Quote:
Originally Posted by Harmon
You are a publisher. You gross 5 dollars for each volume sold. Assume that you can sell the same number of books in either pbook or ebook form.
You can ship 100 pbook volumes to a reseller and get paid in advance to the tune of, say, half the 5 buck price, or $250. Later, when only 40 of the books sell, it turns out that the reseller only owes you $200 for the books actually sold. The rest are returned to you and you have to refund the seller 50 bucks. But of course, in the meanwhile, you've had the whole $250 to work with from the very beginning of the transaction.
Or you can authorize the reseller to sell the ebook. You get 5 bucks each time an ebook sells, and eventually, over time, you get $200.
So, do you want 250 now, repay 50 later, or 5 bucks a sale as the sales occur? Take into account that you have to pay your staff now, not when the sales occur, so if you have a slow seller, you are going to have to borrow money to pay your costs under the ebook system, whereas the resellers are advancing you that money under the pbook system.
Ebook publishing requires publishers to revamp their financing model, and in a detrimental fashion. Maybe this explains the 4 month lag time - it's not that they want to make Big Bucks off of the hardback sales, it's that they want to continue to get their upfront cash from the resellers, and they can't get upfront cash from ebooks.
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Yes and no. You are right about the upfront money perhaps, but it depends on the terms the retailer has with the publisher --- perhaps 90 days, which means they could get the books and not have to pay for them and perhaps even return them before they had to.
The costs and the distribution mechanism are critical. There are shipping costs, warehouse costs etc. You can say those are all built in but the are going to vary from book to book and the equivalent costs for the ebook are tiny in comparison. There is no retail sales people etc. Just an on-line presence. No storage costs no production costs (minimal at least) so the profit on the ebook is perhaps 2-10 times more than for the pbook. In your example you are assuming the profit is the same. It's not.