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Originally Posted by murraypaul
No, those are fixed costs, not variable.
'Printing' an extra 1000 eBooks does not cost you a measureable amount of money.
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No, it doesn't. But fixed costs are
allocated across the production run, and
become unit costs. There is more to unit costs than the simple incremental cost of making one more of whatever it is.
Consider the devices we use to read ebooks. Semi-conductor electronics is a prime example of a capital intensive business. The biggest cost involved is the cost of building the factory to
make the devices, and an allocated share of that cost becomes the biggest part of the unit cost of any device.
This is where economies of scale come in. The more devices you make, the wider a base over which you can spread that fixed cost, and the cheaper you can price each one.
That cost will never drop to zero - there will be a bill of materials for each device with the costs of the components that go into the device, and labor costs for the construction, among others. But the biggest single portion of the cost is setting up to make the things in the first place, and the more you make of a device, the lower the percentage of the cost it becomes, and the cheaper you can make the device.
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The fixed costs are fixed. Everything else is accountancy.
The amount allocated to each copy will change, but the overall amount will not. It does not cost you more money to sell more copies, unlike with physical objects. Therefore there is not the measureable minimum price that there is with a physical object where it can be sold to break even.
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Have you actually read my previous posts on the subject? Was I not clear?
There is certainly a measurable minimum cost. It will be what you
must charge to cover your costs and make enough to remain in business. How large that number is depends upon what your total cost is and how many of whatever you are making that you expect to sell. If your total cost is $100,000, and you expect to sell 1,000 of whatever it is, you must charge $100 per copy simply to cover your costs, and will probably have to charge twice that to make enough money to remain in business. If you expect to sell 10,000, your minimum cost drops proportionately. But you will have an ultimate limitation on how far your price can drop based on the total number of copies you
can sell.
All books don't have equal sales potential. A few will become bestsellers. Somewhat more will sell enough to justify publishing more books by that author. Most won't sell enough to make back their costs. This will be true regardless of whether the book is a paper book or an electronic one.
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Dennis