What Is Your Indie Book Publisher Time Worth? A Look at the Numbers, Part I of II

(If you find this article of interest, please do me a favor and click here to take the 
the Amazon Pricing and Marketing Policies for Independent Authors Survey. It's a quick survey and will provide information and insights in independent publishing you will find very useful. All participants receive the complete summary results.)

Also, before we start, let me inform you that further on in this article you'll be seeing some numbers I've extracted from a spreadsheet analyzing breakeven points on your marketing and time expenditures. I will be happy to email you this full spreadsheet when it's released in a couple of weeks. To receive it, please join the site mailing list and I'll notify you when it's ready. Sign up to your right.)

Now that Amazon vs. Hachette is over, it's time for you indies to start focusing on the issues that are important to you. Mainly, making money from your writing. There are no excuses for you to pay attention to people who tell you that that Amazon is "paying you royalties" when all that's happening is a download fee is being extracted from your bottom line. Amazon and the other online resellers never pay you anything. They are channels and they exist to service demand. They do not exist to create it. For you, they create operating expenses, not royalties.

This is not only true in books. It is true in software, in high-tech hardware, consumer goods, etc.

Before you even start to plan to market your book, hammer this into your brain and keep it close to your thoughts always:

Channels do not create market demand. Only suppliers can create market demand.

And, in this case, who is the supplier?

You. Only you can create the desire for people to read your book. Your business, as an independent author, is to create demand for your book via marketing. Amazon, as a channel, services the demand you create.

Incredibly enough, even  Hugh Howey has actually acknowledged this!

But wait, you say, we aren’t just authors. We are publishers! We pay for cover art and editing. We upload a finished product, ready to go. These aren’t royalties we’re earning; they are a cut of proceeds. So comparing our income as authors to other authors isn’t fair. We should compare our income as self-publishers to other publishers.

But don't get too excited. A couple of blog posts later, he's back to telling us all how Amazon is paying us:

But I see people complaining about the 70% payout, the $1.39 KU payout, the reduction of ACX royalties.

Further on in this series, we'll see why you have good reason to complain about Amazon's very large and in some cases predatory service fees.

Amazon's job, as a part of the book channel, is to extract as much money as it can from your hide, which it will and can do. Your job, as a business, is to resist, scream, and fight as loudly as you can against these efforts. When a member of AAAG (Aggregated Amazon Ankle Grabbers) shows up or blogs about how much you owe the book channel or Amazon, throw a ripely dead rat at them.

This, by the way, is not personal. This is how channels have, do, and will operate. They hunger for margin more than Dracula craves blood. You hunger for revenue so you can write and not have to contemplate eating your offspring when times are lean. So it has been, so it will ever be. Do not hate your channel and never bend over for it. Recognize it for what it is. A middleman. Errr..."person." An entity which is both your enemy and your friend.

Do not waste a minute feeling grateful to Amazon for the Kindle infrastructure. They did not invent the ebook concept or take the risks of the pioneers of 1999-2001, who failed abjectly. (You can read about why in the second edition of In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters.)  Amazon, to its tremendous credit, took advantage of an industry complacent in the wake of that first failure. They have, and are, profiting greatly from ebooks. The long tale is eternal and it costs them next to nothing to service their storage. You pay the transmission fees on downloads. You are doing them a huge favor by putting your book on their servers. The reason Amazon makes no money on sales of their Kindle readers is that ebook revenues more than make up for their hardware expenditures.

Amazon has done you a huge service by driving interest in ebooks, thus making wideband sefl-publishing practical. It also deserves credit for building a demand service platform that has been widely emulated by other companies. (OTOH, Samsung doesn't feel all that grateful that Amazon has built loading docks to accept and ship TVs.) And while the growth of the ebook market was inevitable, Amazon deserves to profit from excellent market timing and an intelligent investment in hardware/software.

Initial Operational Costs

OK, let's go to the numbers. Let's start with the first round of operational costs an independent/self-published author must deal with.  Here's a list of the basic expenses. I know these can vary, so the numbers below are ranges:

Copyediting







Formatting (ebook)







Formatting/layout (print book)





Editing



















Cover design







Production (paper)



Production (ebook)





Audible books $500-$3000. Dependent on book size. My novel Rule-Set, at 120K words, cost me $500, but I had a previous relationship with the copyeditor and bundled other work into the order. For one book, one job, I should have expected to pay $1K at least. Costs do not change based on print or digital. A typo is a typo.

$500-$3500. This cost is heavily dependent on the complexity of your interior. Lots of charts and graphs raise the price of formatting substantially. It's not that easy to manipulate HTML to try to match the look of print (and, in fact, not possible with this generation of technology).

Very similar to ebooks. In fact, print formatting is probably easier than digital, because print is more precise in its placement of text and images and many people have good skills in this area. In ebooks, not so much.

Super highly variable. I am traditionally published (Apress/Springer). When Apress accepted In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters  for publication, I was assigned an editor. They did very little in that role. The copyeditor was more useful. 99% of authors are incapable of copyediting their own work. And let's face it, so probably, are you. I write indie reviews and too many of the books I've received have been personally copyedited. You can tell about four to five pages in.

OTOH, T. S. Eliot is probably not one of the three greatest poets of the 20th century without everyone's favorite Gauleiter of Verse, Ezra Pound. So what value to assign to a smart, experienced editor? I'll range between $1K and $5K. 

Very variable. Yes, you can go to one of those cover design services that create a generic background with some sort of geometric squiggle that you lie to yourself looks like Mondrian was your inspiration, but you're not fooling anyone. Realistically, for a good looking, original cover, $1 to $3K. You can pay more.

For indies, $2.50 to $6.00 per book depending on book type, art, and size. Art books will cost much more, but we'll stay with this range.

