[DMcCunney]

Originally Posted by Elfwreck

1) By studying their target sales audiences, and coordinating smaller publishing groups as necessary to reach them. Some additional costs would be expected in the coordination, so maybe they have to produce $8-10 ebooks, instead of $4-6 ebooks.

Ever worked for a really big company with multiple divisions to be coordinated? Think of herding cats...

I really don't get the argument, "they're so big that everything they do costs more and you have to pay for that." I thought the idea of getting big, was that production would cost less and there'd be more profit at the same price level.

How well that works depends on the products.

The idea behind getting big is achieving market share and being a low cost producer, but how well size translates to lower costs depends on what you sell. You need to sell an awful lot of something to achieve the desired economies of scale. Apple can make bundles on the iPod/iPhone/iPad, but they're selling millions of each. The biggest cost in consumer electronics is the money required to build the factories to make them, and the more you make and sell, the larger a base you have over which to amortize those costs, and the cheaper each can be. While there are different models of iPod/iPhone/iPad, they share many common components, and the added cost of making a particular model is a relatively small part of the total costs.

Along the line, there were questions back when the Sony Reader came out about Sony's long term commitment to it. Sony is a big outfit that has to sell a lot of something to make it worth doing. Sony had previously offered the popular Clie line of Palm OS PDAs. Clies were profitable, but not profitable enough, and Sony decided better returns could be had investing the funds elsewhere and folded the line. The question was whether the reader market was large enough to address profitably. It apparently is, since Sony is still in it.

Books are a different matter. Yes, publishers sell a lot of books overall, but each book is in some respects a unique product, with its own development expenses. And with the possible exception of the international best seller, no book will achieve sales in the millions.

Book publishing resembles film production. Studios producing major films are making enormous bets when they green light a production. The cost may exceed $100 million. They cross their fingers that they'll have enough releases that do well in the box office to cover the losses on the ones that tank and make them some money. Sometimes they don't, and the studio folds.

Publishing is similar, with bestsellers helping to cover the loses on the books that don't earn out (which is most of them.)

The biggest problem from our perspective is that big companies have big overhead that must be allocated across product lines. When you are based in NYC, and employ thousands of people, that overhead becomes a rather large number. (And when you are a company that size, you don't just pick up and move to the lower rent district in another part of the country. It costs an incredible amount to do so.)

I may have misphrased. I was thinking that Baen is plenty profitable, and Harlequin is raking in money. I remember hearing that Baen makes more selling ebooks than their entire line of non-US pbooks, and that they have a 70% sell-through rate on hardcovers. I don't have links for those numbers.

Harlequin is doing well, thanks, but they aren't immune to the doldrums affecting publishing. They've been diversifying beyond the core romance market. Consider the Gold Eagle PB line, aimed at men, and featuring action/adventure, paramilitary, and SF lines, things like the Executioner and "Mack Bolan" books.

I believe the 70% sell-through rate for Baen hardcovers originally came from this Eric Flint post on the Baen site.

You might also see a New York Times article from 2001, here. Back then, Jim Baen had a dim view of pure ebook publication.

There's an interview earlier this year with Toni Weisskopf, publisher of Baen Books, where no hard numbers are mentioned, but there's certainly none of the "how will we *ever* manage to pull a profit from ebooks?" attitude that many other publishers manage to convey.

Small size, focus, and low overhead. Also, Baen is privately held, so it isn't under pressure to produce the sort of numbers and ROI the big guys are. I've no doubt Baen is making money on ebooks, but I suspect the amount they are making would be considered insufficient by larger publishers. Those guys have stock market demands for rates of return publishers generally can't achieve.

I'm also willing to bet their hardcover sell through rate is where they make their biggest money. What happens if ebooks take over, and Baen no longer makes and sells paper books? Think they'll be able to retain that $6 ebook price and survive? I don't.
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Dennis