–matt

Why not design costs only?

Richard

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

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.

“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.”