Why Do eBooks Cost so Much - a publisher's perspective

Discussion in 'Nook' started by AnimaTechnica, May 5, 2011.

  1. AnimaTechnica

    AnimaTechnica Senior Member

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    very interesting insight/argument as to why you hardly see an ebook below $10

    original article here - Why Do eBooks Cost So Much? (A Publisher

    At least once or twice a week someone asks me, “So why do eBooks cost so much?” This is a fair question. After all, digital publishing eliminates the costs of physical manufacturing and distribution. What expenses do publishers have left?

    As it turns out, plenty.

    Let me begin by putting things in perspective. First, the retail price has already been adjusted. As you are probably aware, Amazon is selling most eBooks for $9.99. That is already roughly half the price (depending on the format) of the typical physical book.

    While Amazon is currently buying these books from some publishers at a discount off the physical retail price of the book, this will ultimately change. When it does, publishers will net approximately 70% of the retail selling price or $7.00. (This is often referred to as “the agency model.”) This will fluctuate up or down, depending on where retail pricing levels ultimately land.

    Second, physical manufacturing and distribution expenses cost less than you think. Some people assume that these two items represent the bulk of a book’s costs. They don’t. Together, they account for about 12% of a physical book’s retail price. So eliminating these costs doesn’t do much to reduce the overall cost structure.

    Publishers still have to pay for acquisitions, royalties, editorial development, copyediting, cover and interior design, page composition, cataloging, sales, marketing, publicity, merchandising (yes, even in a digital world), credit, collections, accounting, legal, tax, and the all the usual costs associated with running a publishing house.

    In addition, publishers have to incur at least three new costs:

    Digital preparation. Granted, most new books start out as a digital file. If they aren’t already digitized, then they have to be scanned or manually keyed in. But that’s only the beginning. Publishers must then format the books, so that they work on all the various eReaders.
    Currently, there are about six major formats. Some are similar, but each has its own nuances and quirks. In addition, publishers must collect and add all the relevant metadata, so that customers can actually find the books when they search for them.

    Quality assurance. Once the publisher gets the eBook formatted for a particular eReader, he then as to take it through a quality assurance process (often referred to as “QAing” the book) to make sure that each of the major eReaders renders the pages correctly. This is a time-consuming and laborious process.
    This is fairly easy with books that are straight text. But few are this simple. When you add epigraphs, pull quotes, tables, charts, graphs, illustrations, footnotes, etc., it quickly becomes complicated. In this sense book publishing has become much like software development. At Thomas Nelson, we have seven full-time people managing this process, and we’re currently looking for three more.

    Digital distribution. Once publishers have finished the QA process, then they have to distribute the files to the various eRetailers. You might think Amazon, Barnes & Noble, Apple, and Sony are the only ones out there. They’re not. We are currently distributing our eBooks to more than twenty separate accounts.

    Each of these has a different upload protocol and digital asset management system. When something changes in an eBook (e.g., simple corrections or a new edition), publishers must re-distribute the new file and ensure that each eRetailer has the current version. Publishers must also collect payments from these accounts, ensuring that they are getting paid for each download, so they can, in turn, pay their authors.

    So far in our experience at Thomas Nelson, the elimination of manufacturing and distribution costs are being offset by retail price reductions and the three additional costs I have outlined. The good news is that we are making about the same margins, regardless of whether we sell the book in physical form or digital.

    As a result, I don’t expect eBook retail prices to come down any more. If they do, then publishers will have to figure out how to make it work. But for right now, I think the pricing is fair, based on the associated costs.
     
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  2. J515OP

    J515OP Super Moderator Staff Member

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    Well I for one have asked the question many times myself. I do apprecaite the article and some of the points it makes but I don't buy it. First of all I would like the analysis come from an independent auditor not a publisher. I think one of the biggest issues to start with is the retail price of a physical book "depending on the format." I find it hard to belive that the majority of physical books cost $20 to start with. Of course there are many things to take into account here and without knowing how they are counting this it could be anything.

    Generally I tend to think of ebooks and popular paper backs when comaring physical books and ebooks. Sure hard copies sell for $20 but the paper back of the same book is often $10 or less. When you buy a hard cover you are buying the quality compared to a paper back. An ebook can only be considred the equivalent of a paper back since you are looking at the basic available text for reading in both cases (enhanced books would be like a hard cover and I would expect those to be more expensive but they are not widely available yet).

