SUBSIDY PUBLISHING (PUBLISHING SERVICES COMPANY)

Subsidy Publishing is a form of self-publishing.  Instead of personally performing all of the tasks necessary to publish a book, the author pays the subsidy publishing company to do the work for the author.  The author pays all the costs, but the employees of the company do all of the work.  The author is “subsidizing” the cost of publication, thus the term: subsidy publishing.

One significant difference from full self-publishing is that although the author pays the full cost (plus a small profit for the subsidy publisher) of producing the first printing of the book, the subsidy publisher will typically pay to re-print a book that sells out of the first printing.

For example, the subsidy publisher will present to the author a proposal to produce 500 copies of the work for the specified fee.  Once those 500 copies are sold, the subsidy publisher pays the cost of reprinting the book to fulfill orders for the remaining term of the agreement.  The author continues to receive a percentage of book sales even for those books printed and paid for by the subsidy publisher.  At the conclusion of the subsidy publishing agreement, the author will typically be allowed to claim any remaining stock, even if the subsidy publisher has paid to print the books.

The subsidy publisher agrees to this type of arrangement because the publisher knows that only a very small percentage of books published will need to go back to reprint.  Only about 10-20% of books published by subsidy publishers require a second printing.

Since most subsidy publishing agreements have the publisher receiving a small percentage of the book’s retail price for each sale, the subsidy publisher is actually just using a portion of the money received from the sale of the author’s book to pay for the reprinting of the book.  Effectively, the author is still paying for subsequent printings of the book.

The author becomes a client of the subsidy publishing company just as if the author was hiring a contractor to build or remodel a house, an accountant to prepare the author’s taxes or an attorney to develop a will.  The author pays the subsidy publisher for the publisher’s knowledge of the publishing process and for the use of the systems already established by the publisher.

Unlike the commercial publisher, the subsidy publisher takes no financial risk and accepts most publishing projects.  The author must be clearly aware of this when choosing to work with a subsidy publisher.  Problems occur in the subsidy publisher/author relationship when the author assumes that the subsidy publisher has a vested interest in the success of the book.

Most subsidy publishers would like to see an author-client’s work become a best seller, but will only do as much work as they are contracted to do.  Problems often develop in subsidy publishing partnerships because the author expects the subsidy publisher to do more than what was bargained for at the start of the relationship. 

If an author bargained with a contractor to build a 4 bedroom house, the author wouldn’t expect the contractor to build a 5 bedroom house for no additional cost, but many authors who contract with a subsidy publisher are disappointed when the publisher won’t go beyond what was agreed upon prior to signing a contract together.

Often, authors enter into subsidy publishing agreements with unrealistic expectations in regards to book sales.  As in most forms of publishing, the author should still expect to do some promotional work to develop a satisfactory level of book sales.

Finding a good subsidy publisher is akin to finding any other professional service like a doctor, lawyer or accountant.  Subsidy publishers advertise in the phone book, on-line, in writing journals, many nationally distributed magazines, radio and television.

Approximately 2,000-3,000 books are subsidy published each year. Three of the larger subsidy publishers in the United States are: Dorrance Publishing Company, Vantage Press, and Rutledge Books.  Each of these publishing houses publishes hundreds of new books each year.  However, there are dozens of smaller subsidy publishers across the nation that may publish 10-50 books in a given year.

Many commercial publishers are also starting subsidy divisions or offer what they call cooperative publishing arrangements, which are virtually the same as a subsidy publishing agreement.

A subsidy publisher will ask an author to submit a copy of the author’s manuscript for review.  Often, an author will think that this is a chance to have the manuscript reviewed for literary merit or marketability, similar to the commercial publishing process.

In reality, the subsidy publisher is reviewing the material only so that an appropriate publishing services fee can be developed.  It is akin to getting an estimate for any personalized service to be performed.  As if the author was asking for an estimate for cosmetic surgery or to have a bathroom remodeled.

It is wise for the author to get more than one estimate, thus submitting the manuscript to more than one subsidy publisher at a given time.

Most subsidy publishers will read the manuscript, not for literary merit or market potential, but to identify the general content of the work.  Most subsidy publishers will not publish pornographic or libelous work, nor will most publish work that promotes violence against others.

Typically, the subsidy publisher’s review will take 3-4 weeks to complete.  Generally, they will respond by mail with a very detailed proposal.  Some will prepare and share with the author a synopsis of the work as part of the publisher’s sales process.

Remember, the subsidy publisher is selling the author a service.  Unlike the commercial publishing process, the table is turned.  The author is buying what the publisher is selling, not the publisher buying what the author is selling.  The author must have a belief in his or her work since, to the subsidy publisher, the author’s work is one of dozens they have been paid to produce and market.

In addition to a cover letter that may include a synopsis of the work, the subsidy publisher will also send a contract and supplemental materials.  After receiving these materials, the author will generally hear from a company salesperson.  Often these salespeople are called Author Services Representatives or Author Relations Representatives, but they just are simply salespeople.  Many of these salespeople work on commission and can be quite aggressive. 

