Interesting article on book pricing and why it might rise

[Polyglot27]

Register hardware has an interesting article on book pricing policy and why it might rise in the near future. Curious that with the cost of paper, printing, warehousing, transporting, displaying, and shop space removed, e-books should still cost as much if not more than the paper version. Doesn't make sense does it?
http://www.reghardware.com/2010/11/2..._book_pricing/

[murraypaul]

I though the most interesting bit was this:

or the government takes advantage of a 2009 EU rule change that would allow e-books to be sold at the lower VAT rate of five per cent.

Anyone have more information about this?

[Fbone]

Originally Posted by murraypaul

I though the most interesting bit was this:

Anyone have more information about this?

It was reported in The Bookseller that the French Govt may reduce the VAT on ebooks to match the paper books to 5.5%. Very good chance it will pass.

[Sil_liS]

I know that I just read 4 pages of text, but it doesn't really feel like it said anything other than that the prices will increase. I'm not even sure of the point that the author of the article is trying to make? Does he agree with the pricing or not?

But I did like the ending:

A final word goes to Richard Mollet, CEO of the Publishers’ Association, who told us: “We’ve got to make sure that when people are getting their hands on something, they appreciate there’s a value to what they’ve got.”

The real question, perhaps, is not whether or not readers value what they’ve got – but whether they agree with the publishers on exactly what it’s worth.

[DMcCunney]

Originally Posted by Polyglot27

Register hardware has an interesting article on book pricing policy and why it might rise in the near future. Curious that with the cost of paper, printing, warehousing, transporting, displaying, and shop space removed, e-books should still cost as much if not more than the paper version. Doesn't make sense does it?
http://www.reghardware.com/2010/11/2..._book_pricing/

It makes perfect sense.

But to see why, you have to take a step back from the perspective of the consumer who wants stuff cheaper, and look at what goes into making books.

eBooks drop the print, bind, warehouse, and distribute steps of publication, but those amount to perhaps 20% of the total cost of a book, if that. The majority of the costs of producing any book happen before it ever reaches the stage of being published, in print or electronic form. Dropping the costs inherent in a print edition doesn't provide anywhere near the saving most folks would like to believe.

Folks should follow the link in the article to Charlie Stross's blog outline steps in the publishing process that occur before actual publication:
http://www.antipope.org/charlie/blog...-are-made.html

Tell me which of those you suggest not be done to save money and allow your ebooks to be priced cheaper?

And Charlie is omitting other things that add to costs. For instance, when a book is acquired, a contract is issued to the author. This is a legal document, and requires the attention of the publisher's legal staff. Some titles, like possibly controversial non-fiction or biography titles, may require a full legal review to insure the publisher can successfully defend against a lawsuit over the title. "It's all true and we can prove it."

And there are additional costs to producing an ebook. While there is hope on the horizon, ebooks are currently not integrated into the publisher's workflow. Producing ebooks of a print title is an extra set of steps in the process requiring the attention of specialists.

Aside from all of the costs in producing a particular title, each book gets an allocated share of corporate overhead, like rental on office space, electricity, phone service, and salaries of employees not directly involved in a specific book's production.

And publishers are largely units of larger conglomerates, which may be involved in producing other forms of media. Top management at the conglomerates are essentially custodians of Other People's Money. Their corporations are publicly held, and they have a fiduciary responsibility to preserve and if possible grow the value of their shareholder's investments. If the CEO is perceived as not doing so, he can be removed by the Board of Directors, and Directors seen as not doing their job can be sued by shareholders.

So the basic task of such managements is to invest corporate funds where they will yield the greatest returns. This leads to severe demands on publishing subsidiaries, as they will likely be expected to show a 10% return at a minimum. This is extremely difficult for any publisher: publishing has historically had numbers lower than that. And it produces stories like the one a couple of years or so ago about the well-respected publisher at Little, Brown being fired. She was under pressure from the Group President she reported to to produce more bestsellers. She resisted, because Little, Brown had historically been a "literary" imprint, and she saw it as pressure to dumb down her line. I doubt her Group President wanted to fire her, but he was under pressure from his superiors to produce numbers in line with revenue and profit targets.

