Kindle Books Outsell Hardcovers

[Oldpilot]

Originally Posted by Scott Nicholson

if I had to pick one as an author, I'd certainly go Kindle, as it is more than 90 percent of my sales (and of most indie authors I know).

That's been my experience as well. (Actually, more like 95-99 percent!)

[DMcCunney]

Originally Posted by murraypaul

I find this very hard to believe.
In fact, I can't believe it without hard numbers, it just doesn't make sense.

I know one editor at a major house who reckoned manufacturing, warehousing, and distribution costs at about 10% of the budget of the average book his house published. That struck me as low, and a friend who is a writer and was talking to publishers instead of editors placed the figure at perhaps 20%. (You can see the thread in her blog here:
http://kriswrites.com/2010/08/12/the.../#comment-1474

Email on a list I'm on inhabited mostly by publishing folks got the following posted a couple of years ago from someone in a position to know the costs::

The unit manufacturing cost (paper, print, and bind) of a dead tree edition is as follows:

mass market: $.50 - $1.
trade paper: $1-2
hardcover: $2-$4.

These are "typical" numbers at a medium-to-large trade publisher. Small presses and ultra-short-run presses (e.g. academic presses) typically have higher unit costs, which might explain why some small presses go the all-ebook route, offering paper only via POD.

Admittedly, there are other savings than just the PPB costs--warehousing, for instance. Still, the costs for making a book are considerable *before* it goes to press, and those costs remain even for an electronic edition. Further, if the business shifts to an ebook-dominated market, the publishers will probably have to spend more on marketing. No one's yet figured out how to make viral marketing work on demand, whereas it's pretty easy to offer co-op dollars to the brick-and-mortar stores to put a book in a big display.

Perhaps publishers could shave a buck or two off the price for an electronic edition. On the other hand, they are likely depending on increased ebook profit margins to help them hold down the price of paper editions. The shorter the print run, the higher the unit cost. There's a point where it ceases to make sense to do a paper edition at all. Until we reach that event horizon, the price of ebooks can't go too much lower than the print price.

______
Dennis

[DJHARKAVY]

Everybody is different.

Personally, I don't buy anything but eBooks anymore, so long as the book I want is available as such. Pretty much the only hardcover I have bought in the past few years is Harry Potter and the Deathly Hallows.

I like the portability. I like having multiple books with me, so if my mood changes I can read a different book.

Most of all, I like that I don't forget to return library books. Library eBooks automatically 'return' themselves so that I don't have to. That, in and of itself probably saves me a few hundred dollars a year.

And if I were to manage to lose my JBL, I still have all my books backed up on two computers and Dropbox.com so my entire library is protected.

That's me... I have another friend who can't stand reading on a screen, and wants to hold the books. Find for her.

In either case, I suspect that in the long run, hardcovers will be there for the collector, and ebooks will be used by the masses (either on personal tablets or dedicated ereaders or something in between) but the paperback market will be pretty much gone.

[GA Russell]

Originally Posted by DJHARKAVY

...I suspect that in the long run, hardcovers will be there for the collector, and ebooks will be used by the masses (either on personal tablets or dedicated ereaders or something in between) but the paperback market will be pretty much gone.

I guess it depends what amount of time the long run is. I don't see mass market paperbacks disappearing in my lifetime, which is to say the next thirty years. I think there are a lot of people who enjoy the inexpensive western or romance genre-type paperbacks, and who won't make the switch.

But as eBook readers become more widely owned, I can see the $14.99 trade paperback going away.

[DJHARKAVY]

Originally Posted by GA Russell

I guess it depends what amount of time the long run is. I don't see mass market paperbacks disappearing in my lifetime, which is to say the next thirty years. I think there are a lot of people who enjoy the inexpensive western or romance genre-type paperbacks, and who won't make the switch.

But as eBook readers become more widely owned, I can see the $14.99 trade paperback going away.

