Demystifying Book Deals: A Nobody's Guide to Publishing (Part II)

Welcome to Outsmart the Learning Curve! Fresh self-improvement ideas supported with accessible research. This week instead of an excerpt from my upcoming book, I’m sharing Part II of my insights into the crazy world of book publishing. I suggest reading Part I first, though if you’re lazy like me, you can get the gist reading the recap below.

Demystifying Book Deals Part I Recap

Traditional publishing heavily favors celebrities and franchise authors, while self-publishing, through Amazon’s Kindle Direct Publishing (KDP), enables anyone to publish a book. But self-publishing requires significant author investment without controlling for quality.

Hybrid publishing has emerged as a middle ground, vetting submissions and ensuring quality, while offering higher royalties than traditional publishers. Because I was fortunate enough to receive six hybrid offers, I have a ton of data about the financial side of hybrid that doesn’t seem widely known.

As a courtesy, I won’t tie the names of hybrid publishers with their numbers except for the one I signed with, Koehler Books , whose royalties, costs and sample contract are transparently published right on their website.

Print Methodology Drives a Big Decision

Amazon created Kindle Direct Publishing (KDP) to build an ecosystem around its eBook reader. However, it was another technology, print-on-demand, that enabled the much larger paper side of the self-publishing business. Even today, physical books outsell digital formats 4 to 1.

With print-on-demand, the moment a customer places their order, the print job enters a queue, prints, and ships directly to the end customer. Traditional offset print technology requires forecasting runs of hundreds or thousands of books, which take weeks to complete. The resulting inventory of books needs to be warehoused like any other physical good. This includes fulfilling orders to online retailers like Amazon as well as brick and mortar stores like Barnes & Noble, airports, or thousands of independent bookstores.

Here’s a dirty little secret: While nearly all hybrid publishers will confirm that your book can be ordered by brick and mortar stores, it’s unlikely retailers like Barnes & Noble will keep a print-on-demand book in stock because retailers require return policies that traditional printing is well suited for. Perhaps you could walk into your local Barnes & Noble and convince the manager to order a few copies of your book for that store, but nationwide distribution requires an army of convincing salespeople, some evidence of traction elsewhere, and a 100% return policy. Oh and guess who gets stuck holding the proverbial bag on returns? Not the deep-pocketed retailers or publishers. It’s the poor author.

Besides returns, another reason getting into retail is so hard is that, in the physical world, space is limited. Stocking a new book requires removing an existing title off the shelf. Another little known secret, 86% of business book sales are from the “backlist” or books published years ago. More than once during the publisher discussions I heard something like:

Is your book going to replace Dale Carnegie’s “How To Win Friends and Influence People?”

For reference, as I write this in the summer of 2024, Carnegie’s 1936 book is ranked #5 in Amazon’s “Business and Money” top seller list.

Of the six hybrid publishers that offered me a deal, three used traditional offset printing and three used print-on-demand. For the chance to get my book into retail, I would have to choose one of the offset printing options along with taking the inventory risk.

Authors Must Pay to Play

Self-publishing is not free. Producing and marketing a decent quality book costs thousands. My estimate, detailed in Part 1 of this post and shown as $25,930 above KDP in the chart below, is a guess at the cost to produce a 200 page nonfiction book using Kindle Direct Publishing. I suspect some will suggest this estimate is too low, others too high. But I’ll note it was my thoughtful guess because if my manuscript was rejected by all the publishers, I planned to self-publish.

Of course, hybrid publishing is not free either. It was difficult to normalize the various hybrid publisher proposals for the purposes of this exercise. Each used different terminology, provided different services, and sometimes didn’t include basics like production for the audio book. With that in mind I did the best I could to make sure the services and costs quoted were as equivalent as possible.

Topline findings include:

• The range is quite insane. For essentially the same thing, one hybrid publisher barely cost more than self-publishing, and another proposed more than 2.5x that, at over $66K or the price of a well-configured Tesla Model Y.
• The traditional offset printing hybrids are more expensive in part because they require printing minimum runs at author expense (a major component of “production” in the chart) and in part because they pass the cost of brick and mortar sales on to authors.
• The larger marketing budgets are mostly either strategic or administrative activities versus actual marketing spend. Some charge for mundane tasks like submitting your manuscript for reviews and awards that the author could easily do. To make the budgets apples-to-apples, in some cases, I had to level up marketing spend to match my spending forecast on the self-publishing option.
• Quality of work is not captured in the chart above. However, I did get samples from the publishers I was most serious about as well as conducted reference calls with a few of their authors. While each had strengths and weaknesses, I think I would have been happy with all of them quality wise.

Royalty Promises Are Tricky

Yes, of course, there’s upfront author investment, but don’t worry, you will earn it all back with royalties, right? The good news is that hybrid publishers offer between 50% and 85% royalties whereas traditional publishers only share 10% - 15% of the net price. But what does that all boil down to when you net out printing and distribution costs?

