Ebook-troversy: A hard look at the numbers.

27 April 2012 by 35 Comments

Money

(My apologies in advance is my math is not right. I’m a reader, not a mathematician. If I’ve done the math wrong, please let me know–without being a complete asshat, or I will give you my special asshat award. I will.)

So, I’ve been pretty tough on publishers lately about this whole ebook thing. I tend to get heels-dig-inny when I feel like someone’s trying to put one over on me–and, to be honest, that’s how I feel when I read a lot of missives from publishers. There’s a recent post from IPG about how ebooks aren’t even really digital content. Their argument: while it is, yes, a digital format, the process of creating the book is still the same. The language isn’t digitized. Therefore, this isn’t a digital product.

(headdesk)

Okay, yes, yes. I know that there are other costs incurred when creating books. I think most readers who are reading the more expensive books (i.e., not the modern equivalent of dime novels) are aware that publishers employ numerous editors, proofreaders, marketers, and so forth. For me, this has never been the point of arguing that ebooks should be cheaper. I know there are costs that must be met. Ebooks, though, have advantages that print books do not, and that has been a lot of the basis of my thinking that ebooks should be less. Not $0.99, but less.

But, hey–I could be wrong, right? I’m not an industry professional by any means. Even though I’ve heard some ridiculous arguments thrown out that don’t support more expensive ebooks at all, that could just be because the people making the arguments are bad at arguing. So, I want to run some numbers and see where we end up. For that, I’m going to base my estimates off of IPG’s post, which details some of the costs of publishing a book. I’m going to assume their numbers are accurate, since they’re in the business, and all.

Let’s break it down.

Here’s what IPG says about the breakdown of printing a treebook:

The royalty rate is usually 10% of the cover price for a hardbound book, 7.5% for a paperback, increasing by a few percents if certain levels of sales are achieved. So an author makes $1.12 a copy on a $14.95 paperback.  A 10,000 copy sale of that paperback—a  very respectable performance in the estimation of most publishers—will earn the author about $11,000; not bad, except it takes a year or two of very hard work to write a book. Most authors have to keep their day jobs.

What does the publisher make? He will sell that $14.95 paperback to the booksellers and book wholesalers at, on average, a 50% discount from the price on the cover–$ 7.48 in the case of this $14.95 book. For 10,000 copies sold this will amount to $74,800.  The printing of the 10,000 copies will run about $1.50 a copy or $15,000 total. We have calculated that the royalty for the author will be $11,000. So the publisher nets $48,000 [Note: by my math, this should be $48800], not a bad day at the office except this income also has to cover the cost of that office, and the warehouse, and the staff. When all these factors are taken into account, the publisher’s share is about the same as the author’s.

(Okay, firstly, something is sticking in my craw here–IPG says that the paperback will wholesale for 50%–a pretty standard discount in the retail world for selling wholesale–but later complains about the same discount for wholesaling ebooks. What?)

So, for a 10,000 trade paper print run, the publisher nets about $11000 profit, according to IPG, who says it’s “about the same” as the author’s take. We’ll use that number, since we don’t have the actual figure; I’m going to treat it as a “cost” of the book when I discuss ebooks, since I don’t want publishers to lose out on their profitability, right? So, the publisher has made their $11000 off of a book, which, yeah, really doesn’t sound like much to make. In order to make another $11000, the publisher has to invest another $30000 in printing and warehouse/shipping fees for a second run of the book if it’s the same number of copies (“Warehousing and shipping will add another $1.50 to the real cost of selling a printed book”–which makes $15000 for a 10000 book run. From the article). But! On the second run, the publisher would, I imagine, make more than the $11000. If you’re factoring in the cost of paying for the book in a single run, as far as editorial expenses and marketing and whatnot–and, from what I gather, most books do not have a second print run, so this idea makes logical sense to me–the second run of the book would have that already paid for. Like I said, most books probably don’t get a second run, but, if it did, and all of the copies sold, the publisher would actually get an extra $22800, according to IPG’s numbers and assuming the editorial costs were paid down on the first run.