I was figuring by the end of the next generation... When my son (age 7) is a parent, I expect that most reading will be done via ebook readers. When his children are adults, I expect that the paperback will be mostly gone.

[GeoffC]

Originally Posted by DMcCunney

You can take that one step farther and say "cut the publisher out completely and take it all."

The problem is simple: you can self publish, but how do you reach that market that might be interested in reading your books sell to them?

While you can argue that they don't do it well, selling books is what publishers and retailers do.

If you want to make your living writing (or even a significant fraction of it), you still need a publisher and retailers in the loop, and are likely to for the foreseeable future.
______
Dennis

Drop hints on sites like this one ..... then there's facebook (whatever that is)
etc.

[murraypaul]

Originally Posted by DMcCunney

Er, no. The biggest cost in printing aside from the paper is "set up and make ready", that is, creating the plates the book will be printed from, putting them on the press, adding ink, and running test copies to make sure registration is exact and color values (if the work includes color) are accurate. The incremental cost of printing additional copies once you've done that is a small fraction of the total. (And paper costs less when purchased in larger quantities, too.)

These are all physical costs, which would not be required for eBooks.

Economies of scale take place: the larger your press run, the more you can spread the cost of manufacture over units produced, and the less of a percentage of the cost manufacturing is for an individual book. If I print 5,000 copies and my printing cost is $5,000, my manufacturing cost is $1.00 per book. If I'm charging $5.00 for the book, printing costs are 20% of the price. If I print 10,000 copies, my printing cost doesn't double. It may rise to, say, $7,000, and my manufacturing cost per book is $.70 or 14% of the price.

But the total physical costs have still gone up, and make the initial non-physical costs of editting/proofreading etc a smaller proportion of the cost.

[murraypaul]

Originally Posted by DMcCunney

I know one editor at a major house who reckoned manufacturing, warehousing, and distribution costs at about 10% of the budget of the average book his house published. That struck me as low, and a friend who is a writer and was talking to publishers instead of editors placed the figure at perhaps 20%.

But again this seems be ignoring the cost of retail, at around 50% of the sale price. The agency agreement for eBooks has saved 20% here straight away.

This was what i didn't believe, that only 20% of the sale price of the book was related to production, distribution and retail.

[DMcCunney]

Originally Posted by murraypaul

These are all physical costs, which would not be required for eBooks.

Correct. But my point was that the manufacturing, warehousing, and distribution costs are a far smaller percentage of the total cost of producing a book than most folks seem to think, and eliminating them will not reduce the cost of an ebook as much as many hope.

But the total physical costs have still gone up, and make the initial non-physical costs of editing/proofreading etc a smaller proportion of the cost.

But again, the amount of the increase is a small fraction of the total cost.
______
Dennis

[DMcCunney]

Originally Posted by murraypaul

But again this seems be ignoring the cost of retail, at around 50% of the sale price. The agency agreement for eBooks has saved 20% here straight away.

No, it hasn't. I think you misunderstand what those numbers refer to.

First, the discount given to the retailer or volume purchaser by the the publisher or wholesaler isn't fixed. It varies depending upon the source and the volume purchased. Amazon, for example, is huge, orders a lot of books, and will get a better price on a volume purchase than a bookstore that most deal with a wholesaler like Ingram or Baker and Taylor, who will take their own cut.

And publishers have been tweaking the discount schedule recently anyway. One of the problems for publishing has been that historically, it has had a 100% returns model. The retailer can return any unsold books for full credit. With hardcovers, the physical books are returned. With paperbacks, the covers are stripped off, and the body of the book is (supposedly) trashed to become landfill somewhere. (In fact, many such coverless books wind up being sold for a fraction of the cover price, producing another problem for the industry.) Given the nature of the distribution channels, it may take a year before you even know if the book has sold, and what the returns have been.

Some publishers have been experimenting with offering higher discounts to the retailer, in exchange for dropping the 100% returns model.

