Secret Diary of a Sports Publisher #6 Economics of the Madhouse

In 2009, just as we were starting BackPage, we read a blog by Iain Dale, the MD of Biteback Publishing, who specialise in political titles. Eight years later, it remains an interesting read, but it was his use of the phrase “economics of the madhouse” that resonated with us. At that time, we were attempting to find a viable business model for an industry which was shifting on its axis.

The-Austerity-Diaries

Don’t worry, I’m not going to batter you with spreadsheets and figures. But you might be interested to know where the money goes in publishing a book. Let’s take a standard £9.99 paperback. The average discount we give retailers (including Amazon, WH Smith, Waterstones, wholesalers such as Gardners and Bertrams) is approximately 54% – or £5.40. That leaves BackPage with £4.60.

So, retailer discounts account for the biggest slice of the publishing pie. These discounts have steadily risen since we first entered publishing in 2009. When Amazon entered the market they commanded a 60% discount, so other high street and online retailers, and wholesalers, sought a greater slice of the pie in an effort to compete.

Maybe you’re thinking: “£4.60 is still not a bad return.” Hold that thought. Our books are stored in a warehouse the size of 10 football pitches, from where they are dispatched to retailers all over the UK. The services offered by this distribution company cost around 10% of the invoiced value of every book, so roughly another 45p comes off the BackPage total. We’re down to £4.15.

Print costs vary, but most paperbacks come in around £1-1.50 per book, if you are lucky. The bigger the print run, the lower the per-unit cost of the book. If we get the cost-per-unit down to £1.25, we are patting ourselves on the back. Which brings the BackPage total down to £2.90.

Then there’s the author royalties. These can vary, but the average for a paperback sale is about 9% of the retail price, which is 90p. So, the BackPage total drops to £2. And that’s before we factor in any promotion and marketing fees – or the per-book price of up-front costs such as advances, cover design and typesetting. Also, many companies employ a sales force who present their titles to key buyers at the major retailers. We used to employ a sales agency – who charged the same as our distributors, thereby accounting for another 45p – but we simply could not afford to lose any more from our cut.

What is the solution to a business model that leaves the content creators – authors and publishers – with very small slices of the pie? Well, if the creators want to make a living then they need to ‘do volume’ – publishing jargon for selling shedloads of book. Also, direct sales… buy a book direct from a publisher and the author and publisher get a bigger cut.

Martin BackPage