Quoted from this article.
“Traditionally, publishers have sold books to stores, with the wholesale price for hardcovers set at fifty per cent of the cover price. Authors are paid royalties at a rate of about fifteen per cent of the cover price. On a twenty-six-dollar book, the publisher receives thirteen dollars, out of which it pays all the costs of making the book. The author gets $3.90 in royalties. Bookstores return about forty per cent of the hardcovers they buy; this accounts for $5.20 per book. Another $3 goes to overhead costs and the price of producing and shipping the bookâleaving, in the best case, about a dollar of profit per book.”
What is lacking throughout the entire article, and apparently from the thinking of publishers thought processes, is one simple fact: it’s cheaper to make ebooks.
The margins mentioned in the quoted section, and the original article, are slim as hell. Narrow beyond belief. Yet, when you subtract the cost of returns (quoted above as $5.20 per book), and subtract the cost of producing and shipping the book (listed as $3 per above), the profits for ebooks suddenly explode. An ebook priced the same as a hardback ($26 as above), the publisher earns as pure profit a whopping $9.20 per book. But, publishers are not selling ebooks for $26 each. They’re selling them for $9.99 or $14.99, so are publishers losing anywhere from $2-7 per book, no. They’re not. Why? Because it’s a different model.
Publishers typically pay the author 25% royalties (based on cover price) per book, and pay a 33% of cover price fee to the online storefront that actually sells the books. So when an ebook sells for $10, 58% (or $5.80) of that goes to someone other than the publisher. Now the remaining amount ($4.20) goes to the publisher and from that they pay their staff and earn a profit. So paying editors, marketers, designers, etc all comes from that remaining $4.20 from a $10 book.
That may not sound like much, but it’s a huge improvement. Compare what the publisher gets from each type of book, e- versus physical. For ebooks the publisher gets 77% of the cover price to pay expenses and profit. For hardbacks the publisher gets 50% of the cover price to pay expenses and profit. Even reducing the cost of an ebook to around $10, the publisher would have the same profit margin as a physical book.
When you include the utter lack of expense in producing an ebook, remember that returns are all but non-existent, there’s no shipping or warehousing, no taxes on warehoused stock, no return shipping and pulping involved in ebooks the profit margin skyrockets and suddenly the fight for $14.99 instead of $9.99 looks like what it really is: pure unmitigated greed.
Now, publishers have struggled for years and we all have to admit that. They’ve done good work for little money for a really long time. But, we’re in the 21st century. Ebooks are here, and they’re the future of publishing. The big media companies are still floundering to get in on the “new thing” of ebooks. Publishers don’t want to struggle with narrow profit margins any more. Ebooks offer publishers a way to renegotiate the terms of their service to the world. And more power to ‘em. They deserve to make more for their hard work, and the authors too.
Here’s the catch: you can’t beat free. Without getting into the piracy conversation, there’s a near infinite amount of free content available on the web, legal or otherwise. Paying $26 for a hardback of a book is something that’s difficult to swallow when you’re poor. Which is why paperbacks do so much better. Paying $8 for a paperback version of a book is still hard for some people to accept. Asking people to pay $14.99 for a book they can’t even hold, that might be censored (Moby Dick story about iTunes censoring the free book), that might be erased in a Orwellian irony (as 1984 was from the Kindle), is just plain stupid.
Publishers are in the business of books. Business. The goal of business is to make money, as much of it as possible at all times. Publishers should be paid, and they should be paid more than they are now. Accepted. However, asking readers to pay $5 more for the same ebook is plain retarded. Amazon will come over to the pricing model used by iTunes. Great. Guess what? That prediction that publishing is dead or dying is slowly coming true. It’s a self-fulfilling prophecy at this point because industry that let retailers walk all over them is finally taking the moral stance at the worst possible time.
Now, when the industry is at it’s weakest. Now, when the industry has never been more transparent. Now, when there’s a near infinite amount of free content to compete against. Now, when publishers are folding, when magazines and newspapers are dying in the streets. Now, when self-publishing is easier than ever with the internet. Now, you decide to stand up and demand more money?
Considering the state of things it has come to this. It really is now or never for publishers. I wonder if this is what it looked like when Beta Max took its last gasp.