The question that any business must ask isn't "What is the maximum amount I can make?". It's "What is the minimum amount I have to make to survive?" That question has a simple answer: enough to cover the marginal cost of capital. Unfortunately, the answer to the second question is often higher than the best guess the business can make about the answer to the first question, and companies in that position are in trouble. A lot of publishing falls into that category.

Prices will rise because costs rise, and the publishers want to stay in business.
______
Dennis

[asjogren]

Prices will rise because the Big 6 ate the competition. And Wall Street's quest for higher profits quarter-by-quarter will destroy the Big 6.

Bypass will be the future. Authors Agents bypassing the Big Publishing Houses. Agents will contract for editing, art, and promotion services. And I bet some form of Venture Capital will become available.

[JeremyR]

This is just going to drive people to pirate their books.

Looking at the list by Mr. Stross, no wonder they can't make money, the industry is really bloated. And much of that list doesn't seem to apply to e-books, even though he claims only 14-16 don't apply.

4) Marketing (buy ads and displays in stores). Not needed for ebooks

5) Scheduling (so they don't flood bookstores). Perhaps needed, you don't want 500 e-books in the same month, then 2 a next. But then again, not as badly.

8) Advance Reader Copies (is this really necessary? And if anything, this can be sold to people like Baen does)

9) Book design, cover design, front and back flap copy, and cover artwork (While it can apply to e-books, it mostly doesn't as many publishers don't even bother with a cover).

10) CEM delivered to Typesetting (as e-books aren't typeset, you don't need this)

11) Marketing copy (okay, sure). But you don't need to print them up.

12) Review page proofs (PDF from hardcopy, this is done to catch the errors that crept in during test runs of printing). Not needed for e-books.

13) Collate advance orders and order the print run. Not needed for e-books

17) Invoicing and accounting. Sure, if you have hundreds of bookstores this could get hairy. But there's what, maybe half a dozen e-book sellers? A dozen?


So basically it seems like the publishers are still using the same costs and procedures for e-books as printed books, even though they aren't ncessary. I guess because they don't consider them separate products, but merely an extension of an existing one.

But really, most of these costs are solely involved with making a printed book, and all of these costs should only be factored in regarding the physical book. The e-book should be a whole separate entity. Especially as a lot are back catalog titles and thus any costs cost in producing the physical book no longer apply (and have been recouped in the physical print run).

[DMcCunney]

Originally Posted by asjogren

Prices will rise because the Big 6 ate the competition. And Wall Street's quest for higher profits quarter-by-quarter will destroy the Big 6.

It would be nice if it were that simple.

The problems affecting publishing aren't new, and ebooks haven't caused them. For decades, too many books have been chasing too few readers. Houses have been consolidating to achieve economies of scale and reduce costs. And publishers have been acquired by media conglomerates involved in film, TV, and music, who saw supposed synergies in having all forms of content under one roof. Those synergies were more apparent than real, and as the realization sunk in that publishing couldn't generate the sorts of returns that other units made, the acquisitions began to unravel, as when Time Warner sold its Warner Books operation to Hachette.

That same consolidation has been occurring in book retailing. Smaller "mom and pop" bookstores are dying out. They can't match the buying power and the prices of the major chains, and buyers shop where they can get the books cheapest. I can think of a few independent bookstores near me, but they aim at niche markets like travel, photography, or children's books. The big chains are under pressure from discount retailers like Target, and "warehouse" stores like CoctCo and Sam's Club. and everybody is under pressure from Amazon.

And "higher profits by quarter" isn't just Wall Street. Consider who the largest class of shareholders are: pension funds. If you pay into a pension fund or an IRA, you are complicit in it, as you want your retirement finds to be preserved and grow, and the people running the funds invest where they see the best combination of safety and returns.

Bypass will be the future. Authors Agents bypassing the Big Publishing Houses. Agents will contract for editing, art, and promotion services. And I bet some form of Venture Capital will become available.