Since after the sale, these salespeople tend to disappear, be sure that all agreed upon details are part of the subsidy publishing agreement.

Remember, when obtaining the services of a subsidy publisher an author is negotiating a services contract.  That contract, when signed, will become binding on both parties.

In a subsidy publishing arrangement, the author is responsible for providing a completed manuscript and obtaining permissions to reprint any previously copyrighted work.

The author is also responsible for paying the publishing services fee required by the publisher on the payment schedule agreed upon.

Additionally, the author will typically be asked to review and approve the manuscript once it has been edited, along with reviewing and approving the page design of the book and the cover design.  The author will generally be given an agreed upon time frame to complete the author’s review and approval so that production of the book can remain on schedule. 

It is important for the author to realize that when the subsidy publisher receives the author’s approval for one stage of the production process, they will move to the next stage and it will be difficult for the author to make further changes to the previously approved stage.  This is because the subsidy publisher will have spent another portion of the author’s subsidy fee to complete the next step, which is contingent on the previously approved step.

Therefore, it is important that the author takes time to review each step and be sure it is correct before approving that step.  For example, if the subsidy publisher provides the author with the edited manuscript for review, the author should take time to review all of the edits to be sure that he or she approves of the changes made.  If later, after the book is typeset and designed the author asks for one of the edited changes to be restored, the subsidy publisher will be resistant since the publisher will have to pay additional money to make these changes.

Since the author is paying the bill, like self-publishing, the author should have the ability to approve each step of book production.  However, unlike complete self-publishing, the author may be restricted by the terms of some subsidy publishing agreements.

The author should be sure that he or she completely understands how much creative input they can have in book production prior to signing any subsidy publishing agreement. 

Since book publishing involves the coordination of many details, some of which are subjective judgments on both the author and publisher’s part, it is essential that the author is fully aware of what is contained in the subsidy publishing agreement that they sign with the publisher of their choice.  If there is any disagreement, the subsidy publisher will refer to the negotiated contract as the arbitrator.

Rights and Terms

In a subsidy publishing agreement, the author continues to own the rights to the work and the work is copyrighted in the author’s name.

However, most subsidy publishing agreements call for the author to “lease” the rights to the publisher during the term of the contract.  What this means is that the author is restricted from publishing the work elsewhere while they are under agreement with the subsidy publisher.

This is one area of the subsidy publishing agreement that is negotiable.  However, the author may want to think about why the author would want to publish the work with two different publishers simultaneously since the end result will be that two different publishers will be selling the same work to the book trade and to consumers. 

This is apt to cause confusion among book buyers and possibly could limit sales of the book.

Subsidy publishing agreements are typically for 2-3 years from the time the finished book is produced.  A typical production schedule for a book is about 6-9 months.  Therefore, the agreement can last for 2-3 years plus 6-9months.

The length of the agreement is typically a negotiable point of the contract.  A shorter contract will allow an unhappy author to exit a publishing agreement; however it will also limit the number of reprints that the subsidy publisher is obligated to pay for if the author’s book is selling well.  Most subsidy publishers will agree to a shorter term of agreement because of this. Some may be hesitant to lengthen the term of agreement since it obligates the subsidy publisher to stay with and service an author whose book may not be selling well.

Many subsidy publishing agreements will have a clause that effectively changes the term from 2-3 years to an unlimited time.  This clause is generally evoked if the publisher has gone back to reprint on the book.  The reason for this is that the publisher wants to have the ability to recoup some of the money spent on reprinting the book, before the agreement is terminated.  Again, this is typically a negotiable point.

Subsidiary rights are “other rights” to the work.  This means things like book clubs, movies, television, paperback or hardback rights.  In other words, to profit from the work in a form other than as a book.

In most subsidy publishing agreements the publisher typically will require that the author lease these rights for the term of the agreement.  Generally, there is a provision that the author gets a percentage of the money should the publisher sell these rights to another entity such as a movie production company, etc.  This percentage is split is typically about 80% to the author and 20% to the publisher for representing the author to the subsidiary rights entity and negotiating the subsidiary rights agreement.

Subsidiary rights are negotiable.  In practice, most subsidy publishers rarely pursue subsidiary rights opportunities and will be amenable to eliminating them from the agreement.  If this occurs, those seeking subsidiary rights who contact the publisher will be directed to the author for negotiation.

Additionally, the author can also request to add a clause to the contract asking for right of refusal.  This means if someone approaches the subsidy publisher with a subsidiary rights opportunity, the publisher must inform the author prior to finalizing any agreement and the author has the ability to reject or accept the offer.

Money

As in full self-publishing, the author picks up the entire cost of producing the first printing of a book plus a profit for the subsidy publisher.  Remember, the subsidy publishing company makes most of its money on the author’s publishing fee, not on the sale of the author’s book.

Today, a subsidy publishing services fee can range from about $5,000---$20,000 with the average fee being about $9,000. 

