ATFMB – eBooks

On April 26, 2012, in ATFMB, by Patrick Hester

Welcome to All Things From My Brain.



Recently paid $13 for an eBook.

I know, I know – you’re thinking, “What the Hell?”  Me too.

I did it because I was curious about the author, Elmore Leonard, whose stories about a U.S. Marshall named Raylan Givens, served as inspiration for the FX TV Series, Justified – which I love.  But it took me the better part of a week to buy that book.  My finger kept guiding the mouse to the ‘one click’ button and hovering there before navigating away to view other things on the Internet.  Amazon was kind enough to remind me, when I navigated back to the site, that I had recently viewed ‘Raylan’ by Elmore Leonard.  Helpful little bugger, Amazon.

There was this internal conflict going on inside my head.  You see, eBook pricing is still kinda stupid.  No one has figured it out yet.  If they tell you they have, they’re full of shit.  (Sorry if you think you have it figured out).

The problem is perception and some preconceived notions, plus some facts that always seem to get in the way.  I myself suffer from this, making it difficult for me to pay $13 for an eBook.  I know that publishers don’t want to hear anyone say that.  I can’t help it.  I’ve been conditioned to see eBooks a certain way, and to undervalue them compared to a print book.  Not the writing or the art or any of that, but the process by which they are produced.  The world we live in tells us that digital is cheaper than physical, whether it actually is or not.

Here’s the facts as I understand them:

Fact No 1: Publishing is a business.  Publishers are in the business of publishing in order to make money.  They make money by turning a profit.  Profit is whatever you have left over after you have absorbed all of your costs, overhead, etc.  If they aren’t making money, guess what?  They aren’t going to stay in publishing.  If an author isn’t doing well sales-wise, they will reduce what they are willing to pay that author for their stories.  If the sales just aren’t there, they might drop the author altogether.

Fact No 2: Overhead includes all the costs associated with doing business, including: taxes that you pay, people you employ, the office you rent, electricity for the office, equipment like computers, phones, etc., paper, glue (books, binding), art (covers, maps) — You get the drift?  Someone, somewhere, takes all of these things into account and comes up with a ‘cost’.  Then someone sets a ‘price’.  The difference between the two is ‘profit’.  (Really simplifying this)

Fact No 3: Overhead producing an eBook is different than producing a printed book.  I should clarify that this is something that I fervently believe because I produce things digitally and physically as a marketing person.  Are there some overlapping costs?  Absolutely.  But there comes a point where the two diverge because they have completely different distribution models.  One is physical and the other is digital.  In the physical model, you have to print the book, look at proofs, change the type size or font, run more proofs, pick a paper.  You have to print (maybe) a dust jacket.  Then there’s printing and binding on a mass scale (usually on a web-press).  Next, you have to store your printed books somewhere.  Probably use a ton of cardboard boxes, tape and shrink wrap for that.  Then you have people loading pallets, and a guy driving the forklift (tow motor if you’re from the south) around the warehouse (warehouse rental, insurance), and loading those pallets on a truck.  The truck drives cross-country (have you seen the price of diesel?) to deliver your books to bookstores, maybe goes through a local hub where the pallets are broken down into smaller bites for delivery.  Any or all of this could be true and is part of your overhead – for the physical book.

The eBook would have it’s own course.  No need for a warehouse because there’s nothing to store.  Maybe you have a server farm somewhere – easily pennies on the dollar versus a physical location full of employees – where you store your finished, ready to go eBooks.  Maybe you have them on a tower in such n such’s office – I don’t know.  Probably have a person, or persons, whose job it is to submit that eBook to all the major distributors, your Amazon, Barnes & Noble, etc.  I don’t see that as costing anywhere near the same as a physical book’s overhead for distribution.

