Where’s all the books?

AttributionNoncommercialNo Derivative Works Some rights reserved by Ευτυχία (Jim is Nice)

Ok, I’m not in the publishing business so I may be completely wrong but here’s my views.

I use an Ipad now. I love the screen and the fact that ‘books’ are far more readable on them than they are as ‘books’. I also love the fact that I can store lots of them without having to shuffle stuff round on bookcases all the time. I also, form a professional viewpoint, thin that the ebook is a great solution to resource problems in schools – either as purchases, or as home produced materials.

Now I ‘think’ that the days of manual typesetting went out decade ago, I may be wrong. I assume these days that the books are set up on some software which then ‘talks’ to the printer and off the process goes.

So, why do books cost a lot of money?

  1. Paper costs
  2. Labour costs
  3. Ink costs
  4. Marketing costs
  5. Transport costs
  6. Admin costs
  7. Royalties to writer

Now of the list above only 6 & 7 really count when it comes to ebooks. The digital ‘print’ already exists, you have to stick the ebook out in the marketplace somehow and then as there is no additional cost per sale, everything you sell is profit and goes towards your ‘bottom line’.

A good detailed breakdown of all this can be found here http://ireaderreview.com/2009/05/03/book-cost-analysis-cost-of-physical-book-…

So, my questions.

Question 1:

Why are ebooks almost the same price, the same price, more expensive than ‘real books? (all of the pricing structures seem to apply) The one that does not apply is an ebook is significantly cheaper than a ‘real book’.

Question 2:

Why are so few books available as ebooks? I looked yesterday at the number of books published by an author I liked – wanting to buy some as ebooks, he has written over 20, and yet less than a third were available as ebooks!

Either I am very stupid (and have not understood the costs of publishing at all), or there is extreme lethargy in the publishing industry (yet they could make significant profits here), or there is a fixed pricing policy here that makes sure that printed books and ebooks have an equivalence of cost in order to ‘support’ the printed book industry.

I’d love some answers people!

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One Response to Where’s all the books?

  1. Joe Draper says:

    There is one further cost that is very significant which is the financing of each stage of a physical book’s journey. In steps 1 to 5 a typical publisher will borrower 50-90% of the funds needed to pay for everything from paper to warehousing the finished product until it is sold. One goal of any company’s is the efficient use of it’s working capital. The faster it get go from raw material to finished product to sold for cash then the less working capital it needs. Working capital is almost always borrowed money. Management of inventory is critical and the book business has a terrible record in this regard. For general interest books somewhere between 25 and 50% of all books are returned or never sold! Financing for any retail activity is risky and expensive because of consumer tastes can move fast leaving the retailer with stale, unsalable inventory. Because books are largely sold on consignment basis which allows the retailer to return the unsold books for credit this risk is taken on by the publisher.

    Regardless of whether the publisher actually runs the presses or not they are still paying for the full costs. So here is my estimate of additional costs to publishers that you need to include when comparing to eBooks.

    Borrowing costs: 6%
    % of capital borrowed to finance activities: 60%
    % of funding costs per book: 3.75% (6/1.6)
    % of funding cost per book sold: 4.68%(assumes 30% of books are returned in some way).

    Your costs go up if you use more debt and reverse if you use more equity but I’m guessing most lenders would not let a publisher or retailer get away without financing at least 40% of the costs as they get stuck with the inventory when things go bad.

    Now that’s just to finance inventory. I would estimate an additional 1-2% to finance the physical publishing and transportation costs. Giving total financing costs of close to 10%.

    e-Book costs for the same operations? Should be zero. The book is only “published” when you order it. There are no returns (well very few and easy to manage) and no shipping costs.

    So for all the reasons already put forth along with my very very simple model I am still confused why e-Books should cost anything more than $10.

    Hope that’s contributory to the discussion.

    cheers, Joe

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