (Might as well play into the myth all the way.)

March 1, 2011: Book Finished, sent to agent.

May 1, 2011: Agent gets around to talking to you about the book, wants a few touches to help it sell better.

July 1, 2011: Book sent back to Agent. Agent holds book to not push into summer dead time.

September 15, 2011: Book mailed to five editor friends of agent.

December 1, 2011: Editor makes offer.

January 15, 2012: Offer confirmed as all other editors drop out.

April, 15, 2012: Contract negotiated and you sign. Payments split 1/3 sign, 1/3 acceptance, 1/3 publication

July 1, 2012: First signing check arrives for 1/3 of $15,000 minus agency fee. Amount: $4,250.00

Aug 1, 2012: Rewrite finished, book turned in.

December 1, 2012: Acceptance payment arrives. Amount: $4,250.00.

(In this time period the author will have to go over proofs and copyedits, so more author time spent. Also realize that the book has not been published, but the author has received $8,500 before any sales by the publisher.)

September 1,2013: Publication of Book.

December 1, 2013: Publication payment arrives. Amount: $4,250.00.

October 1, 2015: 3rd royalty statement arrives. Book earns out: Amount: $700.00

Each half year for the next two years until October 2017 checks arrive until the total is $5,000 in royalties minus $750 agency fees above advance are paid out.

Book has been out of print for almost a year at this point.

That’s the end of the money on that book. Your contract won’t allow you to get the rights back (IF you negotiated a good reversion clause) for three or four more years. If you screwed up and allowed the publisher to keep the electronic rights or POD rights, even selling only a few copies a year, you won’t see any money ever again on this book besides dinner money every year.

See why us mid-list writers are fast and write across genres and under many names? The pipeline for each book to spit out any money is very long.

Many mid-list writers will look at my example and think that I was being nice on some of those times. I was.

It can take a lot longer, and always does when you have a mortgage payment due. Publishers NEVER honor contracts when it comes to payments. Ever. I can write an entire novel faster than any traditional publisher can cut a check. And put the agent in the middle of things and it just gets worse. Payment can often take an extra three weeks because publishers batch payments to certain agencies, so they hold off paying until they have a large enough batch. And agents can take up to two weeks or more to move the money through and out the door to you. All part of the fun of traditional publishing.

Note: From finished book until first check was one year and four months. No books sold at that point. Total income for the author for book was $17,000 after agency fees over almost seven years. With a good contract, the author will be able to regain control of the book after about ten years. Bad contract the author will never regain control of the book, even though the book is out of print.

One more note: To earn $20,000 for the author and agent, assume the book was a $7.00 mass market paperback. Author got standard 6% plus other standard ebook royalties that added some. Average per sale to the author about 42 cents. Number of readers to earn the $20,000? About 48,000 sales over the contract time.

Indie Publishing: The Cash Flow

Okay, same book, authors finishes on March 1, 2011. The book is good enough to sell to traditional publisher, good enough to find 48,000 readers.

April 1, 2011: Proofing done, cover done, electronic launched. (Assume cover as good as cover from traditional publisher.)

May 1, 2011: POD launched and electronic distributed to most sites. Process is finished. Author does a little tagging, announces the book, and goes back to work on the next book.

First small money would arrive to the author in July, 2011.

So, let’s talk about sales. Should I use Hocking’s numbers or Konrath’s sales numbers? We can all hope, but let’s stay mid-list and in reality for most of us.

Since traditional publisher priced the book at $6.99, let’s go to the more standard $4.99 per ebook price and $14.99 trade paper. For both that means the author will make about $3.25 or more per sale. (vs 42 cents per sale traditional) Let’s say after a normal few months of a slow start, the book starts selling about 3 copies per day total across all sites.

Does that sound like a lot? Yes, if you are only looking at one site. Realize there are dozens of outlets. Amazon is the most talked about, but when you count B&N, Smashwords, Kobo, Sony, iPad, and all the smaller stores they supply, plus overseas sales both on Kindle and iPad and Kobo and Sony, suddenly the number of possible outlets can get high. All coming back through those major players. Overstreet goes to libraries and don’t forget your POD sales as well.

So across all those sites I am saying the book will sell 3 copies per day. Total. Earning the author about $10.00 per day or $3,650.00 per year.

And those sales numbers are low enough, it should maintain that number for a lot of years.

Over the same ten-year period of the traditional publishing contract, the indie sales would get the author $36,500.00.

More than double what the author would earn in the same period of the traditional book. And only have to sell about 11,000 books over the ten years to do that, compared to the 40,000 plus the traditional publisher had to sell.

So how does that indie-published money flow?

Well, like anything in publishing, delayed, but compared to traditional publishing, the money comes at light speed and regularly.

Book goes fully listed May 1, 2011.

