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How Long Will Publishers Be Able to Ride the E-Book Profit Wave?

28 February 2012

From Digital Book World:

Sales are flat and margins are up at major U.S. book publishers, but how long can it last?

In the past two weeks, both Penguin and Simon & Schuster have reported their 2011 results with nearly no change in overall revenue. At the same time, profits are up at both companies.

There are many things that could account for that – operational savings like moving to a more efficient technology system or a cheaper office space, or realized cost savings from a restructuring several years ago, for instance. But I think it’s because of e-books.

As e-books sales rise by double and triple digit percentages year-over-year, and print sales slowly decline, overall revenues remain relatively flat. But because e-books give publishers a bigger profit margin, the flat revenue comes with an increase in profits.

. . . .

“Sales are down, margins are up. And that will last as long as they [publishing companies] can continue to pay authors the royalties they’re paying them [for e-books] and sell the books at the terms they’re selling them on,” said Mike Shatzkin, publishing consultant (and partner on the Digital Book World Conference + Expo).

. . . .

Booksellers may already be going after that additional profit. Rumors are that Amazon has already started renegotiating contracts with publishers. And last week, reportedly due to a stalled contract negotiation, Amazon stopped selling e-books distributed by the Independent Publishers Group, a large, Chicago-based book distributor for smaller publishers.

Shatzkin has a solution to this problem for publishers: Pay authors higher royalties on e-books.

Link to the rest at Digital Book World

Big Publishing, Royalties

6 Comments to “How Long Will Publishers Be Able to Ride the E-Book Profit Wave?”

  1. They will ride that wave until they have sucked every drop of blood from the stone – stealing rights they are not allowed to have – forcing newer authors desperate for prestige and publicity to sign ridiculous terms – combing backlists and fighting in court to reissue old works as e-books. Instead of realizing they need to change their MO, Big 6 will continue driving themselves into the ground until they’re dismantled by their larger corporations.

    • To be fair, rights are not stolen if they’re included in a publishing contract. And they don’t FORCE writers to sign bad contracts. Stupid writers who think of nothing but getting published at any cost are all too eager to do that themselves.

      So I think the answer to the title’s question is: a very long time. There are PLENTY of the aforementioned stupid writers who care only about having their name in print and are willing to sign anything. That will keep them in the black for a while.

  2. How can profits be up if sales are flat? According to publishers, making an eBook is almost as expensive as a print version–hence the reason we have to fork over $10 or more for them. You mean the publishing company might be lying to me??????

  3. I’m thinking that the really big best selling authors have got to be working with their lawyers and accountants to figure out when it is time to start up with their own imprints, and stop depending on the so-called Big 6. After the Big 6 start losing their cash cows, it will be a race to the exit for the remaining best selling authors, or at least the remaining authors will get far more favorable terms than they are likely getting now, with a resulting brake on the profits.

  4. In my personal opinion, I think the conglomerate publishers, who created this monoculture by buying up smaller publishers, will either

    a) Disintegrate. The nuclear option — which like nuclear war would require severe levels of craziness on the part of the players. The companies would have to keep right on treating their suppliers (authors) like idiots who can’t read a contract (even the naive will get wise to that eventually)and keep right on cutting the back-of-house staff who bring added value for both the supplier (author) and their consumers (readers). If publishers don’t add value with good-to-great editing, covers, marketing etc and still pay their suppliers too little while charging their consumers too much then they really should have the big red button taken away from them. Crazy people should not have that much power.

    or

    b) Let their imprints off the leash. A monoculture is not good in a changing environment. Without a diversity of strategies there will be little or no evolution in the conglomerate’s business model. No evolution equals extinction. So they should let their imprints act like independent publishers, you know like the small publishers their imprints used to be before the conglomerates bought them up and imposed a top-down business model on them. Let the imprints take risks, pay higher royalties, charge lower prices, and see which ones make money and which ones don’t.

    If they don’t do that, then small publishers will take the lucrative niches in the market environment and push the conglomerates into the wasteland of high advances, high marketing costs, and low profit margins. At that point, if they lose their cash cows, because they can’t feed them enough, they’ll be done.

    That’s the way I see it anyway.

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