Quote:
Originally Posted by Hitch
Self-publishing is nothing more than authors taking those risks THEMSELVES, which entitles them to the publisher's share of the profits.
Hitch
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That is an extremely good summary of the situation.
In a traditional publishing deal, the author brings to the table the creative work. The publisher in effect offers a bundle of services in return for the right to publish the work and to share in the profits. Some money is advanced to the author against future royalties, but is not usually recoverable by the Publisher if no such royalties materialise. Royalty rates vary but as I understand it are usually around 15% for printed books and 25% for ebooks. So in such a deal the publisher takes the lion's share of the sales revenue but essentially takes all of the business risks and in addition to the advance to the author pays all of the expenses (eg; editing, cover art, layout, formatting, printing and distribution, etc).
Amazon's KDP, in contrast, takes only 25% in return for distributing an e-book electronically. The author takes responsibility for everything else. Most books are e-books only though pod versions are sometimes made available. Amazon provides only distribution by way of its online store, with all of the other services bundled by a traditional publisher paid for by the author. Some KDP authors choose not to pay for such services, and publish their books on KDP as is. It usually shows. The better self-published authors pay independent contractors for some or all of these services. The quality of these services is variable but can often be very good indeed. Many such contractors are former Big 5 employees, and some even still perform work for traditional publishers as contractors. There are of course significant costs savings in producing e-books only, chief of which are no printing costs and no physical distribution costs including no physical returns. Also significant are the economies of scale applicable to Amazon's electronic distribution infrastructure, and the degree to which the process is automated.
The cost to produce and distribute a self-published e-book is significantly cheaper than the cost to produce and distribute a Big 5 e-book. In the former case it is likely that only an e-book is produced, and any print book offering is incidental to the e-book. In the latter case both a print book and an e-book is produced, with most of the initial costs including the advance and even the initial print run and distribution of the print book considered by the Publisher as part of the costs of the project as a whole. Promotional costs whether initially or continuing will also be attributable to both print and e-book. If print book sales deteriorate too far the costs of producing a print book in the future will rise. Publishers tend to regard at least the initial costs as format agnostic. Thus a traditionally published e-book sold on Amazon will have a significantly higher cost to the publisher than the e-book of most self-published authors. In a competitive environment, as KDP is, these lower costs are partially or sometimes wholly passed on to readers in the form of lower prices. Which is, I suspect, one of the major reasons for the price gap between top Indie titles and Big 5 titles. The other major reason is I think the need to consider the effect of e-book sales on print sales and vice versa. This also neatly accounts for e-book price reductions for some Big 5 back-list titles, which publishers seem to be experimenting with. Such titles have usually by this stage long repaid their initial costs and e-books of course have an effectively zero marginal cost.