You can probably negotiate for a free mobi file as part of your initial formatting payment, but if you decide to support other formats such as Kobo or EPUB, figure $100 to $300 for each file you support.

$3,000 to $6,000. Yes, I know you can do it yourself. Most times, you don't have the right voice and training to pull it off. One of the funniest things I've listened to was a self-produced audible book where the author sounded like Rosie Perez speaking through a helium balloon. She thought it sounded great. There are other potential costs I could include, such as shipping. There are people who print books and fulfill directly, but this is fading. To keep it simple, we'll stick with the above. When you're done, a good median estimate is that you'll need to spend at least $4K to kick things off properly for book one, day one.

Marketing Costs

Marketing your book can encompass many things. Below is a good starting list:

PR.
Virtual press tours.
Speaking engagements.Special and free promos.
Review obtainment and management.Review writing (relates to the above).Website creation and management.Email list creation and management.Collateral creation. This can include creating sample downloads, may spec sheets and sell sheets for technical and professional books, etc.Blog writing.Threatening members of your family for failing to put up the freaking review on Amazon after you asked them 10 times (there is no financial cost assigned to this activity but there is a social one).
I'm not going to break out marketing costs for the above activities at this time, but let's figure that during the course of your launch a good median for your expenditures is $1K. You may spend less, but the trade off is spending more of your time. Which brings us to the most crucial overhead component of selling your book, one that you cannot avoid or bypass (unless you want to have sales close to zero).

What Is Your Time Worth?

To market and sell your book, you must spend your time doing so. Yes, I know, you don't "count" your time as money. This means you are a starving artist, not a successful independent publisher. But despite your naivete, time is money and must be assigned a value!

So, what value should we use? For the purposes of this article and spreadsheet, I've picked $25 per hour. Why? Well, the current federal minimum wage is $7.25 an hour and many states are pushing that to a $10 to $12 medium. If you can write a decent book, I'm going to assume you went to college or have college-level skills, which makes you worth at least two to three times minimum wage. 

Also, $25 an hour over 52 weeks works out to a gross wage of $52K. That's not a living large salary, but you can get by on it. So, we'll use $25. (It's not my fault you weren't smart enough to choose to be a lawyer.) BTW, the spreadsheet obviously enables you to plug in your own numbers and play "what if." I've used Amazon's pricing schedule as they're the 1200lb gorilla in ebook channel and its competition currently shelters behind the big beast.

With this foundation in place, let's first look at some basic scenarios that show what level of sales you need to generate to cover the cost of your most precious commodity, time. The spreadsheet I'm extracting these number covers more scenarios; the below are  highlights. Please note these extracts only calculate how many books you need to sell to cover the costs of your time spent marketing and selling your book at $25 per hour. You then need to sell additional books to cover your production and marketing outlays. 
What Is Your Time Worth Break Even Calculations Weekly
Time 
Promo

10

30

10

30

30

10

30
Time Worth?


$25

$25

$25

$25

$25

$25

$25
Yearly Value 
of Time


$13K

$39K

$13K

$39K

$39K

$13K

$39K
Retail Cost



$2.99

$2.99

$7.99

$7.99

$11.99

$2.99

$7.99
AMZ
Serv. 
Fee

30%

30%

30%

30%

30%

65%

65%

Net
Rev. 


$2.09

$2.09

$5.59

$5.59

$8.99

$1.05

$2.80

Copies Sold Break Even


6,211

18,634

2,324

6,973

4,647

12,442

13,946
These number show us some interesting things. First, I picked $2.99 and $7.99 because these currently function as two "gateway" figures. $2.99 is often recommended as a starting point for new and unknown authors. $7.99 tends to be reserved for better known and "name" indies.

The breakout starts with an assumption that you must spend at least 10 hours a week of your time marketing your book. Over a year, your time is worth $13K and you must sell 6.2K titles at $2.09 to make your time back (remember, we're not counting your production/marketing expenses).

Now, 6.2K sales is not a trivial number to hit, especially for a new indie. I don't think it will be long before you realize you need to make the 30 hour per week commitment. And when you do, you're  going to have to cook to hit your needed sales volumes. 18.6K is a lot of books. What's that I hear you saying? You can't afford to spend that much time on your book because you're already writing the next one? That, ladies and gentlemen, is why they invented "drugs." Find something legal in the amphetamine family and get back to work.

Now, as we see, if you can price higher, your work gets easier. Of course, the main channel for ebooks, Amazon, has been pushing lower prices as part of its war with the publishers. That hurts. And life would immediately become niftier if you were paying, say, 15% for your downloads, not a hellacious 30 points, which, let me assure you, is channel margin gold.

Note that life also becomes substantially better if you can price above Amazon's pricing box, which I richly describer in my previous article, Escape from Stalag $7. But of course, you can't. Now, you may argue that you can't realistically price above $9.99 because you're not a brand name such as Stephen King. This may be true. But perhaps you could sell two books as part of a special promotional bundle? That might be just the ticket. But alas. You remain trapped behind the virtual barb wire of Stalag $7.

Now you understand why the channel is both your friend and your enemy.

The final rows make grim reading. They represent the revenue you're (not) generating from your international sales and for books priced out of Amazon's pricing box. Don't overlook there are huge overseas markets for English books in India, Australia, the UK, Europe, China, etc. And don't forget the 60% service fee Amazon charges on your audible book(s).

In part II of this series we'll dig deeper into these numbers and take a look at some early results of our indie survey.

(If you find this article of interest, please do me a favor and click here to take the 
the Amazon Pricing and Marketing Policies for Independent Authors Survey. It's a quick survey and will provide information and insights in independent publishing you will find very useful. All participants receive the complete summary results.)
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Published on January 14, 2015 12:21
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