Different Models of Publishing and General Philosophy

by Richard Grossinger on March 2, 2010

Chapter Five
Different Models of Publishing and General Philosophy


I can think of a variety of things that had an influence over the development of my strategies:

1. Lobstermen: During my Ph.D. study in Maine, I learned a great deal from fishermen. The most explicit thing that they taught me, as noted earlier, was an elegant principle of division: one for you, one for me, and one for the boat—which meant a two-thirds/one-third split of the earnings from their catch of the day, with the two-thirds going to the owner of the boat. I used that principle with co-editor Kevin Kerrane to split the earnings from selling our baseball anthology to Doubleday (the boat being Io), though it rankled him enough for him to call me “a Martian” over a decade later.

I used it going the other way in just about all our copublishing deals, splitting my own sales 50/50 with each copublisher but giving him (or her) a 70/30 split on his (or her) own sales—30% for each of us, and the usual bookstore cut of 40% to him for selling the books. It convinced a number of individuals and organizations with strong customer bases to throw in with North Atlantic because they got half of our sales on top of 70% of their own. Because they owned the boat, the contract was inherently biased in their favor. It was a case where generosity bred generosity, plenty produced plenty. Yes, we gave away a lot of money, but we earned a lot too, and the wheels of commerce kept turning.

Fishermen also preferred not to call direct attention to injustices, instead righting them by their own counter-measures. For instance, wharf-owners complained to me that the bait trucks weighted down the chum they delivered with water, making it heavier, hence more costly if paid by the pound. So they had their own schemes: one wharf-owner cut a hole in the bottom of his master bait bin, and huge clumps of bait dropped below the scale and some of the water drained off. Yet at the same time, the bait-truck driver told me that the reason his bosses had him water down their product was to exact payback from the wharves for having false bottoms in their bait bins.

Which was the chicken and which was the egg, or who cared?

And this is merely what they were willing to tell a long-haired, bearded anthropology student in 1969 whom they thought was an IRS agent in hippie disguise.

I never outwardly cheated or nickel-and-dimed copublishers who, I thought, were nickel-and-diming or scamming us. Instead I thought of a counter-measure, something imperceptible that balanced the equation, a percentage point here or there. That way, we never had to haggle minutiae or be reactively petty with each other; the sanctity of the deal and a surface good will were never sullied. One copublisher and we have done this dance for years under the banner of a famously happy and mutually beneficial collaboration. He cuts corners; North Atlantic cuts different corners. I think we are still in the lead, but how would I know? Both of us are no doubt equally amused by and equally satisfied with our separate clevernesses, so the outcome is perfect. Information would only sully it.

Also, the fishermen knew when to cut others’ traps as well as when to abandon their own. I may not have been entrepreneurial by intent but, as noted, I rarely threw good money after bad (even if the books at issue were meaningful and aesthetically pleasing—books and money, as noted, are different measures entirely). And I was very competitive with other presses, going after things that I thought I could land in any ethical way I could think of.

In fact looking back, I question even whether I was always ethical, not just in fighting for authors and books but in my whole game. I guess I wasn’t totally. I can recall errors in our favor that I let go over the years. I can remember deals that favored us reasonably because an author or copublisher didn’t understand the mechanics or what they were signing, and I didn’t always enlighten them.  Sometimes but not always.  Strange world, this is.  Often one’s own actions don’t even make sense or seem consistent to oneself.  Mood?  Intuition?  Latent sense of delayed justice?

Not these days. I have pretty much outgrown all that stuff. Publishing is more of a practice for me now, so I try to practice it karmically. I also let staff make final choices, which is a good way to force North Atlantic to be scrupulous and overcome any of my ancient hippie New York street habits. With transactions and book-keeping essentially transparent and accessible, any temptation I have to let an error on our side slide by is held in check because someone is going to catch and correct it, even when the correction is expensively not in our favor. In other words NAB has become squeaky clean; its system of operation prevents cheating, which I try to point out to the occasional paranoid author who is sure that we are hiding sales or somesuch..

I don’t know if I am even as intrinsically ethical yet as the system I put in place, but I do believe that one creates conditions and then follows, especially if there is no other foolproof way to cultivate behavior from scratch in oneself. Set up a way to teach yourself what you need to learn. Externally compel behavior that is not natural or internally governed.  Model what you want to become.

At the same time, I have always been generous, even weirdly so. When people needed money, I have given them the max that we could afford, even if they didn’t really earn it. I have infuriated both Lindy and other employees with overly luxurious deals.  Present managers refer to them as my legacy contracts.  It’s weird.  Sometimes I have been devious and taken more for us than we should have gotten; sometimes I have given away so much that there is no margin left.  All whim in a way.  Hippie business practices.

But I know too—generosity and ethics are not the same thing.

That is all, of course, in the past.  At a certain you realize that you can’t keep making it up as you go, and you also are going to regret eventually giving away the store.  More on all that later.

2. Games: As a sports fan since age eight, I love games and keeping tracks of stats so, from the outset of Io, I have obsessed over its numbers the way a sports fans follows scores, standings, and averages. As I massaged my record-keeping every which way, I discovered hidden data and formulas. For instance, I invented my own ratios among unit cost, average cost, and overrun cost, on the one hand, and discount rates on other, and I used these numbers to help make deals, with stores and wholesalers as well as authors and copublishers. They allowed me to work out beneficial margins. I will describe some of these in Chapter Fourteen.

I savored our grant money and let those Government checks hit the math like sudden bonanzas or algebraic floods—what a day! That is the main reason that I never spent any NEA funds on anything but the items listed in the application. It would have ruined the game. It would have tainted the records and stats.  Kind of life steroid home runs, or their opposite, i guess.

I enjoyed the sport and the numbers and their patterns more than the money, so I took good care of them. I don’t know of any other literary publisher of that era who was a fanatic sports fan in the same obsessive way as I was vis a vis the stats or who conflated book publishing with pro sports.

It was good if the Mets or Jets won, and it was also good if I won too. If either of us lost, there was a bit solace if the other won.

3. Bank Loans: In the late seventies as we departed the East Coast, I watched both Goddard College and Grossinger’s Hotel go deep into debt, each up to the verge of bankruptcy, partly from their huge loans and the interest on them. In fact, Grossinger’s was entirely out of business by the late eighties. My father used to say that he didn’t see the difference between having a million dollars and borrowing a million dollars because, either way, you got to use it. I didn’t share his outlook or temperament.

I viewed debt and loans as the worst possible fate, so I religiously kept North Atlantic in the black, even if my margins were small and my opportunities constrained by lack of capital.  I completely rejected the Silk Adler Colvin idea of turning the nonprofit into a for-profit by leveraging debt (see Chapter Two).

Except in big big business where cash flows like a mighty river, interest paid to an outsider is not only a debilitating but a sterile expense. It brings in nothing and is a daily thief.

People take loans to buy time. I prefer to use time alchemically to ripen things at the own rate. Borrowing money puts immense pressure on a business to use the time they have bought to generate enough extra capital to pay back the interest on the loan and make the transaction worthwhile.  It speeds up time to a frantic point and pressures a publisher to develop bestsellers only.

When you are operating on both borrowed money and a small scale, your whole business mentality changes and everything becomes more intense and stressful. Bank loans rather than the content and natural lives of books drive the activity and determine the philosophy and the office mood. Bank loans become the boss, the de facto publisher as well as the acquisition committee. Never borrow money.

4. Puts and Calls: Around 1980 one of our then best customers, Richard Aaron, owner of Am Here Books in Santa Barbara, showed up at our Richmond front door to do some—at least in his mind—important business. For reasons that I forget, we ended up driving to our local bank on MacDonald Avenue for something and, it being Halloween, the tellers were in costumes.

The international sophisticate Mr. Aaron then informed me, as if this was the first time he had been in an American financial institution on Halloween, that he would never use a bank that participated in such idiocy, especially where something as serious as money was involved. “It shows a bad attitude,” he snarled; “they would never permit such nonsense in Switzerland.”

He then asked how much money we had in the bank. I told him and also that it was our whole savings. He shouted: “At no interest? Get it out [he looked at his watch]…tomorrow.”

The next morning, I walked into the Merrill Lynch office in Berkeley and was assigned an account executive who astonishingly turned out—in a world of six degrees of separation (or less), seemingly forever—to be the son of one of my stepfather’s oldest friends and gophers. The guy (whom I will call Gary) immediately put us and North Atlantic into money-market accounts and went from there, over the next several years, to entice us to invest in his various quasi-legitimate insider-trading and options schemes, which were many and varied.  “Quasi” is probably an overstatement.

The story of our experience with this hustler is told in detail in “Playing for Keeps” in Out of Bablyon (pp. 396-397 and 418-419). For the purposes of this narrative I will mention only that one of his strategies involved buying both the puts and calls on the same stock or buying the stock as well as its puts and/or calls so that you were covered in both directions of the market. He had many combinations of this scheme in which you basically bet against yourself or sold off your high-end potential in order to lock in an almost-certain small gains. He showed me that you could constantly make little bits of revenue—guaranteed—if you were patient and didn’t get greedy.

