The costing of ebooks

Paul Raven @ 20-02-2009

Yeah, another ebooks post, but new material is coming in so thick and fast that every day I seem to find an answer to a question that was raised the day before. Point in case – why aren’t ebooks priced at a tiny percentage of the cost of a hardback? Take it away, HarperCollins:

We still pay for the author advance, the editing, the copyediting, the proofreading, the cover and interior design, the illustrations, the sales kit, the marketing efforts, the publicity, and the staff that needs to coordinate all of the details that make books possible in these stages. The costs are primarily in these previous stages; the difference between physical and electronic production is minimal. In fact, the paper/printing/binding of most books costs about $2.00…

In other words, a $26 hardback equates to a $24 ebook.

Now, I’m in no position to refute those figures, but I don’t think it takes an economics expert to look at them and realise why the publishers are struggling at the moment; if their analysis people can only shave off $2 per unit by removing the printing, shipping, warehousing and remaindering from the equation, then there’s a business model that was on shaky ground before the ebook entered the picture. I suspect the bits I’ve bolded are where the haemorrhaging could be stemmed most effectively.

But it’s easy to say that from the outside looking in; if anyone among Futurismic‘s readership can supply hard figures on this stuff, I’d be glad to give you a soapbox, so drop us a line.

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8 Responses to “The costing of ebooks”

  1. SMD says:

    This is what we in the world call B.S. They just don’t want to let go of the huge profits that eBooks provide on a book to book basis.

  2. Jason Stoddard says:

    Quasi-substantive post follows:

    First reaction–AHHHAHAHAHAHAHAAA!

    Second reaction–the cost to produce a physical product depends highly on the quantity produced. They’re not producing 50K 600-page hardcovers for $2 each.

    Third reaction–production is only one element to the physical cost. What about shipping, warehousing, distribution, management, remaindering–and the personnel needed to oversee these logistics?

    Fourth reaction–if soft costs like the sales kit, the marketing, and the publicity is truly running at 1200% of the manufacturing cost, this is what the manufacturing industry refers to as a “severely broken, unsustainable model.” Unless you’re in a huge-margin industry such as cosmetics or clothing . . .

    Fifth reaction–they need to stop the excuses and denials, and start looking at real ways to evolve. Or the only thing standing will be small presses.

  3. SMD says:

    Jason: The problem with the 5th reaction is taht those supposedly “small presses” grow and cease to be “small” and eventually become the big guys, who will, most likely, not evolve when another technology jump occurs that could spell disaster for the book industry.

  4. Jason Stoddard says:

    Actually, I’m really bullish on the future of small press.

    However, I’m not so bullish on them ever getting “big.” Healthy, yes. They serve a niche market with unique product–done well, they’re golden.

    Growing into the next generation of large publishers? Not unless we suddenly have a culture shift that creates a lot more long-form, linear-narrative, fiction-centric readers.

  5. SMD says:

    Well, I’m thinking more of the non-niche small presses. There are quite a few that do serve a niche, but that niche is much more broad than we might think. I doubt truly niche presses would ever grow into big publishing conglomerates, but certainly some places would have the opportunity to grow.

  6. Soma says:

    Don’t buy it for a single solitary second. You’re telling me, then, that publishers are selling hardbacks at cost and take a $10-15 loss on every paperback they sell? Riiiiiight.

    The price of that $26 hardback is tied up in the draconian deep discounts and return policy of booksellers. Take that $26 and remember that the bookstore is getting a discount of oh, say, 60%. Now we’re down to $10.40. Now remember that they have to offset a projected 1/3 of the print run back in returns and we’re down to $6.97. That’s $6.97 to make a profit, mind you.

    So really, if you’re justifying it according to printing cost, we’re talking $5 per eBook *TOPS*. Yeah, there’s something else going on here for sure.

  7. Kriss says:

    I suspect, as a writer, you don’t want to admit how marketing is far more important than content. This isn’t unique to books, all publishing is 100% marketing, I think it was Crowley that referred to publishing books as “Money Spells”. This money will be generated from people that in fact will read whatever marketing tells them to read or more likely just buy and not read.

    Case in point, which will make more money the best written book in the world or the one that oprah tells people to buy?

    Yes content is important to people, but it’s primary role is to provide free marketing. Friend recommendations, win awards, etc. If it doesn’t generate this free marketing then it’s a fail. It’s not about selling to people who like your book, it’s about placing you book in places where people who don’t really like it will accidentally buy it.

    In the above case your content is what gets you the oprah recommendation but your content is not why the book sells. That distinction is a big one.

    One part of marketing is books on shelves, I suspect it is probably the major one. Ebooks mean publishers will lose ground to whomever distributes them. Since book publishers are at war with book sellers and creating a giant invisible book shop with more power than they can imagine is the last thing they want. I can’t see publishers ever willingly switching.

    They will get replaced over time but it’s probably that the industry will shard into books and ebooks and authors will have to make a choice which side they are on. Do they want to deal with a real publisher who will actually do the marketing job? Or do they want to handle marketing themselves? After you hit success, sure a real publisher will offer to step in and “save you” but do you want them to?

    This isn’t from the point of view of a writer BTW, this is from someone looking at the games industry and trying hard to find where the win is. I suspect there is a lot of parrallels, games are obviously switching to online distribution right now. I see some rather disgusting business entities making land grabs as I type.

    I no longer expect anyone to pay for any primary content I might create, it’s role is marketing not revenue generation, my only hope of income is secondary content. In the case of books secondary content can be the dead tree version. This is fine for authors but it kinda puts you back where you started and useless for publishers who are already making money from the dead tree version.

    Here’s a fun games thread about your possible future problems, http://forums.indiegamer.com/showthread.php?t=15697

    Where having committed to a virtual marketplace, the marketplace suddenly drops the price of content by 50% and creators who where trying to live on 10 sales a day become sad as this doesn’t mean that they now get 20 sales.

    They are a bit of a miserable bunch but it’s pretty much where I figured the casual games boom would go which is why I didn’t even try to jump on it. Well that and the whole creating games for retards is not somewhere I want to be. Even a win would be a fail.

    I seem to have over commented again, I shall twitter a link to it, I’m bored of the concept of real bloging.

  8. Khannea says:

    Remarkable! Let’s see if I get this right – if dead tree was any more popular it wou’dn’t be profitable anymore because the publishing business would go up in a blaze of piracy – conversely, books still are so boring to potential pirates they aren’t pirated?

    Hmmmm lets see how we can change that, fast?