Maybe I’m completely wrong.  This could totally be that preconceived notion I mentioned above.  See, in my dayjob, I create marketing materials.  There is a clear delineation after the materials are created as to how much they cost once I distribute them.  If I create a flyer, double sided, 4/4 color, full bleed, for example, and I push that out through email (digital distribution), the cost becomes pennies on the dollar compared to if I send it to the press (physical distribution), where I will pay a little extra for full color, also for the full bleed (the color goes to the edge of the paper and is then cut to size), extra bit for folding (if it needs to be folded), so on and etc.  I might pay $1.65 per piece by the time I’m done.  Less if I order in the 2500 qty range.  More if I order in the 20 qty range (much more).  But digitally, I can send out tens of thousands of copies and come nowhere near the cost of 2500 physical copies.

I admit here and now that I am overlapping my own experience dealing with digital versus physical overhead and cost, and in that experience, printing anything at all costs more than not printing.  So in my mind, how can an eBook cost the same (which I have been told before that it does) as a printed book?

I’m willing to accept that overhead for producing an eBook could be around the same, only with different built in costs that maybe I’m not seeing.  This idea has been bothering me lately.  You see, it’s entirely possibly to eliminate the costs of the physical distribution model only to replace them with new and different costs that add up to around the same thing.  Looking at my dayjob example above: I could pay $50,000 a year for an Enterprise Level marketing platform (yes, they exist) that does email, websites, print marketing, etc.  The cost of that system, while bloated and probably way more than I need, would have to be factored into the overhead costs, so much so that it might actually change the dynamic completely and make the digital distribution method more expensive versus the print model.

Which is a depressing thought.

And really doesn’t help me with the $13 eBook.

Another thing that has been bothering me, is the realization that publishers are in what I believe to be a unique situation.  Traditional publishing has gone in cycles.  Hardcover comes out first.  Could be on the market for a year, making publisher and author money, before the paperback comes out.  Some people buy the hardcover, others will wait for the paperback.  Today, a hardcover has a retail price of $30 on it, give or take.  The paperback $8, give or take.  Rising in popularity has been the trade paperback, which falls in-between hardcover and paperback in size and in cost, usually between $12 – $16.

The eBook effectively breaks this cycle.  People with eReaders want to be able to read the book when it comes out (the same time the hardcover is released).  They don’t want to wait a year.  Or a day.  They want it now.  That’s part of the whole digital distribution revolution – instant gratification.  Want a song now?  Download it.  Want to watch the tv show you missed last night?  Stream it.  Movies too.

This forces publishers to compete against themselves.  Think about that for a second.  A hardcover doesn’t compete against the paperback.  They come out at different times.  Most of the people who will buy the hardcover already have by the time the paperback comes out.  If they released them at the same time, I’m sure they would lose a lot of hardcover sales because who doesn’t want to save money when they can?

Now, the publishers have a problem.  That $30 hardcover will get sold at a discount when it’s first released, maybe another discount for club members at their local bookstore, or on Amazon, so you might pay around $20 for it.  Overhead/cost is figured in, profit is made, everything is good.  But if the eBook is released at the same time at a price point of only $9.99, that might encourage people to get an eReader or software for their computer/laptop to save $10, which cuts into the profits on the hardcovers.

If paperback readers demanded that the paperback be released at the same time as the hardcover, what do you think publishers would do?  Give in?  I don’t think so.

Unique situation.  Two competing products.  Two overhead/cost/profit structures on the market at the same time leading me to pay $13 for an eBook copy of Raylan.


Tagged with:  

23 Responses to ATFMB – eBooks

  1. Thanks, Patrick.

    The ebook is going to kill the MMPB, and its going to drastically cut the hardcovers. I don’t think publishers quite realize that yet.

    There will be blood in the streets when the hardcovers become a “boutique” item.

