Home » Big Publishing, Ebooks » Consumers Upset and Confused Over E-Book Pricing

Consumers Upset and Confused Over E-Book Pricing

22 April 2012

From Digital Book World:

Publishers are making a killing on e-books because they cost nothing to produce, distribute and sell and are almost 100% pure profit. At least, that’s what many consumers think.

“E-books cost almost as much as printed books but are phenomenally cheaper to create,” said Trevor Doyle, 39, a teacher from Ione, Calif.

“There’s so much less cost involved – no material, relatively low distribution cost, no inventory costs, transportation,” said Michelle Barrineau, 42, a sales analyst from Ft. Lauderdale, Fla.

While consumers understand the basic costs involved in the bricks-and-mortar retail world, they don’t understand the costs involved in selling something that is, well, much, much smaller than a bread box.

. . . .

What many people in publishing know that consumers generally don’t is that most of the cost of a book, even an e-book, comes from the cost of acquiring and developing the content – which, if the book is trade fiction, is mostly words.

“We still pay for the author advance, the editing, the copy-editing, 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,” said Bob Miller in February 2009 on the HarperStudio blog (which has been defunct since April 2010 when the publishing start-up folded) when he was president and publisher of that company; he is now president and publisher of Workman Publishing. “The costs are primarily in these previous stages; the difference between physical and electronic production is minimal.”

The same holds true today.

“It’s still true that publishers have all those costs whether a book is physical or digital,” Miller said this week. “There is a savings in printing or not but we still have all the costs leading up to and then supporting the book’s publication.”

E-book production “costs 10% less” than print book production, said Molly Barton, Penguin’s global digital director. Hardly the vast savings that many consumers imagine. “But the largest expense is author payment and always has been.”

“You can’t take the e-book in a vacuum,” said Adam Salomone, associate publisher at The Harvard Common Press, a cookbook publisher based in Boston. “If publishers are being honest about the process, it actually doesn’t cost less.”

. . . .

Another hidden e-book cost is that of distribution. According to Panchanathan, e-book distributors typically take a cut of 2% to 9% of every sale.

Link to the rest at Digital Book World

PG thinks expense accounting for the cost of books is subject to as much fiddling as royalty accounting.

Big Publishing, Ebooks

41 Comments to “Consumers Upset and Confused Over E-Book Pricing”

  1. The thing that gets me is the author being the largest expense. Given how little they pay new authors, that would kind of indicate to me that it’s not very expensive at all.

    • Average advances in genre fiction being 5k (or less) that would mean… that an ebook costs around 7-8k to produce! ;)

      Also, some of the new romance digital-first arms of the traditional publishers are NOT PAYING ADVANCES, but only royalties (and some of them aren’t even paying higher royalties, but the same bad 25% of net). Um, so where’s that cost, now? I feel sorry for the authors who want to be published so badly that they sign those contracts…

  2. Kristine Kathryn Rusch responded to this in her recent post The Business Rusch: The Changing Definition of Publishing: “Let me say, simply, bullshit.” She goes on to explain with solid numbers.

  3. “But the largest expense is author payment and always has been.”

    They like to say this because it makes them look good, but really all it means is the other expenses are subdivided into a lot more categories. For example, the production of a hardback might cost $2-3 and be more than the author royalty, but they’ll have that split into printing, binding, and so on.

  4. This is total nonsense. Almost two decades ago I was editor-in-chief of a relatively small indie publishing house that specialized in ethnic romance novels (as well as some general fiction and non-fiction). The VAST majority of our costs to produce a book were the printing costs as well as the distribution costs.

    Does anyone actually think it costs just as much to produce a 500,000 first print run of the latest Grisham book as it does to produce the e-book version?

  5. As has been pointed out elsewhere, the simple and continued existence of the mass market paperback blows that entire line of thinking out of the water.

    MMPBs are cheaper to print, and somewhat cheaper to ship and distribute (lighter, smaller, the whole book isn’t returned). The rest of the costs involved are identical, or nearly so — they still have to be edited and designed, and if anything the bright covers are more expensive than the stolid ones on hardbound dust jackets.