Gary’s strategy confirmed and enhanced my own strategies. I too was selling off the high end (to copublishers and authors) in order to lock in small gains. I regularly got half (or more) of the costs of a project paid for upfront, so I continued to eschew risks and sell off high ends. For instance, I traded Richard Hoagland 90% of all profits on revenues over a million dollars on The Monuments of Mars for a low initial royalty, no advance, and being able to deduct around $5000 from his earnings to pay for my time rewriting and editing his book—just like Gary’s strategies. There was a moment when it looked as though I was going to regret that 90%, but then the sales, after soaring early, fell to a dribble somewhere short of $500,000.

Gary’s schemes eventually collapsed when the stock market caught fire and blew right through his parameters. That led to our losing lots of money, his firing by the brokerage house, and celebrated lawsuits (though not by us), as he had recruited widows and pensioners into his schemes—but it worked for many years and during that time he would gleefully point out: “You hardly made anything today. A mere $300 when you could have made $5000 if you were naked, but that’s a washing machine if you happen to need one.”

Usually when we made $300, someone else made $3000, but who cared? That person ultimately lost $6000 somewhere else while we kept making our $150 here, $400 there, week after week.

I applied this scheme religiously to North Atlantic, especially in our copublishing relationships. I gave high royalties and escalators up to the afore-mentioned 90% of Hoagland’s profits in order to avoid risky advances and keep expenses on the front end down. And it paid off for years, until it didn’t (see Chapter Nineteen).

This leads me to a loose generalization: In the great hunt for publishable books—sometimes characterized by mere metaphorical trapping and gathering, sometimes by pure serendipity, and sometimes by all-out war with another publisher (or publishers) or with an author’s agent or attorney—the first goal always is to keep the risk down (that is, to bail before caving in to excessive demands), but the second goal is to get the book regardless of how much of the hypothetical profit you have to give back. Be willing to give away massive amounts of future profit to get a book, but be ready at all times to bail and cut your own trap if necessary.

Books create a publishing esprit and house brand, so even a book that yields no profit but brings in a prominent author (especially one that many other publishers also lust after) is worth the play. I can think of three top authors of ours who had other suitors but whom I snared by my graduating to absurdly one-sided offers their way. I kept going higher, at our expense (though never with upfront money, always with percentages), until they couldn’t possibly go elsewhere. I never once had a rival match me on this auction. Few publishers are willing to cut their earnings to a pittance and give most of the money to the author.  Yet once you land the author or book, you get all the benefits—explicit and implicit, economic and intangible, maybe only “seven and a half cents” but seven and a half as opposed to zero and as opposed to someone else getting the book and having it grace their list and “brand.”

I have used this strategy this over and over with authors and copublishers, just to get them under our imprint. And they cumulatively have shaped the public perception of our press, not only for other potential authors but for customers and buyers at wholesale and retail accounts.

Make the money up elsewhere but, if there is any opening for you, don’t leave the ball without the prize. With one key exception, of course:

No matter how much potential profit is forfeited to acquire a book or an author, they should only be over-bought for future profit, never at the cost of dangerous amounts of upfront money. Escalators and copublishing over advances, always. That is my core strategy in a nutshell.

The need to break even is compulsive to the point of insane for me, even a detriment as you will see, but it has been a guiding faith of my business philosophy and has set our compass for better and for worse.

I have also tried, in frustration or near exasperation, going all the way to 100% (but no higher!), which is what I offered the lymph-drainage guru Bruno Chikly, as a stunt after he rejected every other combo and deal. It saves a lot of time and trouble to offer a difficult negotiating partner everything or almost everything, as it ends a tedious and often faux negotiation game and pulls the cover off any hoax. When a potential author (or copublisher) turns down a deal in which they get 100% of the profit and we get zero, as Chikly did, then they don’t want to work with us in the first place and, for some reason, can’t admit it. Either the negotiation was a sham from the outset in order to get a better deal elsewhere, or a concession to satisfy someone in their professional circle (in Chikly’s case, perhaps the Upledger Institute, our co-partner), or to assuage an artifact of their own curiosity. The interest wasn’t real; it was just posturing or angling.  Either that, or they don’t understand real math and thus fantasize that they are being cheated even when the cut goes: everything for them, nothing for the partner.  Recreational paranoia.  If someone is making their revenue off something other than books, they can afford to posture and not to do the math.

5. The Lesson from the Model of Picking Up Out-of-Print Titles: Photo-offsetting books that have gone out of print with other publishers is almost like its own separate business. You can almost grab them as they appear like apples on the ground—in the old days from lists at the back of Publishers Weekly, these days by watching used prices on Amazon.com. You have no design or production costs. Just send a couple of copies of the book to the printer with a new front and back cover, copyright page, and title page. Tell him to print 1500.  Or run the pages through an OCR scanner and you have new files to design.

Of course, back in the eighties and nineties, there was no competitor. Nowadays Amazon and other online dealers are killer rivals, as they can sell the books without even reprinting. They commandeer seemingly limitless number of used copies of anything (even, in fact, before it is published). Because of Amazon, these days you have to be much more cautious on reprints, even reprints of your own books.  You have to pick the right titles, typically ones with a high price on Amazon and other online used-book sites, as these are the more scarce titles. Books that are selling for a penny, a nickel, a dime, or even a dollar or two per item, are in too great supply already to be worth reprinting. You can’t compete with those prices.

Recently a friend told me about an out-of-print title on Oklahoma City and the politics of terror, selling for like $150 a book on Amazon.  He said it was a smoking gun so I inquired with the publisher.  “You’re welcome to it if you want,” he said, “but you probably should listen to mty story first.  It turned out that he was sued by two FBI agents, had to take the book out of print to avoid an avalanche of legal fees, and then FBI personnel came to his distributor’s warehouse and destroyed all the copies.  Also the author was dead, an ostensible suicide.  “No thanks.”

The old OP formula worked much better when there was no central organizing database to tell you that or to put customers for a particular book internationally in touch with that book’s sellers, however many cheapo copies there might have been on the loose. You mainly had to try to find out if there had been a large remainder (distress sale for anywhere from a nickel to a couple of bucks per book) and if it was still in the market or just guess.

Nowadays too just about every book that can breathe is pirated and available for free download.  Send a legal notice to one website and it pops up on another.  I am told that most of the digitalizing and PDFing goes on in China, unregulated by the government there which either sanctions it or looks the other way, and the various websites are mostly fronts for Chinese copyright crooks.  You are competing against those downloads too as well as used books, even on your own active titles in fact.

In the mid eighties Jay, my venture-capital cousin with whom I went to summer camp, was looking for a for-profit project that we might do together outside of North Atlantic, so I prepared a five-year profit-accreting flow chart for acquiring exactly five (for modeling sake) of these kinds of lapsed titles each year and building a backlist from them, no single one of them selling a significant number but all of them rolling steadily along.  They all would have track records and longstanding market recognition.

The model generated something like $100,000 in profit on $150,000 investment. But Jay thought that was too little to merit his attention and I should just do it myself. In effect, I did—only not with reprints (with a few exceptions) and not under a for-profit rubric and not just five a year. It became my basic business model for North Atlantic Books itself, as I began to realize. I merely drew up for Jay what I had been practicing unconsciously, and then I did it more assiduously after taking stock of my chart.

Six years after this, Seymour, Jay’s afore-mentioned younger brother, made a similar offer, and it flew, creating into our second, for-profit imprint, Frog, Ltd.

Modes of Publishing and Contract Deals

For the time being I would like to segue to a discussion of our various modes of publishing. The tone will change, as the perspective switches from historical to present (diachronic to synchronic). I will also be borrowing sections from the guidebook for authors that I co-wrote with Lindy about fifteen years ago, so there’s a different tone.

Risk Distribution

Copublishing: Copublishing is the quintessential strategy for reducing risks, but it is also the quintessential collaboration. In principle, copublishers each invest one-half of the costs and reap one-half of the benefits (revenues). Developed in rough form with HES in 1979, our copublishing contract needed fine tuning over the years. These days we still give 50% of earnings and accept back far less on books sold by the copublisher, but we have modified the deal in other ways.

In the mid nineties we “upped” our cut on copub sales from 30% to 35% and added a 10-12% overhead charge for passive copublishers, e.g. those who don’t sell or promote the book, as it had become clear that some of them were reaping windfall profits at our expense with no labor. We waived the overhead fee if a copublisher contributed anything major to the sales effort—for instance, a significant number of his or her own sales, steady promotion, a running book tour, or a meaningful bunch of his or her own accounts. The overhead charge has gone up since we moved to Random House in 2007, as they offload many of their costs from the discount rate into separate bills for services and by requiring the publisher to provide personnel to carry out title loads and do catalogues.

We also began to charge a monthly warehousing fee if we had to hold all the inventory, a fee we likewise waived if the copublisher split the storage. But even after these modifications, our copub deal still provided one of the most generous contracts in the business. Maybe that is why we got away with initially applying modifications retroactively to old contracts when we first began with overhead, as described in Chapter Fifteen.

The copublishing model serves many purposes:

1. It cuts back on the risk of the publisher, since half of the expenses are automatically handled—a feature already discussed in the previous chapter.

2. Where the author is the copublisher, it removes the philosophical, ascetic, legal, and personal split between a publisher and an author and allows the book project to be a collaboration between peers, hence reducing tension (though sometimes creating other disputes by elevating an author to the level of publisher and taking away the publisher’s sole authority over production decisions). But no longer can the author play the Marxian violin of pretending he is labor (hence the good guy and a default victim) while the publisher is capital (hence the enemy of the people).  That’s still a favorite show tune in our business.