  2. Actually, I think the publishers realize it quite well.

    One thing Patrick didn’t mention is that books and eBooks have different resale paths — which is actually a brick wall for eBooks. When you buy a book (hardcover or paperback), there aren’t very many restrictions on it. You can loan it to your friends, who might in turn loan it to their friends, and round and round. (That was pretty common in college; my paperback copy of James Blish’s Cities in Flight came apart after a few years because it was a popular borrow.) You might photocopy a page to use in an article or school paper. Assuming you don’t wear your dead-tree book out, you can resell it or swap it for another book. You are specifically forbidden by license or DRM to do any of those things with an eBook.

    Higher price? ? Fewer rights? ? Gosh… at the risk of sounding like I’m full of shit, I’ll hazard a guess that publishers have been trying to kill eBooks to preserve their traditional revenue streams.

  3. J.T. Evans says:

    I just attended the Pikes Peak Writers Conference where this very subject was heavily discussed on several panels that involved editors, agents, publishers, writers, etc.

    One of the stunning facts that I learned is that most publishers’ costs for creating an eBook is about $1 to $1.25 less than the physical book. That includes printing, binding, shipping, storing, forklifting, shelving, etc.

    Why the small margin of difference when an eBook consumes so little hard drive space and doesn’t require shipping (other than bandwidth?)

    The publishing companies are still figuring out HOW to make eBooks. It’s not a streamlined process and there are about 8 different standards for eBook (mobi, epub, pdf, kobi, etc.) The books still go through the traditional acquisition, editing, copy editing, proof editing, marketing and sales positioning that a traditional printed book goes through. Then things diverge.

    They have to do layout, cover art, proofing, printing, binding, shipping, forklifting, storage and shelving of the print books.

    They have to do layout (EIGHT TIMES for the different formats), cover art (again for digital as opposed to print), proof editing (EIGHT TIMES for digital rather than print) and then distribute/submit them for sales at the various eMarkets that exist.

    One publisher I talked to employed 45 people before eBooks came along. He’s added 5 new heads JUST FOR EBOOK handling. That’s 10% of his company (and salary) dedicated to eBook “manufacturing.” Amazing!

    Also, the publishers are building out server farms (on a very small scale) to handle all of this. They’re still ramping up and that capital investment is huge for them. Until they are up-to-speed with their computing power, they can’t afford cheap eBooks.

    Are the publishers streamlined and doing it “right?” Probably not. Not now, at least. Are they working toward getting eBook costs (their costs, not retail) down? They’re working on it, yes. Will eBook prices drop as a result. I hope so.

    So long as an eBook is the same price (or slightly cheaper) than the hardcover (or softcover once it’s released) I’m a happy reader.

    Oh. Another vital question that was asked: Will eBooks kill paper books? The uniform answer across the board at the panels was a resounding, “NO.” Why? Avid collectors of books will always want the physical book in their library. Reading has increased many fold since eBooks hit mainstream (yay!!!) but those people that were avid readers beforehand will probably still gravitate to paper books rather than eBooks.

    Me? I’m split. If I want to read a book and not “collect” it, I’ll probably snag the eBook. However, there are many authors out there that I want to say, “I have them all! Muhahahaha!” and those I will buy. There’s also the factor that you can’t get a limited-edition, leather-bound, signed copy of a book electronically. Yeah, I have a few of those too.

    Thanks for the great post, Patrick. I hope my comment has helped clear things up!

    • JT. I just don’t buy it. I have been told the exact same thing and it doesn’t hold water.

      If you designed a website, would you have to write an entire version for IE, then open up your editor, start over and write an entire version for Firefox, and when that one is done, start on an Opera version, next, Safari, Chrome, Netscape and AOL Explorer?

      I know of at least one publisher who did spend time and development dollars on a one to many engine, of sorts. You format your book as normal and when you export it, you choose the end format for consumption, ePub, Mobi, etc.

      Adobe InDesign’s latest version is said to have this capability as well. So does Scrivener 2.0 on the Mac.