Sales for May on Kindle will be in your hands August 1. And then monthly after that since they are on a two-month lag. B&N is the same if the author went through Pubit.

Sony, Kobo, Smashwords are all on quarter pay system. They pay one month after the quarter ends. But to get your money from Apple, it will wait it’s few months, then report it to Smashwords or your other gateway to their site, then Smashwords will pay that money a month after the quarter.

So in other words, a sale of your book on Apple might take up to six months to reach you. Again, there is a pipeline to fill. But within six months, the pipeline will be working.

On the traditional method, the author hadn’t even sold the book in six months, let along started to generate any money.

Summary

–-Both traditional and indie publishing have time lags in the money. Indie publishing, given the same quality book, the same level of cover, is a much shorter time lag. And with indie publishing stores reporting in so many different ways, it takes some work to see how many books in a certain time period a book actually sold.

For example, if an author had a book up and wanted to see how many copies the book sold in January, the author might have to wait until June to get some of those exact numbers.

However, discovering sales is far worse in traditional publishing. There the author is lucky to be able to figure out royalty statements for how many books sold and were held as reserves against return in a six-month period a year after publication. And that’s if the author can get the agent to send the royalty statements.

At least with indie publishing, with a little patience, an indie author can find out how many books sold exactly in any given month.

–Chance of Larger Sales.

If a traditional publisher offers $15,000.00 advance for the book, it is slotted and would take an act of a deity to move it out of that range and its slot on the publisher’s list.

In indie publishing, the readers might find the book and start talking about it and if the book has something special a traditional editor missed, the book’s sales could explode. Notice that selling 1/4 of the numbers made the indie author twice the money. If an indie author actually found the same 40,000 plus readers the traditional publisher found in the example, the author would make $120,000 plus off the same book.

Why can’t that same explosion happen in traditional publishing?

Because a book is slotted and a press run set. Once set, the publisher thinks of the book as something that will spoil, not grow, so after a certain time, even with some growing demand, the publisher will yank the book. I know, makes no sense, but don’t yell at me, it’s part of the produce model of publishing. To traditional publishers, books spoil. (Of course, to some indie publishers stuck in that mindset, they think the same thing. If sales don’t happen fast enough, they think they should pull the book and rewrite it. Too stupid for words. Books do not spoil. Let them find their readers.)

— Indie Publishers Have to Stop Watching Numbers. With this newfound access to sales numbers, there is also a bad trap. It simply takes time for any decent sales to happen. Often beginning writers will never see any decent sales happen. Just because an author puts a book up for readers to find doesn’t mean the book is worth reading or that the book will sell even three copies a month, let alone per day. In my example I used a book that would have sold for a decent amount to traditional publishing and then put the same level of cover on it for indie publishing. If a book wouldn’t sell to traditional publishing because of a bad opening, bad quality, a bad plot, then in indie publishing that same book won’t sell much.

But it will sell some.

Yes, I said that. A few sales are better than no sales. Stop watching sales, leave the book alone, and work on becoming a better storyteller on the next book. In traditional publishing, a beginning author’s book would be getting rejections. At least with indie publishing, a beginning author’s book gets a little trickle of money.

Cash flow for writers is critical, especially those of us who pay our house payments with fiction writing.

This one aspect alone is why so many known mid-list professional writers are going like crazy to get up at least their backlist books in electronic form. I’m one of them.

The idea of having some regular income flowing every month is just a stunner. I’ve been a freelance fiction writer for almost twenty-five years now and trust me, a regular check for my fiction writing just seems alien. And even though I’m starting to see it happen as my indie-published pipeline fills up slowly, I don’t really believe the idea of fiction writers getting regular checks. I am completely used to the traditional time lags and large checks and painfully extracting money out of publishers.

Getting regular money from my fiction is something I’m going to have to get used to.

But I love the idea.

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Okay, I admit it, I had issues at first with putting in a tip jar in the Magic Bakery. It was one of the “I have it made, why do I need to support my writing with tips.” A minor myth, sure, but still one that took me a few days and some talk with Kris to get past. And also, why put a tip jar in when I’m just trying to help people. But I figured I needed to get past that as well, so here it is.

And speaking of the Magic Bakery, this chapter is now part of my inventory in my bakery. (Confused on that, read the Killing the Sacred Cows of Publishing post about making money with writing.) I’m giving you this small slice as a sample. I’m giving you a taste, but not selling any of the pie.

If you feel this helped you in any way, toss a tip into the tip jar on the way out of the Magic Bakery.

If you can’t afford to donate, please feel free to pass this chapter along to others who might get some help from it.

And I would like to thank all the fine folks who have donated over this last year. The donations and the comments both after the posts and privately are really keeping me going on this. Thanks!

Thanks, Dean