    There are any number of genres in which MMPB is the only format ever provided. Romance is at the top of that list, but most Westerns, SF&F, and mysteries never see hardbound distribution. Since the publishers keep right on producing MMPBs, we are forced to conclude that they can edit, design, cover, print, and distribute them so as to sell for $8 or $9 and make a profit, or else they’d quit doing it, now wouldn’t they?

    Unless, of course, the reason they think we’re that stupid is that they spend too much time looking in the mirror.

    Jim Baen figured it out long ago. Hardbound books are art objects, and command a premium for that reason. The business is getting words to the customer, and the MMPB has up to now been the most cost-effective way to do that for all concerned. Eliding some tedium, it follows that the price of an ebook should be the price of an MMPB less the costs related to creating and shipping a physical object, plus a little extra profit for author and publisher because they’ll probably cut into the market for hardbounds. Result: two-thirds to three-quarters MMPB price. In that scenario the ebook supplants the MMPB, largely or entirely, and the hardbound edition is for collectors, the old-fashioned, and the impatient (I don’t get irritated at them holding back the ebook until the hardbound has earned out; it’s how they managed MMPBs, and ebooks are the “new MMPB”).

    And what do you know? — looking round the author and self-publishing sites, it would appear that the high-return “sweet spot” for ebook pricing is $5 or so — two-thirds to three-quarters of MMPB price. Who’d'a thunk?

    • Absolutely OK with that Ric. Additionally, Baen figured out quite earlier than most that DRMs were a no-go, that he could also charge a premium for early distribution (The ARCs aren’t even completely edited and sell for more than twice the finished book), that electronic distribution allowed him a wider spread of his ebooks.

      However, now that the ereaders are available at competitive prices, I wonder if they can keep on distributing CDs as they have been doing, or if that doesn’t kill some part of the backlist potential.

      • I suppose that the CDs will continue for the authors that already had them in the past. After all the new disk will only include very few books that were not on the previous CDs.
        I however doubt that new authors will join the bandwagon.

    • And remember how MMPBs used to be $5? The prices went up (quite substantially, as a percentage) because the cost of paper increased. Now they want to pretend that paper costs nothing at all….

      • Y’know, I had forgotten that. Probably a lot of people had.

        So by their very own press releases of not too long ago, paper alone is $3 to $4 of the MMPB’s price. Ebooks use no paper, therefore…

  6. I’ll say, “What, 10% cheaper? BOGUS.”

    Okay, go to http://www.sjgames.com/gurps/books/basic/

    SJ Games is a niche market: tabletop roleplaying games. They barely scratch economies of scale. But for their core rules? Their PDFs are $10 cheaper than the print versions (which are full-color hardbacks, I hasten to note), not a mere $3 or $4 cheaper. From $40 to $30, and $35 to $25. Check my math — PDF is about 75% of the hardcover? So 25% cheaper, not 10%?

    Even http://www.sjgames.com/gurps/books/magic/ — where the price was clearly based off the hardcover version ($35, now OOP) — is a full $5 cheaper: $30 to $25 (I think they should re-visit that price, but it’s comparable with their other PDFs for equivalent formatting, so I can see the point there.)

    http://www.sjgames.com/gurps/books/psionicpowers/ started life as a PDF, and got enough interest that they took it to softcover; the additional cost? $8; from 12 to 20. So the PDF is 60% of the dead trees softcover.

    And these are books that require internal art (which costs money); heavy, math-intensive copy-editing; time spent play-testing (or at least opening the books to a select number of people for peer review to catch “did you know that if you do this, this, and that other thing, you can create a character who can move the Moon by the power of his mind alone, for 1% of his starting character points?”); and careful layout so that tables aren’t messy and art goes with the text. So, very plausibly, paper, printing, and binding are a small part of the work that goes into these.

    And their PDFs are still more than 10% cheaper than the dead trees versions.

    Now, move over to Baen. http://www.baenebooks.com/, to be exact. As you know, Bob, Baen is selling ebooks for… $4-$6, with eARCs at $15. Or get a bundle of books for $18! (Looks like 6-9 books per bundle?)

    I would very much hope Baen is not taking a loss on these.

    I CRY BOGUS TO 10%!

    Now, the “distributors taking a cut” part, I’ll say that is potentially valid; I know that my “85%, minus PayPal fees” from Smashwords can be as low as 54 cents for a 99c story, if the purchaser gets nothing else to spread the fees around with. It’s possible that if Baen did distribute to Amazon, say, they’d need to raise their prices by a buck or two, which would put them into the 5-7 or 6-8 range, which is more an “expected” price. (And that’s if they make sure to only distribute to countries where the 70% royalty is in effect. And we’re assuming that they could get a 70% cut.)

