Whatever you may feel about reading books on a screen, you had better get used to the prospect that the e-book is not going away. Print books will not disappear either, but the big players in the market have made sizeable enough investments in electronic technology to push it well past the turning point. Yet even if they hadn’t made the commitment, simple economics make it easy to convince publishers that a large part of the future is digital.
Print has several handicaps. The first is the cost of the book itself. Books cost money, and the inventory of books that publishers need to be taken seriously by bookstores may cost a lot of money. Second, books have to be shipped, usually at the expense of the publisher. Third, publishers need to pay discounts and possibly commissions, often to more than one middleman. Finally, publishers have to wait to be paid for sales, sometimes as long as 90 days or more. It may be discouraging, but a publisher of print books may not get paid much more that 25% of the cover price. From that, the publisher needs to pay the cost of goods, royalties, and overhead. And then come the returns--sometimes as high as 40% or so of sales--and the various chargebacks associated with them.
Electronic books have few of these handicaps. They have no printing costs. They don’t have to be shipped. There is no overhead for the e-book. Sales are automated, and payment is immediate. There are no returns, and even if there were, returns cost virtually nothing to process. Publishers do pay commissions and royalties, but even then, the publisher can reduce the price of the book significantly and still come out ahead.
Consider the imaginary fifteen-dollar book, Martha’s Pickle Juice. It costs Bob the publisher $2.00 each to print the book, and he prints a thousand copies or so at a time. His distributor charges Bob 25% of net for handling the book, and Bob pays Martha a royalty equal to 12.5% of net receipts. Bob also produces an e-book version of Martha’s Pickle Juice, which he sells for $10.00 on ebookemporium.com and pays a royalty of 50%. The accounting may surprise you.
Print book
Printing cost $2.00
Sales price $15.00
Less 40% wholesale discount ($6.00)
Net from sale $9.00
Less distributor commission ($2.50)
Net after commission $6.50
Less 10% returns ($0.65)
Net after return $5.95
Less royalty ($.75)
Net after royalty $5.20
Less cost of goods sold ($2.00)
Less shipping and overhead ($1.10)
Net to publisher $2.10
Net percentage of cover price 14%
E-book
Printing cost $0.00
Sales price $10.00
Less 70% wholesale discount ($7.00)
Net from sale $3.00
Less distributor commission ($0.00)
Net after commission $3.00
Less 10% returns $0.00
Net after return $3.00
Less royalty ($1.50)
Net after royalty $1.50
Less cost of goods sold ($0.00
Less shipping and overhead ($0.10)
Net to publisher $1.40
Net percentage of cover price 14%
These numbers do oversimplify, but they are not unreasonable. You get the general picture: Bob the publisher pockets the same 14% of the cover price for both the print and electronic books. Bob’s cash outlay for the printed book is considerable, while for the electronic book, it is negligible. Meanwhile, since Bob used the existing print book files to create the e-book, his investment in the electronic edition is negligible, and the return on his investment is astronomical.
Numbers don’t tell the whole story, except occasionally to bean counters. Bob still needs to sell Martha’s book to readers who continue to prefer print books over electronic books by a wide margin. Reading habits are still on the side of the traditional book, as are most of the marketing and publicity avenues available to publishers. But even that is changing. According to socialnomics.net, Kindle books account for more than a third of all Amazon book sales. Add in book sales for other readers and for downloaded books in general and it is pretty clear that the economic incentives to produce e-books are pretty compelling. As the population gets younger, resistance to reading on a screen will diminish. Publishers and booksellers would be crazy to ignore e-books, and they are not going to.
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