One of the questions I get all the time is about the economics of the book: How much did it sell, what was your advance, what did it cost to produce. I was thinking about this as I prepare for April 15th, so I did a quick run down of costs.
Here is the skinny: The initial advance for Bailout Nation from McGraw Hill was $50k. You get half upon signing, and the other half when there is an “accepted manuscript” by the publisher.
Recall that there was a small problem with McGraw Hill over my treatment of their S&P division and the rest of the criminally corrupt rating agencies (gee, why did they object to that?). My publishing contract with them gave me final edit, so when they balked at what I had written, I exercised my right to buy the back my manuscript. Once I signed with another publisher (Wiley), I was obligated to return the $25k (which I of course did).
The Wiley contract was a $100k advance, plus back end royalties. The old joke is your agent should insure you never see royalties (i.e., get it all up front). I think I need to sell another 40 -50,000 copies before any royalties come in.
Now, $100k sounds like a lot of money, but in Bookanomics terms, its not much at all. There are all sorts of costs, and they come right off of the top. I ended up with about a fifth of that.
20%? How does THAT happen? Well, right off the bat the agent takes 15%. (That’s gross; my next book deal will be net). That takes us down to $85k. I had to return $25k to McGraw Hill, bringing the net to $60k.
Aaron, who was much more of a collaborator than an editor, was paid $15k. I paid my team of researchers over $10k for their work. (That brings us down to $35k).
I paid for all the cartoons in the book ($3,000) The artwork for the cover (under $1,000), and a few other small incidentals (also ~$1,000). That doesn’t include all of the blog readers who contributed research, artwork, ideas, notes, editing, reading drafts — all for free.
The final tally:
Return prior advance $25,000
Pretax net: $30k
After tax: ~$20k
Pretty astonishing when you see it in black and white.
Now consider this: Over the course of the year, I spent nights, weekends, vacations, and towards the final deadlines, days in the office working on this. My best estimate is I put in about 20-30 hours a week for 15 months (not counting promotional tour, which adds another few 100 hours). Let’s ballpark it and say ~2,000 hours.
So, my pay scale for writing what has been called the best reviewed book on the bailouts is a little better than the current minimum wage.
And a few other writers tell me how lucky I am, that very often, its a break even proposition or worse.
Of course, there are other benefits — People who otherwise wouldn’t have thought twice about you (Him? He’s an idiot!) suddenly start to take you seriously. You become “the guy who wrote the book.” Your speaking fees double, your regular business benefits. Other publishers start pitching you book ideas. In general, your personal brand becomes more valuable. My friend (and book agent) Lloyd Jassin says you write a book to “Build your Brand.” And their is much truth to that.
There are many intangible benefits as well (book groupies!). In my case, it was cathartic, as it was a productive outlet for all the righteous fury that had built up watching the whole disaster unfold in slow-motion. It helped to “quiet down the voices in my heads.”
But Bookonomics means that making a living writing books is something very few people seem to be able to do . . .
UPDATE: February 6, 2010, 2:37 pm
As several readers observed, the 1st advance/return was a wash (+$25k -$25k = 0). They are correct.
But as noted above, I am thinking in terms of this years taxes — since I already paid tax on the $25k in 2008, the $25k that went back in 2009 comes off the top of the income statement for this April 15th for 2009.
Ignoring the different years tax consequences for a moment, the total income for the book increases if you offset the $25. That makes the gross $125k, leaving me $55k after costs, with a net after NYS and federal taxes a gain of about ~$33k, which is better than a sharp stick in the eye.
This raises my pay scale from under $10 to to $16 per hour.