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Blog to Book and the $300K Advance

MoneyThe New York Times recently ran this article about the latest book-to-blog success story, Stuff White People Like.  The blog was launched in January, quickly ran up the Technorati Top 100 list and is currently in the 40's-50's, depending on when you look it up.

Converting a blog to a book isn't exactly new, but paying the author a $300K is pretty bold, especially when you're talking about a $14 book.  The article notes that Random House would have to sell about 75K copies to earn back that advance.  That's a pretty healthy sales number but I question whether even 75K copies will earn back the $300K author advance.

Let's start with the $14 cover price.  The typical discount to retailers is 50%, but I could see this one going into more mass outlets than usual and probably being part of some other deeper discount promotions.  Let's assume the average discount is about 55%, which is still probably conservative.  That leaves the publisher with 45% of the cover price, or $6.30 per copy.

The author's royalty rate is unknown and there are other factors that could come into play on this part of the calculation.  So, rather than speculate on this variable, let's just look at the author advance divided by the publisher's net revenue against the 75K units cited in the article.  Using the $6.30/unit from above, sales of 75K copies would produce $472,500 in publisher revenue.  Divide the $300K author advance by the $473K publisher receipts and you get 63%.  In other words, Random House would have to pay the author a royalty rate of 63% (against net) in order for the author to earn out that $300K advance after selling 75K copies.

That seems pretty darned unlikely to me.  And although this blog has a lot of momentum right now, a $300K advance seems extremely rich and highly speculative for this one.  I'll be curious to monitor the book's sell-through results in Bookscan when it comes out later this summer.


Cecil Vortex

Wow. They must be banking (quite literally) on it selling closer to 250,000 copies.


Morgan Ramsay
That's a pretty healthy sales number but I question whether even 75K copies will earn back the $300K author advance.

What really irks me about all the "we're content businesses" businesses, from books to games, is this approach that presumes only one source of revenue. You see the same thing in the movie and TV businesses where the fates of products are determined by box-office revenues and first-season (or first-week) viewerships.

Great shows, for example, are constantly getting cancelled because they don't "pull in the numbers" during their short runs. Donnie Darko, a great movie, did extremely poorly in the theaters, but performed like a star in DVD sales and such. The ROI metrics in these businesses seem to be unfairly limited, almost prehistoric, in focusing on short-term returns.

I don't think 75K copies would need to earn back the advance, if the publisher found more than one way to skin a cat, so to speak.

Stephen Tiano

Joe, Morgan makes excellent sense. So, taking all he said out of the equations and given your experience in and knowledge about how the business works, what other reasons might there be for taking that $300K gamble?

Joe Wikert

Morgan, I'm simply not seeing any other *significant* viable revenue stream opportunities for this sort of book. There are certainly a few other ways to package a brand or content and make money beyond the book itself. You mention movies, and while they're an excellent example, and probably the most lucrative of all (when they work!), I'm having a hard time seeing this particular blog and its content on the big screen. Could there be other, new models invented today and in the future? Absolutely, but I wouldn't wager a $300K author advance on an unproven platform.

Stephen, hopefully the note to Morgan answers part of your question. I suspect the reason such a large advance is being paid on this is due to irrational exuberance, to quote former Fed chief Alan Greenspan. I think it's the same reason why some people wind up paying more than the going retail price for certain items on eBay. You get caught up in the excitement of winning the bid (or in this case, the book) and you overpay.

At the end of the day, I could be terribly wrong and this book will sell like crazy, more than earning out its advance. But the publishing road is littered with far too many projects that didn't earn out 6- and 7-figure advances. I'd be concerned that this could be the next one on that list.

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