    But after the “oh, it costs soooooo muuuuuch to do the non-physical parts!” FIB, I’m not very sympathetic to the rest.

  7. Someone, quick! Call the Waaambulance!

  8. Liars, liars, liars.

    Rusch should know: According to her husband, they paid more for gas to drive books to the bindery in 1990 than they do today to produce a finished e-book and a POD paper book. http://www.deanwesleysmith.com/?p=6347

    Consumers may be upset, but they certainly aren’t confused!

  9. Publishers: it costs us almost as much to do ebooks as paper books! We only save 10%! Me: You’re doing it wrong, then.

    Seriously, if we take them at their word, and that for them, they only save 10%, then they truly are doomed, because their business model is so outdated and inefficient that competitors won’t even have to be very good to take their lunch money.

    • Yeah, I find this baffling. If it costs them SO much to produce an e-book, how are people self-publishing using professional book designers and editors? Clearly, it does NOT cost as much to produce an ebook as it does a hard copy or individuals would never be able to create ebooks.

      Publishing houses already have these people on staff for their hard copies, and there’s no way they are hiring additional people to do ebooks. And it’s not like an editor is editing the hard copy and then the ebook separately. (I’ll MAYBE give them the copy editor doing it twice and yes, the cover artist would probably do two versions. That’s it.)

      If it costs them 10% less, you are correct–they are doomed.

      • Since publisher’s cover artist already has to provide a hi-res jpg for publicity posters, there’s no reason to pay them twice for an ebook cover, and you can migrate the text from InDesign after the typesetting, so your only cost is tweaking the formatting and loading it on the webite. The last time I did a ebook reformat for a client after someone did the paper version and sent me the text file, it took less than 2 hours to redo it, reload the pictures, add a couple of info boxes, hyperlinked table of contents, and run it through the kindle conversion software. Yet my publisher sends this out to another company to do, and they can’t get them done in a decent amount of time.

        For my 85 cent author royalty per ebook and 65 cents per paperback, if my publisher ever said author royalties were the biggest part of the book cost I’d be the first to cry foul.

  10. Not only they’re stupid, they’re liars too.

  11. Maybe they are telling the truth. Maybe it does cost them that much more to produce an ebook. Problem is, I don’t care. Not as a consumer. I can’t think of a single time that anyone has said to me, “Golly gee, I know this business’s products are way more expensive than that business’s products even though the products are comparable, but I am going with the first because they have higher overhead.”

    Publishers won’t be the first businesses to price themselves out of a market, nor the last.

  12. “We still pay for the author advance, the editing, the copy-editing, 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.”

    So, they’ve already obtained the rights and have produced a physical book. Then, when an ebook is produced, they pay an author a second advance? They edit it all over again? Proofread it, too? Make a different cover? Market the ebook separately? Pay the staff again?

    That sounds like the most incompetent business ever. Or they’re lying. One of those.

    Also, any publisher who states that the biggest expense is the author payment with a straight face should be punched in the throat.

    • One place they appear to be saving money (if what shows up on my Kindle is any indication) is in the hiring of ebook formatters. I suspect they may be using chimps and paying them in bananas.

    • Seriously. After all this time to think about justification of the ebook cost, this is the best they can do? It’s ridiculous and not even logical.

  13. An e-book is created once. A book is created as many times as it is printed. That deals with a part of the costs.

    To create an e-book after the printed book, is even less costly since the book already exists in electronic format in order to be printed. They use computers nowadays to print…And all the marketing, editing, etc costs have already been accounted on the printed book.

    So yeah, right, only 10% less than the printed book for an e-book. Whatever.

    In any case, I’m not going to pay more than 5$ for an e-book. No matter what. And in exceptional cases.
    I would think to pay more only for non-fiction, technical books.
    I don’t care how much it costs to them. I care how much it costs for me. At my reading pace, 2-3 books per week at least, I can’t afford and even if I could, I wouldn’t pay such prices.

    I also get annoyed when I see extravagant prices on e-books, since I can calculate costs. So, no, not paying.