(Math clarification: $74800 copies sold wholesale in a 10000 print run – 11000 to the author – 15000 shipping & warehouse – 15000 printing – 11000 original publishers’ share= $22800 extra after editorial and marketing expenses have been paid.)

Still, that’s quite a bit of money to invest, even if you’re getting a 113% return on your second-run printing/etc investment if everything sells–because what if it doesn’t? Worrying.

(Math clarification: ($11000 publishers’ take + 228000 extra) / $30000 printing expenses = 1.1266 x 100% = 113%)

Let’s say that a publisher decided to release another book only as an ebook. Looking at the numbers provided, a “10,000 copy run” of an ebook would cost about $44800, including the author royalty, the editorial/design/marketing expenses, and the publisher’s share, if we want to keep that on par with a treebook–and for our purposes right now, we do. (Math clarification: $11000 author royalty + ($48800 publisher net – $15000 warehouse expenses) = $44800) That would bring the wholesale price up to about $4.48 a copy; going with the 50% model, the retail price would end up being about $9.

Do you see what’s been under my skin about this scenario?

If you answered, “ebooks don’t have a limited print run,” you’re exactly right.

With ebooks, there’s no scurry to try to make all of your money back in what might be your only print run. A publisher could sell 5, 500, 5000, or 50000 ebooks with one investment. There’s no decision to gamble on laying down another 30-large on a second run, because you just use the same ebook copy you’ve always had. At $9 retail per ebook, publishers net the same profit, according to IPG’s numbers–yet, publishers hate these $10 ebook shenanigans. And Amazon could, as IPG even suggested, slim down the margins even more since they don’t have to make as high of a profit margin off of an ebook, which costs less than physical items to sell, and ebooks could go down to $8 or even $7, still making the same profit for the publishers that treebooks get and also making a profit for Amazon. At a lower price point, more copies would probably be sold, and profits would increase. Because there’s not a limited print run on ebooks, fluidity with pricing can happen and even increase profits through higher volume. There’s also no $30000 gamble to sell another 10000 copies, and to me, a lower price point directed to sell more copies seems less risky. (The lower price could be implemented later, even–to give the book a chance to make the full retail price on the first “run.”)

And the agency model? Even for $9 a book, less than what the publishers seem to want us to pay, they’re still going to make more than treebooks because they sell treebooks wholesale and I calculated the $9 price point off of wholesale profitability. That’s an extra $18200 per 10000 book “run” using the agency model, for a total of $29200.

(Math clarification: $9 retail price  x .70 agency model percentage = $6.30 to publishers per book x 10000 books = $63000 – $44800 cost to publish ebook (including publisher take, as above)= $18200 extra money from the agency model + $11000 publisher take added back in = $29200 total profit from $9 ebook using the agency model)

Also, using the agency model, publishers could make the same profit off of ebooks as they would a trade paperback run at an even lower price point than $9.

For example, if they sold 10000 copies of an ebook, ebooks could retail for $6.40 and the publishers would make exactly the same profit as a 10000 trade paper run.

(Math: $22800 editorial/etc + 11000 author royalties + 11000 publisher take for a treebook run = 44800 / 10000 books = 4.48 cost per unit (at 10000 books) / 0.70 agency percentage = $6.40 retail)

At $6.40 rather than $9 (or $9.99), I think it’s safe to assume that they could sell more copies. What if they sold 15000 copies?

15000 x $4.48 = $67200 – (22800 editorial + 16500 author royalties for 15000 copies) = $27900

Hmm. More than double what they netted off of a trade paper run, and almost as much as they made off of the $9 ebook at 10000 copies. I wish I were fancy at math, and I could make a graph showing how many copies they’d have to sell at the $6.40 price point to overtake the profitability of the $9 price point. If there are any mathy people out there, and you wanted to do that, that would be awesome.

What if they were doing the wholesale model, but the price was still $6.40?