      • J.T. Evans says:

        I agree that they’re not doing it right. How long were we (humanity that is) using quill and parchment before Gutenberg came along and said, “There has to be a better way!” ? I suspect publishers are in the “quill and parchment” phase right now and just waiting for someone to invest the perfect eGutenberg for them. 🙂

        Another thing the publisher said was that each eSeller (Amazon, B&N, Borders, Kobi, etc.) had their own manual submission system. We writers bitch about the wide variety of submission guidelines out there for agents/editors. The publishers bitch the same way about resellers. I suspect that it’s a single person’s full-time job just to add books to the catalog of the different retailers.

        Also, most of the cost of a book is not the physical product. It’s the getting the writing ready for placement into the physical product or the electronic product.

        If eBooks were produced with the efficiency of paper books, and things were priced fairly, I could see the electronic versions being priced at about 75% of the physical version. Give or take a little. 50% is just too much to ask.

  4. I have a hard time believing the that overhead costs of producing an ebook are more than the overhead costs of producing a MMPB. I think the ebook price point for a full-length novel should be about what a MMPB costs. If it’s going to cost more than that, then readers will expect extra content. Hard covers, I think, are going to become collector’s items.

  5. ganymeder says:

    Blood in the streets, eh? 🙂

    I’m afraid I just don’t see how ebooks could ever cost as much to produce as print copies. There are certain built in costs, and while some may change, if they’re advertising the book – I doubt they’re going to advertise separate copies, or pay for different art for print vs ebook covers. I think publishers have to just adjust to the digital revolution instead of fighting against it, trying to manipulate costs in order to make customers buy print over ebooks, etc. This is where publishing is headed, whether they like it or not.

    And I think as self-pub gets more respected, traditional publishers will greatly diminish as authors publish for themselves, take a greater percentage of profits. The traditional model still works, but I’m not sure for how much longer. Certain types of books will always need to be printed because they don’t translate or translate well as ebooks (coffee table books, pop-up, poetry books), but then there’s always POD. 🙂

    • I do admit there are a lot of people out there decrying the boom in SP eBooks because they feel that, without the traditional ‘gatekeeper’, more ‘junk’ is making it onto the market.

      I wonder if that isn’t a self-correcting issue, though.

      I don’t see the traditional publisher going away so much as they will be changing to adapt to new market conditions.


  6. Tanya (@GundamCat13) says:

    As someone who recently helped a friend out publishing e & TPB versions of a book (first-time venture into it for both of us), I can verify that a lot of J.T. Evans’s points above are spot-on: design, layout, cover, proofing etc. for many different digital layouts, verifying everything worked/looked good on multiple programs & devices, was much more time-consuming than getting the single version for the print book right. PR, marketing, web site space. etc. all cost the same regardless of whether the work is in digital or physical form – since we went with both, the budget covers both, but if you’re making an e version only, those production costs are still there.

    Don’t know that the man-hours put into the digital aspect correspond completely to the printing costs, but I’d suspect (from my relatively noob-ish viewpoint) that as those digital aspects are able to be streamlined more, that’s what would help bring down ebook prices some – but not a lot, as they’re still covering the overhead costs along with the print version.

    Just my two cents 🙂

  7. Bryce says:

    Great topic and conversation, Patrick.

    The problem with high ebook price all comes down to economics and price discrimination. The publishing market has always been a favorite of economics teachers and professors because it shows so well how price discrimination works. Those that have to have the book immediately will pay the higher price and those who are willing to wait to get a lower price will do so and get the mmpb. Publishers have found a way to get at most of the consumer surplus this way.

    eBooks are expensive because we want them now, but publishers still want to take a big part of the consumer surplus. They know it’s worth it to eBook readers to pay a little more just to read it immediately (learned from the hardbacks). That’s how they can get away with it.

  8. Mike says:

    The main thing I have a problem with is when an ebook comes out for a paperback but ends up costing more than the paper copy. I’ve seen it where the ebook is $12 bucks while the paperback is out for $8 or $9.