So the discount to the retailer or volume purchaser isn't necessarily 50%.

When the typical discount to the retailer is 50%, the retailer's markup is 100%. The retailer can choose to accept a lower margin on a title and charge a lower price. The difference comes out of the retailer's discount. For bestsellers, the retailer may chose to to accept a much lower margin per sale, expecting to make it up on higher volume, or position the book as a "loss leader" and not make money on the sale, just to get the customer in the store where they will likely buy other thinsg while there are at it.

The agency model casts the publishers as the sellers, and the retailers like Amazon as "agents" in the sale, who get a commission for doing it. But the whole point of the agency model was to protect the hardcover best seller. Those are the industry crown jewels. They generate the highest revenue and yield the highest profit. The presence of hardcover best sellers may make the difference between whether an imprint makes money or shows a loss on a year.

Amazon was selling Kindle editions at the default $9.99 price at the same time as it was selling the bestselling hardcovers. Lots of folks simply wanted to read the book now, had the capability of reading an electronic version, and didn't care if they didn't have a paper copy. Guess which they bought? The publishers saw lower revenues, because they didn't get as much from the sale of a Kindle edition as they did from a hardcover sale.

The agency model essentially tells Amazon "You want to offer the ebook at the same time as the hardcover? You have to charge a higher price and give us a bigger payment, to compensate for what we lose on not making a hardcover sale. If you want to charge your standard price, you must wait several months to give the hardcover time to sell before you compete with it."

Publishers don't issue the mass market paperback edition of a book until a year after the hardcover for a reason, and the same considerations apply to ebooks.

The publisher will set the retail price, and Amazon will get a lower discount. They will be required to charge more for the ebook, and have less margin to cut into to drop prices. I believe that 30% you quote is the retailer's markup. Instead of paying the publisher 50% of the price of the book, they are paying the publisher 70%.

That does not constitute a savings.

This was what i didn't believe, that only 20% of the sale price of the book was related to production, distribution and retail.

I said about 20% of the cost of producing a book was bound up in manufacturing, warehousing, and distribution. A book is printed and bound (manufacturing), stored in a warehouse (warehousing), and shipped to the wholesalers and retailers who will stock it (distribution). This all happens before it reaches the retailer.

The cut taken by the wholesaler and retailer is another matter.
______
Dennis

[Elfwreck]

Originally Posted by DMcCunney

Correct. But my point was that the manufacturing, warehousing, and distribution costs are a far smaller percentage of the total cost of producing a book than most folks seem to think, and eliminating them will not reduce the cost of an ebook as much as many hope.

Manufacturing, warehousing & distribution are per-unit costs. Author advance, editing & formatting are per-title costs; the more books you sell, the less they matter for each unit sold.

The $.50-1.00 printing cost for mmpbs, and whatever it costs to ship & store them, *cannot* be reduced. (The industry has already done everything it can to get those costs as low as possible.) It doesn't matter if they sell 1000 copies or 500,000; that much per sale is reserved for production & distribution. (And that's not considering the returns. If those are the actual production costs per book, the truth is that production costs are more like $1-2 per sale, because about half of them are trashed.)

The production costs of an ebook are "author advance + editing" (a few thousand dollars, if we're being generous?) "+ bookcover" (few hundred, maybe?) "+ distribution" (percentage of sale price). If it sells 1000 copies, the book may have the same profit level or lower than the print version. If it sells 50,000 copies, the profit margin is ridiculously high--even if the per-book profit is just fifty cents.

I want to see one of those publisher cost breakdowns that differentiates between per-unit costs and per-title costs. Because saying that typesetting/formatting costs "$.50 for an ebook; $.80 for a hardcover" is ridiculous. Of course they don't spend $.80 to format every hardcover; they spend a flat rate formatting the title, and divide that cost among however many they print. But that doesn't work for ebooks--they can "print" as many or as few as customers want.

Those numbers are based on an assumed level of sales. According to those numbers, Baen should've gone bankrupt years ago; they're selling ebooks below cost!

