Are Publishers Making a Killing on E-Books? Part 1

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In a post last spring DBW’s Jeremy Greenfield wrote,”Publishers are making a killing on e-books because they cost nothing to produce, distribute and sell and are almost 100% pure profit. At least, that’s what many consumers think.” I’ve been brooding about it since then and thought it might be helpful to give those consumers some insights into how publishers arrive at their prices.

Few subjects have elicited as much wild conjecture as the prices of e-books. Reading rabid allegations of price-gouging, one has to wonder what these critics know about manufacturing costs that we in the e-book industry don’t. Following the proverb Don’t judge another until you’ve walked a mile in his shoes, it might be educational for you to imagine what it would cost you to duplicate the processes that at least one publisher – my own, E-Reads – performs to get a book into the marketplace from raw state to finished product.

E-Reads is among the oldest independent e-book publishers. From its founding our principle has been to split all net receipts with authors on a 50-50 basis. Although we occasionally publish original books, our stock in trade is reprints of previously published ones, particularly genre fiction such as fantasy and science fiction, romance, and action-adventure thrillers. Unlike self-published authors for whom the publication process is generally fast and inexpensive, E-Reads’ production line is artisinal, calling on skills – many of them quite demanding – drawn as much from Old Publishing as from New.

All publishers incur three fundamental types of expense: hard costs, labor and overhead. Many authors contemplating self-publication look at the hard costs but don’t always focus on the softer ones, namely the value of their time and the cost of living.

Let’s, therefore, start with this question: how much is your time worth? If you earn, say, $60,000 a year, your time is worth a bit under $30.00 an hour for a forty-hour week. That is the cost of your labor for publishing your own e-book. But you also have overhead expenses to meet such as rent or mortgage, utility bills, transportation, computer equipment, depreciation and countless other necessities and amenities. When publishers prepare a profit and loss analysis for books they contemplate publishing, they tack on to their hard expenses something like 30% or 35% as the cost of overhead, and you should too. By adding $10 – around 30% of your $30.00 an hour – onto your labor cost, your true hourly expense is more like $40.00 than $30.00. Obviously, you should adjust these numbers if your time is worth more or less than that.

The first task we perform to reissue a previously published book is to accurately reproduce the printed text as a digital file. Even if you possess the original text file, for publication purposes it’s useless. The text you turned in to your publisher was subsequently copyedited and proofread. You may want to key into your computer the changes that your publisher made to your original text file. That will probably take you a minimum of a week – 40 hours. If your hourly cost is $40.00 that’s $1,600.00, a foolish expenditure when it is so much cheaper to have your printed edition scanned.

Scanners in effect take a digital photo of every page of your book and create a crude computer-readable text. I say “crude” because although good scanners are 99% accurate, a 1% error rate in a 300 page book amounts to as many as 900 errors. In any event, scanning costs vary widely from $50.00 a book to several hundred dollars. Let’s say $150.00, plus, say, an hour packing up and delivering or sending your book to a professional scanning firm.

You will then need to proofread your digitized text. Reviewing and correcting should take about one or two minutes per page, or about 450 minutes for a typical novel that will end up at 300 printed pages. That’s about eight hours.

Once you have a clean file in hand you’ll want to convert it to ePub, the universal language of e-book publishing. The conversion software is a free download, but the time to convert your text and make sure it’s properly formatted for various retailers may take three or four hours. Say four.

You’ll have to make a cover. If you choose to buy or commission commercial art the sky’s the limit. We use, and adapt, stock art, which our designer manipulates to properly fit the style of a book cover. We subscribe to a stock art service to guarantee that the rights to the images we use have been cleared. To the cost of clip art fees or subscription add the value of your time to produce the cover and write jacket copy (and don’t forget the bar code!). This will all take two hours if you’re lucky. Better allow for three.

You’ll need to furnish a variety of metadata to retailers or they won’t accept your upload. That includes list price, territory, ISBN number, BISAC code, foreign currency conversion, sample chapter, and many other items. For a taste of what you’re getting into, you might want to read Mastering the Mysteries of Metadata first. But allow one or two full days. For the sake of argument we’ll split the difference at 12 hours.