10000 x $3.20 = $32000 – (22800 editorial + 11000 author royalties) = -$1800

15000 x $3.20 = $48000 – (22800 editorial + 16500 author royalties) = $8700

20000 x $3.20 = $64000 – (22800 editorial + 22000 author royalties) = $19200

30000 x $3.20 = $96000 – (22800 editorial + 33000 author royalties) = $40200

Holding the author royalty per unit constant, because IPG said in its post that the author take would be about the same for lower-priced e-copies, we can see that there are some price points that don’t hold up under the wholesale model–unless more copies are sold. And my, look what happens when more copies are sold. Sell twice as many copies and go from in the negative to $19200. We’ve already proven with the Amazon best-selling Kindle books that we’ll buy more books if they’re cheaper; this is the beauty of the ebook format: ability to do volume sales without incurring extra costs. I’m not saying that books should start off at $6.40; there’s an art to retail, and part of that art is knowing that new books will sell at higher prices because of the rarity of the content being out there, which is why the whole hardback model has worked for so long. I am saying that there’s money to be had even with cheaper ebooks. Especially when you consider that, once a book has its editorial costs paid down, all of those profit numbers I just did are going to bump up. Books that have already done their initial runs could have their ebooks listed at a significantly lower cost and still be profitable through volume, with purchases from people who are just discovering the books, or who are willing to wait, which is a lot of us, and always has been a lot of us. The ebook phenomenon hasn’t really created any kind of new thing where people aren’t willing to pay for higher-priced books.

Let’s look at those numbers ($6.40 price point on wholesale model) again, after the editorial costs have been paid down:

10000 x $3.20 = $32000 – 11000 author royalties = $21000

15000 x $3.20 = $48000 – 16500 author royalties = $31500

20000 x $3.20 = $64000 – 22000 author royalties = $42000

30000 x $3.20 = $96000 – 33000 author royalties = $69000

For a book that’s migrated its way to the backlist, those figures aren’t bad at all. Selling the backlist at a lower price could net more than the publishers claim to make off of the initial trade paper print run, and I think lowering the price on that backlist would be the key to generating the volume necessary to see those numbers jump. So many books are published every year that I know I don’t get to keep up with all of the new books; it’s not like books have an expiration date past which they’re not “cool” anymore, so if I hear about a good book that was published awhile ago and it’s got a decent ebook price, I’ll probably pick it up. (Okay, some do have expiration dates, so to speak. A lot don’t, though.)

Then, there are classics, for which the publishers also don’t have to pay editors/marketing/etc and can put at an attractive price point, sit back, and make bank–but, those books that aren’t public domain are often the same $9.99 as a new book, and they don’t need to be, nor should they be to maximize publisher profit.

So, what does it all mean? For me, it means that, at the very least, publishers can seemingly make money off of the $9.99 price point, despite what they’ve been saying. It means that publishers could potentially make money if they charge less than $9.99, especially the heavy-hitting publishers who have author contracts with mega-bestsellers who will sell far more than 10000 books. It also means, to me, that there’s something very shady about this agency model vs. wholesaling controversy when publishers wholesale treebooks all the time. Why should ebooks be damned if they don’t get agency model prices, but trade paperbacks not? Ultimately, it means that I maintain my skepticism. While there are costs associated with editing, marketing, and so forth, publishers have not yet addressed to my satisfaction the ability to sell ebooks at lower prices to generate higher sales volumes, or even to sell ebooks at lower prices when editorial costs have been paid down (I mean, really–ten dollars for an ebook copy of Faulkner?) to increase sales volumes and profits. At this point, it really becomes a question of finding the right price point–not to maximize profit per unit sold, but to maximize volume and also maximize profitability. Find the sweet spot where we’ll buy the most volume of ebooks for the most money and price the books there. 

What say you, readers, writers, and publishers alike? Too much math? Did I screw up the math somewhere? How do you feel about what the publishers are saying vs. what the numbers are saying? Let me know in the comments!

(photo courtesy of 401kcalculator.org)

Susie

Susie is the Bitch-in-Chief at IB and is also a contributor at Book Riot. She's an ice cream connoisseur, an art fanatic, a cat-mommy of three, and a wife. She runs the @thebooksluts Twitter account and may be slightly addicted.

35 thoughts on “Ebook-troversy: A hard look at the numbers.