[SensualPoet]

I have bought more ebooks in the past year than hardcovers in the past 10 years; the same applies to my purchases of paperbacks. Hardcovers are fine when the presentation is part of the content; or if a paperback is simply not available.

In Canada, books in bricks and mortar stores are expensive -- which is why I almost always buy online, and usually at amazon (.ca or .com). Online is also generally much more convenient even though I have several large bookstores close by.

Here are two real life examples: Elizabeth Gilbert's Eat Pray Love is $18.50 in a trade paper edition; at Kobo it's $10.49; at Amazon $9.05. Or Steig Larsson's Girl with the Dragon Tattoo which is $13.50 in a mass paperback edition; at Kobo it's $7.99; at Amazon $7.65. It's no wonder that, where "the word's the thing", ebooks are much preferred and a lot easier on the pocketbook.

In fact -- the savings over time can easily pay for the ereader device, something that gets very little air play here or in the press. No wonder hardcovers are being eclipsed by ebooks -- and why Amazon's Bezos predicted that, at Amazon, pbooks may be eclipsed as early as 2012.

[murraypaul]

Originally Posted by DMcCunney

The publisher will set the retail price, and Amazon will get a lower discount. They will be required to charge more for the ebook, and have less margin to cut into to drop prices. I believe that 30% you quote is the retailer's markup. Instead of paying the publisher 50% of the price of the book, they are paying the publisher 70%.

That does not constitute a savings.

It does for the publisher, they have reduced the cost to them of having the book retailed from 50% to 30%. They get to keep more of the sale price.

The cut taken by the wholesaler and retailer is another matter.

And where large savings can be made. If Kindles could purchase books online from other stores I think you would have already seen large publishers set up their own eBook stores.

[AnemicOak]

Originally Posted by murraypaul

And where large savings can be made. If Kindles could purchase books online from other stores I think you would have already seen large publishers set up their own eBook stores.

They can. Anyplace that sells Mobipocket format books (without DRM) is available to Kindle owners. This includes a lot of small publishers, Webscription, Smashwords, etc.


If the pubs were to offer their books without DRM they could sell them directly and not have to pay anyone a percentage for the ones they sold direct.

[DMcCunney]

Originally Posted by Elfwreck

Manufacturing, warehousing & distribution are per-unit costs. Author advance, editing & formatting are per-title costs; the more books you sell, the less they matter for each unit sold.

Yes and no. Manufacturing, warehousing and distribution add up to a total cost for the title. The total amount varies depending on the press run, as does the amount per book. Editing and formatting will vary somewhat depending upon the book. Textbooks, for example, have rather higher editing costs because you must make sure the textbook is accurate, requiring peer review by experts in the topic. Author advances are a major variable.

The $.50-1.00 printing cost for mmpbs, and whatever it costs to ship & store them, *cannot* be reduced. (The industry has already done everything it can to get those costs as low as possible.) It doesn't matter if they sell 1000 copies or 500,000; that much per sale is reserved for production & distribution. (And that's not considering the returns. If those are the actual production costs per book, the truth is that production costs are more like $1-2 per sale, because about half of them are trashed.)

Yes. And you may be lucky if only half are trashed. I've heard horror stories about books that were printed but never actually got out onto a retailer's shelves. The record industry talks about "Ships gold and returns platinum", and the book industry has similar problems.

The production costs of an ebook are "author advance + editing" (a few thousand dollars, if we're being generous?) "+ bookcover" (few hundred, maybe?) "+ distribution" (percentage of sale price). If it sells 1000 copies, the book may have the same profit level or lower than the print version. If it sells 50,000 copies, the profit margin is ridiculously high--even if the per-book profit is just fifty cents.

No. First, you have to assume editing costs will be the same for an ebook as for a paper volume. The same operations must be performed. What will differ will be the format of the file that is the end result of the process - PDF for printer, ePub or whatever for ebook. As mentioned earlier, 80% of the costs of producing any book occur before it gets to the final file to be printed or issued as an ebook stage.

