Quote:
Originally Posted by charleski
The principal cost is simply the cost of generating and promoting the work itself - paying the author's advance, editing the text as necessary, commissioning cover art, etc. Actual manufacturing costs represent only around 15% of the price of a physical book, which is why it's reasonable to expect ebooks to retail at a discount of 20-30%.
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This is incorrect.
Advances, editing, art etc are all sunk costs. They're paid only once, amortized over the whole run and eventually can be paid off entirely.
Manufacturing is a marginal cost that is paid per book and never ends. (The same applies to royalties).
What this means is that as the number of book sold increases, the sunk costs count for less and less while the marginal costs become totally dominant and eventually the only real cost after the sunk costs are completely covered.