tag:blogger.com,1999:blog-4316886317870996102.post7671556939192662965..comments2023-04-06T11:51:16.564-04:00Comments on Dr. Syntax: Why Are Publishers Telling Us E-Books Are So Profitable? Another Book-Business FallacyPeter Ginnahttp://www.blogger.com/profile/00678504299313188170noreply@blogger.comBlogger22125tag:blogger.com,1999:blog-4316886317870996102.post-34083435691332915762015-07-28T10:44:20.917-04:002015-07-28T10:44:20.917-04:00I agree completely that all the costs of a multi-p...I agree completely that all the costs of a multi-platform title should be allocated across the board. This topic reminds me of how the software publisher where I worked in the 90s would argue among business units and finance on how to allocate the considerable Web infrastructure expenses. At first the direct marketing people thought the Web fixed costs were free so their P&Ls were biased against the print catalogs that in fact drove the bulk of the business through the Web site. But the costs of running a Web site are huge and need to be fully burdened upon the people using it to make sales and receive their bonuses. Integrated marketing requires true cost allocations so everyone involved understands the real costs.Caleb Masonhttp://www.publerati.comnoreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-44316233998413438052015-01-11T14:46:24.777-05:002015-01-11T14:46:24.777-05:00@Lori, you're quite right that to publish e-bo...@Lori, you're quite right that to publish e-books well involves costs. I have not said otherwise. They key word in what you quoted above is "INCREMENTAL." The costs of file creation (formatting, ISBN, etc.) you mention are all part of what I refer to as plant costs above--they are a lump sum regardless of how many copies you sell. Once those costs have been paid, each *additional* copy sold costs virtually zero--in contrast to print, where each copy has costs for printing, warehousing, shipping, and so on. Note that I spoke of the cost advantage *when it comes to manufacturing and distribution.* <br /><br />My point in this post is that because in houses like the Big 5, a lot of the plant costs that DO go with e-books are shared with the print edition, publishers often tend to overlook them and to see e-books as more profitable than they'd be if they were creating e-originals.Peter Ginnahttps://www.blogger.com/profile/00678504299313188170noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-2339663015576522932015-01-11T02:30:41.719-05:002015-01-11T02:30:41.719-05:00I'm afraid this part of the article is simply ...I'm afraid this part of the article is simply not true: "It is true that e-books have an enormous economic advantage over print when it comes to manufacturing and distribution, because the incremental unit cost of creating & delivering an e-book is virtually nil."<br />===<br />Creating and delivering an e-book costs plenty. Someone still has to pay for editing, copyediting, proofing, cover creation, ISBN, formatting, meta-data entry, debugging, and all the "paperwork" online in order to get the e-book up successfully on multiple sites/platforms.<br /><br />I do believe that print publishing DOES partially underwrite those costs above - but the cost to make an e-book is certainly not "nil." <br /><br />Many of the big publishers are doing a horrendous job on their e-book formatting. 50% of the e-books I've bought from the Big 5, for example, are so shabbily assembled (bad paragraphing, weird characters inserted, ridiculous spacing, etc.) that perhaps they DO think the cost should be nil. Clearly, they are not devoting staff time and attention to proper creation of Mobi and ePub formats more are they debugging and making corrections. Lori L. Lakehttp://www.lorillake.comnoreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-25728522860355119132014-08-12T22:12:40.670-04:002014-08-12T22:12:40.670-04:00@Bob, I can't speak for Mike Shatzkin, but wha...@Bob, I can't speak for Mike Shatzkin, but what might be viable for you is not necessarily viable for a large publisher whose authors expect to see their books in a physical form in bookstores. There's no question that there are problems with the business model of "legacy publishers" nor that many authors and small publishers can make a profit selling e-books only. My post does not say otherwise. My point is that IF you publish print, it's highly misleading to talk about "e-book margins" in isolation. Peter Ginnahttps://www.blogger.com/profile/00678504299313188170noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-43522190163784953062014-08-12T16:48:10.264-04:002014-08-12T16:48:10.264-04:00Simple solution-- don't do print for all title...Simple solution-- don't do print for all titles. When I commented on Mike Shatzkin's blog that we didn't need to sell print at Cool Gus to be in business he repeatedly told me I was wrong. That a publisher absolutely must have print to be successful. I would argue the opposite in many cases. We have POD available if someone really wants to order print, but we don't do print runs, we don't do shipping, returns, yada yada. And we do quite well.