Article on ebook profits

[DMcCunney]

Originally Posted by CazMar

With 10% unemployment in the USA (and probably almost as bad in the UK) you would think finding a few tech-savvy people to do the conversion to ebooks would be easy and reasonable cheap. You don't need a degree in computer science to do the job, it's not that technical. As most modern books would be electronically typeset these days they should have the raw data on file and anyone who can use HTML should be able to convert to EPUB or produce a PDF file.

Conversion of existing books is likely to be outsourced to India for cost reasons. Depending upon the age of the title, there may not be an electronic file, and scan and convert is required.

New books are thornier. The standard publishing workflow is to get manuscripts as Word documents, do editing on those, and import final copy to Adoe InDesign for typesetting and markup. The output from InDesign is a PDF file. The printer feeds the PDF file to an imagesetter that creates the plates from which books are printed.

InDesign can also create ePub files, but currently does so poorly.

The longer term solution is to use well formed XML for markup, and XSLT to do the bulk of the translations needed for things like ebook formats. The tools exist, but are not widespread.
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Dennis

[DMcCunney]

Secondly they are hamstrung by an old fashioned and outdated pricing system that totally lacks a wholesale - retail pricing structure.This results in a constant state of uncertainty of income and profit calculations.

Publishers have a tiered pricing structure. If you are someone like Amazon, your wholesale price is about 50% of retail. (And Amazon was pushing for higher discounts, which was part of the background over the standoff on Kindle edition pricing with the major publishers.)

If you are a smaller bookstore chain or an independant, you go through a distributor like Ingrams or Baker and Taylor, who take a cut off the top, so the wholesale price will be higher. The standard library discount is 40%.

The uncertainty in income and profit calculations is simple: you don't know until you issue it how well the book will sell.

There is on thing we do know for sure though. That is that the widespread claims by the Publishers of enormous costs in creating eBooks are totally and evidently false. The credibility of the industry is at basement level when they repeatedly issue transparently comical woe-is-me claims.

As it stands now, ebook creation stands outside of the normal publishing workflow.

Most trade publishers normally get manuscripts as Word documents, edit, copy edit, and proofread those, then import the manuscript into Adobe InDesign for typesetting and markup. The output from Adobe is a PDF file which goes to the printer. The printer feeds the PDF to an imagesetter that creates the plates used to print the books. (Publishers used to use Quark Express for this step, but most have migrated to InDesign.

InDesign creates ePub files...badly. (Recent point releases are supposed to have improved this, but I haven't heard it's where it needs to be.)

Creating eBook files is currently a separate process outside of the normal publishing workflow, with attendant added costs and complexities. The ideal starting point would be well formed XML, but while the tools exist, they are not widely adopted.
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Dennis

[GA Russell]

Originally Posted by DMcCunney

The ideal starting point would be well formed XML, but while the tools exist, they are not widely adopted.

This is the fourth Christmas that the Kindle will be sold, right? It sounds to me like the publishers have not been doing their job (preparing for the new eBook market).

[Steven Lake]

I don't know why they can't figure out profits. It's just simple math across the top, and this comes from someone who's not a math wiz. All you do is start with your total profits from all sales over a given time period (don't count distribution fees or anything that the distributors themselves take as that's money that never sees your hands, and thus shouldn't be put into the math.), and start subtracting things like marketing costs, formatting, labor, corporate overhead, etc. Whatever is left is your profit.

I think though that they don't understand how to do a simple expense breakdown for an individual product since they've been working at it for so long and are so big. Being with a small house it's really darned easy to do a full breakdown on the sales of an item. But I suspect that big house have a LOT bigger expense footprint, and thus it would be hard for them to get a full accounting of the cost associated with each ebook. But even so, it can't be *THAT* hard. The first time you do it things will be a bit hard, but once you have a baseline you can use that number to do a rough profit calculation on any product.

[Sonist]

Originally Posted by DMcCunney

.... The output from InDesign is a PDF file. The printer feeds the PDF file to an imagesetter that creates the plates from which books are printed.

InDesign can also create ePub files, but currently does so poorly.

...

If set up correctly, InDesign should be able to create perfectly fine EPUB files in the vast, vast majority of cases, and the rest will probably take an extra day or two of work.

I personally would be happy happy with PDFs (which can be reflowable as well), if there were larger screen ereaders available, but that's another topic.

I am not sure why you are so defensive of publishers.... Ebooks are relatively easy to produce, if you already have the InDesign files.

And they should be cheaper than their paper counterparts, for the obvious reasons.

There is no need to try to make the process sound more complicated than it really is, to justify the higher profits publishers want to extract from the new technology.

