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.
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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.”
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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.