Uh-huh.

Something may well appear to fill the void if "Big Publishing" disappears. But the big issue is quality.

While you can argue that they do it badly, selling books is what publishers do. Publisher want to publish books they can sell, so they have editors to work with authors to improve manuscripts. Every published author I know freely admits that good editors are a critical factor in their own success.

And possibly more important, publishers are filters. Even more important overall than what they do publish is the vastly larger amount they reject. The stack of unsolicited manuscripts isn't called the "slush pile" for no reason.

The dream of eliminating the middleman and having a direct connection, author to reader, will be a nightmare if it becomes the norm. With the internet, ebooks, and Print On Demand, everybody can get published. That's very nice. Who will read it? The Internet is now the world's largest slush pile. There may be hidden gems, but frankly, I have neither the time, energy, nor desire to go plowing through it looking for them. They books may be cheap, but as with all else, you get what you pay for. There are several houses whose taste I've learned I can trust, and I'll buy books they publish, because I know they'll be worth reading. I want quality and someone else to winnow the wheat from the chaff, and I'll pay for it.

And "Agents will contract for editing, art, and promotion services"? Nope. That would mean agents morphing into publishers. It won't happen. It's not what they do, and they wouldn't know where to begin. It would be a great way to go belly up while they learned. You're probably thinking of Robert Wylie (see http://www.nytimes.com/2010/07/22/books/22odyssey.html), who formed Odyssey Editions to publish electronic books. But the books he planned to issue were books by his clients which had already been bought, edited, and put through the print production process. He simply claimed the print publishers did not have the electronic rights, and he was free to bypass them and distribute ebook versions himself through Amazon.

After shots back and forth by both sides, a deal was struck with the publishers at rates Wylie wanted, which was the whole point of the exercise.
______
Dennis

[FizzyWater]

I have never had a problem paying a fair price. There's no real reason why book prices wouldn't go up, along with everything else. I want my favorite authors to continue to make a living. I want to keep enjoying the products of their imaginations.

I have had - and will continue to have - a problem with paying an unfair price for ebooks. I mostly bought print books as paperbooks (or used). And I can walk into Wal-Mart or wherever and get most paperbacks at about 20-25% off list. So I don't think I should have to pay more than that for ebooks. So when a publisher insists I pay more (especially since I don't get the same value as with a print book), I complain.

[EricDP]

Originally Posted by DMcCunney

The majority of the costs of producing any book happen before it ever reaches the stage of being published, in print or electronic form. Dropping the costs inherent in a print edition doesn't provide anywhere near the saving most folks would like to believe.

But those costs are not per unit. They are spread across the total of the number of books sold. Increase the number of books sold, and those costs per unit go waaaay down. The best way to increase the number of units is to drop the price. The unit cost of an eBook is lower already, so you can drop the unit price, increase sales (which dilutes the creation costs), and therefore drop prices even more.

The article seems to say the total costs for all those steps is about $20,000 (top end of their range), so unless the book sells fewer than 20,000 units, those costs will be less than $1 per book. If the book gets up to 100,000 units, it will be $0.20 per book. Bestsellers with over a million sold? That would be a stunning $0.02 per book.

And that's my $0.02 on the topic.

[Sonist]

Originally Posted by DMcCunney

...
eBooks drop the print, bind, warehouse, and distribute steps of publication, but those amount to perhaps 20% of the total cost of a book, ...

I believe it amounts to a bit more than 20%, but fine -- then we all agree that ebooks should be cheaper, at least by 20%.

Moreover, they should be of comparable quality to the printed editions, and should be as easily transferred to future hardware devices. If not, then ebooks should be still cheaper.

[FF2]

Originally Posted by Sonist

I believe it amounts to a bit more than 20%, but fine -- then we all agree that ebooks should be cheaper, at least by 20%.

Moreover, they should be of comparable quality to the printed editions, and should be as easily transferred to future hardware devices. If not, then ebooks should be still cheaper.