  14. Even if you shift the entire burden of editing, cover, formatting onto the ebook, there is still a $3-5 differential on cost associated with production. Once you have the digital file ready to go to ebook distributor or printer, the ebook has no more costs. Period. Whereas at that point the book still has to be printed, bound, and shipped. Lulu and Createspace both breakdown the cost to them for the physical printing of a book, separate from the share of the sales price they are taking. That runs about $4 for a short book, and up from there depending on page count. Allowing for the traditional 30% mark up (in food distribution that is the standard upcharge) that leaves publishers paying about 3.60 for physical printing costs; even at a 50% mark up publishers would still pay $2. That cost will never be part of the ebook! And that’s not even including the charges that have to be built into the price–retail or wholesale–to cover the warehouse workers who sling the boxes onto trucks and the trucks that drive them to the stores. Ebooks never have those costs, either.

    So, basically, I second Ric’s point above, that ebooks should be 2/3 or 3/4 mmpb price.

    • And don’t forget the returns system, where the printed books are expected to “sell through” 50-70% of the print run. Yes, publishers only expect to sell about half to 2/3 of the physical books manufactured. The rest are stripped and returned, or, in the case of Trade size and hardcover, put in the discount bin at a ‘loss’ — those losses are factored into the cost of the books.

      Whereas e-books have a 1-5% return rate, max.

      • I’ve seen several sets of figures over the years, breaking down where the industry spends the price of a book. Printing, even for hardcovers, is no more than 10 percent of retail; shipping is in the neighbourhood of 10 to 12 percent.

        The trouble is those returns, as you mentioned. When you buy a paper book, you are not only paying for paper, ink, and shipping on your copy, but on another copy that didn’t sell. Because the Big Six still sneer at POD, you are also paying a share of the tremendous up-front costs of traditional presswork. The first copy of a book printed by traditional methods costs $10,000 or more. Each additional copy costs anywhere from about 50 cents to $3, depending on format.

        If the Big Six embraced POD instead of sneering at it, they could greatly reduce those up-front costs and make money on shorter print runs, as small presses have learnt to do. But that just wouldn’t be Big enough for them. So they stick to a production process that is only economic for the highest-selling 20 percent of their titles.

      • And that 1-5% return rate on ebooks doesn’t incur any cost to the publisher whereas the return of paper books could (the cost of production that could reasonably be charged against the books that do sell, plus possibly some amount to pulp them).

  15. I have heard a panel of publishers saying much the same thing to a room full of experienced writers at an event in Edinburgh. Nobody believed them. Advances are tiny. Writers are expected to do most of the publicity and promotion themselves. And my last agent admitted that since all publishers are now looking for an ‘oven ready’ product, agents are increasingly employing editors to do most of the work before submission. They may fool some members of the general public who seem to believe all writers are in the J K Rowling bracket but since the average earnings for professional writers in the UK, from Society of Authors statistics, are somewhere under £5000 – they certainly don’t fool writers. I don’t imagine the situation is much better in the USA.

  16. Look at the Boyd Morrison story, and tell me again about how much value all that extra expense that publishers bring to the table is worth again?

    I believe them when they say that they can’t produce a book for cheaper — but that’s because they have an incredibly wasteful industry which is optimized for the paper market.

    But that’s not the consumer’s problem, nor should it be the writer’s problem.

    And to put the lie to their claims…. I notice that a good many mysteries from major publishers are published for Kindle at paperback prices.

  17. Here’s a few more thoughts on the truth (and falsity) of the cost of a book:

    The cost of editing and all of that does have to be shared out by ebooks as well as paper books. They are correct that ebooks should not get a free ride. They have to carry the overhead just as much as any other product.

    On the other hand….

    Publishers are playing games with the overhead costs. They have a whole lot of junk hidden behind the curtain that they’re not talking about.

    They’re explaining the per book costs — the cost of bringing a particular title to market. And maybe, if you squint, they’re right about how there’s not so much difference in materials cost. And maybe, if you really squint, you might see that the upfront payment to the author is the biggest single expense in that group of costs.

    What they aren’t telling you is that the pure overhead — the “cost of doing business” (rents, management, deal making, lawyers, stuff like that) is the real biggest part of the cost of a book. They may even hide some of these expenses in other budget lines, but they are there.

