The Economics of Jerry Seinfeld

So Jerry Seinfeld might be getting seven to eight million for his proposed new book -- at least that's what GalleyCat reported.

And Editorial Ass, whom I usually agree with, let out a shriek of anger.

But I don't think she's right in this case. Her objection -- and the objection of the commentors elsewhere -- seem to boil down to "Jerry Seinfeld already has enough money." That's true, but it has nothing to do with this particular case: an advance is based on the expected sales of a book, not some philanthropic idea of what a particular person "should" get.

Publishers throw large sums of money at authors for one reason: because they think those authors will sell large quantities of books. Sometimes that's because the author sells large numbers of books regularly, such as James Patterson or the late Michael Crichton -- both of whom I would not be surprised to hear made on the order of $7 million for a single book -- and sometimes it's because the author is very famous for doing something else (being President, winning a TV show, yelling a lot on the radio -- generally something in the media, though major business leaders also get in there).

The latter is more of a crapshoot -- it doesn't usually matter if the "author" can actually write a book (there are people to do that for them), but sometimes the audience won't follow that particular person enough to buy a book.

There was a big surge in books by comedians in the early to mid-'90s, led by Seinfeld's own SeinLanguage in 1993. That trend eventually cratered with Whoopi Goldberg's Book in 1997, which could be found on remainder tables from almost immediately afterward to just a year or two ago. The field has been more modest since then, but it's still there -- comedians have fans, and they actually do write, which makes them better bets to translate to book form than some celebrities (such as the young women in the UK who get major book deals for being young, pretty, on TV, not overly burdened with modesty and in possession of notable curves).

So: on the positive side, Seinfeld wrote one book, which was an immense success. On the negative side, it was fifteen years ago, when he was the titular star of a top-five TV show. (And top-five TV shows meant more back then, too.) Giving him a big advance for a new book looks like a no-brainer to me, but the question is whether this (rumored) advance is big but reasonable or far too big for plausibility.

Here's what we don't know:

• what SeinLanguage actually sold, back in 1993 and long before BookScan (my memory is that it was huge -- double digit millions in hardcover and probably more than that in mass)
• how this new book will perform in 2009 (long after his TV show went off the air -- but we never know how any new book will sell)
• what, precisely, is included in that seven or eight million -- it could be world rights in all languages, or it could be much less than that. If the publisher can turn around and sell the UK, Australia, Canada, South Africa, and a fistful of translation rights, seven million might be earned back even before the presses run.

(Note that Seinfeld's agent -- and thus the people he's negotiating with -- know exactly what #1 and #3 are in this case. Nobody ever knows #2; this is no different from any other book deal.)

I'm going to assume the simplest, most pessimistic rights case: that the advances being talked about are for US hard/soft only. (But I'm also going to assume that Seinfeld's popularity is still strong, and that this new book will sell well -- a book that sells poorly was a bad decision, no matter how high or low the advance, so that scenario doesn't mean much.)

So let's say, using Moonrat's numbers, that Jerry Seinfeld's Book is published in hardcover in mid-2009 at $24.95, with a 15% flat royalty rate. (The latter won't be true, but it helps to simplify things, and will get us into the right ballpark.) And let's say that Jerry Seinfeld's Book sells a million copies, which is what the book by his missuz, Jessica (Deceptively Delicious) sold last year. I'm assuming a large part of the interest in Deceptively was because she was Mrs. Seinfeld.

Seinfeld will do a lot of media to promote a new book; he can get on any late-night or morning show pretty much by asking, and on nearly anything else almost as easily. (Publishers kill for authors with that kind of platform.)

With those assumptions, we've got $3,724,500 in earned royalties for the hardcover. That's a nice pile of change, but it's only about half of the rumored advance.

But, wait! We're assuming this is a hard-soft deal. (Hardcover-only deals have mostly gone the way of the dodo; you're not going to see them from a big New York house, if you see them anywhere.) So let's say there's a trade paperback of Jerry Seinfeld's Book in mid-2010, priced at $15.00 and with a 15% flat royalty rate as well (we're assuming the publisher throws this in -- it's pretty generous -- to help make the deal with Seinfeld and his agent), which sells about two million copies.

That's an additional $4,500,000 in earned royalties for the paperback, pushing the total earned to $8,224,500. (And that's actually above the numbers quoted -- probably because I'm using very rosy sales assumptions, but so will the publishers running P&Ls to justify buying this.)

And there will be a mass-market edition as well: let's assume that comes along in mid-2011, priced at $8.99, with a flat 10% royalty rate. I'm assuming that mass-market distribution hasn't completely collapsed by then -- which may be an unwarranted assumption -- so let's let that chill our numbers a bit, and only assume another million copies sold.

That will be another $899,000 in earned royalties, for a total of $9,123,500.

Voila! Jerry Seinfeld's Book more than earns out, in three editions. Using more pessimistic assumptions -- for a book at this level, most publishers do several P&L scenarios -- with sales at only about two-thirds of what I originally estimated, it would still earn over six million.

And the publisher's revenue?

Using my original rosy assumptions:

Hardcover: $24.95 list; average 55% discount (it'll be sold into the various outlets in truly epic quantities) for an income of $11.2275 per book and total revenue of $11,227,500. Let's assume the total in-print quantity was about a million and a half, with a pp&b (cost to produce the book) of about $2.00 (lots of special effects on this baby, but huge print runs and a short book), a media spend totaling a cool million dollars, and that remainder revenue covers miscellaneous costs. That's $4,000,000 in costs.

Trade paperback: $15.00 list; average 55% discount (same assumptions) for an income of $6.75 per book and total revenue of $13,500,000. Pp&b will be under a buck, so let's call it $1.00 even, and assume total in print is about two and a half million. Let's say they spend half a million this time around for media and publicity. Remainders should be negligible; this edition will backlist indefinitely. (SeinLanguage is available in both mass and trade even now; the trade is a new edition from this September.) So that's another $3,000,000 in costs.

Mass-market: $8.99 list; average 60% discount (I'm running high, since I have no idea how the mass-market is going these days) for an income of $3.596 per book and total revenue of $3,596,000. I'm just going to say additional costs will run about a million -- another strong (but smaller) ad spend, and cheap printing for a cheap book.


To add those up:
Hardcover revenue: $11,227,500
Trade pb revenue: $13,500,000
Mass pb revenue: $3,596,000
Total revenue: $28,323,500

Advance: $8,000,000
Hardcover costs: $4,000,000
Trade pb costs: $3,000,000
Mass pb costs: $1,000,000
Total costs: $16,000,000

Revenue minus costs; contribution to overhead and so forth: $12,323,500.

That's spread over three fiscal years, and it's based on my very loose and back-of-the-envelope numbers, but this is definitely a book that could be quite profitable for the right publisher.

So, yes -- it does make sense to spend seven or eight million on an advance for a new book by Jerry Seinfeld. I think so, anyway.