3. It gives the author a dramatically increased incentive to sell books because s/he makes so much more per copy.

4. Insofar as many copublishers were content to have us handle everything, we gained a secondary source of income from overhead, warehousing, and freight. While the fees we charged remained linear and absolute, costs could be bundled and reduced on our end because multiple books warehouse and ship together. Thus, we actually made money cumulatively on flat overhead if viewed simply on a fee-versus-cost basis.

Although some copublishers preferred to do a share of the work and/or the warehousing, most were happy to pay us to do it so that, as we added more and more copublishers, we defrayed an increasingly significant amount of our in-house overhead—rent, warehousing, and staffing costs—and we continued to stack economy of scale further in a positive direction. At the end of our warehouse’s life with our move to Random House in 2007 (see Chapter Twenty), it was actually a revenue center.

Historically here have been two different kinds of copublishing for us. In the first (and less common) mode, we copublish third parties—separate authors—with another company, usually a professional organization or, in rare instances, another publishing company.

In order for us to copublish with another publisher, that company has to withdraw our copublished titles from the market and let us distribute them through our exclusive distributor (PGW for almost thirty years and now Random House), as there cannot be two distributors in the book trade of the same book. This means also that the other publisher’s ISBN-prefix cannot be used on a copublished book unless it is the only book with that prefix or we are taking on all the publisher’s titles, because the market expects the distributor of any title with a prefix to have in their available stock and catalogue all titles with that prefix.

The main instances of our copublishing a multiplicity of authors with an organization are represented by our extensive lists with Homeopathic Educational Services (about thirty titles), Feldenkrais Resources (about twenty titles), and the Upledger Institute in Palm Beach Gardens, Florida (about fifteen titles). In each case, the books are on topics developed and promoted by the organization and are simultaneously sold privately by them to their captive market while they get into the book trade through us, leading to exponentially greater sales and public outreach for both parties.

Thus all three organizations (HES, Somatics, and UI) sell our copublished books through their own mailing lists and/or seminars, although their efforts, like those of the near-extinct independent bookstores, have been severely undercut lately by Amazon’s discounting (as well as the ubiquity of online booksellers in general). That makes such collaborations less beneficial than they were in the old days. It used to be that, with their 65%-80% discount from us (depending on the deal they cut—yes, we went as high as 80%; see below), institutional copublishers did so well on their own sales that they didn’t mind ceding some of their jealously-possessed publishing rights to products they had developed and on which they had a virtual monopology, especially in a territory like the book trade, which they hadn’t explored and to which didn’t have cost-effective access.

Unfortunately many attendees of their own seminars now get ahold of their course list ahead of time and buy used or discounted books from Amazon. With Amazon inserted as an unwelcome partner, it has become much more difficult to persuade fresh organizations to copublish their bread-and-butter texts with us. Our potential copublishers, if they are on top of things, realize that they will no longer be able to control the prices of their products to their own customers. Not everyone shares that perceptive or, for that matter, cares about their own sales quite that much. So the game is still on, just not as juicy win-win.

More often we copublish directly with the author of a title, in which case the copublisher and the author are the same party. That is far and away the most common model of copublishing for us.  There are two contrary reasons for authors seeking copublication:

1. A person wants to keep control of his or her own book(s) while earning the maximum possible, more than ordinary royalties would allow.

Depending on the nature and market of a book and its production costs, e.g. the difference between its unit cost and its average discounted net, copublishing contracts can earn authors anywhere from three to eleven times what they might earn by publishing with a royalty only—and that margin includes their expenses.

Any initial boon increases from the first to the second and subsequent print runs because, when a book sells, the upfront and set-up costs have already been handled and the print runs usually get larger and the unit cost of each book drops; hence, the author (like the publisher) is making more and more money at lower costs. This explains some of the spread from three to eleven (the other factors depend on the parameters of the book itself and the terms of the contract).

Usually no additional copublisher investment is needed after as first run, as reprinting costs can simply be extracted, when needed, from cumulative earnings.

One author invested only $3000 because his book was short and straightforward and, within three years, had earned over $250,000 net. He did not have to pay in anything more, even when we did a second (and later a third) title. The production expenses of his new titles as well as all printing costs for reprints were being deducted from his earnings. This was  an unexpected bonanza.

If he had been a mere author, he would have netted something more like $50,000 in that time.

That was great for him, not so great for us, but we weren’t hurting either, and that’s an absolutely crucial point that is most often missed by publishers who want almost compulsively to max out their side of every contract or at least go for the traditional publisher’s share: we can always make up our “losses” by finding other books, something the author has far less opportunity to do unless he wants to start a whole company and publish other people.

A snapshot look at publishing economics shows how the nest egg is generated for both the publisher and the copublisher. Whereas publishing is not the most lucrative business by any stretch of the imagination, it has viral potential. It takes about 1200 books out of a print run of 4000 to break even on an average title, so the additional 2800 are pure profit (minus the investment cost of reprinting). But it might then take only 500 books to break even the second time around. In cash, that’s a lot of massage patients or martial arts classes to do by elbow grease and the sweat of one’s brow, but the right book packages it all in a twice-annual check, deducting ongoing reprint expenses, without the slightest effort on a copublishing practitioner’s part.  It is laborless income going forward.

The agent who represented herbalist Jeanne Rose in fact questioned the sanity of our boilerplate copublishing deal in the early nineties. He had shepherded his client to our door because he knew she would only be open to a copublishing arrangement and we were the most viable publisher around then doing such deals (plus it didn’t hurt that her topic was dead center in our list’s territory). But he was sure there had to be a catch. “No one would give away this kind of money,” he pronounced with exaggerated cunning. “Tell me Jeanne’s hidden costs.”

He already knew about overhead and warehousing, so I insisted that there weren’t any. He couldn’t believe that. But it was true: the motivation to copublish and its hidden benefit to us were legitimate, as he was in process of proving, whether he knew it or not. We were getting an author whom we never could have signed otherwise.

The turning point of our publishing company could well be interpreted as the moment that Dana Ullman of Homeopathic Educational Services first proposed copublishing to me and I impulsively and celebratorily chose to give him his one-third for his boat. It created a model with widespread potential uses, and it set us off simultaneously into trade publishing and niche homeopathic publishing with a partner who on his own sold a ton of books and provided half of each investment. “Three birds with one stone” got us off the ground, and we stayed aloft. Once I saw the model work, I invoked it regularly, and I certainly learned not to worry about the “lost” revenues, as, remember, there would always be other authors, other copublishers, other books. This is how I learned that it was paradoxically more profitable to give money away than to hoard it or niggle pennies in each deal. At a certain point, if an author or copublisher was unbudgeable, I would drop all pretense and scruples and start giving away, piece by piece, everything I had been holding onto. This strategy has also made big trouble for me: see Chapters Eighteen and Nineteen.  It certainly helped us get off the ground, but it is no longer really part of our game plan.

Again, in the end maxing out your share of the money isn’t worth it, not nearly as worth it as landing the fish and keeping the ball in play. It is a little like the New Age paradigm of affluence: giving away money creates more money. Sometimes it does. If done right…. It has certainly worked for North Atlantic, as we have developed a strong and unique list of significant books and authors, many of them copublished. And, though we have given away wheelbarrows of potential profits, overall we have made money and flourished while many of the other publishers in our genre, none of whom to my knowledge did copublishing, were floundering and losing out to the big guys in New York on important authors. If we had been less generous negotiators, we might have hypothetically made more money from the same list, but would we have gotten the same list? When I explained this to Jeanne’s agent, I don’t think he believed me.

A strategy of affluence generated its own momentum. Copublishing created happy authors reaping surprising profits, who then told other people about their deals, so more authors came knocking at our door, totally unconcerned by the absence of an advance because copublishing was far more lucrative. These authors then collectively raised the prominence and profile of the press and attracted yet other authors, both copublished and regular. What we gave up on single books we recovered on the overall copublishing model. If it weren’t for copublishing (and its distribution variant described below), we never would have attracted Bruce Kumar Frantzis, Peter Levine, Richard Gordon or John Upledger.[1]

Let’s examine the Upledger situation more closely. What made this organization daunting to negotiate with initially was the fact that they already had a great game going for them in-house: their books sold as required texts to all their students in their seminars taught both in Palm Peace Gardens, Florida and throughout the world (although, as noted, Amazon later threw a monkey wrench into that monopoly). At the time that I approached John Matthew Upledger, the director’s son, about copublishing, he and his colleagues had already been courted by numerous mainstream publishers, as more than a few publishing executives invariably ended up among the corporate types in treatment at the Florida clinic. Like me they saw the unrealized potential of the Institute’s funky in-house books and admired the system that was making them feel so good, so they were thinking along the lines oif, “Wow, I’ll break this into the mainstream and hit the jackpot.”  One by one they presumed that John Matthew and his father would jump at the opportunity to go big-time.

But none of them were willing to offer a deal that preserved the Upledger cut—publishers were constitutionally against giving up that kind of money to anyone but Stephen King and his ilk (as per below). But the Institute did not see any reason to forfeit their rights or turn over captive revenue from their courses to a third party just for the prestige of an illustrious brand name like Simon and Schuster or Harper and Row. “Upledger” was good enough for them. Only creative modeling could make a publishing work.

