The tipping point for publishing success

When Galleycat ran various Bookscan-related items last week, we got lots of interesting mail — including one dispatch from someone we’ll call “Agent Orange” for the time being. AO first chimed in about THE HISTORIAN, saying that everyone in the industry knows it’s “made a fortune” for Little, Brown because of a whole host of economic factors:

It was widely understood in town that the foreign rights sold were in excess of the original advance, and, furthermore, the book has been a big success in some (though not all) of the foreign markets already. More importantly, though, the economics of the business are such that publishers actually make more — and lots of it — long before the author earns out.

You’re thinking about earning money from the author’s perspective, which is solely in terms of royalties earned against an advance. The author, of course, doesn’t make more money until the advance is earned back. But publishers think of advances as only one debit on the overall profit-and-loss analysis for a book: marketing dollars, printing and distribution costs and any other direct costs of publishing a book — along with guaranteed monies paid to the author through advances — are the costs, whereas what they’re pocketing on the sale of each book is the revenue.

Since they’re likely selling most books at, let’s say for the purposes of argument, something like a 45% discount, they’re taking in 55% of the list price of $26 on each sale, or $14.30. Now multiply that by the 750,000 or so copies Reagan is willing to commit to having sold already (and I think they’ve sold more by the way) and you get $10,725,000. Even taking into account the $2 million dollar advance, the $500K marketing budget and the cost of printing and distributing the book, I think you’ll see that LB has made a ton of money already.

That’s certainly big money, but it raised an intriguing question: what’s the tipping point necessary for a HISTORIAN or DA VINCI CODE-style success to happen, and will it be the norm for publishing in the future? Our conversation with AO continues after the jump, but send your own thoughts our way, too.

AO first responded to this question with the following:

You raise an interesting and even essential point about the direction the business has gone. It appears that, these days, the best way of having a better chance of making real money on a book is to do exactly what LB did for THE HISTORIAN, which is to pay seemingly crazy money for world rights. We’ve seen a number of real successes following this model — for example, RETRIBUTION, which was a real disappointment in this market, nonetheless made a lot of money for Penguin, because the rights sold for piles of cash (and in some markets, Hoffman has become a big bestseller, though not here, obviously).

The tipping point, such as it is, seems to be the big sale itself, which brings the foreign publishers to the table aggressively and leverages the risks involved. For LB, I know this was true: the book was essentially preordained to be a money-maker for LB at the time they spent the money — what was not preordained was that the book would work as well as it has in our market (your point about it hooking readers is well taken on that one).

But I think, frankly, spending $2 million for world rights (knowing when you spend it that the foreign publishers are eager to give you a lot of money back) is a far better bet than spending, say, $400K or more for North American rights.

Now, RETRIBUTION is a particular pet peeve of mine because I don’t know a single soul who actually liked the book, and yet, there’s no question that it’s done well overseas. So this brought up yet another possibility: could publishing be going the way of movies, where so-so domestic success can be dwarfed by much better sales in foreign markets? And if so, what could this mean for future properties, if a publisher has to think about what will sell to the largest number of markets available?

I think it’s somewhat misleading to imply that publishers can recoup invest globally while losing money domestically. That did indeed happen with Jilliane Hoffman, but I don’t think that’s what happened with THE HISTORIAN. Rather, having the ability to leverage their risk — in fact, to leverage their risk down to nothing — gave Little, Brown greater ability and confidence to market the book effectively.

I was arguing that it seems that every year one or two books will go for really humungous money and that the size of the sale followed by the usually substantial foreign sales helps to make the success of the book in the domestic market more — though not absolutely — assured. The catch is that you can’t pull this off too often — no more than a few deals per year get into this kind of dollar range (and even that might be too much).

I don’t think this method of business is going to be the norm, though. Remember that we’re talking about a handful of deals made every year at this level. Most fiction — to keep the conversation to novels only — sells for far less. Far, far less. And that’s not going to change. If I had to guess, I’d wager that over the next few years we’ll see, if anything, a slight rise in the number of mega-deals (as with Kostova and Hoffman) and a dramatic reduction in deals in the low-mid-six-figures, from $150K to $350K say, and with a steady ever-constant number of sales below $150K (maybe I should say $100K, but I’m stretching to $150K because I think publishers often spend a bit more than $100K to signal their enthusiasm for an author even if the dollars don’t make exact sense above $100K).

As AO says, in the end it’s all conjecture, but one case study that will be most interesting to watch is Michael White’s EQUINOX. At Frankfurt, the book sold in pre-empts to a number of foreign markets in an almost cascade-like effect. The kicker, however, is twofold: first, that this happened on a partial, and second, US and UK publishers won’t see the novel until the full manuscript is complete and in the agent’s hands.

I asked White’s agent, Carole Blake, why she’d chosen this tactic. She elected not to elaborate, as giving “intricate details of my plans for selling UK and US rights because it could well affect the selling of them,” but did say how the Frankfurt pre-empts occurred: “Interest basically started building as I talked the book up to international scouts who visit before each trade Fair. This was calculated and had the desired affect. And as one sale happened, so publishers noticed and the buzz started.”

Buzz is hard to quantify and success even less so, but, dear Galleycat readers, what was the tipping point for books you handled (be it on an editorial, sales or agenting side?) Was it foreign rights, and if so, how many were needed? Send any and all answers our way.

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