  1. I wholeheartedly agree! I’ve felt for some time now that the people involved in this lawsuit are simply whining about not being able to hose those of us with ereaders. I would think publishers would be more concerned about making the switch to ebooks and no longer making treebooks. While there will always be a market for treebooks, at some point the ebook market will take over, whether we like it or not. I personally am not interested in their bottom line or fleecing anyone’s pocket.

  2. Wow! As another non-math-person/writer, I admire your systematic look at the entire pricing craziness. Ebooks, self-published ebooks, are often priced at a fraction of the ebooks put out by the conventional publishing houses Unless they are justifying the difference with wonderful advertising and promotion (largely confined to the big books, by known authors that will sell anyway) than the ‘agency model’ is something that reminds me of science fiction. It’s an attempt to go back in time.

  3. “IPG says that the paperback will wholesale for 50%–a pretty standard discount in the retail world for selling wholesale–but later complains about the same discount for wholesaling eBooks. What?”
    I sure do complain about giving an e-retailer the same discount as I give to a bricks-and-mortar store. The discount should have something to do with the cost a bookseller must cover. An eBook reseller has nothing like the overhead of a print bookseller. IPG charges its client publishers 20% of the billing on eBook sales made over the IPG website or through the shopping cart we provide publishers for their own websites. And we make a little money at that rate. How can Amazon justify charging 50% of the billing, and then asking for even more?
    As for indie publishers getting rich because eBooks never go out of stock…well it is true that the margins for eBooks are attractive and there is the exciting possibility of maybe selling a jillion copies. But how likely is that to happen? The big sales numbers you read about are for titles offered at really cheap prices or even for free. Various things do “go viral” on the web, but is going viral a business plan? And here is the really tricky bit: it is still true that most eBook sales are driven by print sales. It is still very hard to break out an eBook if you don’t have a strong success with a print edition first.

    Curt Matthews, CEO, IPG

    • First things first, I reckon.

      Funny, I always thought that retail discounts also applied to the amount that you order. We see it all the time, even us lay people–buy in bulk and save money! As it happens, I do have some little bit of management education under my belt, and I do know that clients who make very large orders are often given a desirable discount because you want to keep getting those large orders and because you want to make sure you sell as much of your product as possible. I also know that the wholesale price often sits around 50%, with the distributor price being a bit higher to cover the distributor costs, but still low enough that the reseller can sell the items to make a profit. Now, I don’t necessarily agree with Amazon consistently selling ebooks “at a loss,” if that is in fact what they were doing (as I look at the numbers above, and I think back, I haven’t seen much evidence that they have been rampantly mis-pricing ebooks), but most of what I’ve heard around the internet has been seemingly misrepresenting the price points at which ebooks would have to be sold in order for them to be profitable.

      I never said indie publishers would get “rich”; you are putting words in my mouth and I feel that using the word “rich” skews my argument considerably. The word I used, and the word I absolutely meant, was “profitable”, which I think I clearly demonstrated can be done at a variety of price points for ebooks. I also only used the ebook-only copy as a financial example of production and cost against a print copy; clearly, many or most books come in both formats at the moment when they’re produced by an actual publisher.

      Another exaggeration that you have slipped into my argument is your use of “jillion.” I didn’t say ebooks would, or even had to, sell a jillion copies. I based my numbers on very reasonable numbers that I took from your post. Selling jillions would not be necessary–I didn’t even go past 30000 copies in the most extreme example I gave. That’s not even “viral.” According to the Guardian, that bloody Fifty Shades of Grey sold 100,000 copies within the first week. That’s a book that’s gone viral.

      Now, look: I know that people are getting a bit touchy on this issue. You and your industry because it’s your livelihood; us on the other end because we expect a certain level of respect when we choose to spend our limited money on your products over someone else’s, and many of us don’t seem to be feeling the respect from the publishing industry in return. Plus, a lot of industry arguments don’t make sense–yeah, I keep hearing that “it’s complicated,” but we’re not idiots. (We do read, do we not?) We are able to reason out quite a few things on our own, and it doesn’t match up to what we’re being told. I would think, with the publishing business always seeming to be under siege, the customers would be the last people that you’d want to alienate. A little bit of genuine concern for what readers and customers have apparently been saying for years, rather than trying to justify the money that we’re paying with every breath, would be refreshing.

