E-Book Prices Prop Up Print Siblings

[xg4bx]

nevermind, please disregard. all links now hidden behind subscriber portions. please delete.

[TimW]

Actually, if you just Google "E-Book Prices Prop Up Print Siblings," you can see the whole article. The picture with the price breakdown for physical vs. digital is rather interesting:

[Elfwreck]

Originally Posted by TimW

Actually, if you just Google "E-Book Prices Prop Up Print Siblings," you can see the whole article. The picture with the price breakdown for physical vs. digital is rather interesting:

I think they've fixed that loophole; searching Google & Google News with the title gets a link to the article with just the first couple of paragraphs showing.

The picture is fascinating, though. Makes it very clear that the point of Agency pricing is *more profit for the publisher* rather than better treatment of the author or more benefit to the consumer.

[xg4bx]

Originally Posted by Elfwreck

I think they've fixed that loophole; searching Google & Google News with the title gets a link to the article with just the first couple of paragraphs showing.

The picture is fascinating, though. Makes it very clear that the point of Agency pricing is *more profit for the publisher* rather than better treatment of the author or more benefit to the consumer.

thats the problem i ran into. the article was available through google but when i checked the link i posted a few minutes later they had closed it down.

[TimW]

Originally Posted by Elfwreck

I think they've fixed that loophole; searching Google & Google News with the title gets a link to the article with just the first couple of paragraphs showing.

The picture is fascinating, though. Makes it very clear that the point of Agency pricing is *more profit for the publisher* rather than better treatment of the author or more benefit to the consumer.

The profit per unit on the physical book versus the digital book is almost the same...until you look at the footnote on the DTB profit amount, "from which publishers must pay for returns and inventory."

[avantman42]

It looks like the full article is here: http://online.wsj.com/article/SB1000...109995700.html

[Kali Yuga]

This chart is basically the same as one in the NY Times a year or more ago.

Originally Posted by Elfwreck

Makes it very clear that the point of Agency pricing is *more profit for the publisher* rather than better treatment of the author or more benefit to the consumer.

Not really. You're not looking at the publisher's profits, you're looking at their revenues -- which means there are numerous costs left out of that chart. The costs for the advance, editing, marketing, legal and overhead all have to come out of that $5.92 per unit in revenues.

There's also no accounting for the many books that don't sell enough for the author to earn back their advance, or the many titles that do not break even.

And what happens if the ebook price is $10 instead of $13?
17% to author = $1.70
30% to retailer = $3.33
Digital distribution = $0.90
Revenues = $4.10

If you lower the price, 2/3 of the price cut comes out of the publisher's revenues. They'd have to sell 30% more copies at the lower price point just to break even.

Shouldn't you know all this by now?

[anamardoll]

Nope, full article is still masked for me, but I do not like the phrasing of the preview portion:

As physical book sales fall, publishers' fixed costs are becoming more cumbersome. One area major publishers can cushion the blow is by keeping e-book prices higher.

I believe the article writer means that the fixed costs (which are, tautologically, fixed) are not rising (since they cannot), but rather becoming a larger percentage of the gross sales, thus lowering the net.

In other words, the author seems to be saying that lower prices mean that the publisher makes less money.

There is a problem here. Or, rather, two.

One is that I'm not sure I believe those fixed costs are fixed. Is there some kind of conglomeration that maintains that all covers cost X, all editing costs Y, and so forth? Are the prices of printing the paper runs contained in those "fixed costs"? Because if they are, it's my opinion that they shouldn't be.

The other problem is that this doesn't seem to be on an infinite time scale. It is possible that lower prices over a fixed time period will result in lower profits, but eBooks are (or should be) forever. Are lower prices on eBooks less profitable on an longer time chart? I wonder.

In other words, I doubt the accuracy of this article.

[pdurrant]

Originally Posted by Kali Yuga

You're not looking at the publisher's profits, you're looking at their revenues -- which means there are numerous costs left out of that chart. The costs for the advance, editing, marketing, legal and overhead all have to come out of that $5.92 per unit in revenues.

There's also no accounting for the many books that don't sell enough for the author to earn back their advance, or the many titles that do not break even.

And what happens if the ebook price is $10 instead of $13?
17% to author = $1.70
30% to retailer = $3.33
Digital distribution = $0.90
Revenues = $4.10

If you lower the price, 2/3 of the price cut comes out of the publisher's revenues. They'd have to sell 30% more copies at the lower price point just to break even.

Shouldn't you know all this by now?

The calculations don't show a 17% author royalty on retail price, but a 25% on wholesale price. The original article has also made a mistake. the publisher doesn't pay for DRM, the agent does. The split for a $10 book would be

$3.00 to agent (e.g. Amazon, 30%)
$1.75 to author (25%)
$0.90 Digital Distribution - incorrect. This is handled by the agent.
$5.25 Publisher's revenues

And to emphasise what you said, the advance doesn't come out of the publisher's revenues. Only the interest on the advance.

For a $13 ebook, publisher's revenue would be $6.82. As I said, that $0.90 for DRM, etc, is paid by the agent, not the publisher.

[murraypaul]

Originally Posted by anamardoll

Nope, full article is still masked for me, but I do not like the phrasing of the preview portion:

I think you have misread it.

I believe the article writer means that the fixed costs (which are, tautologically, fixed) are not rising (since they cannot), but rather becoming a larger percentage of the gross sales, thus lowering the net.

Yes, where does it say otherwise?

In other words, the author seems to be saying that lower prices mean that the publisher makes less money.

No, he is saying that as the number of physical books sold fall, the publisher makes less money per book, because the fixed costs become a greater proportion of the total cost.
They then say, as a separate point, that publisher are trying to make up for some of those losses by charging higher prices for eBooks.

[anamardoll]

Originally Posted by murraypaul

No, he is saying that as the number of physical books sold fall, the publisher makes less money per book, because the fixed costs become a greater proportion of the total cost.

If he means that the fixed costs are a greater proportion of the PHYSICAL book sales, then... I don't care. I mean, duh: lower print purchases mean lower print profits.

If he means that the fixed costs are a greater proportion of ALL book sales, then... I said that already in different words, and then addressed same.

As for the rest, I still maintain that "fixed costs" are not as fixed as the article seems to be claiming.

[elcreative]

I find the figure that e-books net is only 3.15% of pbooks net to be far more interesting... depite our prejudiced look at things, this is hardly a massive move to ebooks... yet.

[kjk]

Originally Posted by elcreative

I find the figure that e-books net is only 3.15% of pbooks net to be far more interesting... depite our prejudiced look at things, this is hardly a massive move to ebooks... yet.

Interesting also to look at the total eBook revenues in 2010 (for trade books, at least) compared to Amazon's overall revenues in 2010, and B&N's as well.

[carld]

Originally Posted by kjk

Interesting also to look at the total eBook revenues in 2010 (for trade books, at least) compared to Amazon's overall revenues in 2010, and B&N's as well.

Interesting stuff. I had no idea that B&N was so much smaller than Amazon. Of course Amazon sells lots more than just books, but I didn't expect the difference to be so huge.

[nogle]

Originally Posted by anamardoll

...

As for the rest, I still maintain that "fixed costs" are not as fixed as the article seems to be claiming.

Typically, fixed costs aren't really fixed, they are "lumpy" variable costs. Think about it this way:

Over a small change in title volume, the number of editors stays the same; the cost looks fixed. But, if you experience a large change in title volume, then you need to increase or decrease your number of editors, so the cost changes.

Also, a handy rule of thumb is that in the long term, all fixed costs are variable and all variable costs are fixed.