Once I understood the ground rules and saw how tough a wrangle this particular deal was going to be, I got creative. I offered for North Atlantic to receive none of the revenue from the Institute courses (only reimbursement of one half the unit cost of the books they took), while splitting our revenue from the trade. That seemed like such a good deal to John Matthew as to be embarrassingly unfair to us, so he on his own offered back 20% of their sales (while we still paid them 50% of ours). Since each party contributed an equal amount to the production of the books, yes it was imbalanced, but that hardly mattered since we could make up the difference by expanding the market for craniosacral therapy and by getting a lower unit printing cost from the much higher run allowed by their captive seminar market—and we still made some money on that market—lots of proverbial seven and a half cents (more like two or three dollars because, unlike our distributors, they sold books at and calculated our share at cover price).  It is the perfect example of choosing to earn less than ideal instead of zero, and to enhance the “brand” at the same time (though I hate this pop business lingo).

Our association with the Institute brought us many new authors, some in somatics and others in different, related fields, while the Institute itself also took to selling many of our other titles at their seminars—an unexpected bonus. Win-win-win-win (sorry!).

Not every potential author understands copublishing. It takes moderate sophistication to do the math and realize that mainstream publishing has a bit of a racket going. Using the lure of big advances to buy off prominent authors, they lock in humongous margins and profits. Their advance money initially looks like a grand prize or stipend, but it is only an advance against future royalties and, if the royalty percentages thereafter are kept low, the authors make much less money than they would by copublishing or receiving no advance but getting a generous escalator instead.

I remember speaking to one of Stephen King’s lawyers with whom I was in touch a few years ago over a somatics project by the son of a friend of his.  I wondered aloud why Mr. King would even need a publisher or would want to give away the publisher’s share of his earnings, since he could just self-publish and get his same readers.

“But that’s what he does,” the lawyer explained. “He just uses publishers to do the work. Do you really think that they get the publishing share? Dream on. His royalty is like 80% of the profits.”

That tells me that this kind of copub model is universal, but the word hasn’t completely leaked out. It is also not called “copublishing”; it is called “the deal.” Yet some publishers still seek absolute rights and revenues, and some authors still cede them to the publisher’s brand and prestige, unaware of the complex and variable field of options.

2. In the second, quite opposite instance, we may think a book is worthwhile but not commercial, and thus we may ask its author to copublish as a way of sharing the risk. We are not always right on the low upside, however, and we often end up wishing we had done a standard author’s contract because the book ends up doing quite well. In fact, that has usually been the case when we try to cut our risk by copublishing—but then the generosity mantra has to be honored.  In fact, one has to forget about the “mistake” and praise the old potlatch, Polynesian Big Man, generosity communal, commensalist, endosymbiotic Lynn Margulis non-zero-sum, non-Darwinian model of the universe. Otherwise, you will drive yourself crazy with second-guessing and lose the spirit of the concept. Giving away money to deserving partners creates good karma as well as good energy and new money.

At very least, risk-defraying copublishing has allowed us to diversify our list without tension or peril and to do some important books without having to fuss over whether to invest the full cost of production and printing.

Distribution: In the distribution model (which represents less than 5% of our list) we put up no money—the author or other publisher pays the full cost of production, and we give back anywhere from 74% to 60% of net, depending on the situation. The underlying motives on either side are the same as with copublishing. Either the author wants to control the book and max out earnings or we want to cut costs by, in effect, selling back the high and low ends (the puts and calls) to the author. With distribution, the numbers are just more pronounced and the scales more extreme.

Distribution of commercial titles is sometimes all we can offer to get an author who knows the game and wants to maximize his or her share of earnings beyond what copublishing will yield. He or she is effectively the publisher but needs the outreach and economies of scale of a larger publisher.  So they in essence publish under our imprint and we take a small cut.  Distribution is also ideal for authors who want to pay us nothing for their own sales.  We only get paid on the books that we distribute whereas, in copublishing, the copublisher must pay us something for their own sales (usually 35% of net these days).

On the other side (wherein we distribute a likely noncommercial title because we do not want to underwrite either its production or printing, the process is tantamount to subsidy publishing (with the exceptions that we only accept titles we would have done anyway (e.g. good books under our mission statement and/or in our niches) if money and sales were not an issue and—very important from an ethical standpoint—we charge no extra vig for production or distribution, as the vanity houses like those that advertise in the New York Review of Books and Sunday New York Times Book Review do.

Diverse situations have led to distributed books. Often we have been enlisted to distribute a title to the book trade while the author uses his or her stock of copies for seminars or other professional purposes, getting, as noted, the total revenues on those. Sometimes we distribute a book because the author has already self-published it and finds himself or herself unable to get it out to the larger world or had become weary of the labor and overhead involved in being a publisher but wants to continue to control the content and appearance of the book and get the maximum possible revenue.

Sometimes, as I will discuss, we distribute the entire list of another, smaller publisher like Health Concerns (Chinese medicine) and Rangjung Yeshe (Tibetan Buddhism). Once upon a time, we also distributed Atrium, a small children’s karate publisher, and Vision Press, an investigative-journalism outfit that Lindy and I discovered on our one trip to London in 1998—but both those presses found the arrangement confining for different reasons and we were forced to cut them loose.

Distributed books come in two forms: the first (as just described) is a situation in which an author or other small publisher has the full skills necessary to put together a book from start to finish but has no way to distribute it. If the book fits our list and goals and is interesting to us, we may take it under our imprint and distribute it, using our already existing networks with their economies of scale. Such books still require our imprint and name on the back cover, spine, copyright page, and title page; a Random House compliant bar code; nonprofit mission statement; and an approved professional level of editorial and graphic execution. We have to see what is going to the printer before it is sent, even if it is the other party’s printer and on their tab, and we need to scrupulously arrange the shipping of pallets or cartons that go to the distributor, even if our partner is keeping most of the books for their own internal sales.

The second category of distributed book is the one in which the author or publisher also needs our help in producing the book from scratch. They are a publisher in checkbook only so to speak.  In these cases, the book is developed in-house by us along with our other titles, with the author or original publisher paying all the production bills directly (at raw cost as noted—no handling charges or service fee from North Atlantic). In this instance, we then get to oversee the design, cover, front matter, and production values as a matter of the regular course of editorial and production oversight.

In both cases (to repeat), the books must be an asset to our list, in terms of the content and in terms of the aesthetics.

Although distributed books take up no production money, they use staff time and consume precious slots at our distributor. This has become a more critical issue since we changed our distribution to Random House because it takes much more work and money to announce a book through Random than it did through PGW.  Thus we have been less inclined to take on distributed books in recent seasons.

Since we need to earn a certain amount each month, we cannot give back three-quarters of the revenue on too many books and still meet our overhead.

We may prefer if a particularly promising author signed a regular contract rather than came as a distributed author or copublisher, but if he or she makes profit-sharing, ownership, and control a prerequisite to a deal, we have to accept the arrangement or we lose the book. On the other hand, an author who insists upon copublishing without being willing to invest any money is not an option for us; it is where we draw the line.

An aside here: Perhaps the most inappropriate request made on a copublishing or distribution contract is notable for how often it is made—a prospective copublisher/author also asks for an advance. I have tried to explain that this is tantamount to all North Atlantic’s books being copublished because if we gave people money to copublish with us, then no one would choose to be just an author. For the same deal and amount of their own upfront money (zero) they would get half the royalties instead of just ten-fifteen percent of them.

I have compared this request to going into a brokerage house and asking to borrow money to buy a stock, while offering to reimburse the company out of the dividends and profit.

It won’t happen. We cannot give people money to invest with us and then take it out of their future profits.

A likely cause of the common misunderstanding regarding upfront money for copublioshing is the “spreadsheet” showing the exponential curve of copublisher earnings on a successful project—not necessarily the spreadsheet itself but its implications. A prospective copublisher looks at how much money he or she may earn, presumes that his or her book is a sure winner, and wonders why we can’t lend them some of that money to co-venture.

One simple answer is: nothing is a sure winner. But the more appropriate explanation is that there is a categorical distinction between being business partners on a co-ventured project and being publisher and author in a traditional publishing relationship. Even if the amount of money required upfront for copublishing is a pittance by comparison with what may be earned, and even though most copublished books break even eventually, the willingness to put one’s own cash upfront and share the risk is the sole and absolute measuring rod for who is a copublisher and who is not. Otherwise, there is no measuring rod and, as noted, all books can be claimed as candidates for any author being an honorary copublisher and due half the publishing earnings.

Occasionally we do give a copublishing deal to an author with no money upfront, but this is more a variant of distribution that allows us to attract a partner whose book or books already have a large market and in cases where we are merely stepping in to replace another publisher. Often this happens when a successful author presses for rights reversion on his or her books and succeeds. I will discuss the whole “breach of contract” gambit in Chapter Fifteen from the publisher’s perspective. When an author has already gotten back his rights to a commercial title, I don’t ask how or why. I assume it was fair and, for whatever reason, agreed to in the end by both parties.  But then the author can bring the book in action as it were as his contribution to the copublishing.  We then deduct unit cost from sales (if that makes sense—if not, skip this example, as it’s a bit superfluous and a rare exception).