The only way to know is to stop talking percentages and calculate the per book unit economics. I calculated the hybrid royalties below based on a weighted average of a $29.99 hardback, $19.99 softback, $9.99 eBook, and $8.99 Audible. With all the other data provided in their contracts, the per book royalty for hybrids all came out to around $4.00, while KDP was nearly double that.

Why Self-Publishing with KDP Yields Higher Royalties

Why is KDP’s royalty so much higher than the hybrid publishers? The answer lies in the way retail sales has worked since the beginning of time. Retailers buy books at wholesale prices, which in the case of book publishing is half the retail price of any book sold. So if your hardcover book is $29.99, about $15 goes to whatever store sells that book to the end customer, whether it be Amazon, Barnes & Noble or an independent book shop. After accounting for the price of the book and distribution costs, you and the publisher carve up the rest according to that royalty rate. Another way to think about it is there are two tiers of distribution: the retailer and the publisher. Each needs to get a piece of the pie.

In the case of KDP, Amazon serves as both the publisher and the retailer, so there’s only one tier of distribution to pay. Note, if you are a KDP author and want to sell your books at Target, Walmart, or Barnes & Noble, you’ll have a similar two-tier distribution and the royalties for those sales will be much lower.

The reality is that most people buy their books on Amazon these days. If you use a publisher other than Amazon, you have to pay that publisher and Amazon’s retail margin. Savvy business people call what Amazon has created a “moat,” but those on the outside of the moat looking in call it a monopoly.

Royalty Rates Can Be Deceiving

Among the six offers I received, the advertised royalty rates ranged from 60% to 85%, yet the range in hard dollar royalty per book followed a much narrower band. How could that be? The answer is that there are shell games built into some of these offers.

For example, one of these publishers quoted a $5.00 cost to print the paperback version. Since all the other offers quoted an exact printing cost of say $4.28 for a paperback, I asked if the $5.00 was just an estimate, assuming I’d be charged the true cost. Silence. When I asked whether we could change the terms of the contract such that I pay for the exact printing cost, the publisher representative, a little flustered, said no author had ever asked for that, and he’d have to get back to me. When your average royalty is in the $4.00 range, and $0.72 gets skimmed off the top, it’s kind of a big deal. I didn’t select that publisher.

Breakeven

Divide the numbers in the blue Author Investment chart by those in the yellow Royalty per Book chart and you get how many books you need to sell to make up for that initial investment, your breakeven. Anything over this breakeven number of sales, and you start actually making money as an author.

When I first started seeing these numbers, I thought “doable.” I’ve been in businesses that sold millions of far more expensive items than books. A few thousand should be child’s play, right? When I mentioned these numbers to an author friend, he told me that 10,000 books was considered a “hit.”

After I signed the deal with Koehler, I learned that 96% of new books never sell more than 1,000 copies . So even the seemingly tiny 3,317 units sold to break even on KDP appear to be a high hill to climb.

How I Decided

This post is all about money, but I never intended to make money from writing this book. I’m writing Outsmart the Learning Curve because I reached a point in my career where it’s time to give back—to inspire, encourage, and teach the next generation. Plus I saw a real need for a book that speaks to “regular people” who want to improve or make a transformation versus using the top 0.1% as examples.

So my primary objective is to get the book in as many hands as possible. I just don’t want to completely devastate my bank account while doing it.

I also want to produce a quality book. While it’s absolutely possible to produce a beautiful, well-written self-published book, there are no shortcuts. Even if you start with a brilliant manuscript, you also need a great editor, a talented cover designer, an expert book layout person, a savvy book marketer, and a detail-oriented project manager.

When I realized how difficult it would be to hire each of those people individually or do all that myself, it was clear that having an established publishing team, who had my back throughout the process, was the right choice for me.

Which Hybrid Publisher and Why

Once I realized how relatively few books get sold through retail and my chances, as a first-time author, of getting carried in retail were slim, I decided to go the print-on-demand route. This decision also relieved me from carrying inventory risk. Just to put it in real terms, if I ordered 3,000 too many $4 books, that’s $12,000 sitting in a warehouse.

Between the three print-on-demand publishers, Koehler required the lowest upfront investment and for a really good reason. They explicitly admitted they weren’t going to pretend to do the marketing and charged basically nothing for it. They offer great marketing resources and guidance free, and even one-on-one sessions with the publisher himself, John Koehler, but their proposal was not weighed down by hand-wavy strategic or administrative marketing costs.

Of course, my book publishing journey is far from over. The manuscript is basically done and is deep into edit as this post goes live. The current schedule makes the title available for pre-order in October and the book goes on sale December 10th, just in time for the holidays.

Sometime next year, I’ll write a follow up to share what really happened.

If you found this post helpful, feel free to share it with your author friends.