June 22, 2011
Poker players will tell you that there’s a sucker at every table. If in the first few minutes you can’t figure out who the sucker is, you are the sucker.
This is important to know because life is a gamble and nobody can revoke the laws of statistics. (Not that I know a hell of a lot about the laws of statistics; I was an English major, for cryin’ out loud; but stick with me on this.) We can’t change the odds. All we can do is attempt to adjust the allocation of risk, and we all do this whenever we can, even if we don’t think of it that way. To wit:
- The ball falls into the well and we turn to our friend and say, “You get it.”
- We let our acquaintances be the early users of technology before making the investment ourselves.
- When the dinner check comes, we wait to see whether anyone else will reach to pick it up.
Notice that in all three of these examples someone did end up taking the risk, may have volunteered to take it, or even enjoyed taking it. But without arguing too much about the nuances of all this (and there are indeed nuances), perhaps you will grant me the following nearly universal truth:
Everyone on earth will accept a bet where they reap the rewards but someone else takes the chance.
If you want living proof, please consult everything Wall Street bankers have done in the past ten years. Given the opportunity, they’ve privatized gain and socialized risk. But I digress.
In the book business, an undercurrent of resentment has brewed for some time between authors and publishers. Publishers argue that they add more value to the equation than authors sometimes give them credit for. Authors argue that publishers often don’t deliver on their promises and offer poor financial terms, to boot. At bottom, in my opinion, most of these arguments are really about the allocation of risk.
There was a time when getting a single book into the marketplace required an investment of hundreds of thousands of dollars. That time dovetailed with the rise of bookstore chains and the advent of the mass-market hardcover, which enabled publishers to pay large advances for books they really wanted. But the tables have turned.
Today, with the exception of a relative handful of brand-name authors, book advances have fallen through the floor. (I was recently talking to an executive editor who departed a few months ago from a major house, and he said he’d participated in an editorial meeting where the leadership team openly applauded its success in bringing down author advances.) Publishers — whose incentives are supposedly aligned with authors — will stop supporting a book that they perceive isn’t working faster than you can say, “Did you even send a copy to Publishers Weekly?” And, at the same time, the advent of new technology has reduced the investment required to create and publish a book. If the book is e-book only, in fact, that investment may be as low as four figures.
Yet royalty terms, though they’ve changed a wee bit in some instances, remain largely the same as they were before this great shift.
There will always be authors who don’t interest publishers for whatever reason and there will always be former authors whom a publisher is happy to see going. But if publishers wonder why some authors they’ve published with relative success are still choosing to leave, they may do well to ask themselves whether the risk-reward equation was properly balanced.
Authors, for their part, should ever be applying the following analysis to prospective deals: Is the publisher taking enough risk to justify the share of my work they’re claiming on the back end?
If a conventional publisher offers you a great deal of money up front and a crappy royalty, you probably should take the money and let the publisher assume the risk. But when both the advance and royalty are low, you, dear author, may be the sucker at the table. Wave to the dealer, stand up, and find another game.
Follow me on Twitter: JEFISHMAN
Visit the Verbitrage website.
Publishing Primacy posts every Wednesday by 7:00 a.m. Eastern Time