There’s this odd misconception out in the world that publishers and authors are rich. We both have money to burn and can afford huge outlandish parties to celebrate our books.

I wish.

Here’s a breakdown of where money goes at a small press.

Let’s do the math.

Say you have a paperback book, like this one for instance. It’s retail price is $9.95 but to make it easier we’re going to say it costs $10. (To be accurate, right now, Amazon has it on sale for 29% off. I’m just saying.)

Of that $10, 50% goes to the retailer like Amazon or Barnes & Noble or to a wholesaler like Ingram or Baker & Taylor. (Actually the discount can vary. It can be as little as 47% for returnable indies like BookPeople or as high as 60% when sold non returnable to wholesalers, but for the purposes of this conversation, we’ll go with the easy 50%).

That means that of that $10, $5 goes to Amazon or whoever, and $5 comes to me the publisher.

From that $5, I pay the author a royalty of 10%. So 50 cents goes to the author.

I also have a distributor. Since I’m a tiny micro press, I can’t afford to have a sales force. My distributor has one as well as doing the fulfillment of orders. For that I pay a complicated fee structure based on monthly gross and net sales, but it averages to 20% a book.

So from the $4.50 I have left after paying my author, I give the distributor $1.

This leaves me with $3.50. *Unfair*, you’re thinking, *this leaves you with 7x what the author made*.

Ah, but I’m not done.

It costs money to physically make that book you’re holding.

There’s $2.15 per book in printing. 50 cents per book in catalog fees if I want that sales staff I’m paying for in my distribution fees to actually be able to sell the book. 50 cents a book in marketing expenses. (NetGalley for example is $500 to have your book available there.)

So, from my $3.50 I’m actually only earning 45 cents a book. 45 cents. You notice that this is less than the author. And that 45 cents has to either pay for the stock art for the cover (if I made it) or it goes out to an illustrator. It also has to cover my time and energy, editing, copyediting, proofing, graphic design work and the time I spend marketing.

So, after selling 1000 paperback books, my author has made $500, I have maybe made $450. If I only put in 80 hours per book, I’ve made less than $6 an hour. But let’s be honest, all the money my company makes goes right back in to fund the production of new books. My current salary is 0.

*But what about ebooks?* you ask. *Those don’t have printing expenses and people are making fortunes off of those. Why dont you pay your authors more?*

I do pay them a higher percentage. But again, let’s do the math.

I price my ebooks at $3. The ebook market is highly price driven. Since my authors are unknown, I have to widen the field to the largest numbers of customers possible. That means a $3 price point.

From that $3, again, the retailers take 50%.

I get $1.50. I pay a 50% royalty on ebooks, so my author gets 75 cents. Yeah! Thats more per book.

I also get 75 cents, but again, I have to pay my pesky distributor its 20% or 30 cents.

I’m back to 45 cents. I make the same money with a paperback as I do with an ebook.

And if its an ebook original, there are expenses associated with it.

For the ebook original coming out on Tuesday, I had a cover expense of $50. That means that I have to sell 112 books to break even. After 112 books, my author has made $84. I’ve made 40 cents.

$84 and 40 cents.

Writing and publishing. It’s a labor of love, not a labor of profit.

To better illustrate all of this, I made the following info graphic. Now the really astute of you will notice that the numbers on it are not identical to the numbers I wrote about above. For example, the author royalty on the info graphic is only 5%. That’s because the 10% royalty I pay an author is calculated after the retailer/wholesaler takes its discount. With a 50% discount on a print book, that works out to 5% of the retail price. Now when someplace takes a smaller discount, obviously the author makes more.

For a printable version, click here.

(Already a subscriber to my newsletter? You have this info graphic plus all of the other free stuff in the email sent 1/22/2015.)