The Team: Liz Pelletier

Jul 1, 2011 by

In today’s installment of Quick Question, publisher Liz Pelletier takes on print strategy, multi-book deals, and subsidiary rights—three of the most frequent questions the Entangled team is asked.

Remember, if you have a burning question for Entangled Publishing and would like that question answered on the blog, email us at marketing(at)entangledpublishing(dot)com.

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Let’s start with the question on the tip of every agent and author’s tongue: What is Entangled Publishing’s print strategy? Will your books be on bookstore shelves?

Ahhh, yes, it’s the question on everyone’s mind: Is Entangled a print publisher or digital? The answer is both, but print publishing is a very complex and variable industry, so please bear with me while I explain.

A “print strategy” involves three important components: production, distribution & reselling. There are two main production methods, print on demand (POD) and print runs. In it’s most basic setup, POD requires no huge outlays of cash by the publisher since books are only printed as purchased. This is a fabulous way to save the environment and limit overhead, but really puts a pickle in the distribution component of our strategy.

Without production, there’s nothing to distribute to brick and mortar resellers. Sure, your print books can be purchased online or requested by visiting a store, but your books will not appear on shelves unless a publisher expands the POD model to include a certain level of financial risk by agreeing to accept returns—meaning if B&N stocks 10 of your books on their shelves and only half sell, the publisher must pay out of pocket the cost of goods sold (about $3.60 per book) and shipping.

One might think the publisher breaks even in this case—the print costs of 5 unsold books are offset by profits of 5 books sold, right? Unfortunately, that would only be the case if the publisher receives 100% of the cover price.

I wish. Let’s break down the “costs” of printing and distributing a book.

There are two big book distributors in the US: Ingrams and Baker & Taylor. Publishers (and self-pubbers) pay a fee to have their books made available in one or both of these distributors’ catalogs, which is how libraries and resellers acquire their stock. When a publisher sets up each title, they must set the discount rate for each book. The discount rate is the amount a publisher pays the distributor to distribute their titles, and can be anything from 25% to 55%. The distributor rakes 15% of the discount rate off the top, and passes along the rest to the buyer.

If a publisher sets the discount rate too low, resellers won’t stock their books—not enough of a profit margin. Most resellers such as B&N and Borders prefer a 40% discount rate, which means publishers need to set their titles at 55% in Ingrams (15% to Ingrams, leaving 40% for B&N and Borders).

That doesn’t sound too bad, right? Wrong. That 55% a publisher pays for distribution? It’s calculated off of cover price. So, let’s take a book which sells for $10. After the publisher has been raked over the coals by the distributor, they’re left with $4.50. From there, they have to subtract the cost of goods (COG), which is about $3.60 per book, leaving only $0.90 for the publisher and author. That’s right—NINETY CENTS. B&N made $4.00, Ingrams collected $1.50, and the printer received $3.60.

Now calculate what happens when half the titles are returned…

Let’s back up a step to answer the question on everyone’s mind—how does the publisher get their book in the bookstore in the first place? Just listing titles in the distributor’s catalog, even with that insane discount rate, does not in any way guarantee a bookstore will stock a publisher’s books. Ingrams doesn’t market books, they simply offer a distribution channel. Publishers must market their books to buyers at the corporate level, as well as buyers at the regional and individual store management level. That’s a lot of marketing. Big publishers create seasonal catalogs of their titles and send to corporate buyers, have sales reps in the field pitching their titles to book buyers, produce press kits (which include a copy of the book) and mail them to individual buyers. It’s a lot of work—and costs a lot of money.

As I illustrated above, their profit margin is too narrow to pull this kind of push off while utilizing POD. So how can they afford it?

By producing print runs. Printing 10,000 books can cost less than a $1.00 a book, which reduces their COG and frees up almost $2.00 in additional profit. (I’m really simplifying things here, not including shipping costs, etc, but this is the gist of things.)

Unfortunately, a combination of huge cash outlays for print runs and resellers ordering too many and thus returning too many books (insert resellers with names that begin with “wall” and end with “mart,” among others), and it’s not hard to guess why the publishing industry is in dire straits in this economy.

So how can Entangled hope to compete with so many variables stacked against anyone small entering the playing field?

By approaching this problem in a similar manner as small movie production companies: test markets. Entangled chooses 3-5 target cities and focuses all of our production, distribution, and reseller marketing dollars in these selected large markets. If our titles can gain traction in these test markets, we’re in a position with an established sales record and increased demand to leverage the discount rate to a much more profitable margin on a broader geographic scale. Some of our titles will include initial print runs of several thousand, others will be sold with the higher COG associated with POD. Fortunately, we’ll have a better margin with a more favorable discount rate to offset these costs.

Our hope is our authors will experience the best of both worlds: ability for anyone to order a print copy of their book via POD, ability to “see” their books on the shelves in these test markets, and possibly utilize initial sales growth to springboard national distribution.

Despite the rise in agented submissions and sales, Entangled looks to be hanging on to most—if not all—of the subsidiary rights. Does that mean you’re planning to sell them?

Entangled has an aggressive policy regarding subsidiary rights: we want them and we intend to sell them. We’ve already contracted a Performance Rights Manager, Stephanie Johnson of Clover Entertainment Inc. Stephanie has over 20 years experience in the movie industry and will be representing our entire catalog, trying to secure options for television or motion picture rights even before the books go to press. We’re very excited to have Stephanie join the Entangled team and hope to see some of our titles on the big screen some day!

