C|Net: Why e-books cost so much

[ATimson]

Originally Posted by Sil_liS

I see that nobody commented on the fact that the author's revenue isn't included in the calculation of how much money everybody gets? Isn't the author the one getting screwed over on this one?

The author's money, if any*, comes out of the publisher's bucket. It's not really something that can be separately broken out in an overview like this, simply because the amount varies so widely based on the individual contract.

* Until the author earns out their advance, they don't get any royalties.

[TheSFReader]

Originally Posted by ATimson

* Until the author earns out their advance, they don't get any royalties.

Which doesn't necessarily mean 1) that the publisher hasn't made profit on the book and 2) that it has correctly (honestly ?) reported the sales to the author.

Some authors have found last year some suspect things in their royalties statements...
http://kriswrites.com/2011/04/13/the...ty-statements/

[Kumabjorn]

What happens if an author receives an advance of $100,000, earns royalties of $70,000 and had costs for researching the book amounting to $15,000. Will she have to pay back $15,000 to the publisher?

[LuvReadin]

Not usually - the publisher will generally take the hit. However, advances are rarely so large that there isn't a reasonable expectation of recouping them through sales.

[Sil_liS]

Originally Posted by ATimson

The author's money, if any*, comes out of the publisher's bucket. It's not really something that can be separately broken out in an overview like this, simply because the amount varies so widely based on the individual contract.

* Until the author earns out their advance, they don't get any royalties.

The article in the OP had this calculation to prove that publishers are making less money with the agency model:

Take that $24.99 list price. Let's say the e-book would have sold for $9.99 at Amazon in the old days but now the publisher charges the consumer $12.99:

Wholesale model e-book:
Publisher: $12.50 (roughly 50 percent of $24.99 hardcover retail price)
Amazon: - $2.50 (selling at $9.99)

Agency model e-book:
Publisher: $9.09 (70 percent of $12.99)
E-bookseller: $3.90 (30 percent of $12.99)

If the author gets 20% in each case we have:
Wholesale model e-book:
Publisher: $7.50 (30% of $24.99 hardcover retail price)
Author: $5 (20%)
Amazon: - $2.50 (selling at $9.99)

Agency model e-book:
Publisher: $6.50 (50 percent of $12.99)
Author: $2.60 (20%)
E-bookseller: $3.90 (30 percent of $12.99)

So the situation that you get is that the reader pays 30% more, the author makes 48% less, while the publisher makes only 13% less.

If you look at older articles you see things like: books are sold to bookstores and to Amazon at a discount rate of 55 percent, standard 55% discount for wholesalers.

So that means that the situation looks more like:
Wholesale model e-book:
Publisher: $6.25 (roughly 25% of $24.99 hardcover retail price)
Author: $5 (20%)
Amazon: - $1.75 (selling at $9.99)

Agency model e-book:
Publisher: $6.50 (50 percent of $12.99)
Author: $2.60 (20%)
E-bookseller: $3.90 (30 percent of $12.99)
And this means that the publishers are actually making more money with the Agency model. Shocking, I know

[tompe]

Originally Posted by Kumabjorn

What happens if an author receives an advance of $100,000, earns royalties of $70,000 and had costs for researching the book amounting to $15,000. Will she have to pay back $15,000 to the publisher?

What am I missing here? Why should the cost for the author matter? The author's cost for research have to be covered by the author (using saved money or the advance).

[Kumabjorn]

I assume that would depend on the individual contract, I'm assuming the author was using a good literary agent.

[murraypaul]

Originally Posted by Sil_liS

The article in the OP had this calculation to prove that publishers are making less money with the agency model:

Take that $24.99 list price. Let's say the e-book would have sold for $9.99 at Amazon in the old days but now the publisher charges the consumer $12.99:

Wholesale model e-book:
Publisher: $12.50 (roughly 50 percent of $24.99 hardcover retail price)
Amazon: - $2.50 (selling at $9.99)

Agency model e-book:
Publisher: $9.09 (70 percent of $12.99)
E-bookseller: $3.90 (30 percent of $12.99)

So on what planet did ebook prices drop from $25 to $13 when agency pricing was introduced?

[ATimson]

Originally Posted by murraypaul

So on what planet did ebook prices drop from $25 to $13 when agency pricing was introduced?

He's talking list, not retail. In that case, the planet in question is ours.

[Sil_liS]

Originally Posted by murraypaul

So on what planet did ebook prices drop from $25 to $13 when agency pricing was introduced?

In theory the price could have been $25. It's just that they were discounted.

[TimW]

Originally Posted by Sil_liS

In theory the price could have been $25. It's just that they were discounted.

According to the DoJ lawsuit, ebooks were discounted a bit more than 50%. Under item 30 of the document:

When Amazon launched its Kindle device, it offered newly released and bestselling e-books to consumers for $9.99. At that time, Publisher Defendants routinely wholesaled those e-books for about that same price, which typically was less than the wholesale price of the hardcover versions of the same titles, reflecting publisher cost savings associated with the electronic format. From the time of its launch, Amazon's e-book distribution business has been consistently profitable, even when substantially discounting some newly released and bestselling titles.

(emphasis mine)

[Sil_liS]

Originally Posted by TimW

According to the DoJ lawsuit, ebooks were discounted a bit more than 50%. Under item 30 of the document:

(emphasis mine)

I think that those were regarding ebooks that were priced at paperback levels.

[TimW]

Originally Posted by Sil_liS

I think that those were regarding ebooks that were priced at paperback levels.

NYT bestsellers would be priced at paperback levels? Perhaps I'm not getting your meaning, could you please clarify?

[Sil_liS]

Originally Posted by TimW

NYT bestsellers would be priced at paperback levels? Perhaps I'm not getting your meaning, could you please clarify?

Sorry, I didn't read it carefully. What it's saying is that the wholesale price was lower for ebooks. So if the typical wholesale price for pbooks would be 45% of the retail price so $11.25 for a $25 retail price, the wholesale price for ebooks could around 40%, so $10, meaning that Amazon wouldn't lose money on average but make or lose something on a case-to-case basis.

[Namekuseijin]

They will go down once all the useless middlemen putting it that high are out of work when copyright laws finally caught up with the digital era of free copying...