What Should an E-book Cost?

The conversation about the pricing and marketing of print books and e-books has not been well informed. Here is information about how the numbers actually run. The place to start is with print books.

What Should a Printed Book Cost?

The royalty rate is usually 10% of the cover price for a hardbound book, 7.5% for a paperback, increasing by a few percents if certain levels of sales are achieved. So an author makes $1.12 a copy on a $14.95 paperback.  A 10,000 copy sale of that paperback—a  very respectable performance in the estimation of most publishers—will earn the author about $11,000; not bad, except it takes a year or two of very hard work to write a book. Most authors have to keep their day jobs.

What does the publisher make? He will sell that $14.95 paperback to the booksellers and book wholesalers at, on average, a 50% discount from the price on the cover–$ 7.48 in the case of this $14.95 book. For 10,000 copies sold this will amount to $74,800.  The printing of the 10,000 copies will run about $1.50 a copy or $15,000 total. We have calculated that the royalty for the author will be $11,000. So the publisher nets $48,000, not a bad day at the office except this income also has to cover the cost of that office, and the warehouse, and the staff. When all these factors are taken into account, the publisher’s share is about the same as the author’s.

A carefully kept secret in the book business is that even the best authors need editing. In fact the good ones insist on help and will follow a gifted editor from company to company to get it. Most books are hugely improved by the editorial process. Nor are the improvements editors make limited to spelling, punctuation, and grammar. Often they are deep structural changes that make a title more engaging for its intended audience, more saleable.

The help that authors get is never mentioned in public because the author is the brand name, not the publisher. Spreading the credit among any more names would just blur the marketing focus. But the cost of editing, designing, page makeup, and proofreading is high, higher in fact than the cost of printing the book.

What Should an E-Book Cost?

What then should you pay for an e-book edition of a $14.95 paperback? Most people would say it ought to be practically nothing because there are no design, no printing, no warehousing, no shipping costs for the publisher to pay. An e-book, after all, is just a batch of electrons, weightless, shippable through a wire.

But this is to misunderstand what it takes to make a successful book. An e-book still needs all of the expensive editorial services noted above; and if it is going to sell, it has to be marketed, distributed, and publicized, just as a print edition must be. And the author royalty on an e-book sale is usually about the same as it is for a print book, even though the list price of the e edition is lower. We have noted that for our $14.95 paperback the printing amounts to about $1.50. Warehousing and shipping will add another $1.50 to the real cost of selling a printed book. A web retailer should be able to work on a narrower margin than a bricks and mortar bookstore, which could lower the price of an e-edition perhaps another $2.00.

Deduct these specifically print related costs from the price of a printed book and the minimum price for a straightforward e-book comes to about $10.00—less than the price of the print version but not some small fraction of the print price. Certainly not 99 cents, and not $5.00 either.  E-books, as they become more important in the book trade, will have to carry their full share of the editorial and marketing costs of producing them.

Amazon’s Terms

At the moment there are two very different ways publishers can work with Amazon: the Agency Model and the Wholesale Model. There has been a lot of fancy dancing around these models, but of course it all boils down to how the money is divided up between the parties. Only the six biggest publishing companies have had the market power to compel Amazon to accept the Agency Model, which allows the publisher to keep 70% of the e-book list price. Independent publishers have had to accept the Wholesale Model, which has let us keep only about 50% of the suggested price. That is a 20% difference.

Now Amazon is insisting on terms for both print books and e-books that are even less favorable for independent presses. How will such presses be able to afford to publish good books when they receive so little of the sales price? They won’t be able to. And is it obvious that independent presses should have to work at such a huge competitive disadvantage to the major publishing houses?

Independent publishers are crucial to the vitality of our culture. They are the reason why in America almost no good author goes unpublished.

Curt Matthews

CEO, Independent Publishers Group/Chicago Review Press, Incorporated

Curt Matthews is the founder and CEO of Chicago Review Press, Incorporated, which is the parent company of Chicago Review Press and of Independent Publishers Group (IPG), the first independent press distributor and now the second largest. Curt has served on the Independent Book Publishers Association (IBPA) board and has also served as its president.

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5 thoughts on “What Should an E-book Cost?

  1. Adam Gamble says:

    Thank you, Curt Matthews. This is great stuff!

  2. Nancy says:

    I agree with many of the points made. However, most books these days are being produced in multiple formats. Take the 10000 volume sales figure listed for a paperback volume above. If it were available in multiple formats, presumably fewer print copies would be sold – but probably very MANY more digital copies would sell. The “expensive” editing (and believe me, many authors are not getting their money’s worth…although I hope that is not true of IPG’s clients) and other fixed costs would remain the same, most marketing could be done in tandem, there would be some small cost for converting to one or more formats, but overall, the net income would be much larger. And e-copies could be sold indefinitely, with almost no storage/maintenance costs, unlike print copies which if not sold in a set period of time, the publisher must dump to make room for new titles. Taken in total, the digital copies should cost far less than print.

    Another thought – perhaps editors should be independent of publishing houses? As it stands, publishing houses can set the rates authors are charged for editing regardless of the skill or effort of the editor.

    • It is true for the moment that the editorial and design costs for producing a good book can be spread over multiple editions. But what happens if, as seems likely, the eBook share of sales becomes greater than the print share? The eBook sales, rather than the print sales, would then have to cover most of the production costs. This situation is much like the old shell game: it looks like the pea disappears, but it will have to be under one of those shells.

      As for editors being independent of publishing houses, indie publishers work with freelance editors, and other kinds of book professionals, a great deal. The uneven workflow typical of small houses has to be smoothed out by bringing in outside help, and we are grateful for it.

      • Nancy says:

        Thanks for the information, Curt. I never did think the pea disappeared – it’s just that for most books, whether sold via a combination of print and ebook, or just ebook, chances are there will be more sales to spread those costs among than there would be with print alone.

        The exceptions, of course, are the very visually focused print books, which will probably never have adequate ebook versions because of screen size and software limitations.

  3. MikeW says:

    The other thing to note is that the percentages that a writer gets for electronic sales are not necessarily as high as those for the hardback sales. Certainly for non-US hardback sales the writer does not typically get that 10 %. (In my case it was 5%). I also doubt if electronic sales numbers will be added to the hardback figures in order to help the writer over the threshold where he gets a slightly larger percentage than 10% so these days it is more difficult to make that threshold than it was as some of the hardback sales have moved across to electronic.

    However in my experience for a couple of technical (computer) books, the writer’s income these days comes maybe 50/50 hardback/all electronic sales (including fees for Safari not just for the few pdf files downloaded from the publisher’s site), so the writer’s revenue still comes in at roughly the same level just split in a different way to the way it used to.

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