Does it really cost less to produce an ebook than a paper book?

That's what Mokoto Rich asked in yesterday's NYTimes. From the article:

On a typical hardcover, the publisher sets a suggested retail price. Let’s say it is $26. The bookseller will generally pay the publisher $13. 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.

...Without accounting for such write-offs, the publisher is left with $4.05, out of which it must pay overhead for editors, cover art designers, office space and electricity before taking a profit.

Now let’s look at an e-book. Under the agreements with Apple, the publishers will set the consumer price and the retailer will act as an agent, earning a 30 percent commission on each sale. So on a $12.99 e-book, the publisher takes in $9.09. Out of that gross revenue, the publisher pays about 50 cents to convert the text to a digital file, typeset it in digital form and copy-edit it. Marketing is about 78 cents.

The author’s royalty — a subject of fierce debate between literary agents and publishing executives — is calculated among some of the large trade publishers as 25 percent of the gross revenue, while others are calculating it off the consumer price. So on a $12.99 e-book, the royalty could be anywhere from $2.27 to $3.25.

All that leaves the publisher with something ranging from $4.56 to $5.54, before paying overhead costs or writing off unearned advances.

At a glance, it appears the e-book is more profitable. But publishers point out that e-books still represent a small sliver of total sales, from 3 to 5 percent. If e-book sales start to replace some hardcover sales, the publishers say, they will still have many of the fixed costs associated with print editions, like warehouse space, but they will be spread among fewer print copies.

There is a problem with his math. He should have used the numbers for paperback books, not cloth bound. If a publisher can produce a paperback with a retail of $8, then they can produce an ebook for for the same price. See, that's what customers are thinking, and that is why there is a disconnect between publishers and consumers.

About Nate Hoffelder (11471 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader: "I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

1 Comment on Does it really cost less to produce an ebook than a paper book?

  1. There are a couple of things I’m unhappy with in that analysis. I know a little about publishing having audited some book publishers in my time, so thought I’d put finger to keyboard.

    The assumption that Apple is the supplier is odd- certainly in the UK we have a lot of other vendors. Waterstones online presence sells ebooks for a lot of money- Dan Brown’s latest is £13.58 in ebook form but only £9.78 in hardback for example. I assume that Apple has been used as most of the printed newspaper world see the iPad as a saviour?

    A fixed cost per unit of 50 cents to convert the text to a digital file, typeset it in digital form and copy-edit it seems excessive unless you are expecting very low volumes, which if you’re charging more than the cost of the hardback is fair enough I suppose.

    In fact looking at some costings I’ve dug out, on the first run of 5,000 copies of a new title the cost of printing, binding and shipping is roughly 65% of the total fixed costs. The remaining 35% relates to editing, cover art etc. So even before royalties, advances to authors and storage are factored in, its apparent the largest single cost is the printing.

    This article gives you an idea of how little top 20 NYT bestsellers can actually earn in terms of royalties, so the money must be going somewhere mustn’t it? It works out that Carrie Vaughn made something like 62 cents per copy of Twilight Fall sold. I find that depressing.

    In the UK ebooks aren’t covered by the VAT exemption like paper books are but that only accounts for a small amount of the difference in price.

    At the end of the day, the consumer is being hammered for a new tech, much like we’ve always been. The excuses this time round are a little different in specifics but generally the same as ever.

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