With regard to foreign rights, we’re in discussions now to sign an agent who will handle all of our foreign, translation, book club, audio, and the rest of the subsidiary rights for our entire catalog. Our goal is to pursue sub-rights sales prior to our titles’ primary market (U.S., Canada, etc.) release, hopefully using this platform to drive additional sales in our primary markets.

While assembling our Sub-Rights Department, we’re certainly not letting grass grow beneath our feet. Entangled has already received interest to translate several of our titles into additional languages!

 

Entangled is a brand new publisher—why would an author sign a multi-book deal with you guys?

There’s been a lot of discussion on author loops lately cautioning authors not to sign multi-book deals with new publishers, but this advice is often erroneous. Multi-book deals are in the author’s best interest more than the publisher’s. I know, it seems counter-intuitive, but it’s true and I’ll explain why.

At first glance, for those who are not familiar with standard contract language, it might seem as if a multi-book deal “locks” the author into a relationship with a publisher for subsequent books, regardless of performance. This simply isn’t the case. In fact, what it does is “lock” the publisher into publishing your books regardless of sales. That’s a pretty heavy commitment on the publisher’s side of the fence, trust me.

Almost all contracts (whether with a digital publisher or traditional publisher) have a standard clause built-in regarding “right of first refusal on works produced within a similar world.” This means that regardless if you’ve contracted a multi-book deal or only a single title, the author MUST offer the publisher the right to contract subsequent books in the series before he/she can offer it elsewhere. There’s really no reason for a publisher to offer a multi-book deal to “lock” an author into giving us the next book in the series—we’re going to get first dibs no matter what. More importantly from an author’s perspective though, if we don’t offer a multi-book deal and your sales tank on the first book, we’re under no obligation to publish your next title, we can simply pass.

But if we offer a three book deal, even if your first two books lose money we STILL have to publish that third book as long as the author turns it in on time. Clearly, in these instances the publisher is making a financial commitment to the author. What many authors don’t realize is most series do not receive appreciable sales until the THIRD book is released (statistics from AAP).

Does this mean an author is REQUIRED to write all three books? Nope. In fact, they’re not even legally obligated to write the first one. Most contract language states if the author doesn’t turn the book in by the due date (plus typically a 60 day grace period), the contract becomes null and void except where the right of first refusal comes in, meaning the author can’t simply let the contract expire and then sell the next book in the series to another publisher (and this is regardless of multi-book deal or single title). Other than that, no harm no foul if you decide you’d rather write a different series with a different publisher.

So why would any publisher offer a multi-book deal? Two reasons. One, we can fill out our schedule months in advance. This is ESSENTIAL if you’re planning to release books in print in bookstores on release day or you want any of the larger publications to review your book. Publishers must put galleys up on Netgalley and other places for reviewers months in advance. We have to create press kits for each title and mail to the bookstore CRM’s a minimum of two months in advance. We have to create a catalog of available titles released by season (which requires significant advance planning) to submit to buyers at the corporate level. In addition, the Managing Editor can plan to allocate resources in advance, ensuring no editor is overwhelmed, copy editors are queued at the right time, covers are moved through marketing and production well in advance of the release. Holy cripes, the planning planning PLANNING involved is so much easier when you can schedule months and sometimes years in advance.

The second reason is marketing. Marketing is expensive and being able to create one cohesive plan for an entire series as well as leverage well-established titles to springboard a debut release is essential. We can plan months in advance, combine certain titles into one promotion and thus reduce our per unit costs, or even plan a special event far enough in advance to secure space and a discounted rate. Not to mention when we go to create the most important part of a book’s marketing plan—the cover—we can plan a design that makes each book identifiable as part of a particular series which is critical to leverage backlist titles to propel new reader interest. Think of the last time you browsed a bookstore and saw the spines of several books in a row which all looked very similar… Readers are drawn more to discovering a new series than single titles, so this type of cover planning is very important for future sales.

Okay, there’s a third reason: our editors can help the author craft a well-planned series arc if we know how many books this series is going to span.

Entangled offers multi-book deals for a fourth reason: we know it takes three books to earn any significant payout, and we want our authors to know we’re financially committed to giving that series a real chance. And if you think this is no big deal, ask any of the NY-pubbed authors whose contracts were not renewed after the first or second book. You’ll be shocked how many there are. But honestly, considering how much money it takes one of the larger publishers to bring a book to market, I don’t blame them. Traditional publishing is a money pit these days and it has more to do with reseller discount rates and return policies than any desire to not commit to an author’s career.

I think what scares most authors when they hear someone just signed a multi-book deal with a new publisher is the fear of bankruptcy and your rights being tied up for years. First of all, what happened with Triskellion is rare, and from what I understand was unreasonably exacerbated by the disappearance or inability to contact the publisher, as well as a poorly worded contract. MOST contracts (and I’ve read Samhain’s, Ellora’s, Tor’s, NAL’s and several others) have specific language regarding bankruptcy, several stating in the case of bankruptcy, rights revert to the author 60 days after bankruptcy regardless of publisher communication. An author only needs to have a publisher’s approval to have their rights reverted back to them if they wish to terminate the contract for another reason, and honestly just don’t turn in the next book and that’ll happen all on it’s own.

 

Liz Pelletier is co-founder and managing partner of Savvy Media Services, which owns Savvy Authors, Savvy Readers, and Entangled Publishing. In addition to running a successful online writing community, Liz is an award-winning author, a workshop instructor, and a freelance editor. She has also held board positions for other writing associations.

You can find Liz on Twitter and Facebook.

 

1 Comment

  1. Bankruptcy…yikes! I never considered that.
    Great informative post. I learned lots.

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