    Maybe they should have digital hardcover copies that are more expensive, say $15 or $16, and when the paper back comes out drop it to $7 or $8. That way the instant gratification types pay a little more and those who choose to wait get a discount.

    Personally, I think it’s going to take a while for publishers to get this all settled. The federal lawsuit may change things as well. Hopefully for the better.

  9. Fred Kiesche says:

    I think these publishers need to speak to a publisher that has managed to do it for years: Baen. eBooks come out ahead of the physical books. They started out at $4.00/eBook, have recently gone to $6.00/eBook. But that’s $6.00 whether the book you are buying is a paperback…a trade paperback…or a hardcover.

    Books are made available in multiple formats (e.g., MOBI, EPUB, RTF, HTML and 1-2 other formats). No DRM. Available to you for infinite downloads.

    So how does Baen do it when other companies claim they can’t? Less overhead. Cheaper (non-NYC) offices. More efficient processes (telecommuting, lots of online marketing, website store, book packages).

    Most publishers have baggage. A lot of baggage. That baggage comes with territory and legacies and friends. All this baggage is trying to avoid change as long as it can, even as the market and the environment shifts around them.

    If they don’t change…well, how many buggy whips are sold in the world each year? Could be the same boutique environment for physical books (and possibly sooner than they think).

    Look, I love books as a physical object. But publishers print too damn many books. They have too many marginal (mid list) authors. The tax laws work against physical inventory, so too many books are “stripped” and remaindered. Too much of a publisher depends on too few authors to carry the rest (sounds like the music industry). Maybe the mid list would do better in electronic format, where their books could sell bit by bit, build up an audience, over time…and not be lost because too many books were returned and you don’t get to move on and build that audience.

    Are eBooks the saving grace for the mid-list (where I have bought most of my books over the years)? I think so. Yes, more work for the writer (self promotion is hard). They’ll have to be on “social media”, interacting with those grubby fans.

    But it sure beats obscurity. Or obsolescence.

    (Damn. Maybe I shouldn’t have had that double espresso before leaving work this evening.)

    • Excellent points Fred.

      This piece made me think of a possible solution – but the horse is gone and shutting the door at this point would be a waste of time.

      If, back in the day that ebooks were just beginning, publishers had decided that paper was going to be preeminent and ONLY made the ebook version available with the purchase of the printed version. In other words, if you wanted ebooks, you still had to go to the book store to get them, you still had to purchase the paper version, etc., etc.;

      With or without DRM, controlling piracy would have been much easier: ANY copy of a book available for download on the web would be a defacto pirated copy; the market for e-readers would be greatly diminished, thereby probably preventing their introduction to the marketplace – or relegating them to a very small niche of specialty needs. Print sales might even have been enhanced by those who wished to obtain the ecopy; there’d be a more robust market in used books, true, but I think that would be largely mitigated by the increased initial sales.

      And – no incentive for Amazon to switch to electronic documents (probably little or no incentive for Amazon period as the founding of the company was predicated on the antiquarian practices of publishers to begin with). Individual publishers would have to have maintained some kind of backup/replacement service – but again, valid downloads would be linked to some kind of key provided with the hard copy of the book and/or the medium the ecopy was provided on.

      No doubt there are flaws in the above but – who cares? It’s already far too late to implement something like it.

      Probably the best answer now is hinted at in your comment: the big publishers should divest themselves of their electronic publishing businesses – spin off separate entities that can ‘start from scratch’, aren’t over-burdened with legacy expenses and can contemplate the high-tech solutions and benefits currently available; sure, wholly-owned subsidiaries, but let them separately negotiate e-rights and run their businesses unecumbered.

    • Baen is a good example of an efficient ebook operation. Agreed, Fred. And the prices seem to fall right around what I’d expect, and what I’d pay, for one.

      • Fred Kiesche says:

        And to bring it full circle (cue Disney “Circle of Life” theme NOW), I’ve written on my blog about all this. A bit more from above, and some new stuff tossed in.