    And they may be justified in the paper book side of the industry. A lot of the bloat has to do with location of their offices, and the cost of wheeling and dealing and impressing their “partners” — like the big distributors. Schmoozing newspapers and magazines. Creating expensive campaigns to help the booksellers. (A “launch” is not necessary with ebooks, they stay in print and available for as long as the publisher wants — but it’s critical for paper books, which will only have a narrow window of availability.

    The cost of things like a book launch isn’t just in the launch itself, but in the infrastructure that they must have to manage book launches in general. And it’s like Hollywood — you may well have “producers” who do nothing but schmooze all the partners and keep things moving along. These are necessary because there are so many personalities and your partners are so powerful.

    There are more subtle things too — but basically the cost of paper publishing is far more than the cost of materials. But all products have to bear that cost until they jetison paper, or at least do some serious and painful reorganization.

  18. I spent several hours today reading through the financial statements of the ‘Big 6′ and several other large publishers. The issue I constantly ran into is the consolidation of the Cost of Goods and Expenses for the company as a whole. This means we do not find Income statements for the individual publishing segments of the parent company.
    For example, Penguin returned just over 10% net profit on revenue of 1 billion pounds sterling -but I cannot tell you anything about their Cost of Goods or Expenses.

    I decided to search for smaller but still publicly traded publishers. I found Bloomsbury Publishing PLC.
    http://www.bloomsbury-ir.co.uk/html/about/a_chairman.html
    I had no prior knowledge of this company and cannot express an opinion as to whether their financial results are indicative of the Publishing industry as a whole.

    Please note that all figures are in United Kingdom(UK) Pounds Sterling. US dollar Conversion rates for last year I believe ranged between 1.4 and 1.6.

    Bloomsbury is a relatively small publisher with Revenues for fiscal 2011 of just over 103 million pounds sterling. Close to 70% of their revenues are derived from the sale of Children and Adult books. If we round the revenues down to 100 million then we can easily calculate percentages for the individual group and line items in the Income statement below.

    Highlights include:
    (All percentages expressed as a percentage of total revenues)

    Editing 2.5%
    Royalty Costs 17%
    Marketing and Distribution 17.5%
    Administrative 28%

    (Copied directly from Page 69 of the 2011 Year End report)
    Cost of sales, marketing and distribution costs and administrative expenses are analysed below:
    14 months ended 28 February 2011
    £’000
    All figures are in thousands(add 3 zeros to all values in the Income statements).

    Cost of sales:
    Editorial staff costs 2,489
    Cost of goods and rights sold 26,108
    Inventory provision and write down 4,796
    Royalty costs 16,923
    ———————————–
    50,316 43,839

    Marketing and distribution costs:
    Staff costs 975
    Depreciation 21
    Marketing expenses 6,815
    Distribution fees and commission 9,728
    ————————————–
    17,539

    Administrative expenses:
    Staff costs 17,817
    Other staff related expenses 799
    Share-based payment charge 804
    Depreciation 634
    Premises costs 3,017
    Professional fees 1,968
    Editorial expenses 1,839
    Insurance 499
    Bad debt provision and write off 171
    Exchange gain (62)
    Other 742
    ——————————————-
    28,228

    Highlighted items:
    Amortisation of intangible assets 1,136
    Impairment of goodwill 1,532 –
    Other highlighted items 781 –
    Total highlighted items 3,449
    Total administrative expenses 31,677

    Stephen Lebans

  19. As another mentioned, you can’t say direct cost of goods or overhead is all picked up by the paper books. When a publisher figures cost, they will figure the cost over all product sold related to that cost. And the cost of editing, marketing, royalties, staff work, etc., will be “equally” divided over the revenue generated by all product. So part of what they are doing from an accounting perspective is the marketing dollars, for instance, are being spread among all expected sales of hardbacks, paperbacks, mass markets, and ebooks.

    And though I don’t know this since I’ve never been an accountant for a publisher, I wouldn’t be surprised if they are dividing the expected cost of printing the paperbacks and distribution/warehouse among all books, including ebooks, in figuring cost.

    But here’s the catch as far as costs go. Publishers work on a window of opportunity model, because that’s how print books have always worked. Thus, they expect to make the bulk of their money off a title in a 3-6 month period. So they take the projected sales of a book, including the ebooks, for that period of time, whatever they are using.

