As the print industry continues on an inexorable path to extinction, an analysis by the Wall Street Journal reinforces what many of us already knew. Specifically, ebooks are just less expensive to publish.
First off, I’m not a book hater. Actually, quite the opposite. I’ve had a lifelong love affair with print. I spent many years in print publishing. Now that I’ve started writing books, I’m hoping that print sticks around just a bit longer.
Unfortunately, that’s just not going to happen.
The Internet has has led to fewer people buying and reading books. That much we know.
Mainstream publishers have tried to keep the cost of ebooks artificially high, since the perception is that you can’t make money on books 99 cents at a time. Publishers want you to pay $15 or more for a new release, so that they can make a good profit margin on their bestselling authors. And hey, you really can’t blame them. You have to publish a lot of “not-exactly-bestselling-authors” as you look for that golden needle in the author haystack.
The Wall Street Journal estimates that an ebook that sells for $12.99 (that’s $3 higher than the $9.99 Amazon currently charges) makes a publisher $5.92 in profit. A print book that sells for $26.00 makes the publisher $5.85 in profit.
How did they get there? First, they estimated the retail fee for both Amazon (around $3.90) and a comparable brick and mortar ($13 for Barnes & Nobles by default). Then they estimated the royalty to the author, which is significantly lower in ebooks ($2.27) than print ($3.90), since royalty is based on percentage of the sale price. A lower retail price means a lower royalty.
After that, they make an estimate of digital rights management (DRM) for the ebook ($.90) and compare that to the estimate for shipping, warehousing, and production ($3.25). This cost for printing and shipping books is actually less than you might imagine, right?
Pull it all down to the bottom line (and hey, that’s what the WSJ is really good at!) and you have a comparable profit for ebooks, at least for the publisher. The author earns a lot less and the retailer is closing up shop, but the publisher is doing okay.
So what does all of this mean to you? Well, if you are a marketer, you’re already aware that content is what people really want. Many people will choose print books because they like the feel of the medium.
But many other people will vote with their wallet and buy an ebook, if the content is the same. For example, if I told you that I would sell you something for either $26 or $12.99, which would you choose?
You can do an honest comparison of all aspects of the decision and you still may be willing to pay $26. Or…you may just look at the prices and go for the cheaper ebook.
It may not be the perfect reading experience, but if you already have a Kindle, Nook, or iPad, you’ll want to justify the cost of the device by saving money on the media. You’re going to take the $12.99 option…and brag about it to your friends.
The Wall Street Journal also waves around big numbers. For example, they say that the 2010 net sales revenue for ebooks was around $878 million. That’s a huge number that’s a little hard to understand. But I can certainly understand the difference between $26 and $12.99. That’s a price difference that I relate to on a personal level.
In the end, I’ll be sad to see my local Barnes & Nobles go, but I won’t be surprised. Actually, I’ll probably read about it on my iPad newsreader before I actually see it in the store.
PS: I actually read this article in the good, ol’ print edition of the Wall Street Journal. Ironic, no?