Posts filed under “Financial Press”

Bookonomics (or, why writers barely make min. wage)

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:

Revenue:
Advance $100,000

Costs:
Return prior advance $25,000
Agent $15,000
Editor $15,000
Research $10,000
Artwork $4,000
Other $1,000
———————
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.

Category: Bailout Nation, Bailouts, Financial Press, Media

Thursday’s Reads

Today’s readings look pretty interesting: – Volcker Rule unabridged (Marketwatch) How the former Fed chairman can sharpen his proposal – Never short a country with $2 trillion in reserves – 41% Fine With Budget Deficit If Taxes Are Cut (Rasmussen Reports) – Five myths about America’s credit card debt (Washington Post) – Fed’s Warsh: Regulatory…Read More

Category: Financial Press

Wednesday Reads

Today’s eclectic and interesting reading list: – Remarks by Chairman Bernanke at his swearing-in ceremony – Easy = True: How ‘cognitive fluency’ shapes what we believe, how we invest, and who will become a supermodel (Boston Globe) – R.I.P. CPFF, PDCF, TSLF, AMLF, et al (Real Time Economics) – Housing Red Flags Ignored (Fox Business)…Read More

Category: Financial Press

Monday Reading

New week, new stuff to read: • Dear Wall Street: We’re Sorry (Marketwatch) • The first review of Paulson’s book is out, via Bloomberg: Paulson Defends Lehman Rout, Gives Bush Primer on Hedges: Books Shorter version: Eh. • Are Appraisals the New Organized Crime? (Housing Watch) • Google Economist Explains Why You Won’t Pay For…Read More

Category: Financial Press, Markets

BizWeek Bulks Up

The realignment of the magazine segment of the business media continues today as BusinessWeek‘s new editor Josh Tyrangiel announced former Fortune Managing Editor Eric Pooley would become Deputy Editor of BusinessWeek and New York Magazine Editorial Director Hugo Lindgren would join him there as an Executive Editor. The two hires are something of a confirmation…Read More

Category: Financial Press

Thursday Linkfest

Some interesting reading I happened across today: • Goldman Viewed as Favored by Regulators, Fed Says (Bloomberg) • What Congress missed at AIG-Geithner hearing (NY Post) • Volcker has the measure of the banks (FT) • Mortgage Bulls Bid Fed Adieu (WSJ) • Reinhart and Rogoff: Why we should expect low growth amid debt (FT)…Read More

Category: Financial Press

More WSJ Errors: This Time, Its Math

Last week, we discussed a highly politicized, misleading front page article about new bank rules (WSJ Jumps the Shark). If you recall, that story included a large chart showing much various banks declined, in dollar and percentage terms. Turns out the data was wildly wrong. The Journal ran a milquetoast correction, under the heading “Corrections…Read More

Category: Financial Press, Mathematics

What’s Contributing to Market Volatility?

This will be the last mention of media bias for the foreseeable future: The NYT wades into the market action last week, and spots numerous factors contributing to the volatility: “Worries about the strength of the global recovery and proposals from Washington to clamp down on banks have sent fresh jitters through financial markets, prompting…Read More

Category: Financial Press

What Will this Week’s Housing Data Suggest?

We have 3 major Housing releases this week: • Existing Home Sales (1/25 10:00) • S&P Case-Shiller HPI (1/26 9:00) • New Home Sales (1/27 10:00) I expect the trio will show that housing remains weak, that we are not seeing much in the way of any structural improvement in the Real Estate market; but…Read More

Category: Financial Press, Real Estate

The WSJ Responds

After this morning’s WSJ post, I was contacted by several different people from WSJ/Dow Jones I have known over the years. Each of them are people I have read for a long time, and each covers different parts of markets and investing. All 3 of them told me that they have never experienced anyone “messing…Read More

Category: Financial Press