I’ve been there and done that.

Dr. B

In a sense of course, all authors are ‘out of pocket’ until they have earned enough to reflect the work they have put in to their manuscript.

Er, NO, the situations of Writer A, B, C, and D are not the same financially. Writer C has a home equity loan that has to be paid off, even though the book went bust and that person was relying on the sales money to pay the monthly payments. Cash flow is a critical consideration for a writer (or any freelancer for that matter).

Most of the real life examples you quote are of books published poorly. I tend to use a starting point of books that are published well …

Back in the 1990s & early 2000s, I knew (and worked for a few) software companies that assumed best case scenarios. They’re gone now since they were unable to survive the dot com bust and 9/11 recession. No savings, heavy debt, poor cash flow (too much money out, too little in). The ones I knew that survived (like Red Hat Inc.) ran a very tight ship financially.

But the idea that an author doesn’t ‘pay’ a traditional publisher? They may never write a check, but the author receives less revenue because the publisher takes the upfront risk and pays for production, marketing and distribution. So in a sense, the author does pay. Every time. Which is not to say that is unfair, or theft, or deception – it’s just that these functions happen and someone has to pay, whether the author sees the money go out of their account or not.

Sorry, but I have to disagree with you. From the perspective of financial risk, “paying” a traditional publisher through their earnings of sales on a book is NOT the same as a writer “paying” from his or her own pocket. Let me provide some real life examples (modified to respect the writers’ privacy):

Writer A spent $100 on submissions to traditional publishers. Sold book for $3000 advance to publisher. Due to ugly cover art and bad timing, sales were poor. Writer only did publicity that was free (twitter, blog). Even after taxes and (possible) agent’s fee, Writer A still in the black.

Writer B spent $0 on submissions to e-publishers for romance novellas. Sold a novella for no advance, 35% royalties. Sold poorly, got about $350 in royalties. No agent. No publicity costs. Writer B’s finances are still in the black.

Writer C went with a vanity press and took out a home equity loan to cover the costs (editing, printing, etc.). Paid out about $6,500. Book sold poorly. Writer is now seriously in the red.

Writer D went and self-published. Never expected to sell much. Started out just doing e-versions of books. Bartered services with a graphic designer and copyeditor. Costs ran under $200. Writer is slightly in the red.

The most important lesson I learned while working in the software industry was Cash flow is King. It is not a coincidence that organizations like SFWA urge writers to either go the traditional route (publisher pays you) or self-publish as a small press of one.