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Worldwalker · 04-07-2011, 07:53 AM

There's something else you're forgetting in the difference in prices, Piper: returns.

For historical reasons, publishers give 100% refunds for returned books. And such returns are often 50% or more of a print run (the "more" comes in when the publisher guesses really, really badly about what the next blockbuster is going to be).

Also, you're assuming that, for the hardcover, Amazon pays the publisher what the retailer pays the distributor. I don't know Amazon's numbers, but it's entirely possible (in fact, given the depth of their discounting, probable) that they pay the publisher only 40% of the cover price of the book, the price the distributor would pay. So for a book listed at $27.99, Amazon would pay the publisher $11.12, giving them $3.16 profit.

But out of their $11.12, the publisher has to pay for the printing, shipping, and warehousing of not just one but two books -- one that will be sold, and one that will be remaindered or recycled. If we assume that the price to print a hardcover book (buying the paper and the ink, physically printing and binding it, putting the dustjacket on it, putting it in cartons, delivering it to the warehouse, paying for warehouse space to store it in, paying taxes on unsold books if they're in the warehouse at the end of the fiscal year, keeping track of the thing, and so on) amounts to 5% of the cover price, that's another $1.40, meaning that the publisher is getting $9.72 per pbook if every one of them sells, or $8.32 per pbook with 50% returns.

$10.50 for the ebook versus a maximum of $9.72 (possibly as low as $8.32) for the pbook. Assuming equal royalties (which may not be the case) the publisher makes more money from a $15 ebook than they do from a $28 pbook.

Let's look at paperbacks: Baen charges $8 for a pbook and $6 for an ebook. If they get 70% of the price of that ebook (it's kind of complicated, due to their sales model, but treating it as though it's in line with the cabal works for the moment) they're making $4.20 for the ebook; if they get 40% of the price of the MM paperback, they're grossing $3.20, and if dead tree costs are 50 cents (which is probably way low), they're netting $2.70 even without returns. There's a reason Baen sells ebooks for six bucks a pop: they're raking in the dough. When I buy a Baen book off Webscriptions, they're getting $4.20 of my money; when I buy it at Borders, they're only getting $2.70. But what if I want the hardcover? Well, if I'm one of those people who just has to have that book with the fancy covers and all, they'll sell me one. Or Amazon will, with faster shipping. My fondness for ebooks wouldn't change that -- no committed HC buyer is going to switch to little digital files if what they really want is something to smell and caress. But if I just want to read that book ASAP? Then I'll buy the ARC (advance reader's copy) -- basically, an unproofed galley -- months before the official release, for $15. Let's say Baen pockets $10.50 of that (and isn't paying much in production costs -- as I understand it, the ARCs are little more than the author's raw manuscript files, which is kind of the whole point). So they're making nearly as much as they would off a physical HC even given my low estimates of production costs.

04-07-2011, 07:53 AM	#87
Worldwalker Curmudgeon Posts: 3,085 Karma: 722357 Join Date: Feb 2010 Device: PRS-505	There's something else you're forgetting in the difference in prices, Piper: returns. For historical reasons, publishers give 100% refunds for returned books. And such returns are often 50% or more of a print run (the "more" comes in when the publisher guesses really, really badly about what the next blockbuster is going to be). Also, you're assuming that, for the hardcover, Amazon pays the publisher what the retailer pays the distributor. I don't know Amazon's numbers, but it's entirely possible (in fact, given the depth of their discounting, probable) that they pay the publisher only 40% of the cover price of the book, the price the distributor would pay. So for a book listed at $27.99, Amazon would pay the publisher $11.12, giving them $3.16 profit. But out of their $11.12, the publisher has to pay for the printing, shipping, and warehousing of not just one but two books -- one that will be sold, and one that will be remaindered or recycled. If we assume that the price to print a hardcover book (buying the paper and the ink, physically printing and binding it, putting the dustjacket on it, putting it in cartons, delivering it to the warehouse, paying for warehouse space to store it in, paying taxes on unsold books if they're in the warehouse at the end of the fiscal year, keeping track of the thing, and so on) amounts to 5% of the cover price, that's another $1.40, meaning that the publisher is getting $9.72 per pbook if every one of them sells, or $8.32 per pbook with 50% returns. $10.50 for the ebook versus a maximum of $9.72 (possibly as low as $8.32) for the pbook. Assuming equal royalties (which may not be the case) the publisher makes more money from a $15 ebook than they do from a $28 pbook. Let's look at paperbacks: Baen charges $8 for a pbook and $6 for an ebook. If they get 70% of the price of that ebook (it's kind of complicated, due to their sales model, but treating it as though it's in line with the cabal works for the moment) they're making $4.20 for the ebook; if they get 40% of the price of the MM paperback, they're grossing $3.20, and if dead tree costs are 50 cents (which is probably way low), they're netting $2.70 even without returns. There's a reason Baen sells ebooks for six bucks a pop: they're raking in the dough. When I buy a Baen book off Webscriptions, they're getting $4.20 of my money; when I buy it at Borders, they're only getting $2.70. But what if I want the hardcover? Well, if I'm one of those people who just has to have that book with the fancy covers and all, they'll sell me one. Or Amazon will, with faster shipping. My fondness for ebooks wouldn't change that -- no committed HC buyer is going to switch to little digital files if what they really want is something to smell and caress. But if I just want to read that book ASAP? Then I'll buy the ARC (advance reader's copy) -- basically, an unproofed galley -- months before the official release, for $15. Let's say Baen pockets $10.50 of that (and isn't paying much in production costs -- as I understand it, the ARCs are little more than the author's raw manuscript files, which is kind of the whole point). So they're making nearly as much as they would off a physical HC even given my low estimates of production costs.