    Consequently, that’s how you get the high cost of ebooks. Because they are only factoring in the expected ebook sales for the first few months after publication in the cost.

    However, unlike print books that can only sit on a bookstore shelf for so long before getting yanked off and become essentially “out of print,” and ebook can sit on its virtual shelf on Amazon or wherever for years and years. The publishers should have enough data to reasonably make projections on what an ebook will sell, say, over a five year period, and amortize the start up costs and continued distribution costs of it over that period of time. Then come up with a more realistic cost of an ebook, and you know what, suddenly that cost per book goes down significantly despite the huge overhead of publishers.

    But, and this is really key here, the price you pay for a book has nothing to little to do with costs. It is based on market demand. And if people aren’t willing to pay for a product in a way that the producer of that product can make a profit, then the product stops selling, is taken off the market, and/or the company goes out of business. Or the business figures out a way to produce the product more inexpensively so as to still make a profit at the price the market will bear.

    With books, when it first comes out, guess what? That is when it is at its highest value. Consequently, first they come out with the hardcover, and when those sale slow, then they come out with the trade paperback. And when those sales slow down, they come out with the mass market. So one should expect one of two things when an ebook comes out.

    One, it doesn’t come out until the mass markets do, since many view it as the equivalent to that format and pricing. However, what they have found is ebook readers don’t want to wait. Their format of preference is ebooks, and want it as soon as the book comes out, if not before!

    So, two, the ebook comes out with the hardback, but to protect the hardback sales and to preserve the high value a reader might have in buying a hardback, they ebook price will be equal or higher than the hardback. But when the trade paperback comes out, the ebook price should be adjusted down to match. And when the mass market comes out, the ebook price should come down to match. And then finally, when the mass market sales dwindle down, the ebook price should come down to a minimum, since all start up cost would have been accounted for and there is little overhead or cost of goods to factor into its continued sales. So whatever price they think people might be willing to pay for it, based on the author and perceived value of the series, titles, etc., they’ll charge that much, whether it is on the upper end of the indie scale, $5.99, or a little lower.

    And that is why you see ebook prices so high from traditional publishers most of the time, regardless of what the real costs are to produce it. Because they are not thinking of ebooks like indie publishers as to what it cost and how cheap can I get the price down to because the author is unknown and we don’t have a big marketing budget. They are basing ebook prices on perceived market demand and value. If you want Stephen King’s latest book in ebook right when it comes out, your going to pay for that value. If you want it cheaper, you’ll wait.

    And really, that’s all they need to say. Not all this accounting juggling and justifications they are most likely based upon partial truths and a narrow view of how to account for their costs. They have no reason to justify the price of an ebook based on what it costs them to make it, as long as they are making more than cost. How much more over cost really is pointless to debate. People will either pay it, or if the market demand falls at that price, they’ll either not offer it or lower the price.

    The error I think most of us here have on this is thinking of books as widget sales, and ignoring the basics of supply and demand on pricing. Cost is only one factor in what the price will be, and then, only what the minimum price can be in order to still make a sustainable profit. After that, it has nothing to do with it.

    • The error I think most of us here have on this is thinking of books as widget sales, and ignoring the basics of supply and demand on pricing.

      I don’t see people making that error at all. What I see is an entirely different calculation, which runs roughly like this: ‘If I, as a writer, can make $2 per copy on a self-published ebook priced at $2.99, or make less money on an ebook from a Big Six publisher priced at $9.99 — what does that publisher offer me that can possibly offset the loss of sales due to the higher price?’

      In fact, there seems to be evidence coming in that the extremely low prices on indie ebooks, 99 cents to $2.99, were an overreaction — that writers perceived a need to offer low prices in order to overcome the stigma of self-publishing, and they overcompensated. Readers seem willing to pay $4.99 for a full-length novel released as an indie ebook; so that (for instance) Dean Wesley Smith, who was a proponent of the $2.99 indie novel, now recommends pricing at $4.99 to maximize revenue. Note that the Big Six set their ebook prices, not to maximize revenue, but to minimize cannibalization of print sales — which is an entirely different calculation.

