[DMcCunney]

Originally Posted by Elfwreck

Manufacturing, warehousing & distribution are per-unit costs. Author advance, editing & formatting are per-title costs; the more books you sell, the less they matter for each unit sold.

Yes and no. Manufacturing, warehousing and distribution add up to a total cost for the title. The total amount varies depending on the press run, as does the amount per book. Editing and formatting will vary somewhat depending upon the book. Textbooks, for example, have rather higher editing costs because you must make sure the textbook is accurate, requiring peer review by experts in the topic. Author advances are a major variable.

The $.50-1.00 printing cost for mmpbs, and whatever it costs to ship & store them, *cannot* be reduced. (The industry has already done everything it can to get those costs as low as possible.) It doesn't matter if they sell 1000 copies or 500,000; that much per sale is reserved for production & distribution. (And that's not considering the returns. If those are the actual production costs per book, the truth is that production costs are more like $1-2 per sale, because about half of them are trashed.)

Yes. And you may be lucky if only half are trashed. I've heard horror stories about books that were printed but never actually got out onto a retailer's shelves. The record industry talks about "Ships gold and returns platinum", and the book industry has similar problems.

The production costs of an ebook are "author advance + editing" (a few thousand dollars, if we're being generous?) "+ bookcover" (few hundred, maybe?) "+ distribution" (percentage of sale price). If it sells 1000 copies, the book may have the same profit level or lower than the print version. If it sells 50,000 copies, the profit margin is ridiculously high--even if the per-book profit is just fifty cents.

No. First, you have to assume editing costs will be the same for an ebook as for a paper volume. The same operations must be performed. What will differ will be the format of the file that is the end result of the process - PDF for printer, ePub or whatever for ebook. As mentioned earlier, 80% of the costs of producing any book occur before it gets to the final file to be printed or issued as an ebook stage.

Second, you can't assume the advance will be that low. (Imagine you're a published author, who got a $10,000 advance for you last book published as an MMPB. How would you feel if the publisher offered you $3,000, or even $5,000 for your latest book, because she was pallning to issue it as an ebook edition?) The advance offered will depend upon the book and how well the publisher expects the book to sell.

Third, the cover may not be that cheap. Depending upon the cover design chosen for the book, it may cost rather more. One of the complaints I've seen about ebooks is crappy covers, done on the cheap. For that matter, I hear it about paper books, too, as publishers try to cut costs.

The more interesting question is what purpose the cover serves. In a printed book, the purpose of the cover is to catch the reader's eye on the retailer's shelf, and get them to pull it off the shelf for a closer look, as the first step in the purchase decision process. What sot of cover should an ebook have?

Fourth, each title will bear an allocated share of all the corporate overhead costs that can't be directly charged to a book, like rent, phones, and utilities. Those don't magically go away just because the end product is an ebook.

I want to see one of those publisher cost breakdowns that differentiates between per-unit costs and per-title costs. Because saying that typesetting/formatting costs "$.50 for an ebook; $.80 for a hardcover" is ridiculous. Of course they don't spend $.80 to format every hardcover; they spend a flat rate formatting the title, and divide that cost among however many they print. But that doesn't work for ebooks--they can "print" as many or as few as customers want.

Costs spent on typesetting and markup vary by book and subject matter. Some are more complicated and require more time and effort than others.

And the fact that it's an ebook (or print on demand, for that matter), is irrelevant. You expect the book to sell X number of copies, or you wouldn't publish it to begin with. What you expect X to be will help determine things like how big an advance you offer, and may affect how you price the book. (Academic titles aimed a scholarly niche market will have a lot higher prices than mass market books, by necessity.) Essentially, you're placing a bet, and the anticipated payoff if you win governs how big a bet you place. Sometimes you lose...

Those numbers are based on an assumed level of sales. According to those numbers, Baen should've gone bankrupt years ago; they're selling ebooks below cost!

Baen can't be used as representative, for several reasons.

First, they're in North Carolina, with a much lower overhead than the folks based in NYC. Costs are lower down there, and the allocated share of corporate overhead will be less.

Second, they do things a bit differently. For instance, the last I knew, their typesetting/markup for the print editions was done by Nancy Hanger, their Managing Editor. Nancy is in New Hampshire, and while her title is Managing Editor, she's not a full-time employee. She works on a contract basis and gets paid per book. (I know Nancy, but haven't spoken to her in a while.)

Likewise, the ebook editions are created by Arnold Bailey, their webmaster. Arnold is not an employee. He's proprietor of Webwrights, a web design firm, and Baen is his main client. He created and maintains their Webscriptions program, and gets a cut of the take.

This lowers Baen's headcount, removes some salary and fringe benefit expenses from their cost structure and moves the cost to different line item, and lowers the costs. (As an employee, I can expect things like company health benefits in addition to a paycheck. As a contractor, those are on me.)

Third, they are a specialty publisher, catering to a defined niche market, and they understand who the market is and what it likes. They aren't likely to have best sellers (save David Weber's Honor Harrington series), but they also won't suffer the sort of losses a full line publisher suffers on a book it hoped would be a best seller and paid a huge advance and promotional costs for, but which tanked. Baen doesn't place that sort of bet, and while some of their titles will do better than others, I doubt any of them tank.

Fourth, they're an independent publisher, but they are manufactured, marketed, and distributed by Simon and Schuster. I don't have a good feel for what this does for their numbers, but I assume it makes them different than they would be if they were actually owned by Simon and Schuster and simply existed as an imprint of that house.

Bottom line, Baen's model works for them, but doesn't apply to other publishers.
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Dennis