Curiosities

Economics of the E-Book

By posted at 11:48 am on September 29, 2010 4

The Wall Street Journal reports how literary authors are feeling the pinch in the age of e-books: “The upshot: From an e-book sale, an author makes a little more than half what he or she makes from a hardcover sale.”

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4 Responses to “Economics of the E-Book”

  1. Emily St. John Mandel
    at 11:45 pm on September 29, 2010

    Excerpt: “The new economics of the e-book make the author’s quandary painfully clear: A new $28 hardcover book returns half, or $14, to the publisher, and 15%, or $4.20, to the author. Under many e-book deals currently, a digital book sells for $12.99, returning 70%, or $9.09, to the publisher and typically 25% of that, or $2.27, to the author.”

    Painful, yes, but there’s a big part of the equation missing here. Paperbacks generally sell for about $14.95, and a typical royalty rate is around 7.5%. 7.5% of $14.95 works out to a little more than a dollar a book. So if people who used to buy hardcovers are now buying ebooks, then yes, it’s financially disastrous for authors who are barely getting by as it is.

    But if people who used to buy paperbacks are now buying ebooks, then authors come out ahead. Bottom line, I think it’s too soon to tell whether authors will be adversely financially affected by the rise of digital books.

  2. JS
    at 8:29 am on September 30, 2010

    Maybe I don’t understand the economics of the publishing industry but it seems to me that authors should come out ahead for sales on e-books regardless of whether you’re comparing them to hard or soft covers. E-books have to cost much, much less to “publish” then any form of the written word in physical print. Now, I realize that there is probably more cost involved in getting e-books out there than meets the eye, but still, the publishers have to be saving a good chunck of money somewhere. Am I wrong? So while it looks like the ratio of pay for publishers & authors is similar for e-books vs. paper or hardcover, what I’d really like to know is how much the publishers are SAVING by publishing e-books and how much of that savings (if any) is getting passed on to the authors?

  3. Emily St. John Mandel
    at 11:16 am on September 30, 2010

    JS — the economics of publishing are a bit mysterious to me too, but I came across this link recently on the Harper Studio blog that I found enlightening:

    http://theharperstudio.com/2009/02/why-e-books-cost-money-to-publish/

    I’ll just paste it below in case anyone doesn’t feel like clicking:

    “…There seems to be a common refrain in many discussions of e-books, the idea that publishers should charge next to nothing for e-books because it doesn’t cost publishers much to produce them. This reflects a lack of understanding of a publisher’s costs. The cost of manufacturing a book is only the final cost in an extensive process. Whether a book is printed on paper and bound or formatted for download as an e-book, publishers still have all the costs leading up to that stage. We still pay for the author advance, the editing, the copyediting, the proofreading, the cover and interior design, the illustrations, the sales kit, the marketing efforts, the publicity, and the staff that needs to coordinate all of the details that make books possible in these stages.

    “The costs are primarily in these previous stages; the difference between physical and electronic production is minimal. In fact, the paper/printing/binding of most books costs about $2.00…so if we were to follow the actual costs in establishing pricing, a $26.00 “physical” book would translate to a $24.00 e-book…and while I agree that e-books should be priced at a greater discount to hardcovers than $2.00, we need to move the conversation beyond the idea that e-books “don’t cost publishers anything to make.”

  4. Lincoln
    at 1:46 am on October 1, 2010

    JS: You are wrong, although its a common misunderstanding. Think of CDs, they only cost a few cents a piece to print plus a little to ship. The roughly 13 dollar cost of a CD was never about the actual physical printing, it was about paying the band, the recording studio fees, artwork fees, etc.

    Same thing with books. It depends on how many books are printed, but I think the physical cost of a major publishing house book is like 2-3 dollars all told. The money goes to marketing, copy editing, cover art, editing, the author, etc. Since e-books are already several dollars cheaper, publishers aren’t saving any money on ebooks really.

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