If you want your book printed on paper you can do it cheaply enough through a variety of commercial processes. How good the book will look – many have special formatting issues – is hard to say. Because we are a professional publisher and our POD titles are sold on Amazon, Barnes & Noble and other retailers, we take great pains. It may take a day or two of special formatting for print on demand, for the editorial processes are quite demanding. If you want to adhere to our standards, let’s say one eight-hour day.

Assuming you’ve performed these tasks to perfection you will want to upload the book to various e-book retailers and a print publisher as well. E-Reads’ uploads are managed by Ingram’s excellent CoreSource. But as that is a service for publishers and not individual authors, you may want to employ commercial companies like Bookbaby, which will upload to all major retailers for as little as $99.00. Otherwise, to upload to all significant retailers on a do-it-yourself basis it will take several hours of trial and error, for retailers often send you error messages and you will need hours more to troubleshoot and re-upload. Three hours sounds about right.

There are other functions but these are typical ones. Tallying up the hours you’ve spent we get 31. At $40.00 per hour that’s a cost of $1,360.00, plus several hundred dollars in hard costs. Let’s round it off at $1,600.00 to get your previously published book back in print in all formats. That doesn’t include a penny for marketing and publicity.

In the next installment of this posting we’ll set some price points for your book and figure out how many copies you have to sell to make your money back – plus a profit.

Richard Curtis

Richard Curtis

About Richard Curtis

Richard Curtis is a leading New York literary agent (www.curtisagency.com) who foresaw the Digital Book Revolution and launched an e-book publishing company early in 2000. E-Reads (www.ereads.com) is one of the foremost independent e-book publishers in the industry, specializing in reprints of genre fiction by leading authors in their fields. Curtis is also a well-known authors advocate, author of numerous works of fiction and nonfiction including several books about the publishing industry, and prolific blogger – see his hundreds of other blog posts here.

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17 thoughts on “Are Publishers Making a Killing on E-Books? Part 1

  1. Thank you – v. useful post, both for its logic and information. Helpful ball park figures. I’d like to add one point drawn from my own (more sketchy, though perhaps more even-handed?) post on the subject (http://monographer.wordpress.com/2012/08/21/on-whether-to-self-publish-a-professional-publishers-view/), namely that there is an opportunity cost. That is, there is the value of what else you would have been doing with your time if you hadn’t been self-publishing. One argument is that, if you’re good at writing and that’s what you enjoy doing, it makes sense to maximise the time you spend doing that and outsource everything else.

    • @Anthony Haynes Good point. Authors have the choice of doing it themselves or outsourcing. The more you outsource the lower your compensation. You can outsource everything to a traditional publisher and get a mere 5-10% royalty. But many authors not only like that arrangement, they long for it.

  2. “The first task we perform to reissue a previously published book is to accurately reproduce the printed text as a digital file. ”

    I think this is the part we consumers have most trouble with. I have lost count of the number of times I have found back-catalogue e-books that seem to have been scanned from the with some kind of automatic software, with no additional proofreading done at all.

    I came across one book where the word ‘the’ was often replaced with the word ‘die’. It certainly changed the meaning of many sentences!

    Recently I came across a book (no names – no comeback) that did seem to have been proofread, but by an illiterate 10-year old, complete with bonus apostrophes – (e.g. “the dreaming spire’s of Oxford”), which presumably were not in the original.

    Some say that if we are only paying pennies, we should expect this kind of thing. I don’t really agree, but in any case this phenomenon is not limited to the bargain-basement end of the market. By all means charge us for proofreading, but only if it has actually been carried out.

    I should note here that none of the books I refer to above were bought via E-reads, so my comments are general, and not driected at Mr Greenfield specifically.

    • @Chris – A sure sign that a scanned text has not been proofread is errors such as “ruming” instead of “running”. The scanner has misread the double n. When books are printed on pulpy paper or the edition is old and yellow, the camera will make such errors. Good scanning services are supposed to do a first review to catch junk like that. But a proofreading afterwards is still imperative.