[Dark123]

Originally Posted by DMcCunney

Most trade publishers normally get manuscripts as Word documents, edit, copy edit, and proofread those, then import the manuscript into Adobe InDesign for typesetting and markup. The output from Adobe is a PDF file which goes to the printer. The printer feeds the PDF to an imagesetter that creates the plates used to print the books. (Publishers used to use Quark Express for this step, but most have migrated to InDesign.

InDesign creates ePub files...badly. (Recent point releases are supposed to have improved this, but I haven't heard it's where it needs to be.)

Creating eBook files is currently a separate process outside of the normal publishing workflow, with attendant added costs and complexities. The ideal starting point would be well formed XML, but while the tools exist, they are not widely adopted.
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Dennis

Calibre can create very good HTML file from PDFs.

I think once they setup the process to create eBooks, the rest will be very easy.

[DMcCunney]

Originally Posted by Sonist

If set up correctly, InDesign should be able to create perfectly fine EPUB files in the vast, vast majority of cases, and the rest will probably take an extra day or two of work.

"Perfectly fine" isn't the description I've heard from people trying to create ePub files with them. Recent point releases have supposedly improved ePub support, but I haven't used CS5 and can't say from experience. (I have a much older version of InDesign here with no ePub support.) Adobe has been a main force pushing ePub as the ebook standard format, which made InDesign's relative lack of support for producing ePub ironic.

And from what I've heard, ePub isn't one size fits all: you are at the mercy of the ePub viewer in the device, so you may need to do tweaking for best results. You can't just create an ePub file and assume it will look the same in all reader devices that display ePub.

I personally would be happy happy with PDFs (which can be reflowable as well), if there were larger screen ereaders available, but that's another topic.

PDFs created with proper tagging are reflowable if the reader implementation of the PDF viewer supports it. Amazon's Kindle DX viewer does not. No surprise: it's intended for things like textbooks in PDF format, and how do you reflow a multi-column layout? (Forget having two separate layouts, multi-column for print and single column for ebook. Textbooks are expensive as is. Maintaining two output files would make them more so.)

I am not sure why you are so defensive of publishers....

I have some idea of how they operate. I'm not defending publishers per se. I am suggesting that you won't see ebooks from major trade publishers at the kind of prices a lot of folks here might like, because they can't sell them that cheap and make money.

And responses of "Let them go under if they can't adapt" is a "Be careful what you wish for. You might get it." matter.

Ebooks are relatively easy to produce, if you already have the InDesign files.

Depends on the ebook. And for back catalog, you may not have the InDesign files. InDesign as the standard tool is relatively recent. Everybody used to use Quark Express. (There's a fair amount of back catalog out there for which no electronic files exist, because it dates from the days when you submitted a hardcopy manuscript.)

And they should be cheaper than their paper counterparts, for the obvious reasons.

How much cheaper? The usual "obvious reasons" - dropping the cost of print/bind/warehouse/distribute - aren't sufficient for what folks might like to see.

There is no need to try to make the process sound more complicated than it really is, to justify the higher profits publishers want to extract from the new technology.

Right now, creating ebooks is not part of the standard workflow. It would be nice if it were "Save As PDF for printer, Save As ePub for ebook". ePub has the necessary metadata, and other formats can be created from it via scripted conversion. But the last I heard, InDesign ePub support wasn't good enough to make it that simple. Right now, ebooks are an extra step in the process.

Ideally, publishers should store things as XML and use XSLT to handle much of the conversion to other formats. While tools exist to do XML markup, they aren't widely used in publishing. To some extent it's inherent conservatism, but that strikes me as misplaced. If I'm the person doing typesetting and markup, my concern will be a UI that will let me use the program easily to do the work. The fact that the output is an XML file instead of a PDF is irrelevant.
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Dennis

[DMcCunney]

Originally Posted by Dark123

Calibre can create very good HTML file from PDFs.

So noted, but you shouldn't have to bother. PDF should be a final output format, and not an intermediate stage to feed to something else. You really want to grab the Word document that is the final manuscript, do the appropriate markup, and generate ebook files directly.

I think once they setup the process to create eBooks, the rest will be very easy.

I hope so. I'd love to see ebook production become part of the standard workflow, and happen automatically as part of the publication process.
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Dennis

[DMcCunney]

Originally Posted by Steven Lake

I don't know why they can't figure out profits. It's just simple math across the top, and this comes from someone who's not a math wiz. All you do is start with your total profits from all sales over a given time period (don't count distribution fees or anything that the distributors themselves take as that's money that never sees your hands, and thus shouldn't be put into the math.), and start subtracting things like marketing costs, formatting, labor, corporate overhead, etc. Whatever is left is your profit.

If you rephrase that "total revenues" instead of "total profits", yes. Revenues - expenses = profit.