    So where does this $20 figure come from? Text books, photo books, map books, technical books? Sure those things can cost a fortune and when figured into book prices would pull the avereage way up but how many of those books are being sold on ereaders? I would think you would have to look at non-reference books (including text books) sold in high volumes from major retailers and then find the average price of those books being sold for a comparisson with the tyoes of books people are buying on ereaders to get an accurate price.

    In my mind that puts us back to comparing popular paper backs to ebooks and I would think $10 would be a better basis. So at a minimum I would think that ebooks should be 12% cheaper than phsyical books.

    There are other issues I have with the article such as having to deal with mutiple edistributors being a cost. Don't they also have to seal with mutiple physical distributors? And if it is so expensive to deal with the other 15 edistributors that we haven't heard of why bother?

    Is preparing eboks in 6 major formats really so difficult? Don't phsysical books have different formats that must be prepared (hard cover, paperback, set binding, easy to read, etc.)? I guess nobody has to proof the physical copies that come back from the printers either and no time is spent on quality control of physical copies.

    To say that these are extra costs is sort of rediculous since physical books would require the same sort of attention and issues with ebooks can be resolved more quickly and efficiently. Imagine finding a typo in a book after running thousands of copies vs finding a typo in an e book. Which do you think is easier and cheaper to correct.

    Quick 2 cents because I could go on and on about this. It is nice to see them try though.

    JP
     
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  3. RaVenJ

    RaVenJ Senior Member

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    Ebooks will always be cheap as long as utorrent still works on my computer.
     
  4. uplade3

    uplade3 Super Moderator Staff Member

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    True but it's not a good idea to say that outloud lol
     
  5. RaVenJ

    RaVenJ Senior Member

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    If I own a physical copy of a book, I have no moral objection to downloading a digital version of it as well. Now if you just go out and steal the digital version without some contribution to the author, that's a bit different.
     
  6. uplade3

    uplade3 Super Moderator Staff Member

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    Exactly. I just try to stay away from bittorrent protocols except for downloading beta versions of Windows.
     
  7. BoloMKXXVIII

    BoloMKXXVIII Senior Member

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    I don't buy it either. The cost of converting the book into the various e-book formats has got to be small. It is mostly an automated process. I am sure someone needs to check the file once it is complete. I used to create e-pubs for reading on an old Casio Pocket PC years ago. It was dead simple. The biggest expense is probably created by the publishing houses trying to fit digital works in their analog world. I want to see the writers get paid. I think they should get a bigger piece of the pie as they do the most work. Most of the rest of the cost is probably a car dealer's equivalent to extra undercoating.
     
  8. AnimaTechnica

    AnimaTechnica Senior Member

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    i agree - the author was a bit disingenuous - it certainly does not cost that much for some of the activities and most of those cost are amortized over the millions of units - the QA/type setting for example is done once and the file is replicated millions of times. Each engnie has a predetermined set of fonts it works with so i don't see why he makes it sound so complicated in the typesetting process
     
  9. WillysJeepMan

    WillysJeepMan Member

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    The article ignores the greatest benefit of ebooks (particularly those hampered with DRM)... no revenue lost due to "loaning books" or the secondary (used) book markets. I have bought books, read them, and passed them on in a daisy-chain fashion to 10-20 people. The seller only gets paid for a single physical copy of the book. I read an ebook (with DRM) and I either have to loan my friends/family my ereader (no way, José) or they need to buy their own copy.

    As others have said, I don't buy the argument for the high cost of ebooks. In typical capitalist fashion, they are charging what the market will bear. Right now ereaders are "boutique" items... bought by people with the financial ability to pay those higher prices for ebooks. As soon as ereaders come down in price to the "impulse" purchase range (~$50) watch the price of ebooks drop.
     
  10. BoloMKXXVIII

    BoloMKXXVIII Senior Member

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    Good point. I can see a time when e-books are a common part of all markets like i-tunes, Android market, etc. This will help reduce costs and streamline the payment process for the writers.
     
  11. durendel

    durendel Member

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    I thought that the mark up comes from the retailer. Many people erroneously believe that storage of e-books are much more cost effective than it really is. Most retailers have fairly large warehouses which handle regional distribution as well as maintain a good sized display area. However warehousing isn't very expensive they certainly don’t have the high recurring costs of maintaining data centers.
     

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