<br /><br />I would submit that having offices in New York City must account for some overhead. And a business model that is decades out of date might hurt a smidge. Frankly, publishers have done quite well the last couple of years on their eBook margin. To expect it to last the next several years is counting on those multibook contracts with big name authors.Bobhttps://www.blogger.com/profile/17030209378371995304noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-27863928526018651442014-06-13T11:20:15.470-04:002014-06-13T11:20:15.470-04:00@Martyn, i'm not sure I entirely follow your p...@Martyn, i'm not sure I entirely follow your point about the physical supply chain, but I agree that digital technology and platforms such as smartphones might allow the creation of different products. We know there's a robust market for fiction on cellphones in Japan, for example. My focus here, though, was specifically on the putative profitability of e-books that are published alongside print counterparts. Peter Ginnahttps://www.blogger.com/profile/00678504299313188170noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-52198193109877489302014-06-13T06:14:32.891-04:002014-06-13T06:14:32.891-04:00the logic is right but the answer may not be so si...the logic is right but the answer may not be so simple. We have simply poured the physical content into the digital container and presumed that is the answer and job done. This itself is a very questionable route in that it creates a direct competitive product that will imbalance the physical supply chain and economics over time whilst reducing revenues which are governed by a small group of players with different economics. The answer would be to create a related but different product which encourages reading , introduces physical content and authors, may be a subsidiary right etc IT may be about enhancing content but given the rise of the smartphone as the device solution a more radical rethink of content may work equally well.Martyn Danielshttps://www.blogger.com/profile/02134633193540004531noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-29905089224455034852014-06-12T22:01:45.413-04:002014-06-12T22:01:45.413-04:00@C.W., Thanks for your further comment, and thank ...@C.W., Thanks for your further comment, and thank you for posting under your own name. Based on my own experience, I doubt any publisher is going to tag you an "agitator" for raising honest and understandable questions about your royalties. I have long said that publishers' royalty reporting is needlessly confusing for authors (and everybody). I can tell you that if you are earning out your advances you're doing better than a lot of authors. <br /><br />@Sandy, thanks for the comment. I'm glad to hear the post makes sense to someone who knows the business well. Peter Ginnahttps://www.blogger.com/profile/00678504299313188170noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-31191467162913406762014-06-12T19:15:27.554-04:002014-06-12T19:15:27.554-04:00Thank you, thank you, thank you.Thank you, thank you, thank you.REShttps://www.blogger.com/profile/14560876993855647256noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-8207564353218911192014-06-12T16:37:36.932-04:002014-06-12T16:37:36.932-04:00I've been making this argument for a long time...I've been making this argument for a long time now, most recently in personal correspondence with Evan Hughes, but it's a hard assumption to dislodge from the minds of people who haven;t actually worked at a publishing house.Sandy Thatchernoreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-77039890342201759402014-06-10T12:28:39.749-04:002014-06-10T12:28:39.749-04:00Thanks for your reply. It clarifies some questions...Thanks for your reply. It clarifies some questions for me. I'll readily admit that I'm more than a bit confused at how these numbers shake out in the long term - and I'm an author who earns out his advances every time. And I was just thinking, is it a sign of the times that I've been wary of posting under my name for fear of being tagged as an agitator, thereby pissing me off my respective Big 5 publishers? (Three to date). Guess I'll take the chance now.<br /><br />Part of the confusion for authors like me is that we really do not have a complete understanding of these "allocated costs" and most of us - barring the rare 1% of uber-rich authors - who earn mid-five to low-six-figure advances tend to veer to the side of "They're making a killing on e-sales and we're getting ripped off." Better transparency in this situation would really help; royalty statements can be like rubric cubes and no one in publishing likes to talk about profit or author earnings in a very coherent way. It becomes difficult to ascertain who is friend or foe: Amazon, which pays every month and supports indie platforms (I haven't used them, yet, but several of my friends are now hybrid authors, with both traditional and indie titles) or the houses we work with?