Quote:
Originally Posted by Fbone
I don't think you can accurately calculate ebook profit until you can determine hardcover losses. How many hardcover sales did the ebook steal?
The publisher earns about $7 less for every person who purchases an ebook instead of the hardcover. ($9.99 @ 70% as compared to $28 @ 50%)
It's probably easier to calculate profit/loss per title than individual formats.
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I don't think the math quite works that way.
One question is exactly what Amazon pays the publisher. Hardcovers generally list between $25 and $30. Amazon gets a 50% wholesale discount, and pays the publisher between $12.50 and $15.00 per title. What are they paying the publisher for an ebook edition offered
at the same time as the corresponding hardcover?
Before the Agency Model pricing took effect, they were charging $9.99 for such ebooks. Under Agency Model pricing, they are charging higher prices for ebooks, with a 30% commission on the sale.
Some folks think they were paying the hardcover wholesale price, and eating between $2.50 and $5.00 per copy, using the ebooks as "loss leaders". Another possibility is that they were paying under a different price schedule, and remitting less to the publishers.
If Amazon
was taking a loss on each Kindle edition sold instead of hardcover, it was still less revenue for the publishers, because less hardcovers were sold, and returns would be greater. If they were paying under a different price schedule, remitting less, the publishers were seeing even lower revenue. Since hardcover bestsellers may mean the difference between a profit and a loss on the year, the publishers were be unhappy.
The question is this case is precisely " How many hardcover sales did the ebook steal?" Apparently, enough to cause a showdown with Amazon and the move to Agency Model pricing.
Another question is what happens when the mass market PB edition is released. Those still average about $8. If Amazon retains the $9.99 price, ebooks are more expensive than the MMPB edition.
Agreed, it is easier to calculate profit or loss on the title as a whole, but you can still make plausible guesses. Part of the fun will be deciding how to allocate costs common to all three formats (All the costs involved in acquiring and preparing the book for publication before it's actually
published.) to the various editions. The same will be true for allocated corporate overhead.
The big unknown will be sales in any format. Publishers make a guess at what they think a book might do, but may not know for up to a year in the case of a paper edition whether they guessed right.
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Dennis