The same rule about paying your way applies in the case of occasional distributed authors who try to get us to front their printing bills. We have one author who started on a standard author’s contract but wanted to make more money, so we switched him to being a copublisher. He still wasn’t happy—so we moved him to 76% as a distributed publisher. Damnit if, fifteen years later, he doesn’t still try to get us to pay his printing bills. He bills his books to us, claiming that we can pay them out of his account, or he sends us the bills with a note instructing us, as if it were pro forma, to pay them from his earnings. And that may be a week or two after he just got a check for the previous six months of earnings.

What applies in principle to copublishing applies in a parallel way to regular “royalty” authors, though at a different scale and along different risk-reward parameters—usually advances and escalators. There are myriad ways in which authors can exert leverage and gain more revenue from a project, either upfront as a guarantee or exponentially with increased sales—although Stephen King has a better shot at this with Harper, say, than the average author who comes to us.

Advances are traditionally the magic key for entry into the system (and a requirement for mainstream New York publishers seeking contracts), as many authors have come to expect upfront earnest money as their due reward for writing a book.

An advance is a specific sum of money representing a pre-payment on royalty earnings. An advance, in essence, guarantees an author earnings on a certain number of books, whether those books actually sell or not.

Because of the longstanding custom and even cliché of publishers giving advances, authors don’t generally think with beginner’s mind about their intent or consequences, and this has led to a mentality whereby some authors do not even consider going with a publisher that does not offer an advance, and the majority of authors at least look on such publishers adversely.

Nonetheless, we avoid advances, when possible, for the following reasons:

(1) Advances unilaterally increase our risk. For an author, an advance is primarily an insurance policy that a certain amount of books will be sold and, if they are not, the publisher will still in effect guarantee the royalty from those sales by not only paying it but paying it in advance. That is, the publisher fronts the royalties for hypothetical sales without knowing that it will actually sell the books.

As long as an acceptable manuscript is received and the book is published, this advance is nonrefundable, so the publisher is on the hook.

Despite the fact that we are a very cautious publisher and our advances are as scarce as hen’s teeth, we have around $100,000 red ink on the books in advance money paid out for items that did not and will not sell enough to earn it back, plus another $200,000 of unrecoverable author debts from other royalty-account expenses such as books sold to authors on invoices that were never paid, royalties later negated by returns that were never reimbursed as required contractually (when returns came in excess of sales after royalties were paid), and uncollectible bills or chargebacks for money advanced to authors to pay for extra editing or indices, author’s alterations, and the like.

Large publishers that give large advances invariably end up carrying millions of dollars of unrecoverable debts in the form of useless accounting credit items. This is a harpoon in the side of many of the big houses.  It is very hard for most books to earn back the level of advance that commercial bestsellers command these days, and that is one reason why the mainstream publishing industry is crumbling.  Presses cannot not compete for the big books, but they rarely break even on them.

Any publisher already carries the expense of production ($8,000 to $20,000 for most books), all of which is at risk if a book does not sell. We prefer if the author at least assumes some of the risk (in addition to his or her time invested in a book) by not requiring a guarantee of royalties whether books are sold or not.

We also generally pay at a lower royalty rate when a book has an advance, so one of the author’s considerations should be whether he or she wants money upfront or to earn more money over the life of the book.  We rarely offer both.  That would be too easy and, from our standpoint like playing against Heads I Win, Tales You Lose.

Our strategy, as described earlier, is in lieu of advances to give significantly higher royalties and escalators (such that royalties increase at numbers like 3000 or 5000, 10,000, 15,000 copies, 50,000 sold on up). When we offer a choice—a modest or no advance or higher royalties, almost always authors choose the higher royalties. Thus, the basic risk-reward strategy behind the copublishing—in which the publisher dampens its potential profit in exchange for not having to put as much money at total risk—underlies author contracts too in the advance versus escalator proposition.

We think that it is fairer for us not to be obligated to pay for unsold books but, on the other hand, to expect to pay at a higher rate for increasing sales. That way the publisher loses less money on commercially unsuccessful books, but its authors make more of the revenue on commercially successful books, which is how it should be. As long as the lack of an advance is balanced by higher royalties from the get-go and enhanced by escalators at higher sales levels, the publisher is giving the author more money on successful books but protecting itself against additional losses (in excess of the costs of production and printing) on books that don’t sell. This should come off as more than fair to both parties.

(2) There is always a possibility that an author may not produce a publishable book, and, though legally obligated to return the advance in that eventuality, may have spent it or not have personal funds for reimbursement—or just take a “fuck you” viewpoint: “I’m keeping this; come and get it if you want.”

(3) Advances take money out of circulation for producing and marketing existing books.

(4) A simple tautological fact is sometimes misunderstood: an advance is an advance is an advance, against royalties, not a separate payment or a fee for purchase of rights. It is not like an advance sum for writing a freelance article, which is a discrete payment. An advance means what it says: that the author will not earn any royalties at all on sales until the amount of the advance has been earned back by the normal procedure of applying his or her sales against it. Thus, from our standpoint, there is sometimes less incentive for an author to promote and sell a book on which he or she is not due to receive any immediate royalties.

It can also be discouraging to an author to receive many yearsof negative royalty statements, which is in fact what happens while a book earns back its advance, because all earnings in the meantime are going against the balance of the advance. This can occasionally lead to creative fallacies and even blights on our honesty and reputation. Despite the fact that advances are real money, some authors have short memories or a blind spot on this matter. They expect to receive current earnings when, in fact, they were paid them in advance.

So overly large advances rarely make either party happy or set a relationship on a sound footing. The publisher starts off deep in the red, and the author may end up blaming the publisher (even unintentionally) for the lack of a steady income stream from a book that is earning only against its advance. “What have you done for me lately?” is the motto of many a client upon receiving consecutive royalty reports with a slowly declining unearned advance balance on them. From the standpoint of the publisher who once wrote out a big and generous check to a once-grateful author, the motto is: “No good deed goes unpunished.”

As an example of how a large advance can distort both the earnings of a book and the relationship between publisher and author, Richard Hoagland, author of The Monuments of Mars, for years complained (in fact, quite vocally and publicly) that he had never received a royalty check from North Atlantic Books in fifteen years of publishing with us, which was true at the time. What Hoagland chose to overlook was that his perhaps-excessive advance and his editorial agreement for increasing percentages of the profits on the back end ate up all his potential royalties for years.

In summary, we would prefer to have books earn royalties as they go and not have to pay out what may be years of advance earnings.

Another, related point is that we cannot subsidize general industrious well-intentioned activity; while we are a nonprofit, we not an all-purpose philanthropic organization because we have no external funding and must pay our way.

We cannot compensate or advance an author more than it costs us to produce, warehouse, and distribute his or her book. We cannot increase agreed-to advances before publication because the author needs more money. Contractually we pay authors royalties on sales only, but that seemingly obvious, transparent, and direct provision falls on deaf ears more often than would seem plausible. As a former employee used to tell demanding authors, some of whom regularly came in the front door with palm extended, “We are not the bank.”

Among the reasons given to us by authors for why we should pay them money beyond royalties or upon their mere appearance at our office are:

1. They are broke and need it; 2. They spend so much of their own money writing (or promoting) the book; 3. The book is important and the one thing that can save the planet; 4. They are going to get on Oprah and it will sell very soon (or some other version whereby a million book sales are just around the corner); or 5. North Atlantic really sold more books and we are hiding the sales and cheating them. All of these have been invoked, believe it or not, many times.

Authors also routinely cite how many sales we aspired to in preliminary discussions or amounts earned in past seasons (as if we could sell the same books to the same customers all over again). They also want us to overlook returned books and books purchased by them themselves, paying them just on gross sales as if these other things didn’t exist. They think of every way possible to twist the data, every imaginable trick.

I am quite sympathetic to the first four of these arguments, especially the first two, but we cannot routinely subsidize authors beyond the value generated by their books, and also stay in business.

The following section from a 2010 email of mine capping a failed negotiation with a prominent New Age author summarizes a good piece of our position as a small, independent publisher:

“Everyone at North Atlantic admires and respects your body of work and publishing trajectory.  No one would want to penalize you for having already published several competitive books.  Your loyal readership is a boon to any publisher, and there are definitely going to be readers who buy everything you write and publish. However, you have not addressed or even acknowledged a point we have made many times: the extremely poor track record of anthologies of even the most successful commercial authors.  Years ago I read, I believe in PW, that anthologies of selected works, whether published or unpublished or both, have sold at an average of 25% of the sales level of single works by the same authors.  That doesn’t mean that yours will hit that low number, but to ignore this statistic and to insist on full value for an anthology as if it were a single-topic book and carried that intrinsic value is unfair to us and casts us in the light of protagonists unnecessarily.  After all, you can’t unilaterally decide to set the market value for an anthology and expect us to meet the bar despite historical statistics.  Doug and I are merely citing the fact that you are submitting an anthology, and then Doug based his advance on the expected first-print-run sales of an anthology by a successful author. Even then he figured high.  And he arrived at his number independent of anything I said to you and anything you proposed; he was an honest broker in that regard–nothing punitive at all.

“My original verbal numbers were strictly off the top of my head without any calculation and were spoken only because you surprised me by asking for an advance.  I did not bother to think about what an appropriate advance would be for an anthology.  I was just trying to think of the maximum we would go to.  I think that you are unaware of our policies, reputation, and business strategy and seemingly uncognizant of our nonprofit status.  I have tried to call your attention to these many times, and I will repeat a few benchmarks:

“We have gone as long as two years and over a hundred books without paying an advance, and some of those non-advance books had very commercial authors and later sold in the high six figures.  Not everyone asks for or expects an advance.  An advance dramatically increases the publisher’s risk and only gives the author more money than he or she would get otherwise if the book is a failure.  I don’t think that it is a good starting dynamic for working together, and it is hardly a necessity or a given, as our history has indicated.