<br /><br />Most authors with traditional contracts who are doing well, myself included, don't want to see publishing as we now know it vanish into the Amazon vortex. I welcome the variety of options available and support authors empowering themselves, but I like my editors, too, my teams at the houses that work hard to see my books to the market; I like bookstores and want to see them thrive.<br /><br />But the nagging e-book profit question does hang heavy over the author community and fosters a sense of mistrust. Rash judgments are made and publishers blamed for sticking it to us, when in fact discussions like these can indeed assist authors to better understand the mechanics around publishing and find common ground when it comes to earnings.C.W. Gortnerhttps://www.blogger.com/profile/11881402758065602605noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-51058975828498193922014-06-10T11:55:40.139-04:002014-06-10T11:55:40.139-04:00Anonymous #1, you’re misunderstanding the numbers ...Anonymous #1, you’re misunderstanding the numbers (which, I grant you, can be less than intuitive to follow). The hardcover’s share of the investment load does not depend on what percentage of sales are hardcovers. It depends on how the house allocates the lump-sum costs I mentioned, such as copyediting, jacket design, typesetting, marketing, and so on—and also any unearned advance. I’m sure how those allocations are done may vary from house to house, but at some houses I know most of those costs are assigned to the print edition. So even if the hardcover and e-book each represent 50 percent of sales, the e-book doesn’t have to recoup as much investment to be profitable—regardless of what the royalty rates are.<br /><br />As for the royalty rates, keep in mind that the print royalty is computed on the list price, not the amount received per copy as it is for e-books. And that amount is typically 50% or less of list. So when the hardcover royalty is 15 percent, as it usually is after 5000 copies, the author is getting 30 percent or more of what the publisher collects--*better* than the e-book—while the publisher is applying all those costs against it. Again, one way of looking at this is that the p-book is subsidizing the e-book. Especially if, as I argue above, that a vibrant print book marketplace is part of what helps sell e-books. <br /><br />There is a perfectly valid argument, based on unit costs alone, that authors should receive higher royalties on e-books. But by the same logic, publishers could argue they should receive significantly *lower* royalties on print. No publisher has wanted to go there, understandably; they have been happy that the overall profits from the print/e-book combination has sustained their business model. <br /><br />Anonymous #2, I don’t know why you would conclude that “an author can never earn out while his publisher makes a very serious profit.” In most trade publishing arrangements, unearned advances are the biggest drag on profitability, so the publisher can’t make really big profits *unless* the author earns out his advance. In your example, by my reckoning the author would earn out his advance on a typical royalty schedule and a typical hardcover price of $25. <br /><br />To both Anonymouses (Anonymice?), I would say that “record profits” for publishing houses involve clearing a pretty low bar. Ten percent is considered a good profit margin in trade publishing, so we’re not talking about Google or Apple-type margins here, but of eking out a few more percentage points. And in the last few years those profits have been whittled from overall sales numbers that have been declining. When I got into the business a joke I often heard was, “How do you make a small fortune in book publishing? Start with a large one.” It’s still true, I’m afraid. <br />Peter Ginnahttps://www.blogger.com/profile/00678504299313188170noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-92115711640838500012014-06-10T03:15:31.498-04:002014-06-10T03:15:31.498-04:00This is all irrelevant anyway - the point Shatzkin...This is all irrelevant anyway - the point Shatzkin et all are making is publishers have been reporting record profits because they keep such a high % of every ebook they sell. An author can never earn out while his publisher makes a very serious profit on that authors books. If an author gets a 100K advance and sells 20K hardcovers and 20K ebooks he will not earn out but the publisher will take in over 400K. That's fair?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-36633444236192899712014-06-09T23:08:02.883-04:002014-06-09T23:08:02.883-04:00You say, "And it leads to fuzzy thinking abou...You say, "And it leads to fuzzy thinking about the business if we look at the P&L spreadsheet for a given book and say “wow, the e-book is really profitable” when the poor hardcover is carrying 80 or 90 percent of the investment load." I'm not sure I understand this. You cite that the hardcover could be subsidizing the e-book but in many cases, the hardcover is not carrying that 80-90% of the load. Many authors will tell you that their e-sales vs. print on a new release are close to 50 / 50 or even higher for e in some cases, yet they're not making the same royalty on e as on a print copy. Hence, it takes longer to earn out the advance and in some instances, the e-version can cannibalize print sales because it's priced less and for many readers, is more accessible.