How does a publishing company make money?

A publisher pays authors royalties in exchange for the rights to publish their work in book form. Royalty rates are percentages of book sales and they are entirely negotiable, though some publishers have standard royalty rates or standard royalty ranges that they try to stick to for the majority of their book deals.

What does a publishing company do?

The publisher receives manuscripts, polishes them, designs and prints them as books, and then pours money into advertising and sales promotion to generate maximum sales.