    • “IPG says that the paperback will wholesale for 50%–a pretty standard discount in the retail world for selling wholesale–but later complains about the same discount for wholesaling eBooks. What?”
      I sure do complain about giving an e-retailer the same discount as I give to a bricks-and-mortar store. The discount should have something to do with the cost a bookseller must cover. An eBook reseller has nothing like the overhead of a print bookseller. IPG charges its client publishers 20% of the billing on eBook sales made over the IPG website or through the shopping cart we provide publishers for their own websites.

      Here’s where I’m confused.

      From what you say here, I assume that your issue with the 50% wholesale (50% off retail) price for e-books is because e-books *don’t* need to be trucked to stores, or take up space on bookstore shelves, or use up electricity and gas and other utilities needed to maintain that bookshop space as fit for both human and book habitation (print books being persnickety about humidity) – aka “bookseller overhead.” Publishers are more interested in giving steeper discounts to places that have to sink more of their own money into selling the product as an incentive to booksellers to put physical books on their physical shelves.

      I get that bit.

      Here’s where I’m lost: If you are charging a bookseller more for an e-title (by “offering less of a discount on the retail price” or by “charging more for wholesale copies,” whichever you prefer), why do you have to maintain the retail price of the e-book at the same point as the retail price of the print book, unless your goal is to make a larger profit off e-books than it is off print books?

      Example: If Publisher sends Bricks and Mortar Bookstore 500 print books, the bookstore pays 50% of the print books’ cover price (50% off retail). Out of that 50% comes both the recoupment of the publishing/marketing/shipping/etc. costs *and* the publisher’s profit. I’m going to guess, as per this post, that that profit is about 10% of the retail/cover price, so the portion of the money you’re getting from wholesale that goes toward expenses is about 40% of the cover price.

      But when E-Bookstore orders 500 e-books (or 500 legal/technological opportunities to click-sell one file), they pay 80% of the e-book’s cover price (20% off retail). Assuming that your expenses stay steady at 40%, your profit just jumped another 30 percent on top of the 10% profit you’d have made if that e-book were a print book.

      I realize that running a server and maintaining a click-to-buy system cost some money. But, having started my career in the business of publishing and selling identical learning modules electronically or in print form, I also know that running that server and paying the people to process orders and iron out the bugs does not need to equal 30-40 percent of the per-unit cost of the electronic product – and if it does, the company is wasting its resources.

      Does this shed some light on why customers are not amused when e-book prices and print book prices are equal? From where we sit, you’re pretty obviously making more profit on the e-copy, especially when you *admit* to charging retailers more for the e-edition.

      That said, I do see why you wouldn’t be amused at Amazon’s demand for a 50% or steeper discount on *any* titles, whether e- or print.

      • We don’t agree on the discounting thing, but I agree with everything else you’ve said. I think you are awesome. :)

        • Thanks. :)

          By the last bit, I just mean that when one’s profit margin is 10% when the product is sold at 50% off retail, I see why someone running a business might not want to accept a deeper total discount. If production costs can’t be lowered, the increased discount has to come out of profits.

          That said, I think the increased discount *can* come out of profits in the case of e-books, because I suspect e-book profits are higher, and production costs lower, to begin with. I have yet to see a compelling argument that explains why e-book profit margins *need* to be higher than print book profit margins. (“We want to pay our shareholders ALL YOUR MONEY” is not, from my point of view as a consumer, a compelling reason.)

          • Ah, yes. I’m not even sure where the “more than 50% discount” is coming into play, though. Mr. Matthews mentioned it in his reply, but his initial post indicated otherwise:

            “Independent publishers have had to accept the Wholesale Model, which has let us keep only about 50% of the suggested price.”

            I also feel the word discount is a little shaky here, despite having used it myself, as it implies that they would be able to get the “full” price elsewhere–but no retailer would buy the books for retail value, so what he really seems to be talking about, to me, is the wholesale price–which would decrease if the retail price were lowered, perhaps, if Amazon were selling ebooks cheaper? Which you and I have both already established is quite possible to do and maintain a healthy profit margin. I’m a little fuzzy on exactly what was meant, there; but, of course, a wholesaler wants to sell for as much as possible :D I’m sure if a retailer would pay them the full retail price, they’d jump on it!

