There’s been a lot of talk in the ebook world lately about pricing and how much should publishers really charge for electronic books. I wanted to take a few moments talk about what goes into pricing. From a publisher point of view, I can tell you a few things with absolute certainty. There are fixed, substantial costs that go into the production of an ebook. It isn’t as simple as hitting SAVE AS in your word processing program and being done. Also, as a publisher, I don’t want to price books higher than I am willing to pay for them. Because as a reader, it comes down to a few things. If a book comes out in electronic and dead tree formats, and I know that I may have to wait, but I can eventually get the book in mass market paperback ($7.99), then I don’t want to pay more for that for an electronic book.
Ideally, I’d like to see a book come out in hard cover with a price point on the electronic version at, or below, the mass market price, if you’re looking at the business model that supports that (such as for NYT best sellers or nonfiction books). If the book, such as a nonfiction book, may not have a mass market release, then the electronic price point shouldn’t top out over trade paperback ($14.95) levels. But, there’s an extra bonus for nonfiction books, because these titles lend themselves to additional content that the paper version can’t provide. (Or the extra content comes on a CD like the ones packaged with Baen books or some computer books.)
So, what goes into the making of an electronic edition? First there’s the editing process, and you want the editor to get paid. Without quality pay for quality editing, well, I think we can all see what would happen then. Secondly, there’s the ISBN#. Now Bowker would like us to purchase one for each format, and at least one start-up electronic publisher told us that’s what they were going to do too. The truth is, most publishers only use one ISBN# per work. There’s also cover art, and like editing, the better it is, the more it’s going to cost.
We’re not done yet. You have to convert the files, and if it isn’t done in-house, then you have to pay someone to do that, either hourly or as part of their regular salary. I can tell you that for the seven formats me produce, including the zip file containing all the formats, it takes at least a couple of hours, and that’s if nothing goes wrong.
You also have website expenses. And in the world of cyberspace, you most definitely get what you pay for when it comes to website hosting. That $3.99 Godaddy or 1and1 plan might be just great for an author website (or Callisto Hosting has better offers, but moving along…), but even if it claims “unlimited” storage space and bandwidth, it isn’t. And those are shared servers, too, which complicate things. I could go on here, but suffice to say, the average publishing company is probably spending more than a few dollars a month on hosting.
There’s also general overhead like making sure the principals in a company earn at least a living, or semi-living (if they have other income) wages, bank fees, merchant account charges, software services, and all that good stuff that makes a business go around. Add all of this up, and you come up with a rather large figure that now must be paid back out of the sales from a book. And, this has to happen after the author receives her royalties.
I suspect there are a couple schools of thought for how to set prices. Figure out how much money you have into it, figure out how much time you want to spend paying it back, use some average sales figures and divide it out so you earn everything back within three to four months (or less!). Or, you could simply set a price and let each book earn itself back on its own pace. Another method would be to determine how many books you want to create “break even” point (i.e. 50 sales, 250 sales) and then use that to create price points. You would still, hopefully, earn out after a month or two, but this would allow niche books to find their audience as well. It also makes figuring out a book’s transition into print a bit easier, because you can calculate those costs into, or beyond, your “break even” point.
It’s also true that smaller publishers, such as Jupiter Gardens Press/Pink Petal Books, probably have lower break even points than larger ones. From my discussions with other publishers, I’ve found this to be the case.
The only difference in this model and that employed by the publishers you see on the NYT Best Seller’s list is that some of the costs, such as cover art and editing, can also be absorbed by any dead tree versions of the books. There is still an electronic ISBN (at least one) that’s needed, manuscript format and preparation still needs to occur, and even if you funnel a lot of that overhead into the paper books, it still should be factored into the electronic book pricing. The main question is how much of the print overhead do you expect the electronic version to carry.
The largest difference in the pricing model is that for an electronic version of a book you don’t need to print, warehouse, ship and distribute several thousand copies of a title. That upfront cost (especially the printing and shipping) is what eats into the profit margins.
I can’t quantify those numbers for any house except my own. They are proprietary information. However, I thought in light of all the recent discussions about electronic book pricing that it might be good to go over just what all is involved. That way, readers can see for themselves that digital products aren’t free to create or to produce. And oftentimes, the margins can be rather slim when you start to consider vendor discounts as well.
