eBooks provide benefit across the publishing value chain

It’s out of print, a familiar moniker for those seeking titles long since published, particularly when the author put their best foot forward on the first attempt and nobody has been able to match it since. The publisher has a choice to make: do a small run and risk sitting on 999 copies, or forgo the cost along with the potential revenue. In either scenario, the author has little to gain. Meanwhile, by the time the house has distributed the second printing, the original purchaser has already made their decision – picking up a used copy in the secondary marketplace.

They could have bought the eBook.

Authors are fretting that the pricing strategies employed with eBooks are putting the pinch on their ability to make a living. What was once a $75,000 advance has turned into a $15,000 upfront slug, and some are now questioning whether their creativity must now be supplemented by a W2 plus dental insurance. The price gap between the tangible and intangible delivery is supposedly the cause, but in economic terms the responsibility for success is being spread further across participants in the system.

Dollars and sensee-books

Based on Wall Street Journal estimates, a large publishing house takes 50% of the retail price of a debut literary fiction. After paying the author their cut, the publisher still has to cover costs for editing, design, marketing, and the printing itself.

Under the eBook scenario, the price drops by 54%, but the publisher and author are now taking a bigger piece of the pie. The publisher’s share is down five dollars per book, but printing costs are no longer in the picture. We’ll assume that other publication costs fall too, but it’s likely the lion’s share of it was absorbed during the first printing. The publisher and author reap more of the rewards, but all players must work harder for success. At the writing level, selling 10,000 print editions is roughly equivalent to 18,500 eBooks1, as far as feeding the family goes. The retailer’s gross margin, however, is cut in half2, so you have to think they (i.e. Amazon) are in it for the volume.

Moving to small publishers, the outlook changes. Retail prices are lower across the board, but smaller print runs means higher distribution costs, hence a smaller percentage for the publisher and author. Call that a cost for being discovered, particularly where access to major publishing firms doesn’t exist. When you move to eBooks, however, you are now dealing with an organization bearing less overhead – it stands to reason more of the retail price of the book could be passed on to authors. If you (again) assume that editing, layout, and other fixed costs of production are absorbed during a first printing, it’s a slam dunk – with 20% of the retail price going to authors, 10,000 now equates to only 12,500 in digital form3.

[Read more…]