Food chain of book publishing business

New York Magazine has a fascinating set of business case studies investigating how New York businesses turn a profit. The one interesting me most in the study about book publisher Random House. On the weekly bases, the country’s biggest trade publisher releases 67 new books, out of its 33,000-book backlist.

According to this study, out of every 8 books, 1 is very profitable, 1 is very unprofitable, and 6 either break even or lose money. On average, for a paperback which retail for about $10, $5 goes to the retailer; $2 covers publisher's overhead costs (buildings, admin, payroll); $1.50 goes to author payments (that is 15%); $1 goes to paper, printing, and binding; only $0.50 is profit (that is 5%). The best ways to make money? Underpay writers. "The most-profitable books are highly successful authors early in their career with a contract that doesn’t reflect their success".

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