    • Oh, and incidentally:

      It is still very hard to break out an eBook if you don’t have a strong success with a print edition first.

      …is exactly the opposite of the popular wisdom among emerging writers, who are being encouraged left, right, and center to go the e-book route first, build a following, and then use that momentum to place the book with a publishing house. Is the “popular wisdom” (once again) total crap?

      • This. Thank you, Dani – I was going to bring up this point as well.

        As someone with several friends that have gone the indie/self-published route, WoM referrals are the biggest percentage if their sales. According to the statistics for how well first time (traditionally published) authors sell in their first year, the people I know that have gone the ebook only route have far exceeded those numbers.

        • Reading is really, largely, a word-of-mouth industry, I think. Most readers seem to come by recommendations from other readers, especially since the advent of sites like Goodreads and Shelfari, and even Amazon with its rating and review system. (Also Twitter and FB and social media–it all plays a role.) We bookish people love to chat up others about what we’re reading.

    • I would also like to beg to differ a bit about overhead. Amazon, while it doesn’t run brick and mortar stores, certainly has plenty of overhead in getting ebook sales to climb and climb as they have been doing. Large advertising campaigns constitute overhead; Kindles are also, supposedly, sold at a loss to Amazon in order to stimulate ebook sales. That’s beneficial for them, sure, but also for you, as you move more units. Amazon also has to assume the cost of running a site that can handle enough traffic to move your thousands of units, to store customer purchases on Amazon Cloud, plus maintaining excellent customer service (you might not know this, but that costs money–and also builds loyalty). There’s overhead, indeed, involved in moving and promoting ebooks, and I’d wager that Amazon spends way more in ebook overhead than even a small chain of bricks-and-mortar stores.

  4. I agree with GGG on that last particular point.

    There wouldn’t be such a hullabaloo around the pricing of ebooks if what we’re being told by those who speak on behalf of the industry actually did match up to what we see on paper (proverbially, and ironically).

    Honestly, those who work in the publishing industry should understand that the art – the business – of literature is always, always, always under siege. That’s how it should be. There is no better, more solid way to convey information than in writing. So yeah, there should be a shit ton (that’s a legit number, I checked) of scrutiny surrounding the field. Take it like a man, and know it just comes with the job.

    Also, she has a point in saying that publishers have often lately alienated their target audience. We know when you’re overly attempting to sell something, to justify something. If it needs that much justification, maybe you should rethink what you’re trying SO avidly to justify. Maybe we’ve got a point and we should be heard, too?

  5. I’m not going to lie, I had a hard time reading this post because math tends to be like Greek to me on paper, but from what I gleaned I agree with what you’re saying. And this issue gets even more ridiculous by the moment. I understand you can’t short-sale your books if you expect to make a profit, but you also can’t overprice them or else you won’t sell any because people have limited funds to purchase with. Good layout of the numbers.

    • Thanks! I’m sorry I laid out so much of the mathiness, but I wanted it to be transparent in case someone mathy wanted to rip apart my numbers :D

  6. Saw math problems. Brain went on screensaver. I totally agree with that thing you said about that issue with those people who did that thing you are angry about.

    But srsly, you are awesome for doing all this research. I’m still outside the e-book-sphere myself, preferring the treebooks for now. I spend enough time staring at the computer; any more and my eyes might shrivel up ^_^;

    • “I totally agree with that thing you said about that issue with those people who did that thing you are angry about.”

      This made me giggle :D

      I daresay that I had the same objections to ebooks. I really do find reading on a Kindle so good, though–no glare or light to hurt my eyes. I couldn’t do it on one of those backlit readers at all. (Plus. . . . those tend to have internet, and I’m already a Twitter junkie.)