      • There is an additional issue to consider when scanning a previously published book. The copyright for the edit that the previous publisher performed on the original manuscript may lie with that publisher. Obviously, copyright for the work itself lies with the author, but the particular form in which it is presented, given that this form results from the publisher’s edits, does not. It might be prudent, then, for self-publishing authors to obtain a release from their print publisher allowing them to use that particular edit for their own ebook purposes.

  3. Interesting.

    I do, disagree with some of your points. For example the $60,000 salary is a bit doubtful. I think the average income in the United States is around $35,000 (though I could be wrong) and the designers I know usually make between 24-55 grand a year for stuff like formatting etc…

    Plus let’s face it, going the self published route is a labor of love for most people. How much does it cost to engage in a hobby? Probably both too much and not enough at the same time.

    Personally, I like my take on self-publishing more. Not that you don’t make good points, just, I’ve read similar pieces in other places.

    http://bit.ly/SpMKS8

  4. I think you are basing your starting point on a fairly old book. Most of the major publishers have moved to providing the galleys in electronic form. If you have that it could save a lot of time. But otherwise I agree that you are not likely to have a ‘digital copy’ that incorporates the changes between the last version of the manuscript (such as after content edits) and the printed book.

    As a reader most of my complaints regarding pricing of e-books is not for a ‘out of print’ book returning to print in E form, or a never before in E book being published in that form. My complaints come from publishers of new works, available in both paper and E, who want to charge me the full price of a trade paperback for the E version. I know much of the fixed costs are the same, editing, formatting, layout, cover, etc.. but where the costs start to differ is for materials (paper, cover, etc) printing, binding, warehousing, shipping, remaindering, etc. And that savings is what I expect to see reflected in a lower price for the e-book.. if you want to charge me the same in that case for E as for Paper, I feel you are gouging me.

    • @Chuck vdL – point well taken. Not apologizing for those publishers, but they do incur costs to produce the physical book on which the e-book is based, and some of those costs must be allocated to the e-book. How much they allocate is something that I would love a Big Six publisher to chime in on.

      That said, Big Six publishers are now beginning to publish “e-originals”, meaning far lower costs than they would incur if they had to create a print edition. If the royalty paid to authors for e-originals doesn’t reflect those cost savings, authors will have a legitimate gripe.

  5. Thank you for this. Proof-reading those scanned books can be a real pain, but inflicting unedited versions on readers is more painful. I’ve had a scan rejected by an e-book publisher because the quality was so poor, and had to pay to have it scanned a second time. And all of this just gets us onto the web, then we have the endless task of trying to draw traffic to the book, especially if it is an e-book original and not an upload of our backlist books.

    Traditional publishers have screwed up in many ways, and don’t usually treat writers very well or support us in ways that would benefit all, but I’m grateful that I have a shelf a books, thanks to traditional publishing, and only now contemplating the brave new world of original e-publishing.

    That being said, I would love to make $60,000 a year some day, via e-books, other employment or even a life of crime. But I’m too busy writing. I call this “get rich slow.”

  6. Chuck, you need to be sure whether you are comparing list price or actual sales price. I see lots of people complain that an ebook is more expensive than a print version of the same book, but rarely is the LIST price higher. Typically a publisher might put out a novel at $25.95 list for the hardcover and $14.95 or $19.95 for the ebook edition…but then the retailer will turn around and heavily discount the print edition.

    I’ve seen a lot of super-low pbook pricing that, assuming even a better-than-typical wholesale discount, suggests to me that certain online retailers are using new hardcovers as loss-leaders.

  7. Thanks, Richard. I’m a production editor and my colleagues and I often feel helpless in trying to explain that printing a book is NOT the only cost involved (and it’s in fact the only cost that a print book has and an e-book doesn’t). Want to note that $1600 is quite low, because you’re using the example of a previously published book. For a new manuscript, throw in the cost of a professional copyedit (and yes, every book does need one), a complete professional proofread (that is, not just checking for scanning errors), inputting of corrections, professional book design (if you so choose, for the print version) and you’re easilu up another couple thousand bucks, minimum.

  8. @Pamela Berkman

    Many thanks for these vital insights. Without giving away state secrets, can you provide any idea of what percentage of the cost of producing a hardcover book publisher allocates to the e-book? That is, it costs us X thousands of dollars to produce this book and we’re charging off Y to the e-book?

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