I think though that they don't understand how to do a simple expense breakdown for an individual product since they've been working at it for so long and are so big. Being with a small house it's really darned easy to do a full breakdown on the sales of an item. But I suspect that big house have a LOT bigger expense footprint, and thus it would be hard for them to get a full accounting of the cost associated with each ebook. But even so, it can't be *THAT* hard. The first time you do it things will be a bit hard, but once you have a baseline you can use that number to do a rough profit calculation on any product.

Oh, they understand how to do it: every book has a P&L. Ebooks muddy the waters a bit.

Print/bind/warehouse/distribute amount to perhaps 20% of the total budget of a printed book. The other costs all occur before publication happens in any form.

It's a fair assumption that costs common to all forms will be allocated across all forms. Ebooks don't come along for the ride for free, with the costs of production born by the print books. (What do you do if the ebook is the only format in which the book is issued?)

Profit calculations are fraught because you don't know what sales will be, and won't know for a while. eBooks simplify this in one respect: printed books have a "reserve against returns" factored into the costs. The distribution chain can be convoluted, and you may not really know what you've sold for 6 months to a year, as it can take that long for all returns to straggle in. And publishing has historically had a 100% returns policy, with full credit being issued for any unsold titles. (According to a long time editor, that policy originated to get bookstores to take a chance on new books by unknown authors back when. "Didn't sell? No problem. You can return all unsold books for full credit!" Publishing seems to be unique in this respect. Retailers selling other products are expected to estimate what they think they can sell and order accordingly, because they can't simply return any unsold merchandise.)

Yes, that big house will have a much larger expense footprint. One of the fun parts will be deciding how to allocate corporate overhead to titles.
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Dennis

[Sonist]

Originally Posted by DMcCunney

"Perfectly fine" isn't the description I've heard from people trying to create ePub files with them. Recent point releases have supposedly improved ePub support, but I haven't used CS5 and can't say from experience....

And from what I've heard, ePub isn't one size fits all: you are at the mercy of the ePub viewer in the device, so you may need to do tweaking for best results....

Ideally, publishers should store things as XML and use XSLT to handle much of the conversion to other formats....

CS5 has come a long way in streamlining the workflow to produce EPUBs.

As to EPUB viewers which are not compliant..., you can hardly blame EPUB or InDesign for it.

And I don't think you can achieve complex designs with XML.

But seriously, if the publishers were so stymied by EPUB, then why not just output perfect PDFs from the InDesign (or QuarkXPress) files? Then they can flood the market with PDFs, and the manufacturers will quickly respond with readers which can accommodate the format.

[DMcCunney]

Originally Posted by GA Russell

This is the fourth Christmas that the Kindle will be sold, right? It sounds to me like the publishers have not been doing their job (preparing for the new eBook market).

If all you are concerned about is distribution for the Kindle, I believe there's an Adobe unit that will create Kindle files if the publisher doesn't supply them.

But the ebook universe is more than Adobe, and more complex to handle.

XML as the standard storage format won't happen quickly. It's a major change in workflow requiring a different set of tools, and a fair bit of investment by the publishers.

And yes, it's the fourth year the Kindle has been sold, but note the progression in ebook sales:

How many folks do you think might have predicted the growth rate 4 years ago? Hindsight is always 20/20...
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Dennis

[GA Russell]

I assume that the black marketing of books will progress in a similar fashion to that of music.

I saw former Sony Music exec Tommy Mottola interviewed a couple of weeks ago. He said that music used to be a 50 billion dollar industry, and it is now a 25 billion dollar industry. (I believe [without evidence] that the primary reason for that decline is that the companies are not putting out records that people want to buy. But that's for another discussion.)

I believe that the primary effect of pirate sites is not that the music/book is free, but rather that the customer/consumer has an affordable option. The big companies can no longer say "Take it or leave it."

Dennis, I believe your statements regarding the difficulties of publishing an eBook. But I sense a reluctance on the part of the publishers to make the necessary changes.

They appear to be foot dragging with their back catalogue. With their eBook pricing they appear to want to maximize the profit of each sale rather than maximize the profit of each title (through increased volume).

We often speak here about back catalogue like the Perry Masons, none of which are available as eBooks legitimately, but a few of which are available at the pirate sites. We hear often about the Harry Potters eBooks, none legitimately but all at pirate sites.

I believe that it is only a matter of a few years before everything I can think of will be available at a pirate site. Five years, maybe? Ten?

So to me it is inevitable that the eBooks will become available, and the question is whether the big publishers want a piece of the pie of their own properties. It appears that they have wasted the past four years (since the Kindle was introduced), and the pirates (who as far as I know are college kids) are ahead of them.

As a friend once said to me years ago about the cable tv company we were having problems with, "Either get in the business or get out of it." I don't want to hear about the publishers' difficulties because the pirates appear able to overcome them. If the big publishers don't offer easily affordable eBooks, they will find themselves with none of the action.