    • I have a Nook 1st Edition (black and white e-ink) and a Nook Color (basically an Android tablet), and I find that I use the 1st Edition for casual reading. e-ink is far more like reading a page than reading a screen, and the 1st Edition’s leaner feature set is actually kind of a plus, since it means fewer distractions. The Color allows for rotating and zooming, which is nice for tech manuals, PDF’s, or anything that relies on illustrations. Other than that, it’s just another reading app on another backlit screen.

  7. Sorry if I’ve missed this, or if it’s not an issue in America, but do all these numbers take into account VAT as well?

    In the UK at least, treebooks have no VAT on them, but ebooks do – meaning your book selling at ‘£9.99′ is actually selling at £8.33 as far as the publisher is concerned (then minus your wholesale price, costs etc as well). That government-imposed 20% markup on your title does make quite a bit of difference.

    Also, in the sector of the industry I work in, you might be lucky if you sell 2,000-4,000 copies. Add to that, you’ve already paid your author an advance. Royalty is meaningless until you get to the point when you’ve sold enough copies to cover that advance. Say you’ve paid a £30,000 advance to the author (by no means unusual, or on the high side). Your initial print run of 10,000 is going to come nowhere close to breaking even.

    I don’t (/can’t) dispute your maths or your argument, which is all very interesting and quite probably does hold up for the massive publishers or the major titles. I’ve got an ereader myself, and from a consumer side would LOVE to pay less for all the lovely books. But I also want to say, in the country I live in and the area I work in at least, I can understand why the charges are how they are.

    I’d love to see that graph though.

    • Thanks for commenting!

      I don’t think VAT is a thing stateside, to answer your question about that. I’ve only really seen it mentioned for the European markets.

      The interesting thing about my numbers is that they came from IPG–the Independent Publishers Group. If those are the kinds of numbers his/their clients produce, it’s not reflective of the largest publishers at all.

      “Add to that, you’ve already paid your author an advance. Royalty is meaningless until you get to the point when you’ve sold enough copies to cover that advance. Say you’ve paid a £30,000 advance to the author (by no means unusual, or on the high side). Your initial print run of 10,000 is going to come nowhere close to breaking even.”

      Compared to what I’ve read elsewhere, an author advance that large compared to the low number of copies sold does seem unusual; a lot of low- and mid-list authors say not to expect much of an advance at all, certainly not in the 30k pounds range. It doesn’t make sense, to me, to advance an author more than you’d make back? How do you stay in business? I truly don’t understand.

  8. The agency model sucks because writers who create the product make very little money and all publishers have agreed to only pay 17.5% royalties. The wholesale model works BUT the real expenses aren’t editing, marketing, formatting, etc. but rather the office space, building expenses, staff expenses of a publishing house.

    I think that’s what the publishing business (besides the fact that they are used to paper and don’t want to switch to eBooks) is not coming clean on.

  9. Pingback: Should selling ebooks make print books cheaper? | Insatiable Booksluts

  10. I know I’m weeks behind, but I just wanted to say thank you for hammering out all the maths. I’m ashamed to admit that I’m a (student) maths teacher and even I zoned out during your explanations of how you got the figures BUT it all seemed very logical and damn it yes they should be able to be profitable at a lower price point.

    Living in Australia I feel doubly disadvantaged, as not only do publishers try to make higher profits from ebooks, but Amazon (or at least the publishers) likes to price gouge us based on the fact that we live outside the US. I’ve seen some book prices more than doubled here on Kindle, compared to what US residents pay.

    I hope that one day soon they settle on some kind of reasonable pricing model, that is equitable for everyone.

    • I’ve heard about the outrageous ebook pricing in Australia. I think it blows. At the prices they charge, it should come with a free kangaroo or something.

      • Lulz, free kangaroo. Believe me, no one would want that.
        There’s a bit of a movement going on in regards to boycotting the worst publishing offenders. I can’t remember which off the top of my head, but I came across a Random House title the other day that was $23.19 in Aus and only $12.99 to US customers. How do they justify that?

    • Also, so sorry about the lack of clear paragraphs. Am playing with a few new plugins and I enabled the wrong option, apparently.

  11. Pingback: Reading Rage Tuesday: Ebooks vs. Paper Books | Insatiable Booksluts

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