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Living Room / Re: Let's face it: the ebook market is FUBAR, thanks to pure greed
« Last post by 40hz on February 05, 2011, 11:34 AM »To the best of my knowledge, printing and distributing a book is a minor part of overall publishing costs. I think a standard hardback print run for a mainstream novel costs less than £1 per book. So if publishing companies are looking to maintain the same level of profits on ebooks that they obtain on print books, you're not going to see a huge reduction in prices.-johnk (February 04, 2011, 05:55 PM)
Based on my own personal experience in getting technical books printed and distributed, I doubt a finished "standard" hardcover book could be produced at a cost of £1 per copy regardless of the size of the production run.
Back in the 80s I was responsible for annually getting over 100K sets of technical documentation printed, bound and distributed for a major corporation. The average "doc set" consisted of two to three (paperbound oversized-trade format) books averaging 300-500 pages each. Even with "normal" industry runs of 20,000 copies the average delivered cost of each book hovered in the $7+ range despite using every trick in the book ("slow time" press runs, aggregating paper purchases for multiple titles, etc.) to keep the costs down. And this was back around 1988, so boost it $1-2 to account for inflation and paper cost increases since then
And while manufacturing may only account for a portion of the cost, it's not an insignificant part of the expense to produce a book. Add in transportation and shipping, warehousing, returns for unsold and damaged copies, etc. and the fully absorbed manufacturing costs climb even higher.
A general rule of thumb for manufacturing is that sales prices need to be set somewhere in the range of 3X to 5X the total manufacturing cost to maintain profitability. Volume runs can help get unit costs down, but there's a limit to how much savings volume alone can provide. Especially when factored to account for risk (unsold, damaged, transportation cost increases, etc.) which increases more than proportionally with larger production runs.
The way it usually works is the publisher sells to a book distributor for roughly 50% off the cover price. The distributor sells to retail channels at 20-30% off cover depending on the title and quantity.
So lets run some very round quick & dirty numbers:
Publisher's total manufactured cost = $5.
To be profitable, they'll need to sell it for $15-20 per copy.
Based on the going market, similiar titles retail for $28-35.
Publisher sets the initial cover price at $30 (actually $29.95 for marketing reasons but lets use whole numbers)
The distributor purchases from the publisher @ $15/copy (with 10% discount applied to unsold copies after 2 months, and full return allowed after 6 months.)
The retailer purchases from the distributor at 25% off cover. So $30 less 25% = $22.50
Here's the breakout (under absolute ideal circumstances):
Mfg's Cost $ 5.00
Mfg's Markup 10.00
Distributor Cost $15.00
Distrubutor Markup 7.50
Retailer's Cost $22.50
Retailer's Markup 7.50
Sell Price $30.00
Note: take the above example for what it's worth. In actual practice it's much more complicated than that. But at least it will give you some idea of what's driving physical book prices.
Not that ducky a gross profit margin for the publisher. Especially once discounts get taken and the returns start coming back. I don't know what it is today, but back when I was involved with this stuff, a title that earned back total cost + 15% was considered a wildly successful title. Most titles were lucky to break even or make a few percent. Subtract out all the titles that lost money, and the bottom line for a very successful publisher used to be somewhere around 2-3% of total revenues.
Truth is you can make better money selling books than making books to sell. And with less risk since all distribution copies, and virtually all retail copies, are purchased with the option to return for refund.
Any wonder product quality has deteriorated, and so much of the manufacturing now gets done in places where labor is dirt cheap?
One good indicator of the publisher's cost is to check out the remainder tables. The publishers usually agree to sell at or below cost just to avoid getting books returned to them for "pulping." So all those $28 books that you see selling for $8.95 at Borders or Barnes & Noble? Take 30% off that closeout price and you have a pretty good idea of what it actually cost to print them.
(yummy!) twice a day, combined with very little exercise, and you'll soon have one too! Just ask my nephew. (Who is reading this and is not amused.) 