<br /><br />I'm traditionally published and always want to give publishers the benefit of the doubt; I also firmly support the printed book. I don't even read e myself. But it seems to me, 25% royalty of net on e is rather low, compared to what the house earns. Authors are struggling and advances are lowering every year; yet publishers post record profits in their quarterly statement. I'm confused about the logic here. Before e, publishers made do with a hardcover followed by trade, or trade alone in non-hc deals. E sales are a boon, as we lose bookstores and display space, but are not authors the last beneficiaries of the profit at the end of the day in this model? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-18759637627109798172014-06-08T16:50:01.521-04:002014-06-08T16:50:01.521-04:00I meant the way the growth of e-books has slowed n...I meant the way the growth of e-books has slowed not <br />"have"....and of screen time, <br />not "if."brucejquillernoreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-29072527614354123442014-06-08T16:34:13.198-04:002014-06-08T16:34:13.198-04:00Excellent points, this piece offers a much-needed ...Excellent points, this piece offers a much-needed corrective to the simple-minded blather about e-books so often cluttering the airwaves and newspapers. People who have been talking about the inevitability of print books disappearing in favor of digital texts must be shocked at the way the growth of e-books have suddenly slowed down. No one knows what the future holds. There may even come a time when people aren't smacking into each other in public places as they stare at their phones. There are powerful economic interests pushing us towards ever increasing amounts if screen time.brucejquillernoreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-48068127849417967122014-06-08T15:40:18.872-04:002014-06-08T15:40:18.872-04:00@Ken, thanks--I don't disagree that we are goi...@Ken, thanks--I don't disagree that we are going to see plenty more disruption. <br /><br />@G. Genova, you raise a good point that I didn't even get into. There's a very substantial amount of overhead that goes into creating e-books--even if the cost of any additional copy is very low, all the expenses you mention, and more, must be absorbed by publishers. Some of it can be outsourced, but it still has to be paid for somehow.Peter Ginnahttps://www.blogger.com/profile/00678504299313188170noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-46455530549677304612014-06-08T15:34:10.457-04:002014-06-08T15:34:10.457-04:00There are hidden costs in maintaining e-anything f...There are hidden costs in maintaining e-anything for sale and delivering it upon receipt of payment received online. E storage, e backup, e searchable database, e IT and web developers, and such. I've been trying to create and e publisher for sheet music and it could potentially be a lot cheaper than printing and shipping, but so far the technical costs involved and the continual upgrading of such e services have me wondering. G. Genovahttps://www.blogger.com/profile/13384282153693432903noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-52354922351902073462014-06-08T14:50:27.045-04:002014-06-08T14:50:27.045-04:00Nice pitch to even out the accounting, but even if...Nice pitch to even out the accounting, but even if E-books picked up their full freight, the "disruption" is still overwhelming the book publishing industry. I haven't been able to adjust to e-books other than the convenience of poolside and travel reading. The population is not going to switch to E-books quickly but the change is inexorable. The publishing industry is not in its death throes, but radical restructuring has to occur and more realistic accounting is the first step toward an effective survival strategy. Thank you for pointing out the need for realism in coping with this major restructuring(if from this side) or,imposition(if from without).Anonymoushttps://www.blogger.com/profile/08931660498352188888noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-39515742775578877542014-06-08T13:30:41.778-04:002014-06-08T13:30:41.778-04:00Thanks for the kind comments!Thanks for the kind comments!Peter Ginnahttps://www.blogger.com/profile/00678504299313188170noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-89162671917629519002014-06-08T08:58:44.928-04:002014-06-08T08:58:44.928-04:00Thank you for this. Such a clear, powerful well wr...Thank you for this. Such a clear, powerful well written analysis. Ned Stuckey-Frenchhttps://www.blogger.com/profile/05471581590916113667noreply@blogger.comtag:blogger.com,1999:blog-4316886317870996102.post-90337086931443303672014-06-07T09:13:29.639-04:002014-06-07T09:13:29.639-04:00Fascinating stuff, Peter, thank you. Well... very ...Fascinating stuff, Peter, thank you. Well... very interesting anyway!Julia Johnstonhttp://www.juliajohnston.co.uknoreply@blogger.com