That's what I was going to say, so well said. If 20% of the cost no longer exists than why are the books not 20% cheaper. And then as someone else mentioned I can go to Costco or elsewhere and get a discount - seems similar discounts should be available for ebooks.

Too bad the Justice Department is defending war stuff - if some of those lawyers had time to read ebooks, maybe they would investigate price collusion.

[DMcCunney]

Originally Posted by JeremyR

This is just going to drive people to pirate their books.

Looking at the list by Mr. Stross, no wonder they can't make money, the industry is really bloated. And much of that list doesn't seem to apply to e-books, even though he claims only 14-16 don't apply.

Oh, dear. Where to begin...

4) Marketing (buy ads and displays in stores). Not needed for ebooks

Dream on. Marketing is a catch all term for letting the readers know books they might want to buy and read exist. It extends far beyond things like plus fours and POP displays in retailers, and is probably even more critical for ebooks than for print editions.

5) Scheduling (so they don't flood bookstores). Perhaps needed, you don't want 500 e-books in the same month, then 2 a next. But then again, not as badly.

eBooks ease scheduling concerns, but do not eliminate them. Scheduling is still critical. Remember, every book goes through a production process, some of which was outlined by Stross. A publisher can only work on so many titles at any one time. Decisions have to be made about which titles are worked on in what order.

8) Advance Reader Copies (is this really necessary? And if anything, this can be sold to people like Baen does)

Advance Reader Copies are what is also known as "galley proofs". They are the quality control stage before publication, to catch errors missed earlier in the process. They are what gets sent to the author for review before publication, for example. (And I've heard some classic stories about what happened when it was.) They exist for ebooks, too. Baen makes a few extra bucks by selling theirs to folks who want to read the book now and will tolerate errors to get faster access, but the rest of the market has higher standards.

9) Book design, cover design, front and back flap copy, and cover artwork (While it can apply to e-books, it mostly doesn't as many publishers don't even bother with a cover).

I'm not sure which publisher's ebooks you buy, but the ones I have have cover art. And while you may be willing to do without it on an ebook (I'm not), that cover art still has a crucial purpose, and the same purpose it serves in print editions: to sell the book.

On a printed book, the job of the cover is to catch the eye of the browser in the bookstore, and get them to pick the book off the shelf for a closer look, as the first step in making the sale. The cover has the same purpose in a ebook offered on a web site: an arresting image to get you to take a closer look.

10) CEM delivered to Typesetting (as e-books aren't typeset, you don't need this)

eBooks are most certainly typeset. They fact that the device you use may have a limited subset of fonts it can display does not remove the need to do typesetting.

The preset workflow is that publishers get manuscripts as Word documents, and edit them to reach an approved final form for publishing. The final form gets imported to Adobe InDesign for typesetting and markup. Cover art and design, jacket copy and the like are also imported. The output from InDesign is a PDF file which the printer feeds to an imagesetter to create the plates from which the book will be printed.

If an electronic edition is produced, it will be an additional step in the process. If the eBook file is a PDF, the same typesetting for the print edition can be used, as the PDF can have the required fonts embedded, and display them as they would appear in the printed book. If the output is a MobiPocket, ePub, or other file, there must still be consideration of how the target device will display the book and what capabilities it has to do so.

11) Marketing copy (okay, sure). But you don't need to print them up.

You don't? Well, if you don't care whether the folks it's aimed at actually read it, I suppose not. But too many of the intended audience for that stuff still expects hardcopy.

12) Review page proofs (PDF from hardcopy, this is done to catch the errors that crept in during test runs of printing). Not needed for e-books.

You don't need to review hardcopy page proofs in ebooks, but you do need to review proofs. See above about the need for ARCs.

13) Collate advance orders and order the print run. Not needed for e-books

No, but there will still be a need to estimate how many copies the ebook will sell.

17) Invoicing and accounting. Sure, if you have hundreds of bookstores this could get hairy. But there's what, maybe half a dozen e-book sellers? A dozen?

A few hundred? Absolutely necessary, one way or the other, but simplified with ebooks.

