The main financial role of a publisher is to manage risk.
In traditional publishing, the publisher takes all the financial risk. The publisher will undertake and pay for manuscript evaluation, structural editing, proofreading, layout, cover design, ebook production, printing and marketing and the publisher will organise warehousing and distribution in the territories it sells into, and employ its own or third-party sales reps to introduce books to retailers and wholesalers. Money flows from publisher to author in the form of royalties if the book sells (sometimes with an advance against royalties). Traditional publishing is gatekeeper driven and the model relies on a small number of retained authors with a proven track record of generating commercially successful work.
In self-publishing, the author becomes publisher and takes all the financial risk. At the simpler end of self-publishing, the author saves money by designing their own cover, doing without editing, asking friends and family for advice and publishing online with Amazon. At the other end of the scale, an author can assume all the responsibilities of a publisher and professionally produce, warehouse and distribute their books to retailers globally. And in between these two extremes are countless other options of going it alone or using self-publishing services companies.
In hybrid publishing, author and publisher share the risk and rewards. The publisher selects manuscripts based on their merit and assumes all the roles of a traditional publisher, professionally producing a book and making it available for leading trade accounts worldwide, but the financial risk of the publisher is mitigated through a subsidy by the author and in return the author earns much higher-than-industry-standard royalties. Read more about hybrid publishing here.
The decision to publish one’s manuscript with a traditional publisher or a hybrid publisher or whether to go it alone and self-publish is a difficult one. In recent years, many authors aimed for a traditional publisher first then, if they were unable to secure a contract, chose the self-publishing route. Other authors jumped straight into self-publishing and many struggled to produce or sell their books. With the advent of hybrid publishing, some authors are making this model their first choice due to the high royalties while others are arriving here having tried other routes. There are success stories from all forms of publishing and there are plenty of resources online to guide authors.