Sums • 11 March 2009 • The SnowBlog



quids in

So Audrey Niffenegger's new book has received an advance of $5m. Let's see how many copies it'll have to sell to make 1 profit. First, the facts: The $5m advance is the US advance only. In the UK, it'll be published by Cape who paid 'lots and lots'. Let's assume for the sake of argument that it's 3,617k - the same quantity at today's exchange rate. That sounds like 'lots and lots' to me. In the UK, the first edition will be a 17.99 hardback. Let's assume that it sells 25000 copies in hardback, and see how many paperbacks need to sell on top of that to break even. At 59% discount - the standard promotional rate on the High Street - each hardback copy will net 7.37. This is a rather optimistic figure, because the grocers will demand much more discount, but let's go with 59% for the moment. We're assuming the hardback will sell 25,000 copies which is 184k. However, that's just the net sales. Let's say the print costs per unit are 55p, the marketing costs are 15% and the distribution costs 22% of net. That's 13.7k, 27k and 40k respectively, taking the proceeds down to 102k. And remember, that's just the contribution to overheads. There are plenty of other costs like staffing, office, admin, legal, and all the other costs of running a business which aren't covered yet. Anyway, onto the paperback. The price will be 7.99, let's assume, and the discount again will be 59%. Once again, it's likely to be higher than this in the grocers, but let's be optimistic and hope that the average discount comes in around 60%. That gives 3.27 per unit net receipts. Using Excel's awesome Goal Seek tool, I calculate that the paperback would have to sell 2,050,732 copies to generate 3,514k (the value of the advance, remember, less the contribution from the hardback? Do keep up at the back) after distribution, marketing and print costs of 1.5m, 1m and 0.7m respectively (at the same percentages as given above but with a lower print cost): Price: 7.99 Discount: 59% Net per unit: 3.27 Vol forecast: 2,050,732 Net receipts: 6,717,994 Cost of print @ 0.35/ unit: 717,756 Cost of marketing @ 15% of net: 1,007,699 Cost of distribution @ 22%: 1,477,959 Contribution from hardback: 102,420 Amount left over (to pay off advance): 3,514,580 And don't even think about the cost of tying that money up for 18 months. Or the exposure if there are lots of returns. Or the additional cost of the extra stock - this model only costs the stock which sells. The Time Traveller's Wife has sold 1m copies, according to Nielsen. Do you reckon that this new book will sell over double that to contribute 1 to the overhead costs of the publisher?And Cape only have UK and Commonwealth rights so the scope for some supplemental rights deals is a bit low. Big publishing, eh? I'm glad we're small, where the quantities and maths make sense.


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