Friday, October 19, 2012

eBooks and Price Gouging.

The decision by the justice department to remove agency pricing from the market for eBooks has led to what I think, is a lot of price gouging by the major publishers. They’ve put out a lot of lame excuses, but the fact is that in many cases, eBooks are priced higher than print books, and there’s truly no justification for it.
As a self-published author who does all the work with the exception of editing, I can guarantee that the cost of publishing an eBook is much cheaper than publishing a print book. The eBook version of my second book in the series is $2.99. To maintain the same royalties, the hardbound print version of the same book is $22.50. The paperback is half of that.
I actually had to put in more effort in creating the printed version than I did for the eBook version. Although the print version came out nice, it hardly justifies the effort required to create it.
I recently read a printed paperback. As someone who’s been reading eBooks exclusively for the past three years I was amazed at how difficult is was to cope with the paperback. It wouldn’t lay flat, the print was too small, and I kept losing my place in the book. Why anyone would opt for a print book when they could read the same book in electronic format is beyond me.
This is the dilemma that major publishers face. Once a printed copy is produced, they’re stuck with it. It either sells, or they must swallow the cost.
An eBook has no returned copies to shred. Unlike conventional brick and mortar stores, the eBook’s place on the bookseller‘s shelf isn’t constrained by limited space and what’s-hot-now eliminating it from the book market.
EBooks are taking more and more of the market for all books, amounting at this time, for one in every three sales of books in general.

But let’s at least try to be fair. The major publishers are whining about the costs of salaries, overhead, and the exorbitant royalties (12%-15%) authors demand. That’s their reason for justifying the eBook prices.
I think we can arrive at a ball park figure for the costs of creating a book, eBook or otherwise, and then extrapolate the real price of an eBook from there.
What are the services a publisher must provide to create a book? Well, they can be listed as; slush pile, editing, cover design, copy editing and formatting. Few authors see many marketing efforts today, but to be fair we’ll tack that baby onto the list. If the author is lucky he or she will get an advance, but since that’s part of royalties we can ignore it for the moment.
I’ve read some figures about the salaries of employees in major publishing houses. Most often mentioned is about $85,000/year for a good editor and $100,000 for a managing editor. Editors say they fish the slush pile looking for good books to publish and regardless of how skeptical I am of the claim; I’ll go along with it.
Copy editors are paid less than that. I have no idea but I imagine it’s $20k below a full editor. Cover design is done in-house or farmed out. A good cover can cost upwards of $500, most are less than that.
Overhead’s a big factor. It’s the cost of doing business; power lunches, business jets, heating, lighting, rent, mortgage payments, phones and a lot more. It could be very high. (That’s a likely reason why the cost of books is so high.) For sake of argument, let’s say it’s a mid range of $100/hour. (If it’s substantially more than that, the publisher needs to take a serious look at his or her business practices.)
During the process from submission to ready to publish book, there are hours involved. Many people spend a period of time handling the manuscript and the amount of time varies from person to person.
To avoid a lot of tedious math which no one will pay attention to, I calculate the cost of producing a good-sized book at $18562. I used reasonable figures for hourly rate, overhead, and the time expended for each task. Let’s round it off and say, $20,000. (That’s 50 times more than the cost of most expensive eBook I’ve published yet.) (If anyone cares to view my calculations, email me.)
Okay we have the cost, now let’s look at the other things. Say the author has been published before by the publisher and he or she gets a $5000 advance on the book. (In this economic climate it’s unlikely.) Depending on how well the contract was negotiated, the author may earn royalties on the projected price of the book but that varies with the contract. The maximum royalty rate for authors publishing through a traditional publisher is 15%. The calculations are complicated, balancing expected sales with the costs and expected profit, but to keep it simple, let’s say the author expects to earn $1.00/book in royalties. That means the publisher must sell 5000 books to equal the author’s advance. Dividing the cost of producing the book by the expected sales comes out to $4.00/book. (That’s to cover the publisher’s initial investment, not the publisher’s profit or the author’s advance.)
Adding profit for the publisher at 20% and the author’s royalty and rounding off, brings us to about $8.00/book total base price. (A publisher does not willingly shell out an advance without projecting sales. If the author is trusted enough to get an advance, the publisher expects to at least sell enough books to cover it.) (If you factor in the projection that for every two print books you’ll sell one eBook, the publisher’s costs spread across all the books (paper and electronic) could actually be less than $4.00.)
Anyone who’s bought a hardback recently knows they’re not cheap. Depending on where you purchase the book, you could pay $17 to $35 dollars or more. Paperbacks typically go for $10.00 (Okay, $9.95), but the publisher’s cost plus profit and royalties is fixed at $8.00 for a 5000 book printing, so anything else must be printing costs (unless the publishers are being less than honest).
Publishers typically complain about how hard it is to format an eBook and how much it costs. Well, I’ve done several and it’s not rocket science. It boggles my mind that J.K. Rowling’s new Amazon Kindle eBook was screwed up from the get-go. From my experience in formatting both eBooks and Print books, eBook formatting is much easier. It should cost less than getting the book ready to print. In addition, if you convert an existing paper print book to electronic format, most of the above more expensive costs disappear, leaving only the scanning, copy editing and formatting tasks (and possibly the cover).
No matter how you figure it, (and I’m figuring high) the prices should progress like this: eBook $7.95, ($8) paperback $9.95 ($10) and hardback $19.95 ($20).
Regardless of what the publishers claim, eBooks should always be cheaper than paper. (This does not factor in the unlimited shelf-life of an eBook and the fact that there are no returned books to be shredded and recycled.)
In the past, publishers have printed more books than they expect to sell. The cost of any unsold book must be covered by the publisher. This results in losses when the book is returned, typically to be shredded rather than resold. To recover the costs, they must find a revenue source and the eBook is a handy alternative. (If the publishers had any sense, they’d do a print run of enough paper books to cover the advance and rely on the eBook to cover the rest.)
Do I believe that publishers are taking advantage of eBook readers? You bet I do! In my mind, there’s no justification for pricing an eBook higher than a print book and eBooks should be substantially less.
The time is near. Shadow Twins is slated to be published this month. I can’t predict when it’ll be available on Barnes and Noble, Sony, Kobo, or Apple iBooks because they need to vet it first. Some time after I publish to Smashwords, I’ll make it available on Amazon. Taken in all, that means a release date of October 26, give or take a few days. Look for it on your favorite site.
The book is priced at $2.99 on all the sites, less than a cup of cappuccino at Starbucks. With the changes occurring in the publishing industry, the book is a bargain.

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