“Almost all of our advances have been under $4000.  In fact, I can’t think of an advance for a single title (as opposed to multiple books) that we ever paid over $4000.

“Once we state our advance policy to an author, we are rarely asked for anything more than a token advance.  If I personally have any grievance with you, and it is a completely good-humored, remediable one (and I hope that you can hear this as coming from someone who likes your work and your personal style), it is that you have not ever in this dialogue entered into the discussion in terms of who we are, only in terms of who you are and what you want and can possibly get out of us, and thus have never considered the possible legitimacy of our programs, our history, and our reputation as a non-advance press.  We do give back value, and it is not always in conventional terms.  Whatever numbers I quoted to you, I did so hesitantly and, in doing so, I stated explicitly that this was the highest we could go.  To me a respectful and friendly response would have been either to back out then and there (to say, “I can’t do that”) or to come back with a number that was within our range.  To do what you did, which was to hear my highest number and then beat it, whether by $1000 or $2000, despite my obvious reticence to mention any number at all or offer any advance, was like saying: I don’t take you seriously.  I am going to play a different game.  And I’m not even going to tell you; I’m just going to do it.

“What you did end up saying was something like, Don’t you believe in negotiation?  The answer is, not really.  I’d prefer straight talk back and forth and mutual acknowledgment and respect for each other’s terms, limitations, and boundaries, plus especially for each other’s words.

“I mean, I would throw the same game back to you: if you don’t like our terms but like our press, consider the overall situation and come back with a counter-offer that stands a chance of working and being accepted. The way that you are going about it leaves the sense, justified or not, that you could care less whether we break even or not on your book, whether we survive or not, or even whether we are your publisher or someone else is. What might seem punitive is a sense on our side that you are basically out for yourself and thus we have to protect ourselves.  Usually that doesn’t happen with authors.  Look at our list and you will see a lot of distinguished people who treated us fairly and felt that we treated them fairly.  And, as I said, we already give back more than ten percent more of sales revenues to authors than the industry mean.”

A number of authors over the years have become so caught up in the old dialectic of labor and capital—author exploitee/publisher exploiter—that no amount of reasoning can stop them from raging at us. In one recent instance an author who is also supposedly a friend brought a witness to our workplace, then charged past the receptionist while shouting dubious pretexts, came up to my office, and demanded that he be paid on the spot. He showed me his royalty statement and said we had to be cheating him because he knew he had sold more books than that.

I painstakingly showed him his Random House sales in their Portal on the computer. He looked the screen over, then remarked that Random House was known to be a company of crooks, and he went on to cite numerous bits of stray gossip from god knows when or where. He then charged that we were in cahoots with Random House to steal from him.

Another author more recently returned her statement with comments to the effect of: “Who are you kidding?  I know I have sold more books than this.  You can’t get away with this.”

As if we could hide sales from our staff and our auditors or would go through the trouble to steal a few hundred dollars here or there from authors….

The cases of these accusations are very rare but, as you can see, they are memorable.  It is always striking when someone insists that they know more about how many of their books sold than the audited systems doing the calculations.  It is like a throwback to attitudes even I had once upon a time: constitutional paranoia about the motives and ethics of any institution or company.

The entire publishing situation breaks down when an author refuses the logic and reality of sales figures and decides that either we or some other company is purposely hiding their real sales figures (see Chapter Seventeen).

This is a cargo-cult mentality.  The idea that either we or PGW or Random House have singled an author out to corrupt our whole accounting system in order to hide a few sales on a systematic basis is ludicrous.

I finally convinced the first guy, more or less, that what he heard was untrue about Random House—that no one could try to commit and conceal such a crime in this computer-run day and age (forget Madoff for now), nor would anyone attempt it for such a small return.

So he switched to the argument that he was just a poor peasant working behind a plow and we were the like the Daddy Warbucks banker putting small farmers like him out of business with our cutthroat policies.

I could see how it might look that way to him—he had invested a lot of spunk and hope in his books, and I too thought they should have sold better. But we still couldn’t pay for wannabe sales.  We may have looked to him like the oppressor because we were who he could get at rather than down-market America, but in the world at large we belong in truth more to the plow than behind the banker’s desk. We aren’t the corporate beast to scapegoat.

Ultimately, in frustration and blind hope that maybe she was unbiased and reasonable, I asked his witness what she thought. She retorted, “The hard-working author always get screwed by the publisher. The poor author takes the brunt of everything.”

Well, I guess that’s why she was there, and I naively supplied her cue.

But, Ms. Witness, the publisher takes the brunt too. Most of the money in the publishing business goes to neither the author nor the publisher (see below) but to the retailer and the printer.

Happily I ran into this author on the street recently, and he told me that he had come to peace with the situation; he apologized for the incident and outburst. “I no longer expect to be wealthy in my lifetime,” he explained. “So I am grateful now for what you did by publishing my books so beautifully, and I am not looking to you for my fortune.  I learned to stop being delusional about that.”

Thank you. I had thought that such matters were generally clear from the outset. On some level, though, they never are.

Royalty Bases

For years our royalties have been figured (one way or another) on percentage of net sales, meaning a set percentage of the amount of revenue we receive from the proximal party to whom we sell the book. “Net” does not mean, as some authors and copublishers worry initially, that we deduct any of our overhead expenses or costs of doing business from this amount. If we sell a book at cover price, the author’s percentage net is a percentage of cover price; if we sell it at 50% discount, the percentage net is the same percentage of 50% of cover price. ( Publishing’s percentage net is otherwise traditionally called percentage grossin business, meaning gross revenue to the firm in question.)

Conventional “New York” publishers have historically paid royalties off the cover prices of books. If an author gets an 8% royalty, for decades into the eighties and early nineties (and in many circles still today) that has meant 8% of cover price. This basis of calculation, developed in an era before the advent of computers, extensive middlemen, and a high-discount market controlled by retailers and wholesalers rather than by publishers, is functionally obsolete, but many publishers still use it because authors and agents insist upon it (and European publishers particularly insist upon it, stubbornly and patriotically so, in their rights deals). The yardstick remains in many deals and negotiations because no one wants to risk losing business by breaking ranks with the norm.

Of course these same traditional publishers also generally have small print for clauses that authors do not always get to. These allow reductions of the base royalty, even drastic reductions, for certain categories of sales. The royalty may be cut by a third to a half for ranges of customers that tend to be high-discount, whether they actually are or not. The royalty basis may even change to percentage net for some sales. Publishers may eliminate the royalty altogether or reduce it to the equivalent of a single percentage point or two in the case of particular sales, but they usually hide that information in sections of the contract where it would be least expected.  I wouldn’t call it shifty; it’s kind of like those $15.95 or $26.99 prices.  It’s traditional.  “Traditional” would be the right word (see Jack Nicholson in The Crossing Guard).

The upshot is that traditional publishers tend to overpay authors on the base rate, especially for many copies of books sold through chainstores, but underpay them in the fine print for special sales. Authors who don’t read that print are often surprised to see that most of their sales fall out of the domain of the base royalty into clauses and subclauses elsewhere in the contract. Some authors never do the math and are not good at eyeballing percentages, so do not even know that they are being paid less than they think they are. They can’t eyeball what, for instance, approximately what 8% cover price should look like in the bottom line, so they assume they are getting it on all sales. But they may be getting an average of 5% or less.

How fair or beneficial a contract an author negotiates may well depend on how on top of the language of the document s/he or his/her agent is. Some large publishers can actually be called on their subclauses and will compromise. Conversely , the percentage-net concept can be sold to many authors and agents.

Traditional publishers controlled the market far more broadly and effectively in the seventies and eighties than they did by 2000, so they were able to enforce inflexible discounts throughout the trade and hold to them. Their discount rates were pretty non-negotiable. But, as noted in Chapter Two, one of the ways in which independent publishers and distributors, most of them in California, broke the trade monopoly was to offer higher discounts to the emerging chainstores in the eighties. They broke ranks, ignoring tradition and using creative models to corral business.

Ever since then, the movement within the industry has been toward floating, flexible, and aggressive discount categories, fiercely-waged discount points (and even half-points) and, as a result, a contractual shift towad percentage of net. The reason is obvious: pretty much all book distribution is done on a percentage-net basis. Computers are constantly recording and transmitting net returns in their collective hum on each sale for each publisher and distributor in each store, so whereas before the digital age it would have been difficult to impossible (and absurdly expensive) to track net scrupulously enough to use it as a royalty basis, now it is not only pure common sense but simple operationally. Though there are holdouts, percentage net, which was originally considered a California fad and even a countercultural indignity and act of anarchy imposed by Left Coast publishers, is becoming the norm. A publisher merely has to use a higher base number to give the author approximately the same value. An 8% royalty with a reduction at higher discounts might convert to a 12-14% percentage-net.  Not rocket science!