      At that price, traditional publishers can’t offer competitive royalties unless they dramatically increase the author’s percentage. And with administration eating up nearly 30 percent of the wholesale price (if Stephen Lebans’ numbers above are typical), I don’t really see how they can afford to do that. To survive, the Big Six will have to learn to run with a lot less overhead.

      • You’re actually proving my point, Tom. (g)

        You’re thinking like an indie publisher, not like a Traditional publisher who has some big name clients as well as not big name. In their understanding of marketing, you don’t start with your lowest price. The value starts high and then you work your way down to a sales number. They don’t look at cost in what to charge other than a minimum base where they’ll be losing money. They’re going to base the price on what they think the market will buy it for, and for the perceived value of the book. Which, yes, for traditional publishers is based on the value of their print titles too. They tend to look at an ebook as simply another format of the same product. And if the hardback can sell for $24.00, then the ebook can as well.

        Again, it goes back to supply and demand, not cost, not what the author gets paid, but whether the market will bear it.

        Now, we may disagree with them on what they think the market will bear. We may think there’s a lot more money and profit to be made selling an ebook at $4.99 instead of $14.99. But they are using their history and numbers, and their model is totally different from an indie publisher.

        Whether an author should seek traditional publishing or go indie is a whole ‘nother question. But the article above is making the mistake of assuming Traditional Publishers set their price primarily based on cost, and they don’t.

        And truth be told, neither should indie publishers.

        • I don’t think anyone thinks the price is based only on the cost to produce, but the argument the publishers are making is that an ebook is no less costly to produce than a traditional book. And no one believes them.

          If the publishers want to say they are pricing what the market will bear, that’s fine (although all the arguing might indicate otherwise), but these ridiculous justifications just don’t make sense.

        • And if the hardback can sell for $24.00, then the ebook can as well.

          Then why can’t the mass-market paperback also sell for $24.00? Because the market won’t bear it. And why won’t the market bear it? Because it is not an equivalent product. Fortunately, the same features that make MMPBs less desirable goods (so that they can only be sold at a lower price) also make them cheaper to produce (so that they CAN be sold at that lower price).

          The same is true for ebooks. If anything, they are a less attractive product to most consumers than MMPBs, because the consumer has to supply a reader (and power for the battery) at his own expense. Even if I prefer to read books in ebook format instead of paper, I want something knocked off the price to compensate me for the cost of supplying the physical medium myself. I don’t believe I’m unusual in this — as witness the huge numbers of one-star reviews on Amazon, complaining about excessive ebook prices.

          • Your correct, Tom. They can’t sell a mmpb for $24.00 because the market won’t bear it. And that is the main reason. And the reason for that is mmpb don’t last as long. Therefore their value is less.

            Yes, they are cheaper made and so can sell cheaper and still make a profit. But they are also shooting for the market segment that doesn’t want to pay $24.00 for the hardback. They’ll wait until the cheaper book comes out, months after the book has been released. But if they could sell it for $24.00 and people would buy it, they would, no matter how cheap it was to produce.

            If enough people refuse to pay a high price for an ebook, they’ll either do two things. They’ll lower the price. Or clap their hands for joy that they’ve saved another paperback sale from the ebook pacman. :)

            But that market demand will still determine the price of an ebook much more than cost.

            • Agreed.

              In fact, I don’t think we are in disagreement about very much. I just think you overgeneralize when you characterize indie authors as basing their pricing on costs. In my experience, a lot of them just feel inferior because they’re self-published, and consequently underestimate what the market will bear. Whereas the Big Six have unfounded feelings of superiority, and deliberately charge more than the market will bear because they would rather sell paper books.

              This would suggest that the true revenue-maximizing price lies somewhere in the middle.

    • A great example of this model is Baen, who charges premium prices for eARCs. They get that *early access* is what the readers are willing to pay for, regardless of format. :)

    • And really, that’s all they need to say. Not all this accounting juggling and justifications they are most likely based upon partial truths and a narrow view of how to account for their costs.

      Yeah, it’s the lying that bothers me. It’s just constant, and it shows such contempt for both writers and the general public. It’s like when they justify decisions that are being made purely on financial grounds by claiming they are all about literary merit. It’s offensive.

  20. Absolute TOSH!

    SPIN, SPIN, SPIN!

    E-book at £9.94, paperback £6.45. Go to hell!

    I earn more as an Indie/self-pubbed author than I did as a mid-list author…

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