Friday, October 12, 2012

The CreateSpace Royalty Structure

Or Why I Have to Raise My Prices on The Golden Lynx


People talk about the great royalties that self-publishers get for their work. Although I am one step away from self-publishing, the small press that my writers’ group put together can survive, in part, because it takes advantage of the inexpensive printing options that the Brave New World of Publishing has made available. So in that sense, we are closer to self-publishing than to traditional publishing.


I assure you, we appreciate every option out there. Yet it’s important to be clear about what each process involves, and that includes being up front about pricing. First off, most people’s mental image of a paperback carries a price in the neighborhood of $7.99. Traditional publishers can charge those prices for mass-market paperbacks because printing is an unusual business: the big costs are in the setup. One copy costs X, but ten copies don’t cost 10X—more like 2X. Once you have set up the job on the phototypesetter, the more copies you run, the less each one costs. Print 100,000 copies, or 1,000,000, and you can make a handsome profit at $7.99, even if you are splitting it with the bookseller and handing off 10% of the wholesale price to the author (who then pays 15% to a literary agent, in mass-market publishing).


In small-press/self-publishing, the situation is different. The print-on-demand (POD) technology that makes self-publishing or small-press publishing possible relies on producing books only as they are needed. Fewer copies, no storage, no returns, lower costs. The system also relies on pre-formatted PDF files, which reduce setup costs. But as a result, there is no reduction by size of job. Each POD-published book is, in effect, a trade paperback, and these typically cost $10.99–$19.99 depending on the number of pages (production costs) of the book. In fact, Five Directions Press exists for this very reason: since we have to charge higher prices for our books, we want to ensure that readers receive a high-quality trade paperback for their money.


You would think that if a publisher can survive on charging $7.99 for a paperback while paying 8–10% to the author, then authors self-publishing at $12.99 must be raking in royalty payments by the sackful. Alas, not so—or not entirely so. The comment about great royalties applies above all to e-books. There, where production costs (although not preparation costs) are near zero, authors routinely net 65–70% of the purchase price. Compared to 8–10% of wholesale, that’s a huge difference. I can charge $4.99 or $5.99 for an e-book and take home $3–4 in royalties. Even for four to six years’ work, that’s a good rate.


But print books do have production costs, and the royalties are calculated after the POD publisher deducts those costs. This makes perfect sense, of course: the POD publisher has to make ends meet just like everyone else. Royalties also vary by distribution channel—which is why, much as I hate to do it, I have to raise my price on The Golden Lynx as of November 1.


The math goes something like this. On The Not Exactly Scarlet Pimpernel (300 pages), I charge $12.99 for the print edition, which nets me a royalty of about $3 per print copy (under 25%).* Although the rate is much lower, the payment approximates that of the e-book version.


If, however, I pony up (as I did, mostly as an experiment) the $25 for Expanded Distribution so that CreateSpace will list Not Exactly Scarlet Pimpernel with bookstores and allow wholesale purchases, I net not $3 but 70¢ on each sale (5%). I have not worried about this much lower rate, because I don’t sell many copies to bookstores (one in three months, so far). So if I sell a few books for 70¢, well, at least I’m selling books. And maybe one of those purchasers will recommend my book to friends, generating more sales.


The Golden Lynx
is 50% longer than The Not Exactly Scarlet Pimpernel: 450 pages. As a result, the production costs are proportionally higher. At $14.99 (which to me seems like a lot, even for a trade paperback), it nets more like $2.75 (18%) per print copy, compared to $4–$4.50 as an e-book. I consider this rate acceptable, but I didn’t sign up for Expanded Distribution because it would cost me 25¢ on every sale.


Then I realized that for Lynx, I actually need Expanded Distribution. If I want to sell to college bookstores—and I do, because I put a ton of effort into making the history accurate, and it would be wonderful if professors adopted my book for their courses—the only way to make it work is to raise my price to $16.99. I will still net only 50¢ on every bookstore sale ($3 on print sales through Amazon.com), but if I sell enough additional copies, the difference will work itself out over time.


So on November 1, 2012, I will raise the price of the print edition of The Golden Lynx by $2 to cover the costs of Expanded Distribution (the e-book version will remain at $5.99). Until then, the book will cost $14.99.


The Brave New World of Publishing, indeed—and in many ways it is, don’t get me wrong. But perhaps not quite as lucrative as the ads would have you believe.


*Note that these are the numbers for books printed through CreateSpace and sold through Amazon.com. Books purchased directly through CreateSpace earn twice as much in royalties (because CreateSpace is not splitting its profits with Amazon.com). But since I don’t know anyone who has either bought or sold a book directly through CreateSpace, the Amazon.com numbers are the ones that matter to me. The rates for other companies (Lulu, Bookbaby, etc.) may also differ.

1 comment:

  1. Wow! It certainly sound like epublishing is the way to go over print if you're in the do-it-yourself market.
    I'm always surprised when I see ebooks for $9.99 or more because I know there isn't any cost to the author or publisher once the initial formatting is done.
    I hope your book makes it into some college classrooms.

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