Math of Publishing Meets the E-Book

[Madam Broshkina]

Here is an article by Motoko Rich on publishing math & how much publishers/authors make on ebooks.

In the emerging world of e-books, many consumers assume it is only logical that publishers are saving vast amounts by not having to print or distribute paper books, leaving room to pass along those savings to their customers.
Publishers largely agree, which is why in negotiations with Apple, five of the six largest publishers of trade books have said they would price most digital editions of new fiction and nonfiction books from $12.99 to $14.99 on the forthcoming iPad tablet — significantly lower than the average $26 price for a hardcover book.
But publishers also say consumers exaggerate the savings and have developed unrealistic expectations about how low the prices of e-books can go. Yes, they say, printing costs may vanish, but a raft of expenses that apply to all books, like overhead, marketing and royalties, are still in effect.

Read the rest here:

http://www.nytimes.com/2010/03/01/bu...l?ref=business

[drmaxx]

The article is quite honest:

“If you want bookstores to stay alive, then you want to slow down this movement to e-books,” said Mike Shatzkin, chief executive of the Idea Logical Company, a consultant to publishers. “The simplest way to slow down e-books is not to make them too cheap.”

Translation: Don't change the current system because we know how it works and because the transition might hurt.

The math is quite flawed. Hardcopies are often read by several people (e.g. there is quite an active second hand market) with no revenues for the publisher what soever. DRM protected e-books are way more complicated to share (yes I know, it is possible...). There are quite some cases where I did not buy a book because it was a pain to get a copy - e.g. books that first come out overseas. Until they actually hit the local market, I forgot that I wanted to get them. The last new book I bought because it was available as e-book and I could buy it without waiting to reach a book store near me.

E-books on the other hand can be stored and made available for sale for almost no costs. There is a longer selling tail even with the option of a revival of an old book (e.g. Herman Hessen, ...). Additionally, I bet the loss rate of digital copies is way higher then with hardcover books. E-books and standards will change fast and I am not sure how many of the ebooks sold today still will be readable in 5 or 10 years.

Bottom line: e-books will have a different economic line up with lot's of unknown. Publisher simply don't want to venture into this new area if there is any risk for the current business model.

[Steven Lake]

Companies hate change and love the status quo. That's something I have to deal with on a regular basis in the Linux world. It's like trying to turn the Titanic with a tugboat. You'll eventually do it, but it'll take a lot of work and she won't go willingly.

[poohbear_nc]

I remember way back when - when Amazon began to allow readers to sell their used copies of books on Amazon - and the furious outcry from publishers & authors - about loss of revenue, doom, disaster, etc. And yes - a lot of brick & mortar stores went under, esp. used book stores, but the big publishers seem to somehow have survived. Even though this selling model gives absolutely no revenue to publishers & authors.

Now - with ebooks - the furor over loss of revenue and the collapse of the sales of pbooks seems merely recycled from before - IN SPITE OF the fact that ebook sales don't remove revenue from publishers/authors as did the sales of used books on Amazon (and other websites). Just look at the "Used Like New" listings on Amazon for hardcover editions the week after a major author (such as Cornwall, Patterson, Crichton, King, etc.) releases a new book (esp. one in a series that has committed readers). These sales revenue go to Amazon and the seller ONLY. Whereas ebook sales (at whatever price or release date) DO go to the publishers/authors.

It's unbelievably short-sighted of publishers NOT to realize that delaying ebook release dates can fuel the used book sales figures if disgruntled readers decide not to wait for the ebook, but refuse to pay full price for a pbook, lowering their sales revenue even further, not to mention angry readers who decide to either use a library copy or skip the book altogether. They've already lost out on any revenue from the thriving used book sales, and now seem committed to further lowering their revenue by not selling ebooks in a timely fashion. Didn't the ebook sales figures for The Lost Symbol register anywhere?

[rcuadro]

Originally Posted by Lord Raiden

Companies hate change and love the status quo. That's something I have to deal with on a regular basis in the Linux world. It's like trying to turn the Titanic with a tugboat. You'll eventually do it, but it'll take a lot of work and she won't go willingly.

I think it is more that they dont want to be the first ones to do it. they would rather let someone else try it out and, if it works, then they would be open to change.

[Daithi]

This is by far the best article on ebook pricing I have read. I may quibble over some of the details/amounts or emphasis of argument, but for the most part I think the article was pretty accurate and enlightening. I'm particularly in agreement with his position concerning the publishers wanting to raise ebook prices because it helps brick and mortar / independent bookstores remain more competitive. After all, it is access to these retail outlets that provide publishers with any relevance.

One thing I did find a bit amusing was Anne Rice's quotes at the end of the article -- she is defending ebook publishing but ironically Interview With A Vampire and much of the rest of her work is not available as an ebook.

[Dumas]

This article apparently sets forth what Rich and/or the publishers and consultants that were interviewed who work with the publishing industry would have us believe are the costs associated with publishing.

Unfortunately, it would appear Rich failed to interview someone with an economics/finance background to know what kind of questions to ask and be able to differentiate between fixed, variable, and marginal costs.

The article is appropriately titled - "Math of Publishing Meets the E-Book". This branch of math must be similar to the Math of Music and the Math of Motion Pictures. They certainly are not related to the mathematics of economics and finance.

[JoeD]

But publishers also say consumers exaggerate the savings and have developed unrealistic expectations about how low the prices of e-books can go. Yes, they say, printing costs may vanish, but a raft of expenses that apply to all books, like overhead, marketing and royalties, are still in effect.

Out of that gross revenue, the publisher pays about $3.25 to print, store and ship the book, including unsold copies returned to the publisher by booksellers.

So once the EBook has been out a while at hardbook prices and the mass paperback comes out selling at $7.99 will we see the print/store/shipping costs take off that and the ebook sold for $5? I very much doubt it. (maybe slightly more depending on how much difference there is between printing a paperback and hardback)

Even that $5 price IS STILL too much because ebooks are more restrictive than paper books. We can't resell the ebook and we can't lend it out. Add in DRM and it's not even "our" book and may not be readable in the future. We have less rights with the eBook so the price should drop accordingly.

Comparing ebook prices to Hardback is not a valid comparison because the price when the book first comes out been higher isn't an issue so long as the ebook is LESS than the hardback at that time, that's fine. Sure there's arguements that you may lose customers who won't wait until mass paperback is released and the price drops, but that's a different topic. The problem is we're not seeing the cost savings when the mass paperback is in fact released.

If publishers increase the price they sell ebooks to retailers when the hardbook is out, but then drop the prices when the paperbacks comes out AND include the print savings in that new price, then I doubt people would have as big an issue.

They don't need an agency model to do that though. Just sell ebooks for a higher cost initially to retailers and then later reduce the costs you're selling the ebooks for when the paperback comes out.

Chances are that won't happen though as the savings are certainly not been passed on in most cases at the moment even on sites where the publisher is in control of the prices.