Before computers of course no one had an easy way to calculate net consistently, but North Atlantic followed the West Coast model of flexible discounts—so our older contracts solved the problem by a kind of fuzzy logic of tier-based, percentage-of-cover-price royalties (with cutoffs at graduated discounting levels). These represented a pre-computer-era attempt to create something like a percentage-of-net situation in reflection of the actual marketplace in which we operated. Whereas traditional publishers solved the problem by transferring high discounts to a separate codicil of the contract, we built them into a two- or three-tier royalty gradation.  Same difference: only there was no base royalty number with categorical exceptions; there was a royalty spectrum

Many authors express an understandable preference for a fixed amount for every book we sell; that’s why it remains popular. We could only do this in a pure form if we had lots of fine print or if we paid a much lower royalty. By logic alone we cannot pay the same royalties on a book sold at 35% of the cover price as a book sold directly to the consumer at the full bar-coded number, at least not without some other consequences—stealing from Peter to pay Paul. If we had to figure royalties on a percentage of cover price, then depending on what royalty percentage we used, one end of the spectrum or the other would distort. Either we could not sell books at the highest discounts in the present market (because a royalty percentage based on cover price would force us to sell those books at a loss) or if, conversely, the royalty percentage were low enough to allow us to sell at 65% discount without losing money, the author would get cheated of his fair royalties at lower discounts including zero-discount (cover-price) sales.

Percentage of cover price simply cannot be executed in today’s market. If it is used, then the exceptions will drown out the base rate. But try telling that to a French publisher.

Division of the Publishing Pie

Authors are often shocked to realize that selling a book in bookstores involves not only a significant royalty reduction at high discounts but a long trail of wholesalers and/or middlemen. An author who thinks that his or her earnings should be higher because of the loftier dollar-and-cents number inscribed on the back of the book should not look at the haughty cover price (as a baseline for what he should earn) but inquire into the actual amount that the publisher receives from selling the book. The various middlemen that are necessary to place a book in the chainstores and independents exact a proud ransom out of any book’s hide.

If we want our books to be in the full range of stores, it invariably means selling to the high-volume end of the book trade. More sales almost invariably mean more higher-discount sales (by percentage), but they also, syllogistically, mean more sales overall. Thus, the more successful a book is, the greater (and increasing) majority of its sales will be at high discount and the lower the unit earned will be.

Despite appearances, the number of high-discount sales is not a trick on the publisher’s part; it is a condition of the present state of publishing.  I think that the notion of maxing out revenues through a high base number (for either the author or the publisher) is a chimera because in most cases the limitlessness of the potential market out-trumps the value of any particular sale but, even when a book has a very low absolute and potential sale, unless the market is fully circumscribed and dedicated, it will not reach its audience unless its discount rate is allowed to fluctuate according to present market terms.  In other words, it won’t get distributed.  One is left either with defending margin and an old-fashioned purism and having a book invisible or simply joining the insanity.  It is a matter of preciousness of some degree or other or playing in the communal mud.

Any pie chart of publishing revenue today shows the author and publisher combined into a tiny sliver of the confection, not fit for even one of them let alone both—but that’s the way it is; that’s the way the game is played; and nothing is going to change it short of reinventing the publishing wheel from scratch to sell only direct to consumer.  (I wrote this in the late nineties, and digitilization and the e-market are clearly headed in that direction toward a new “wheel” in 2011.)

Most of the money in publishing is made not by publishers or authors but, as foreshadowed earlier, by printers, freight companies, wholesalers, and chain bookstores. The percentage of customer revenue that comes back to the publisher (for division between publishing overhead and the author) is rarely more than 40% of the cover price. Our own margin averages two-three dollars per sale for the average-priced book ($16.95).

Initially the Internet with its “garage sale” and on-line retailer aspects, has made matters worse. The cover price of books has become all but meaningless, and the market price is set, like that of other commodities (platinum and pork bellies) by firms like Amazon.com that are marketing ostensibly both new and used versions of the same book at different rates (I say ostensibly because marketing high-discount new books as “used” is actually a popular sales trick online). So, while many middlemen were eliminated online, so was the sanctity of the cover price—no one any longer expects to pay it.  The tiers of middlemen are substantially gone but the collective crunch of a giant single middleman comprising everyone in the world has compromised the cover price ever more.

Unless you are a Dean Koontz or Malcolm Gladwell, the book business is generally not a place to make your fortune anyway. Your writing in most instances will not support you—not when the largest portion of the cover price of your book, at least 40% on up to 60%, goes to the retailer, usually the bookseller—whether independent, chain, or on-line—and he often wants so-called co-op money on top of that—his kickback for ostensible services like displaying the book well or even carrying it at all, a “commission” that I liken to payola.  Nobody really thinks that the creator or the publish is king.  It is a sales market, a money market, a commodities market, not a creativity market or even really a product market.  Most authors do not get this.  The paper on which their book is printed, even the ink (or e-ink), has more stable value.

Let’s go back to the pie chart as it stood vintage 1999: After the store (brick and mortar or online) the wholesaler or wholesalers take another 10%, the printer/production process takes 20%, about 5% is lost in damaged or free or discarded books (this is an industry in which merchandise produced is routinely destroyed, shopworn, or otherwise dinged), and that leaves about 15% for both the author and the publisher, and the latter must handle overhead too.

Now these numbers do vary. Reprints are cheaper and thus don’t cost 20%, and the combination of wholesaler and retailer can come in at 5% or less, but there is still not a whole lot to work with percentage-wise.

Publishing can be a profitable business, as demonstrated by the copublisher windfalls cited above—but, more than most businesses, it is retailer-friendly with its high discounts, unlimited returns, “cooperative” kickbacks, and publisher responsibility for covering all damaged and shopworn books, no matter who gets them into that state.

The publishing business is waged between two extremes: an economy of scale producing increasing revenues as more books sell more copies and get reprinted more cheaply, and an hungry machine that finds new and devious ways to eat up more and more of that revenue short of the publisher and author.  The machine doesn’t even care if it puts the publisher and author out of business because there is still paper and ink; there are still electrons.  Consumers will consume something, and it is really good at making somethings.

An author who claims that he or she is the victim of the so-called greedy publisher should realize that they and the publisher are both victims of a capitalist bias that rewards capital and real estate (wholesaling and retailing), along with clever lawyering and accounting, over the actual production of creative works. Again, neither the writer nor the producer of a book is adequately rewarded. The only way to change this is to knock out all those middlemen and go straight to the consumer in a rapidly evolving digital era which is now threatening to do away with the publisher as well.

In addition, according to book-industry statistics, 75% of all books published in 1999 did not sell even 10,000 copies. 90% did not sell 20,000 copies.

This continues to mean that very few books make even six months’ salary for their creators. Deceptively the few that produce windfalls tend to dominate the mythical landscape of the bookarama and inflate author expectations. It is a lottery mirage disguised by the glamour of publishing and the psychological fervor, sometimes to the point of megalomania, engendered by the act and passion of writing a book.  The belief and presumption far exceed the reality.

Every author cannot produce The Celestine Prophecy, even if they think they have written a better book (and they probably have); every book cannot be selected by Oprah Winfrey or her equivalent, no matter how salient it is to her concerns, no matter who the author knows in her organization. Very few authors get their due, either in acclaim or dollars. These are problems that no publisher can solve.

Some authors realize and accept the situation; others like the dude who charged our offices with his witness assume that the publisher is making all the missing money; they have tunnel vision about the publisher, adopting, as noted, an us-versus-them model of exploitation. Publishing at our level is not big enough business for this.

The publisher’s primary task is to publish a good, original book handsomely, error-free, and with integrity. That is what we are geared to do. Our responsibility is not to guarantee an author revenue at a certain scale or to promote him or her or his or her organization separate of the sale of the book.  That is beyond our control.

Every now and then an outraged author understandably expresses some version of the lament, “Well, I don’t see why you even publish my book. If I’m making so little, how much can you be making?”—our answer is, “Very little too, but multiply our ‘little’ by several hundred books at about the same level of sales, and it is enough crumbs to survive on.”

Unfortunately but for obvious reasons authors do not get to multiply their royalties by several hundred titles. When some of the more suspicious of them see their publisher flourishing in spiffy quarters with many employees working at new model Apple units, they jump to the conclusion that somehow it is at their expense and that they are being cheated out of their fair share. They presume it is impossible for all those guys and gals at desks to be hired unless it is at their victimization. I mean, what does the publisher do to earn its share except shovel the compost?  These authors are very few, at least for us, but, again, the few are memorable because they press so hard and shout so loud, and I know from the grapevine that most publishers have more squeaking wheels than we do.  The more commercial the publisher generally, the louder the squeaking, to the point of lawyering.

The truth lies in the math from Chapter Three. If we have 800 books in print and half of those are modest enough sellers that they only generate an average of $1000 a year in revenue above production expenses per book (which might mean annual royalties of under $100 per book), that is still $400,000 a year—a substantial portion of our payroll. In fact, backlist success on slow-moving titles is what has made us a viable publisher. Until we had enough books on our list for critical mass, we couldn’t pay one salary, let alone the twenty-five or so we now pay.

Despite all this, we have authors who earn over $50,000 a year on just royalties, copublishers who earn more than $150,000 a year. When things work, they really work; they exponentialize—we sell huge numbers of books at a healthy profit, and authors make the same kind of money they would with larger commercial houses.  Mostly it is a happy scene, so I regret making a stink about the problems.  But I used the exceptions to establish the rule, and also to give perspective on the industry—a major goal of this blog.