        Steve Davidson, Steve Davidson. Somewhere I know of this name.

  10. Larry says:

    Hi Patrick.

    As the CEO of a software company, and the part-time owner of a publishing (print, eBooks and apps), I think that main point for your fact #3 is…it depends.

    Just like writing a piece of software for different platforms, the cost for writing for different outputs (hardback, paperback, eBook) depends on how you start. If you start with the end result of actually implementing you wares on Apple, Android and a PC platform (which we do), your development process is a bit different that if you write for Apple, then decide you need to go back and make the same program work for Android.

    Most of the large publishers are in that situation. They have their processes and entire businesses set up for print, and are having to go back and re-engineer them.

    If you start with a process that is *just* deploying eBooks, the publishing process is quite simple.

    If you want your process to include all three medium (HB/PB/eBook), then your process needs to be configured that way. And, if you are able to build your process this way, then the cost of producing the eBook includes some of the base setup costs.

    As you note, Adobe InDesign and others have the capability to produce Kindle and/or ePub formats. If you layout your paperback in the correct format to start with, producing the eBook at the end is a relatively minor effort; but it does take some forethought and different starting proceses. This implies some of this “setup cost” is part of the eBook costs.

    In my world, this is a process problem.

    We’ve been working with some non-profits, who have amazing content, most of it in print format (or, in some cases, out-of-print format). And our message to them is: redesign your process with the end result in mind, and you can save expense which helps with the costs of both the print book and eBook.

  11. Chris McClelland says:

    I think that one thing that everyone keeps forgetting is that the hardcover vs MMPB release cycle is that the hardcover is used to defer the costs of the author too, not just the overhead costs of the publisher. There is no way that a publisher is going to pay Steven King the big bucks and then release his book only at MMPB prices. They will never see back their money. So I fully understand why eBooks are initially priced the way they are when they first come out.

    That said, I don’t like DRM and format restrictions on eBooks. I want to be able to read my book on whatever platform I choose whenever I want. Hardware comes and goes so proprietary formats like the Kindle MOBI format limit the reread options years and decades down the road.

  12. Peter Snede says:

    I am of the opinion that costs to make an ebook are irrelevant. Consumers with disposable income have choices of where they spend their money and they assign a perceived value to the product independent of cost.

    For me, I will pay $10-$13 for a new fiction title if it is something I am waiting to get released. I paid even more for the Steve Jobs biography when it came out last year.

    Backlist titles for this price are ridiculously priced. On new titles I have no option. Once a book is 6 months or older, I can get it for free legally from the library. For $5-$6, I’d be more inclined to buy the actual book to support the author than the release-day price.

  13. I know that re-building something that is already set up a certain way is more cumbersome than building it that certain way from the beginning, but I really find it hard to believe that e-books only cost a dollar and change less to produce than tree books.

    And all that stuff about how hard it is to convert them to the various formats is bull hockey. As a self-published author, I hire a formatting company to do this. They have it back to me in a little over a week in every format required. And they charge a staggering $210.

    Traditional publishers price e-books to try to keep them from competing with tree book sales. And what they don’t get is that a lot of readers like you, Patrick, are hesitating more and more often about paying as much or more than the price of a paperback for an e-book.

    And a lot of traditionally published authors, especially midlist ones, are no longer signing contracts with their publishers because they are realizing they can make more money, have more creative control and get their books out much faster by self-publishing.

    I agree with the person who said that hardcover books will become collectors’ items. And I’m not so sure that paperbacks will survive forever either. Technology, like it or not (and there are plenty of days when I hate it), makes some things obsolete. When was the last time you saw a pay phone (that still worked, that is)? Or a truck going down the street selling chunks of ice to housewives to put in their ‘ice boxes’?

    Kassandra Lamb

Looking for something?

Use the form below to search the site:

Still not finding what you're looking for? Drop a comment on a post or contact us so we can take care of it!

Visit our friends!

A few highly recommended friends...