Tuesday, March 02, 2010

E-Book Profits

When it comes to e-books, how much do publishers make? How much do authors make? What is the profit distribution? Not always an easy question to answer, but the New York Times has tackled it.

If you said publishers save money by not having to print and distribute paper books, you’d be right. But you might be wrong at how much they save. There are still expenses like marketing and royalties.

Here’s my summary of what the New York Times figured for the typical hardcover at $26
Bookseller pays publisher: $13
Publisher pays --
Printing: $3.25 - $4.25
Cover design, typesetting, copy-editing: $.80
Marketing: $1.00
Author: $3.90 or more for a best-selling author
Publisher’s take to pay overhead, cover art, office space, utilities & profits: $4.05

Now, let’s see what the New York Times calculated for an e-book, based on an Apple agreement where the publisher sets the consumer price and the retailer acts as agent, earning a 30% commission on each sale. In this case, the e-book is priced at $12.99.
Publisher takes in $9.09.
Publisher pays:
Conversion of text to digital, typesetting, copy-editing: $.78
Publisher is left with $4.56 - $5.54 to pay overhead and write off unearned advances

The article didn’t list what the author gets for an e-book. It did give a reason why publishers are hoping the price of e-books doesn’t drop lower:
As more consumers buy electronic readers and become comfortable with reading digitally, if the e-books are priced much lower than the print editions, no one but the aficionados and collectors will want to buy paper books.
Another nugget from the article is:
In fact, the industry is based on the understanding that as much as 70 percent of the books published will make little or no money at all for the publisher once costs are paid.
This is just a little from the full two page article. Before you zip off to read the full post, what do you think?
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  1. Many institutions limit access to their online information. Making this information available will be an asset to all.

  2. I can see why publishers would like e-books. I've often wondered how the cost was broken down. A lot of people don't realize that the author doesn't get the full price from a book.

  3. That's a pretty convenient set of figures (no doubt submitted by a publisher to the NYT, or generously advised by one) to show that publishers aren't making crazy profits with the Apple deal, and to dissuade against argument for a $9.99 price point.

    Curiously, under the Amazon deal the publishers were getting the hardback price and Amazon was swallowing the loss to discount the retail price for the e-book to $9.99. So, by switching to Apple's agency model, the publishers have fought to reduce the amount of profit they make on each sale - but must be hoping that long term they can buoy up prices until they're, presumably, able to exploit e-book sales directly.

  4. The publishing industry is way too complicated!

    Steamy Darcy

  5. There's obviously been much hoopla lately over digital books, but it may yet prove to be the case that they are not all they're cracked up to be.

    Besides overhead and markup and all the number crunching, I still see very few people using them. But on a crowded subway during rush hour, I still see many, many peopl with an actual book in their hand.

  6. There is still something to be said for turning the corner down on the page you are reading and jamming the paperback into your purse...I haven't read the article yet, but that said, I think we are in the "growth pain" mode. Before we know it, we'll only be able to buy books on line and prices will reflect that, going up and up. It's like cable TV, when first introduced, prices were low, but now that most TV watchers depend on some kind of cable, prices are much higher. Oh, and have you tried to buy a song on I-tunes lately? Yes, it's still dirt cheap, but hit songs are double the cost of what they were a year ago.

  7. If the e-prices drop much further, how is it economically feasible for a publisher to continue on that route? I can't see the publishers wanting to continue with them.

  8. I love e-books, more than I thought I would.

    I'm interested to see the entire article, thanks for the heads up. It would be nice if this was a financial advantage for the Author in the end.

  9. In 1999, when my first ebooks were published on CDs, the cost was $29.99. Now prices have been reduced to $5.99-$6.99 for Kindle and Fictionwise multi-format, and 40% lower for short periods to clear out stock. The lower prices seem to shout to potential buyers, "These books are second rate." Having served as a judge in the Eppie competitions, I know that isn't true.

  10. This is the period when something new is in great flux. Prices change, formats are not fixed, competition is heating up and the truth is getting lost in the ruckus. About all of us with little control can do is try to stay abreast of what those in control are doing.

  11. I have accepted the fact that I will never get rich from writing. I just hope my publisher makes enough off me to keep publishing my books. But, I see why so many publishers are struggling these days.

  12. Jane, most writers say they write for the love of writing, not for the money. Those are the ones who keep at it and don't give up.

  13. I think authors who are not best-sellers are in trouble. Thank goodness I didn't get into this for the money. You are so right in what you said to Jane.

  14. Hi Ginger,

    You might find the launch notice below of interest; an effort of multi-published authors (yours truly among them)to take things into their own hands:

    Launch Notice

    We proudly announce the launch of www.AWritersWork.com, a new e-book publisher owned and operated by multi-published authors.

    A Writer's Work came about under the direction of Pat McLaughlin (Patricia McLinn) when a number of novelists realized that a group of authors could reach a formidable audience if they banded together to offer old favorites and new discoveries directly to readers.

    The authors at www.AWritersWork.com believe their work will never be done as long as there are readers who love a good story. For more information, please visit www.AWritersWork.com or contact Pat McLaughlin at info@awriterswork.com. Participating authors may be contacted via the links to their web sites.

  15. Miss Footloose, thank you for letting us know about this effort. I'd be happy to have you post about the new launch here on Straight From Hel, if you're interested.

  16. Between distributors and retail outlets, publisher doesn't keep much, does he?

  17. Interesting information, as always. The times and the technology are definitely a'changin'. Thanks for keeping us informed.
    I'm with Liza, still with paper.

  18. I don't have an e-reader either. But I can foresee a day when I will.

  19. I would own an ereader if I could afford it. I would like to make money as an author and I'm worried about what will happen to those of us who aren't best sellers. I'll certainly be keeping my day job.
    Will technology send publishing the way of the post office?

  20. I don't own an ereader yet - but probably will in a few years. In Canada, we're a bit behind the trend. I finally saw my first ereader just last week :)

  21. I've been curious about this for a while now. Thanks Helen!

  22. I was curious what the break down was, thanks for posting this.


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