Overall Strategy and Philosophy

In general, my approach to publishing has evolved to the point that for many years now I have come to imagine our press, perhaps a bit grandiosely, less as a traditional company, an acquirer of rights or properties, than as an energy field—a living, shape-shifting network. Originally such an image might have been a fantasy or romanticized metaphor to explain our unconventional and motley relationships with our authors and other partners, yet over time I have come to accept it as an actual revelation and calling. In other words I have been working toward this model for a long time, from my childhood and perhaps even before that karmically in some way. I have gradually been casting off obstacles, divesting myself, increment by increment, of my own tendencies toward possessiveness, ambition, and cynicism, purifying the press by trial and error, with occasional quantum leaps.

I have come to realize the truth, not just the aphorism, of collaboration, grace, and gift-giving—and that is North Atlantic Books at its best or when it is living up to its destiny. In some way, the press was, as our author Robert Schwartz describes in his book Your Soul’s Path, part of a spiritual plan, a decision I made about what to do in this life, whenever and wherever such decisions are made.

North Atlantic began as a series of loose, improvisational acts, defying business sense and commerciality, and it congealed uniquely through the events and wisdom generated by those acts into a functional, imaginative company. The process can be tracked symbolically to a moment when I was nineteen: the ceremony in the glen behind Phi Psi, which laid the basis for Io. That glen is now paved over into a parking lot for the college Alumni House, but the mandalas lit on that Halloween night have morphed into radiances in the world.

Yes, I can testify finally, generosity does work; it does all come back.  And I am not someone who arrived at the perception natively or by nature. I have had to fight through greed, competitiveness, anger, self-righteousness, and the incipient son-of-a-bitch businessman role conferred subliminally by my New York Jewish family—as well as its holier-than-thou hippie antithesis—to arrive at a relatively effortless intention and capacity to receive energy and let it go in the form of books, money, authors. That only could have evolved subliminally; it never could have been imagined, devised, or constructed.

It actually does work for a business to create an energy field and an esprit. It comes about in part by not being opportunistic, by not trying to max out your share in every instance (as described above). Real and stable affluence is not created by acquisitiveness, except when it is.

For someone of my lineage and temperament, to have tried to do any other, less yin, more yang way would have been too much work and too much heavy-handedness, especially insofar as relations with authors, prideful and dignified beings seeking respect, tend to become jaded or strained at the slightest misstep. We have enough of that already, operating even as we do.

In their own milieus Inner Traditions and Shambhala continue the mind-body-spirit branch of the old publishing tradition well, but it is something, for whatever warp of subtle karma, we never developed in our culture at North Atlantic. For that reason (and maybe others) there isn’t that same perceived magic, e.g. perceived value, to our imprint; we have much less of a brand. Readers who say they have never heard of us often turn out to have a dozen or more of our books on their shelves; it’s just that they never thought of them as North Atlantic or given due to the collective content of the press. We have had to grow and establish our existence by a different principle, through commitment to our themes expressed through a slaphappily, egalitarian economic philosophy.

People enter our press’s energy field on all sorts of bases and with differing fantasies, both overt and covert, and with quite varying motivations and goals. So they negotiate for and end up with differential degrees of ownership of their projects and shares of the pie. Conventionally, “normal” publishing companies, even alternative and independent ones, try to garner and cache the full rights of all their books, or as a great a number of them as they can enforce—and then defend the authority and prerogative of the publisher over the author much as a college would defend its institutional investiture over its students or a large corporation would command its employees and their on-the-job performances. The publisher is traditionally lord of the manor, judge and jury over what the author gets, both concretely and abstractly, from bells and whistles to shekels to attention. From the standpoint of the traditional publishing operation, the motto is a familiar: “Father knows best.”

But that is an obsolete business model these days for books. Anyone can self-publish now. Design programs are available to one and all, and there are freelance designers falling out of trees in your local town plus megabytes of them online. Firms like iUniverse, Lightning Source, Author Solutions, and Lulu can play the role once played by Vantage Press and other subsidy publishers: hired guns that make books—the whole job from keystrokes to paper glued together and bound in a wrapped-around fasicle available for purchase online and in stores. Only, the new guys with their cutting-edge technologies do it less pretentiously and much less expensively. They can even include a pinch of marketing, for a fee—hence the NYRB and NYT group ads.

If someone enacts the same Lulu process by himself or herself (no fee, just raw costs), it is even cheaper and simpler; they can distribute their finished book online through a website or by contract with one of the many independent distributors looking for clients—smaller versions of PGW—or even through us or another press. There have been enough bestsellers by self-published individuals to prove both that a “peer review” commerce-savvy publisher hardly needed.  Why would anyone need a publisher to take seventy-five percent of the profit?

In truth the publisher does little that the author can’t do herself and provides virtually nothing in terms of actual products or services that isn’t also available to any author in the open market. We have entered the era of self-publishing.  Every aspect of publishing, from editorial work to book design to marketing and publicity can be hired. The same printers with the same equipment are available to Simon and Schuster and Joe the Plumber, if not the precise volume discounts. And Amazon, by definition, takes all books that have a heartbeat orflicker of commercial life.  Amazon can also convert any writer’s file into an instant e-book and then put it up for sale the next day in the planet’s largest bookstore.

A publisher in 2011 offers mainly an editorial vision, the esprit of its imprint, an assembly line for getting books out, an in-house sales network, and access to economy of scale at various levels of production, printing, and distribution—most of which is replicatable by anyone for perhaps a little more money.  We have reached an era when a publisher must prove the value it provides; it is no longer just obvious.

The old model ruled by the Vikings and Doubledays of the world is really obsolete; only most authors don’t know it yet. Stephen King, after all, is his own publisher, using mainstream imprints as his production freelancers and distribution service. He sells enough books for everyone to wet their whistles by even an extremely author-friendly slicing of the pie. Even if the “house” clears only fifty cents a book, multiply that by millions. It is definitely worth the trouble and humble pie.

Economically and logistically, there is no need for old-fashioned publishing companies at all, but they still sell the perfume of legitimacy and the chimera of authorhood, as if there still were such things.

The whole prestige publishing world is based on a mirage.

For the publisher to seem to offer value, there has to be something extra, a dose of magic, individual acceptance into an exclusive order, a patina of fame and hobnobbing with celebrities (sort of like the fake paparazzi once hired to appear at those subprime real-estate parties in Florida and Vegas), the thrill of winning the lottery and hitting the jackpot. That’s what acceptance by a publisher amounted to in the old days.  An ineffable snob appeal attaches to names like Scribners, Viking, Random House, Doubleday, brands that in themselves invoke the history of literature, a club of famous people from John Milton and Charles Darwin to John Steinbeck and Ernest Hemingway. That mystique alone keeps the game going.

Our own anarchistic model has been more a futuristic, “Generation X” matrix from the time that we threw in with Dana Ullman and HES, inventing ways to engage with people based on what they wanted, needed, or could tolerate and, from there, concocting a business plan on the run, an emergent new paradigm that morphed as it emerged.

As a Random House executive recently told me that we have “the world’s most uncooperative authors.” Since becoming our distributor in March, 2007, RH has been valiantly trying to adjust to the independence and rebelliousness of a few of our authors, some of whom publish when they want, ignoring seasons, and then sell thousands of books outside the sanctioned channels. This behavior, to the average old-time publishing regular, is unruly and ungrateful to the point of criminal. Yet we have long accommodated diverse modes of this sort of behavior, even as it goes against the grain of what any distributor is trying to accomplish with their clients.

I don’t mean to suggest that we are purely laissez faire, hippie publishers, making up all new rules as we go. Most of our contracts specify old-fashioned relationships, and most of our books are done under traditional rubrics and published rigorously in season. We likewise struggle to impose conventional rules on authors; we have hardly turned into a revenue-sharing co-op.

Yet, on the whole, we own a relatively smaller percentage of our publishing properties than just about any other real publisher, and we regularly deconstruct the familiar labor/capital dialectic in novel ways. Our emergent business model is more wave/particle than Newtonian or acquisition-of-property-based; I know that many would like to claim such a chic designation, but I think we have earned it. We don’t own many of our most important books, merely distribute or share them.

Because of this set-up we give back, by industry standards, a shocking amount of our revenue; yet we are routinely more successful than most companies our size and orientation. Not all of them certainly, but most. Inner Traditions still proves year by year that a tight conventional capitalist model is the best vehicle for maximizing revenue and profit, and Ten Speed confirms that highly commercial books published under time-tested rubrics and aimed at the masses are the surest way to override all other obstacles and market resistances—but aside from such stellar enterprises we do remarkably well in the pantheon of publishers. We stay in the black and have mostly profitable years, especially given that we operate under a nonprofit mission statement, publish many books every year that have little or no chance of breaking even, and occasionally give away money to charities.

I hate the authority of gurus and bosses, though I understand their perfect roles. My favorite fable of Aesop is that of the sun and the wind. The two elementals were arguing as to who could get a strolling gentleman to take off his coat first. The wind was sure that it could do it by blowing real hard until the coat ripped loose, but the harder it huffed and puffed, the more tightly the man held on. Then the sun came out and simply shined; the man took off his coat.

The moral (or application) is something like “Persuasion is more powerful than Force.”

Chapter 6: Competitors and Ethics| Table of Contents


Some of these authors’ books are actually distributed instead of copublished, as I will discuss below.

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