The release of the last Harry Potter book and the assured success of it (12 million books were printed for the US alone) got me to thinking about return on investment. Specifically, the return on JK Rowling’s investment (of labor/time), which has to be among the highest in the history of creative enterprises. Let’s look at some rough numbers.
- Harry Potter books have sold 325 million copies worldwide, making JK Rowling a billionaire and the wealthiest author in the history of literature. I don’t know what the average price/book is but let’s be conservative and say $10. Amazon sells the hardback for $18 as a point of reference and the MSRP is $34.99, but I doubt anyone is actually paying that price unless they’re buying it in an airport bookstore or whatnot. Paperback sales also cut into the average price quite a bit, so I think $10/copy is probably within the realm of reason. That’s $3.25 billion from the book sales alone (all of which is certainly not going to JK Rowling, lest anyone think I am implying that).
- JK Rowling spent 17 years writing the 7 book series. I doubt she put in the equivalent of steady 40 hour work weeks writing during that entire 17 years (I’ve never met an author who can legitimately claim to productively write 40 hours a week year in year out) but let’s be generous and say that 17 man-years of work went into the development and production (not including printing, marketing, and distribution) of the HP books.
- World of Warcraft cost, I believe, somewhere between 70 and 80 million to develop (not including manufacturing, marketing, and distribution) and had a team of upwards of 100 people. The current dev team for WoW is 135 people according to Gamasutra. I’m not sure when development on WoW started but given that Blizzard first announced WoW in 2001 at ECTS (European Computer Trade Show) and had gameplay footage there and at E3 that year it must have started development in 1999, at least. It’s likely that the WoW team size averaged at least 80 people on average for 5 years, or 400 man-years of work, at minimum.
- I’m willing to bet large amounts of money that the average person working on WoW did in fact work at least 40 hours a week, so even while comparing oranges to apples it seems certain that WoW cost at least 20x the amount of labor that Harry Potter did. I suspect the real figure (factoring in the amount of work done rather than just the (amount of time from start to finish*average number of workers) is more like 50-75x as much.
That means that if we just look at the book sales for Harry Potter (merchandising is easily 1-1.5 billion/year and then there are the movies, each of which has done very well) in terms of return per hour, they have earned about (using my very very rough estimates) $191 million for every man-year of labor put into them.
For WoW to hit such a ratio it would have to produce, in total, $76 billion (and again that’s without including HP merchandising, which certainly dwarfs WoW’s, or the HP movies). Currently, WoW brings in about $650-700 million/year plus box sales, which have added a few hundred million to the subscription and Asian net cafe figures. In other words, WoW would have to run for about 100 years at the current activity level to match the revenue/man-year from the Harry Potter books alone. (And of course given that a dollar today is worth a lot more than even an inflation-adjusted dollar in the future, the real answer is that WoW would have to run a lot longer than that to give the same return.)
Disclaimer again: Many of these numbers are estimates. Informed estimates, but still estimates. I’m also comparing apples and oranges to a large extent since WoW has enormous support costs that Harry Potter does not have, but similarly WoW has enormous recurring income that Harry Potter books do not have (though Harry Potter merchandise and the movies probably more than make up for that).
13 comments
Comments feed for this article
July 25th, 2007 at 3:23 am
Pingback from FreshlySqzd RezPlz! - Archive - Rowling In It
July 24th, 2007 at 11:25 am
Allen Varney
You’re neglecting resource costs. Printing all those books required whole forests, whereas WoW’s required resources are basically just electricity. And of course, if you’re including all of WoW’s artists, animators, QA testers and so forth, you must fairly include the staff at J. K. Rowling’s publisher, the advertisers and marketers, the sales force….
July 24th, 2007 at 11:31 am
Matt
Well, I did say I was specifically comparing development costs only. Marketing, distribution, and manufacture were not included. WoW’s required resources for manufacture and distribution are certainly not just electricity either. They include hundreds or thousands of servers, the boxes, the cds, the manuals, etc.
–matt
July 24th, 2007 at 12:09 pm
Riv
Well this seems to coincide with the fact that people will purchase the product whether it’s produced by one or one thousand, they don’t really care, they just have to like it. So if you have the ability to produce something the masses will enjoy, in the end the best potential income is realized with the least amount of people.
Albeit, what would be another fun comparison is calculating average time to read the book and assumptions about how many times someone will read it versus the average play time associated with a player of WoW over the course of his career. WoW wins in the timesink department.
July 24th, 2007 at 12:11 pm
Riv
Whoops, missed the last part. So if WoW could capitalize on time spent within the game, they’d theoretically surpass the Potter book much faster.
July 24th, 2007 at 12:23 pm
Matt
I think they do capitalize on time spent within the game actually, via their subscriptions. Granted, you can pay a subscription and not play at all but the longer WoW keeps someone interested the more money they get from that person.
July 24th, 2007 at 2:19 pm
Bob
I think you will find this article interesting
http://nymag.com/news/features/2007/profit/32906/
“Two thirds of Random House’s income comes from paperbacks, which retail for about $10. Of that, $5 goes to the retailer; $2 covers Random House buildings and staff; $1.50 goes to author payments; $1 goes to paper, printing, and binding; 50 cents is profit.”
July 24th, 2007 at 3:19 pm
Matt
Cool, thanks for the link Bob!
July 24th, 2007 at 4:16 pm
Psychochild
Some more interesting bits for you, Matt.
According to an online biography, Rowling only made an advance of £1500 on the first book; the first print run was only 1000 books.
One interesting thing to note, however, is that Rowling kept all other IP rights to her work. This means that when Scholastic came along later to offer £100,000 for publishing rights in the U.S., she got to keep most of that. The reason why she’s now a billionaire is because she got to keep many of the rights that let her make tons of money off of merchandising, etc. She also had a strong negotiating position with future books.
Compare this to working with a game publisher: they want most of the rights, even the ones not associated with producing the game. Most development contracts now include language stating that the publisher can acquire the company in the future for a bargain basement rate, too, so even if you are independently successful the publisher will be able to take most of that profit, too. If you do not have original IP, the publisher usually tries to lock you into an exclusive deal for a certain number of titles.
Of course, you can point out that a book publisher’s investment is pretty low compared to a game publisher. But, the great return on investment that Rowling had on her books is in part due to the fact that she retained IP to her work. It’s also instructive to note that most of the very successful developers have had similar arrangements. However, this type of arrangement tends to make publishers cranky because they don’t have enough control.
Finally, it’s instructive to see that these data points, Harry Potter and WoW, are statistical outliers. For everyone one of these, there are dozens if not hundreds of others that struggle along.
July 25th, 2007 at 2:09 am
Ola Fosheim Grøstad
Brian, I believe American and European (book) publishers represent different cultures regarding IP. Lots of small countries where publishers needs to be favoured by their governments for their work as cultural institutions (being ardent defenders of local languages and culture gives them taxation and other benefits). Not sure if that applies to Britain though.
July 27th, 2007 at 12:28 am
Richard Bartle
Ola Fosheim Grøstad>Not sure if that applies to Britain though.
It doesn’t. There may be grants for publishers of books in Welsh or Gaelic or Esperanto or whatever, and there may be grants for publications about certain subjects, but on the whole the industry has to sustain itself.
Richard
July 27th, 2007 at 12:29 am
Richard Bartle
Matt>Well, I did say I was specifically comparing development costs only.
Why not design costs only?
Richard
July 27th, 2007 at 9:45 am
Matt
Well, could compare design costs only but I don’t know how much time Rowling spent designing her plot as opposed to writing out a finished product. I suppose this would come down to your definition of designing vs. developing (which I look at as including designing).
–matt