So basically it seems like the publishers are still using the same costs and procedures for e-books as printed books, even though they aren't ncessary. I guess because they don't consider them separate products, but merely an extension of an existing one.

Correct. eBooks are simply another format in which books are issued. When a publisher acquires a manuscript, they will acquire various rights, which may include hardcover edition, paperback edition, and electronic edition. It's the same manuscript, going through the same production process. What differs is only the final form in which it's issued. Each book will have a P&L that will cover the book as a whole, with costs associated with different formats being line items in that format. eBooks will not have a separate P&L. Most of the costs involved in producing a book occur before the book ever reaches the stage of being published in any format, and do not magically go away because it's an eBook.

But really, most of these costs are solely involved with making a printed book, and all of these costs should only be factored in regarding the physical book. The e-book should be a whole separate entity. Especially as a lot are back catalog titles and thus any costs cost in producing the physical book no longer apply (and have been recouped in the physical print run).

You might make that argument for back catalog, but what about new books? Print volumes don't subsidize the production of electronic editions, and you can't simply say an assortment of costs have already been recouped by the physical press run. The accounting doesn't work that way, and better not work that way if you expect to stay in business as a publisher.

You seem to be assuming printed books will go away, and ebooks will be the only form. I suggest not holding your breath waiting. There are whole classes of books for which electronic publication is a poor fit, and ebooks are still an emerging format. They are an additional format for books, and not a replacement for print. You may expect this to be the case for the foreseeable future.
______
Dennis

[DMcCunney]

Originally Posted by EricDP

But those costs are not per unit. They are spread across the total of the number of books sold. Increase the number of books sold, and those costs per unit go waaaay down. The best way to increase the number of units is to drop the price. The unit cost of an eBook is lower already, so you can drop the unit price, increase sales (which dilutes the creation costs), and therefore drop prices even more.

I think you're making an unwarranted assumption about elasticity of demand. Every book has a market: the total number of readers out there that might want to read that book. If you're Stephen King, Tom Clancy, or the like, that total market will be hundreds of thousands to millions. If you're most other authors, the total market will be tens of thousands.

If the market for a book is 50,000, and I can sell 50,000 copies priced at $10.00 each, what happens if I cut the price to $7.50 or $5.00? Do I magically conjure new readers out of nothing because of a lower price?

Lower prices boost sales, but there's always a "sweet spot" - cut prices too much, and you get less total revenue, because the existing audience is simply paying less for the book.

There are limits to how much lower pricing will help sales, because there are only so many readers who want to read any particular title. The trick is pricing at a point that will generate the maximum revenue and profit, not the maximum unit sales.
______
Dennis

[DMcCunney]

Originally Posted by Sonist

I believe it amounts to a bit more than 20%, but fine --

It varies by book. I know one editor for a major trade house who claims the costs are 10%. I consider 20% the top end, and suspect 15% is more likely.

then we all agree that ebooks should be cheaper, at least by 20%.

We do? Why?

I know why you think they should be 20% cheaper - you're the reader interested in buying the book.

Pretend I'm the publisher issuing the book. I see the chance of selling the ebook at the same price as the paper edition, with the 15%-20% savings of not issuing a print edition flowing to my bottom line. If I believe I can successfully charge the same price as the paper edition and see comparable sales, tell me why I ought to lower it? (The fact that you will then buy it will not sway me. You're one reader. I'm concerned with tens or hundreds of thousands of readers.)

You want to get your ebooks cheaper. I want to stay in business. Guess which will trump?

(I have encountered folks who think that being in electronic form adds value to the book, and will pay more for an ebook edition than a mass market paperback.)

Moreover, they should be of comparable quality to the printed editions, and should be as easily transferred to future hardware devices. If not, then ebooks should be still cheaper.

Easily transferred is a thorny matter. Right now, that means "no DRM", and I'm all in favor of that. But what happens down the road as devices change and ebooks change? What if the format you get becomes obsolete, and a new ebook format becomes dominant? What if your new reader can't read your old format ebooks?

And while I agree in theory on "comparable quality", what exactly does that mean?
______
Dennis