Traditional publishing is screwy. Book makers set a cover price, say $25. They sell that book at half that to bookstores; which nets publishers $12.50.
Publishers give authors about 15 percent royalty on the cover price, which is $3.75. This leaves the publisher $8.75. From that, all bills must be paid: salaries, lights, printing, shipping, warehousing, marketing.
There is a twist: booksellers are allowed to return unsold merchandise for a refund! Depends on the book, but returns average about 50% or more. Paperbacks are not even physically returned; the cost of shipping not making it worth reselling them.
This means the publisher has to eek a profit out of about $4.38 per book. Most reports say profit is about a buck a book.
That’s “on average” which, regular readers will know, is always a dangerous way of presenting statistics. Much can be hidden in a single-number.
For example, bestsellers won’t be, by definition, returned (the discounting booksellers apply to blockbusters affects publishers only indirectly). Plus, backlists—classics that remain in copyright—are also unreturned.
This means publishers make their money on backlists and bestsellers—however, big-name authors are freer to negotiate bigger royalties. Publishers lose money on many other books.
Electronic books save money three ways: no printing, no shipping, and no returns. Eliminating the first two saves only about two bucks a book. Eliminating returns saves about four bucks—but only for those titles that would be returned.
No money is saved on returns for blockbusters or the backlist. That means we should not expect e-books price points to be much less than the regular price. Say, about $3 to $5 less, which would put hardbacks at $20 to $22.
That’s my calculation: but publishers calculate a $13 e-book cover price. Even if the only e-books are bestsellers and backlist—so that publishers realize the full benefit of no returns—the cover price would only come down to about $18.50.
That must mean that publishers are willing to take a hit on e-books so that they will sell. But: they also do not spend much additional money on marketing, salaries, and so forth, because nearly all e-books are also real books.
That savings—temporarily in place as long as there are real books for each e-book; and because e-books represent only 4% of sales—does make the $13 price point reasonable.
Amazon sells—I should say licenses—them for about $10 for the Kindle reader. Obviously, they do so at a loss. According to the New Yorker, this angers publishers, who are afraid “consumers” (people) will grow used to the $10 price point.
Jeff Bezos doesn’t care. What he would like is to work directly with authors who self-publish. Those authors would (probably) receive a larger royalty, Amazon would see larger margins, publishers would see nothing. (This can work, but then authors lose out on such services as copy-editing: right, readers?)
Now, in almost every review of e-readers, writers whined about “lack of color” on the readers’ screens. There was moderate glee when Barnes and Noble brought out their Nook because it showed thumbnail covers in glorious full color! The text was still black and white.
Everybody also complained about the “lack of a browser.” Sure, the Kindle could display a book—in the sun, in the dark—just as it would appear on paper, but readers couldn’t check Facebook with it!
Enter Steve Jobs and his iPad, who gave reviewers what they wanted: color and a browser. Appearance drove its design: page turns are like a video games. But readability suffers: it has a standard glare-prone, eye-straining screen.
Jobs entered the business of selling books to people who don’t read. The New Yorker quotes: “It doesn’t matter how good or bad the [e-reader] is, the fact is that people don’t read anymore,” Jobs said. “Forty per cent of the people in the U.S. read one book or less last year.”
Apple will, through its already well-established channels, sell—license—e-books for $15. Which is, as my calculator shows, $5 more than Amazon charges. Jobs is counting on impulse buys.
Publishers are delighted. They also (nowadays) don’t care whether anybody reads their books. They want the money.
Given the religious fervor which Apple is able to generate, their e-book model may beat Amazon’s. But that might create a negative feedback where publishers fashion titles that are designed not to be read.
Books with “interactivity” will soon be found. These will be marketed as “educational.” Look for more books-of-the-moment “written” by celebrities, politicians, and other transients.
Also look for a decline in the number of mid-list books: those which usually fail. But they don’t always. The ones that succeed create new bestselling authors, or became entries in the backlist.
In other words, by focusing on the quick profit, publishers could be shooting themselves in the foot.
Update I wrote before I read this quote (one prediction is already coming true):
To thrive, [Grandinetti] believes, publishers have to reimagine the book as multimedia entertainment. David Rosenthal, the publisher of Simon & Schuster, says that his company is racing “to embed audio and video and other value-added features in e-books. It could be an author discussing his book, or a clip from a movie that touches on the book’s topic.” The other major publishers are working on similar projects, experimenting with music, video from news clips, and animation.
Update Thursday morning. Boy, if you want to increase your spam by over 100%, just write a post with the word “iPad” in it. Dozens of link spam overnight.