Second, you can't assume the advance will be that low. (Imagine you're a published author, who got a $10,000 advance for you last book published as an MMPB. How would you feel if the publisher offered you $3,000, or even $5,000 for your latest book, because she was pallning to issue it as an ebook edition?) The advance offered will depend upon the book and how well the publisher expects the book to sell.

Third, the cover may not be that cheap. Depending upon the cover design chosen for the book, it may cost rather more. One of the complaints I've seen about ebooks is crappy covers, done on the cheap. For that matter, I hear it about paper books, too, as publishers try to cut costs.

The more interesting question is what purpose the cover serves. In a printed book, the purpose of the cover is to catch the reader's eye on the retailer's shelf, and get them to pull it off the shelf for a closer look, as the first step in the purchase decision process. What sot of cover should an ebook have?

Fourth, each title will bear an allocated share of all the corporate overhead costs that can't be directly charged to a book, like rent, phones, and utilities. Those don't magically go away just because the end product is an ebook.

I want to see one of those publisher cost breakdowns that differentiates between per-unit costs and per-title costs. Because saying that typesetting/formatting costs "$.50 for an ebook; $.80 for a hardcover" is ridiculous. Of course they don't spend $.80 to format every hardcover; they spend a flat rate formatting the title, and divide that cost among however many they print. But that doesn't work for ebooks--they can "print" as many or as few as customers want.

Costs spent on typesetting and markup vary by book and subject matter. Some are more complicated and require more time and effort than others.

And the fact that it's an ebook (or print on demand, for that matter), is irrelevant. You expect the book to sell X number of copies, or you wouldn't publish it to begin with. What you expect X to be will help determine things like how big an advance you offer, and may affect how you price the book. (Academic titles aimed a scholarly niche market will have a lot higher prices than mass market books, by necessity.) Essentially, you're placing a bet, and the anticipated payoff if you win governs how big a bet you place. Sometimes you lose...

Those numbers are based on an assumed level of sales. According to those numbers, Baen should've gone bankrupt years ago; they're selling ebooks below cost!

Baen can't be used as representative, for several reasons.

First, they're in North Carolina, with a much lower overhead than the folks based in NYC. Costs are lower down there, and the allocated share of corporate overhead will be less.

Second, they do things a bit differently. For instance, the last I knew, their typesetting/markup for the print editions was done by Nancy Hanger, their Managing Editor. Nancy is in New Hampshire, and while her title is Managing Editor, she's not a full-time employee. She works on a contract basis and gets paid per book. (I know Nancy, but haven't spoken to her in a while.)

Likewise, the ebook editions are created by Arnold Bailey, their webmaster. Arnold is not an employee. He's proprietor of Webwrights, a web design firm, and Baen is his main client. He created and maintains their Webscriptions program, and gets a cut of the take.

This lowers Baen's headcount, removes some salary and fringe benefit expenses from their cost structure and moves the cost to different line item, and lowers the costs. (As an employee, I can expect things like company health benefits in addition to a paycheck. As a contractor, those are on me.)

Third, they are a specialty publisher, catering to a defined niche market, and they understand who the market is and what it likes. They aren't likely to have best sellers (save David Weber's Honor Harrington series), but they also won't suffer the sort of losses a full line publisher suffers on a book it hoped would be a best seller and paid a huge advance and promotional costs for, but which tanked. Baen doesn't place that sort of bet, and while some of their titles will do better than others, I doubt any of them tank.

Fourth, they're an independent publisher, but they are manufactured, marketed, and distributed by Simon and Schuster. I don't have a good feel for what this does for their numbers, but I assume it makes them different than they would be if they were actually owned by Simon and Schuster and simply existed as an imprint of that house.

Bottom line, Baen's model works for them, but doesn't apply to other publishers.
______
Dennis