A subsidy publisher determines the author’s subsidy fee by looking at the actual costs the publisher will incur to produce the author’s specific book.  Charges for the following are typically considered:

Editing

Proofing

Cover Design

Typesetting/page design

Promotion costs

Printing costs

Most subsidy publishers do not keep staff editors, proofreaders, artists and page designers.  Rather they employ freelance professionals.  As a full self-publisher does, they contract with the freelancer for a specific fee to complete a specific task.  This is similar to a contractor hiring a sub-contractor.  The fee charged by the sub-contractor is added into the author’s subsidy fee.

Additionally, most subsidy publishers do not own their own printing presses.  Rather they buy printing services from a printing company as any other business or individual would do.

As a general rule, the subsidy publisher acts more as a coordinator of production rather than actually having salaried staff do the work.  This keeps employee costs for the publisher low.

For editing, proofing, page design and printing costs, the size of the finished book will be a variable factor.  The bigger the finished book, the more expensive to edit, proof, design and print which translates into a higher author’s subsidy fee.

To determine the author’s subsidy fee, the dollar amounts for each of the above pre-press activities is determined and a production sub-total is calculated.  Then, the actual cost of implementing the proposed promotion campaign is added in along with costs for advertising and marketing the services to authors, sales commissions for the representative who signs the agreement with the author, and a figure for general fixed overhead administrative costs, plus the subsidy publisher’s profit.

A typical fee calculation would be as follows:

Actual pre- press costs (edit, proof, typeset, page design, cover design)

+Actual printing Costs

+Actual promotion Costs

+Advertising and Marketing Costs for selling the service to authors

+ Sales commissions

+ Fixed Overhead charge and profit

Author’s subsidy fee

As a general rule, half of the subsidy fee is made up of pre-press, printing and promotion costs and half covers advertising and marketing, sales commissions fixed overhead and profit.

For example, a $10,000 author fee would mean that the subsidy publisher is paying to other freelance vendors about $5,000 and $5,000 covers the cost of selling the service to the author, covering the publisher’s general overhead costs and allowing the publisher a profit.

If the publisher is providing the service promised to the author, the profit margin on subsidy publishing contract sales is actually quite small at about 5-10%.  Subsidy publishers expend a great deal of money to advertise and market their services.  A good 10-20% of an author’s fee covers advertising and marketing. 

A subsidy publisher needs many authors to contact the company since a very small percentage actually ends up signing a publishing services agreement.  Primarily this is because of the average publishing services fee of $9,000---$10,000.

How to Lower the Subsidy Publisher’s Fee

The actual cost of production is a significant factor in determining the amount of an author’s subsidy fee.  Therefore, if the author’s vision for his or book is a full-color coffee table type book, expect that the subsidy fee will be much higher than, let’s say, a 32 page paperback, perfect bound book of poetry.

As in the house-building analogy used earlier, an author can invest “sweat equity” into the production of his or her book and bring down the amount of the subsidy fee.

Things such as:

• Providing the text of the book on a computer disk

• Asking the publisher to skip editing and proofreading

• Providing the cover art for the book

• Even providing pages ready for printing

makes the production costs for the author’s book lower and the subsidy publisher should reduce the amount of the subsidy fee if the author can do some of the “pre-press” work.

Many authors believe that a subsidy publisher’s fee can be influenced if they can convince the publisher that the book is “good”.  They mistakenly believe that the publisher will lower the fee with the expectation of making a bundle on the book sales.  A few authors will propose lowering their royalty percentage if the subsidy publisher lowers the fee.  The author thinks the publisher is interested in this since the publisher would stand to make a bundle when the book sales.

Since the simple fact is most books do not sell well---no matter how good the author thinks the book is, authors should not waste their time and energy.  While it is true there are negotiable elements in most subsidy publishing agreements, the author must always remember the subsidy publisher is simply selling a service.  They are not truly partnering with author. A good subsidy publisher will fulfill all contract obligations, but the publisher really does not care how well the book sells. 

Remember that about 50% of the author’s subsidy fee is covering fixed overhead costs for the publisher, costs for marketing and selling the service to the author and the publisher’s overhead.

The more publishing services contracts sold by the publisher the less the publisher needs to cover fixed overhead costs.  Fixed overhead costs cover things like building rent, the electric bill, etc.  For example, if a publisher’s monthly overhead costs are $10,000 the publisher might budget $1,000 from each subsidy fee to cover the overhead costs if the publisher signs up 10 new authors each month.

If the publisher signs up 15 new authors each month the publisher still has budgeted $1,000 per author and can put the extra $5,000 toward profit. 

The same holds true for the publisher’s advertising and marketing costs.  The more publishing contracts sold, the less advertising dollars needed per contract sold.

The publisher has a vested interest in volume.  The more contracts signed, the less needed per contract for overhead and advertising costs.

Because of this, the author has some leverage in negotiating the subsidy fee.  A subsidy publisher would rather see another contract signed at a slight discount from the proposed fee than see the contract not signed at all.

An author should never pay the full subsidy fee a proposed to the author.  At the minimum, the author should propose at least a $1,000 discount.  That’s right, the author should simply tell the publisher that he or she is ready to move ahead that month if the publisher reduces the fee by $1,000.  Odds are in the author’s favor that the offer will be accepted.

Another ploy is to play one subsidy publisher against another.