[DMcCunney]

Originally Posted by Sonist

CS5 has come a long way in streamlining the workflow to produce EPUBs.

I'll take your word for it.

As to EPUB viewers which are not compliant..., you can hardly blame EPUB or InDesign for it.

I don't. But it's like browsers that aren't web standards compliant (and no browser is 100% standards compliant): my web code may be standards complaint, but I'll probably have to do fiddles here and there to handles cases where browsers don't implement the standard.

And I don't think you can achieve complex designs with XML.

Entirely? No. XML is the storage format, not the end format. But once in XML, you should be able to use XSLT transforms to do a lot of the work automatically, and reduce what you need to do to properly reproduce the intended design.

But seriously, if the publishers were so stymied by EPUB, then why not just output perfect PDFs from the InDesign (or QuarkXPress) files? Then they can flood the market with PDFs, and the manufacturers will quickly respond with readers which can accommodate the format.

Possibly because of what PDFs won't do?

PDF is Portable Document Format. It's intended to look just like the printed page, on any device with a capable PDF viewer.

What if what you are doing is more than a printed page? ePub is a container, and doesn't have to contain just text and static graphics. We are beginning to see experimental ebooks incorporating video and audio.

The other issue is the chicken and egg problem: why should the publishers flood the market with PDFs when most extant readers don't display them? The presumably want to sell the things, and who will buy them?

If they don't sell, what is the incentive for a reader vendor to add PDF display capability? (Doing that right would likely involve licensing Adobe's Mobile SDK, which is what Amazon did for the Kindle DX.)
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Dennis

[Elfwreck]

Originally Posted by Steven Lake

I don't know why they can't figure out profits. It's just simple math across the top, and this comes from someone who's not a math wiz.

Because they don't have a simple, obvious way to calculate costs.

They know how many dollars they've gotten from sales of ebooks, and how much was left in the hands of retailers. They know how much of that money is due to the authors. They don't know how much it's cost them to produce & sell those ebooks, counted separately from the costs of producing the pbooks.

The workflow for ebooks is so erratic and changing that they haven't figured out what it costs them to make ebooks. (Every few months, new software or new methodology comes out, and the system changes. Do they count retraining time against the profits of ebooks? Or do they lump that cost under "general business overhead?")

I think though that they don't understand how to do a simple expense breakdown for an individual product since they've been working at it for so long and are so big.

I think it's partially that (I'm not seeing any signs that the big publishers actually understand ebook production; I have suspicions that some of them believe that retailers have stockpiled hard drives with hundreds of copies of the ebooks, which they sell one by one), and partially that the whole system of production is new, and doesn't mesh with their previous methods. They don't know what to count--there's no column in the established spreadsheets for "export to epub and mobi; confirm files are workable," much less "check contract to find out if we have rights for ebook release of Book 3 of series now that book 5 is in print, and if so, get the OCR team on that." And which marketing costs count as ebook marketing costs?

If a book accidentally goes out botched--corrupt file, scrambled text, whatever--and they offer free replacement with a new version--how much do they count that as? It's not like "return pbook; get new one" with the same production-and-shipping cost as the original book.

And every six to eight months, the industry goes through radical changes, and whatever methods they'd figured out for accounting don't work anymore.

[Xanthe]

I wonder, if the publishers had been on the ball and actually invested some money in digitalizing their back catalogs and providing them as ebooks at say a $2.99 price, would the dark net ebook sites have expanded as fast as they have?

A lot of the traffic on them originally was people looking for copies of favorite books (most of which they actually owned in paper format) in ebook format for convenience's sake. Not being able to find them for sale by the publishers, they've created their own and put them on the net. This created a behavior pattern of turning to the dark net for books in a lot of people. Not everyone is there looking for the latest Harry Potter or John Grisham book.

Imagine if the first response had been to obtain the book from the publisher's site because it was easily available, reasonably priced, and uniformly formatted. That would have prevented the now-learned response of turning to the dark net to find the back catalog.

I really have no patience with publishers who say "we didn't know ebooks would take off like that". Any company that does not look to the future and try to anticipate technology deserves to pay the price for hanging onto a pre-industrial mindset. There is no reason why a consortium of publishers, authors and readers cannot come up with format criteria that must be met for trade or technical or art books, not to mention magazines and newspapers, to standardize formats so that they appear the same no matter what the ereader used is. There's no reason why when a book is being laid out it can't be done two ways - one more suited for print and the other more suited for the smaller ereader formats.

Case in point, all those "For Dummies" and "Idiot's Guides" books. Their quirky layouts make gleaning information easy in their paper versions, but they are usually hell to read on an ereader.